Presidio Production Company (FTW) Earnings Call Transcript

Hello everyone, and thanks for joining Presidio Production Company's call covering our second quarter 2026 results. I'm Connor Fair, serving as Director of Investor Relations, and with me on the line are Chairman and Co-CEO Will Ulrich, our Co-CEO and Director Chris Hammack, John Brawley, who is EVP and CFO, Brett Barnes, EVP and General Counsel, and Chief Technology Officer Jason Hudak. Before we go further, please note that forward-looking statements are part of today's discussion. Such statements rest on what management currently expects and assumes, and they carry risks, uncertainties, and other factors — lots of them outside the company's ability to control — that might make actual results diverge materially from what is expressed or implied here. To review those risks, take a look at the cautionary language included in yesterday's earnings release along with the risk factors described in our SEC filings, both of which you can find in the investor relations section of our website. Certain non-GAAP financial measures will also come up. The most directly comparable GAAP measures, plus definitions and reconciliations, appear in yesterday's earnings release, accessible in the investor relations section of our website. On that note, I'll hand things over to Will.

Thanks, Connor, and good morning to all of you. Every one of us faces mountains that must be climbed — some placed in our path, others we decide to put there ourselves. Chris and I launched this company with nothing beyond our friendship and a notion that we could generate enormous value by putting money into oil and gas while never drilling a single well — a head-on rejection of a philosophy the industry has held for 150 years. These last two weeks, my thoughts have frequently turned to the death of Nims Purja, who lost his life in an avalanche in Pakistan on July 30th. Should his story be unfamiliar to you, I'd suggest watching the Netflix documentary, 14 Peaks. Nims attempted what seemed impossible — summiting every one of the world's 8,000-meter peaks, all 14 of them, within six months — and he accomplished it. Project Possible was the name he gave it. At Presidio, we likewise have faith in the possible. We go looking for challenges, and if none can be found, we will invent them. We pick our own routes, we accept risk when circumstances demand it, yet our aim is to purposefully fulfill our business model across extended stretches of time; this quarter fit that pattern. Several months back, during our inaugural call as a public company, we laid out our intentions. We stated that we would buy producing assets and make them more efficient. By completing and integrating Canyon Creek, that is exactly what we did. We stated that we would keep generating efficiencies on our balance sheet. By refinancing our bonds and financing our first acquisition through our $1 billion ABS acquisition warehouse with Goldman Sachs, now joined by Citizens Bank, that is exactly what we did. We stated that we would speed up our standing as the world's first agentic oil and gas company. By way of this quarter's hires, headed by our new Chief Technology Officer, Jason Hudak, alongside a team of seasoned Silicon Valley executives, that is exactly what we did; we established a goal of boosting the company's production 3%-5% via AI, with no drilling and no capital expenditure, and we are progressing nicely, attaining a 2.3% uplift through the second quarter. We have shared with you our backlog of acquisitions, which stays as appealing as it has ever been. Much like a climber who waits for the right conditions to summit, we will complete our next acquisition in short order. All of this unfolds amid significant shifts in the global energy landscape that I covered on last quarter's call, and we believe FTW ranks among the most compelling investment cases in American energy today; we operate and acquire producing, cash flowing American oil and gas assets. Four pillars support the case for Presidio: our dividend, acquisitions, optimization, and artificial intelligence. First, the dividend. Cash return is where any investor in Presidio begins. Our annualized dividend comes to $1.35 per share, a yield of approximately 12% at our recent share price. Canyon Creek’s deal was completed on July 1st, which means none of that company’s cash flow appears in the figures we’re discussing today; our plan is to boost the dividend after the Canyon Creek properties begin adding to what we report. In the quarter, free cash flow reached $15.7 million, equal to about $0.50 per share, while the quarterly dividend was $0.3375. Next, expansion by buying companies, supported by distinctive access to capital markets. As a public company, in less than five months, we have completed two purchases: EQVR when we were formed, and Canyon Creek right after this quarter ended. Around $17 billion sits in the acquisition opportunities we are tracking. What turns that set of opportunities from wishful thinking into something we can act on is how we are capitalized. Because of our $1 billion ABS acquisition warehouse, our master trust drop down structure, and refinancing flexibility that has never been seen before in the energy ABS market, we are able to pursue the right asset rapidly and fund it cost-effectively in a manner that most operators of our size just are not able to. In the quarter, 25 opportunities were presented to us. We advanced 16 into review and placed bids on nine. We observe virtually every transaction available in the market, and with discipline, we bid on slightly more than one-third of them. The third item is optimization, where the narrative keeps developing. Operating discipline has always been central to what we believe. In the past, that discipline appeared mostly as discipline on expenses, and that remains true. This quarter, lease operating expense was $9.39 per BOE. More and more, that same discipline, combined with our data and AI capabilities, is appearing on the production side. Chris will take you through the details, but here is the main point: controlling costs is no longer the only thing we do better than anyone else. We are turning into the top operators at expanding production from assets requiring essentially no capital expenditures. The fourth item is our artificial intelligence platform, which increasingly connects the other three. In the quarter, we named Jason Hudak as Chief Technology Officer. Jason does not come from oil and gas. He is a Silicon Valley technology and AI executive with close to thirty years of experience, most recently serving as Vice President of Engineering at Aerospike, and before that holding senior positions at Twilio, RapidAPI, Foursquare, and Yahoo. Jason has assembled a group of senior technology leaders spanning AI product, machine learning, data engineering, data science, and cloud infrastructure, recruited from businesses such as Twilio, Cisco, Aerospike, VMware, and Akamai; we are bringing together top-tier technology talent with the operational expertise and field data that already exist within Presidio. Knowing oil and gas tells us which challenges are important. Knowing technology enables us to address them more quickly, more reliably, and on a larger scale. This is not an IT project inside a corporation, and its main purpose is not automating back-office tasks. As I mentioned earlier, in this business, the prize is production, revenue, and cash flow, and that is what the mandate is aimed at. I want to be precise about what this has generated so far, since the term AI can easily come across as a catchphrase instead of an outcome. During the quarter, output came in at an average of 22,755 barrels of oil equivalent each day. Compared with the 3% to 5% target we set for full-year AI gains, we've delivered about 2.3% so far — 1.4% of that from DUG, our production surveillance agent, plus close to another 1% from the other AI programs Chris will walk through. This is uplift measured at the well level, and it produced $4.5 million in annualized revenue during Q2, and we're only at the beginning. Considerable extra value could be seen simply from where our expanding AI platform stands right now; we currently have about 2,000 wells sitting on the intelligence platform; we remain on track for that 3% to 5% full-year goal, and Chris will take you out into the field and demonstrate precisely how this works. Moving to the quarter, Q2 was a significant stretch of execution; net income attributable to Presidio came in at $14.4 million, equal to $0.34 per Class A share, while adjusted EBITDA reached $33.2 million versus the $30 million we had guided you toward. That's an outperformance of $3.2 million, or about 11%. Output averaged 22,755 BOE per day alongside minimal CapEx totaling $600,000. We also finished a lower-cost, investment-grade ABS financing. Right after the quarter closed, we completed the Canyon Creek acquisition and stepped into the Arkoma Basin — a deal that, combined with our cheaper cost of capital, underpins future dividend growth, subject to board approval. Canyon Creek represents our second acquisition since becoming a public company and signals our arrival in the Arkoma. That arrival is significant because Canyon Creek amounts to more than one transaction. It creates a fresh land and expand platform. The initial deal hands us an operating foothold, local knowledge, field infrastructure, and a team within the basin. Starting from that base, we bring in our operating playbook, develop basin level intelligence, and assess nearby opportunities. That's precisely how Presidio was built from day one through our land and expand strategy; we step into a basin via an asset we understand, enhance it through operations, then grow around that position with discipline; we'll stay selective. Winning every process or growing merely for growth's sake isn't the goal. The goal is buying the right producing assets at the right price with a clear route to operational improvement, attractive returns, and dividend growth. We purchase producing American oil and gas assets that already generate cash flow. We turn those assets into more productive ones through operations, technology, and improved decisions. We finance them efficiently, and we hand a meaningful share of the resulting cash flow back to shareholders. We acquire, we optimize, we grow the dividend, we repeat. With that, I'll hand the call over to Chris.

Thanks, Will. Here at Presidio, value creation begins the moment a deal is finalized. Right away, we take charge of the personnel, the wells, the suppliers, and the infrastructure, and we get to work improving how that asset performs; we don't lean on drilling programs or major capital outlays. This quarter's CapEx totaled $600,000, while adjusted EBITDA reached $33.2 million. What actually generates value instead is the countless daily decisions that shape output, expenses, and cash generation throughout a mature asset portfolio. That's the subject I'd like to dig into this morning, because these choices have no real parallel in the current marketplace. Before we get into the details, I want to point out something about the first six months of 2026: we recorded no injuries that had to be logged, no cases involving time away from work, and no incidents involving vehicles. The safety committee we have is run by employees themselves. Each month we gather for safety discussions centered on whatever risks fit that time of year, and after any incident, the review that follows is passed along to every member of our field staff. What gets learned moves upward from the field rather than only downward from the main office. When you're managing about 2,000 wells spread over three states, a record like that shows real intentional effort on the part of our field organization, and they deserve credit for it. Will brought up the fact that our AI has produced an increase in output of about 2.3%, compared with the 3% to 5% goal we set for the whole year. I'd like to explain precisely how that figure came about. To start with, DUG functions as our agent for watching over production; it keeps a constant eye on well level information throughout the operated base, calls out any departures from what we'd expect, and sends suggested actions to the field engineer who owns that particular well. Across the past three months, DUG delivered an average of 400 BOE each day in additional output, which amounts to 1.4 percentage points of our production result by itself. Among everything driving our production beat this quarter, it stands as the biggest single contributor, and one year ago it wasn't around at all. Next, weekend coverage strengthened by AI. On our mature assets, Saturdays and Sundays have historically been a problem, purely because staffing is lighter then. AI helped us pinpoint the wells where missing weekend coverage causes the greatest loss of uptime, and we matched that against the wells producing the most. Weekend pumpers then received an interactive table plus a map showing where to head and in what sequence. During Q2, output on weekends rose 2.5%. For years we had accepted that scheduling issue; better information, not additional staff, fixed it. Third, the AI plunger boxes: 24 have been placed on wells so far. Without needing a full-scale SCADA setup, this unit examines and constantly tunes the timing of the plunger cycle, keeps an eye on micro events, works out estimated fluid volumes for each cycle, and follows plunger performance even in cases where ordinary sensors fail to catch the signature. At the wells where it has been deployed, gas went from an average of 2.7 million per day before installation to 3 million a day afterward — an increase of roughly 10% in production and about 0.2% of total company production. As of today, 24 wells have it. Once we complete optimization of the wells with this plunger box, it will be moved to the next group of wells so that further optimization can take place. None of this takes the place of field judgment. What all three do is direct field judgment toward the correct well, in the correct sequence, on the correct day; that difference is significant, and that's the reason our field organization embraced this instead of pushing back. Let me now address workovers. The clearest illustration of what disciplined, data-directed intervention delivers across a mature asset base is our wedge workover program; of 69 identified jobs, 25 are done, 44 are still in the current queue, and the program is expected to wrap up in the fourth quarter. During the second quarter, 17 workovers were completed. Payout time shrank from one year under the original forecast to 0.75 years based on actuals. PV10 went up, moving from $2.7 million to $3.4 million, while workover returns exceeded 100%; results are exceeding what we expected, and additional work remains. Beyond the barrels, here's why that's significant: each workover tranche teaches us which candidates screen well and which don't, and that feedback flows straight into how we put the next tranche together. Turning now to integration, starting with EQVR. Roughly 2,800 net BOE per day comes from this asset's 216 active wells, and for the items that affect cost, integration is basically complete. The headline number here is that lease operating expenses for this asset fell 30%, going from roughly $700,000 a month in Q2 2025 to $500,000 a month at this point. Let me walk you through how we got there. On the labor side, we split the asset into four routes, we promoted from within to fill a newly created production tech role, and we retained the fifth EQ among our EQ pumpers to handle our Presidio route, while doing away with a contract pumper entirely. Turning to compression, we let go of two units, reduced the size of two more, renegotiated eight, and today the bulk of what remains in the fleet is under contract extending through the second and third quarters of 2027. On chemicals, the vendor was shifted to Presidio pricing, and production software integration was finished in mid-May along with SCADA integration. We're also continuing to enhance the quality and consistency of data coming off the EQVR assets, since better data sharpens both daily operating decisions and the intelligence platform's performance over time. Now on to Canyon Creek. There, 42 operated wells are generating roughly 3,500 net BOE per day. Field operations were taken over on day one, and the same playbook was immediately put to work. Already finished: one contract route was removed and a company route was established, an additional foreman role was cut, the chemical vendor was switched, and an excessive foamer expense was eliminated by performing workovers the prior operator had postponed, plus production software was transitioned on day one; all five neglected workovers identified during diligence were also completed. Every one of the five succeeded. Still ongoing. Regarding compression, we've finished two releases and two downsizes, with another downsize set for August. When it comes to SCADA, the switch to Presidio is done, and at this point we're handling the integration of SCADA directly with production software. There's also a yard consolidation underway, plus we're scrapping inventory that can't be used and relocating a portion of it to smaller yards, all planned for the close of September. At Canyon Creek, we expect lease operating expense to drop 32%, going from about $250,000 per month to $170,000, compared with the third quarter of 2025. Speed is critical in this. Operating culture takes shape during those initial days and weeks following closing, responsibilities get defined, and the groundwork for later performance is laid. Our aim is for the individuals nearest the wells to grasp the way decisions get made, what they're answerable for, and how they're enabled to enhance the asset. We want information from those wells moving swiftly into the systems that our operating and engineering teams rely on daily. With those systems, relationships, and disciplines established, we're much better positioned to assess and bring in more assets within the basin; that's the reason land and expand is important. Canyon Creek isn't just one more acquisition. It represents an operating platform, local knowledge, field infrastructure, and a data foundation that lets us grow across the Arkoma. One final point, and it tends to get missed. Across the trailing 12 months through July, we've brought in roughly $13 million in cash consideration from leasehold monetization through 61 separate transactions. We're a producing asset company. We don't sit on undeveloped acreage that somebody else prizes more highly than we do, and converting that acreage into cash is a genuine, repeatable element of how this model self-funds. I'll hand the call over to John now.

Thanks, Chris. For Presidio, this marked the initial complete quarter since becoming publicly traded after our March IPO. I should point out that Canyon Creek isn't reflected in this quarter — that deal finalized on July 1st, right after the quarter wrapped up; we delivered a robust quarter across each of four crucial dimensions: production, revenue, operating expenses, and EBITDA. I'll address them one by one, since in each instance the beat can be traced back to a particular factor. As I walk through the figures below, regarding revenue, I'm referring to the entire quarter and the first quarter — both the predecessor and successor periods taken together — while for per-unit metrics, I'm relying solely on the successor period spanning March 4th through March 31, since that window includes the EQVR asset, comes after the IPO, and thus provides a like-for-like per-unit comparison with the second quarter. Turning first to production, it averaged roughly 22,800 BOE per day, a touch above the successor period from March 4th to March 31st, with a blend of about 16% oil, 57% natural gas, and 27% NGLs. That production rose rather than following its typical decline, and the credit goes to our AI systems along with our wedge workover program. Now to revenue. Revenue, factoring in hedge settlements, reached $60.9 million, which includes $6.9 million of realized hedge settlements, climbing from $34.4 million in the first quarter. The biggest factors behind higher revenues this quarter stem from our restructured hedges and rising oil and NGL pricing during the period, partly offset by lower natural gas prices. On the expense side, lease operating expense came in at $9.39 per BOE, an improvement over $9.47 in the first quarter successor period. Total operating expense, which takes in production and ad valorem taxes, was $11.22 per BOE, declining from $11.68. This reflected the effect of boosted production through optimization, AI, and achieved cost efficiencies. Consolidated net income totaled $15.5 million, with $14.4 million attributable to Presidio C Corp, or $0.34 per Class A share. Adjusted EBITDA was $33.2 million versus the $30 million we mentioned on our earlier call. Although this was an excellent quarter, with current commodity prices tapering off in the third and fourth quarters, I'd anticipate EBITDA coming in just barely below $30 million each quarter over the next two quarters, yet totaling $90 million across the final nine months of 2026. Reconciliations of all non-GAAP measures to net income appear in the earnings release. This quarter gained from the first complete period of the restructured hedge portfolio along with ongoing operating efficiencies throughout the asset base. Capital expenditures stayed minimal, in line with our low reinvestment model. Now I'll turn to the ABS refinancing for a bit, since it substantially lowered our cost of capital and the structure underpinning our acquisition and dividend model; on June 9, we completed a $350 million investment-grade refinancing of our previous asset-backed securitization at a weighted average coupon of 6.38%. Two investment-grade tranches, each $175 million, made up the refinancing; our weighted average coupon went down 184 basis points, moving from 8.22% to 6.38%. Proceeds from the deal went toward repaying our previous ABS, clearing amounts owed under our RBL, and a $35 million hedge restring. An anticipated repayment date, or ARD, structure also came with this refinancing. The notes do mature in 2041, but under the ARD structure scheduled amortization is lowered across the first five years. Put plainly, in the near term less cash is contractually steered toward principal, so more cash remains available to back dividends and acquisitions. Compared with the prior ABS, that marks a significant step up. What we have now is a reduced fixed cost of capital, financing with long duration, and a near-term amortization profile that is more efficient. When putting this ABS together, we deliberately built a structure that fits both our strategy and our status as a public company. Our capital structure stays as simple as we can keep it while we still capture the ABS advance rates cost of capital. Flexibility to fund our growth stands as the single most important structural feature of our ABS. Two avenues get us to that flexibility. First, a master trust structure sits inside the ABS, permitting additional assets to be dropped down into new series of bonds. Among ABS deals, that is fairly typical. A new structural design element is the second piece — a first for the energy ABS market. Since we are a growing public company and transparency matters within our capital structure, we fundamentally altered the call protection relative to every energy ABS transaction that came before ours. Historically, energy ABS prepayment penalties generally call for paying all expected future interest, discounted at Treasuries plus 50 basis points. Our notes, by contrast, can be redeemed at 102 to 101 during years one and two and at par after that; that gives us flexibility no one has had before to refinance multiple series of notes into a single one after acquisitions or drop-downs out of our warehouse. It lets us fund future acquisitions while avoiding needless complexity in the capital structure. Adding assets to our ABS now comes with two choices. Either we utilize the master trust structure, or we refinance without enduring a costly make-whole. Considered together, the lower coupon, decreased scheduled amortization, and enhanced refinancing flexibility amount to a substantially stronger financing platform for Presidio. Turning to the warehouse facility, our $1 billion ABS warehouse facility saw its first use with the Canyon Creek acquisition. An initial $55 million draw under the facility funded the transaction, and at the closing of Canyon Creek we issued 1,962,240 shares of Class A common stock to the sellers. The warehouse did precisely what it was built to do. It let us fund a PDP acquisition at closing in an efficient way, with the option to shift that asset into permanent ABS financing down the road. I would also mention that our friends at Citizens Bank, who likewise lead our credit facility, came into the warehouse with 40% participation, which widened our lender base and added capacity for supporting acquisitions ahead. What this shows is that we keep bringing in top-tier capital partners while maintaining a cost of capital that works for us. Moving on to the balance sheet: at June 30, the principal amount of total debt outstanding stood at $350 million, while net debt came in at $296.5 million. If you give pro forma effect to the $55 million drawn under the ABS warehouse facility that was used to fund Canyon Creek, net debt would have been $351.5 million. Using that pro forma net debt figure of $351.5 million along with annualized second quarter adjusted EBITDA of roughly $132.7 million, leverage worked out to about 2.7x. Turning to liquidity: at June 30, unrestricted cash totaled $42.3 million, and we had nothing drawn under the RBL. After the quarter closed, the borrowing base on our RBL was redetermined as part of the normal process, moving from $65 million down to $60 million. That decrease captures production and hedges realized since the last borrowing base redetermination, and it was anticipated. So on a pro forma basis for the borrowing base adjustment, liquidity right now sits at about $102.3 million, made up of $42.3 million in unrestricted cash plus $60 million of available capacity under the RBL. On the hedging side, we keep a multi-year commodity hedging program in place covering oil, natural gas, and NGL production. Hedging matters to us as a component of our capital structure; it delivers visibility into cash flow, underpins dividend durability, and lets us underwrite acquisitions with more confidence. You can find the detailed hedge table in the earnings release. My final topic is the acquisition market. Moderate increases in commodity prices have come about because of instability in the Middle East. With that backdrop, a plethora of companies have chosen to bring their assets to market when before they had been on the fence. Deal activity has been incredibly strong. We bid actively on opportunities on a daily and weekly basis; the assets we are bidding on range from $50 million to $2 billion. Our bids have been competitive; even so, we will not overpay, and we stay disciplined when it comes to price, structure, and returns. The environment is strong, and we are getting terms that back. Thanks to the combination of our PDP strategy, public platform, ABS access, and operating track record, we are well positioned to execute our growth strategy; with that, I will hand the call back to Will for closing remarks. Thank you.

Thanks, John. During the prior quarter, we told everyone that Presidio had been designed for an energy landscape in flux. In the quarter just reported, we demonstrated what that looks like when put into action. Net income came in at $14.4 million, while adjusted EBITDA reached $33.2 million, compared with the $30 million we had guided to — an 11% beat. We managed to raise production over the period, and we have now achieved 2.3% of AI-driven production uplift versus our 3%-5% goal, all with no additional capital. We took 184 basis points off the cost of our ABS capital and arranged $35 million in extra hedge protection running through 2027. Canyon Creek was closed, and a new operating platform in the Arkoma was put in place. Our dividend is tracking precisely the timeline we laid out to you a quarter ago — $1.35 per share at present — with an anticipated increase down the road tied to the Canyon Creek acquisition, pending board approval now that Canyon Creek sits on our platform; our acquisition pipeline stands at roughly $17 billion; discipline will remain our approach. Owning every asset is not our aim. What we aim to own are those assets where our operating model, capital structure, and technology generate the most value; this nation is going to require more dependable energy, more productive infrastructure, and smarter choices regarding the physical assets already in the ground. Presidio occupies precisely that intersection; we hold producing American oil and gas assets. A low reinvestment model is how we run them — $600,000 of CapEx set against $33 million of EBITDA. A purpose-built capital structure is how we finance them, and we are developing technology meant to make each well, each employee, and each acquisition more productive. Such a combination is uncommon. We consider it strategically significant, and we consider that it could become exceptionally valuable. Executing is our task right now — keep integrating EQVR and Canyon Creek, keep enhancing the existing asset base, buy the right assets at the right price, grow the dividend, and build a company deserving of the opportunity before us. The beginning is still where we are. Thank you for being with us this morning. Operator, please open the line for any questions.

Good morning, everyone. Nice update. My first question probably goes to Chris — for you and John, about acquisitions. You've touched on this somewhat already, but I'd really like to hear details: could you describe how you think about the early operational and financial priorities, and what I'd term the easy wins, that you all recognize, "Let's examine a deal such as Canyon Creek." Once you get moving right away there, what are you and John reviewing on both the operational and financial fronts to capitalize on?

Yes, Neal, Chris here. I'll handle the operational portion, and John can jump in regarding the finance portion. I believe we seek assets that clearly suit the profile we want from a basin standpoint, setting aside everything we've discussed previously. I think the notion of stepping in with not just a solid acquisition value, but also levers we've employed historically, centered on emphasizing producing wells rather than the drilling portion of the business. As we've witnessed repeatedly, when companies concentrate more on the development portion, they simply aren't as sharply attentive to operational matters as we are, and we stay extremely focused. Be it regarding staffing or optimization, compression utilization, or chemical management programs we handle internally — these are roughly three of the major levers we apply. We check which of those aligns well with those playbooks; we've devoted considerable time to the Arkoma Basin and believed it was quite comparable in those respects to the Western Anadarko Basin, where most of the assets have been located up to now; we've invested a lot of time there working out our entry points and where the land and expand begins. The Canyon Creek assets suited that perfectly, coming from a company that devoted most of its effort to developing these assets, drilling new wells, validating what their business plan was there, and not really concentrated on the everyday items we handle. Almost a textbook play, and we believe there's a substantial amount of additional work to pursue in and around those assets and within the wider Anadarko-Arkoma Basin.

On the financing side, there are a couple of methods available to us for covering the debt component of an acquisition. The first method involves tapping the ABS warehouse facility we hold with Goldman Sachs, which Citizens Bank has recently come into as well. Beyond that, smaller acquisitions can be funded through our RBL. Whenever we assess these opportunities, we exercise a lot of caution, ensuring whatever we pursue will be accretive to free cash flow per share, dividend per share, and similar metrics. We additionally examine the full cycle all-in return, confirming that equity levered returns we generate come in near 20%. Turning to the operational finance angle, our aim is to put an FP&A system in place that, in my view, reflects what much larger E&Ps use; we roll out our data systems and begin embedding that operational financial discipline into day-to-day operations.

Great. Will, the next thing I want to ask goes to either you or Jason regarding the AI platform. To be specific, could you folks shed some light on — you mentioned this briefly — but I'd really like to hear additional detail about the cost savings programs like DUG and how fast those savings are coming through.

Yeah. DUG is an agent for well intelligence. Through DUG, our emphasis is on growing production. Later this year, in the fall, we'll introduce one more tool, and that one leans much more toward the cost-saving portion of the business; however, what the model currently does is basically give a real-time daily view of production. Every one of our field personnel has it available, and it spots anomalies relative to budget as well as relative to what we refer to as the theoretical max production of the well — meaning if there were no restrictions and no pipeline pressures or anything else limiting flow, what might it achieve? We examine the largest gaps between that theoretical max production and either actual output or the budget, and for every pumper and every one of our field hands, those get flagged. That way, when they bring up the platform, they can view what's happening along their route, identify the biggest underperformers for that particular day; and beyond that, thanks to the systems we've created, it offers a high, medium, or low recommendation regarding what it believes the problem is and what ought to be done about it; and then, if the issue turned out to be something different, the pumper can also enter a solution of his own, and as a result the model picks that up. What's neat about this is that, since it keeps learning, it spreads the knowledge base of all our pumpers — the ones pumping these thousands of wells over a fairly wide geographic area. In effect, it gives each pumper access to what every other pumper knows when it comes to troubleshooting well production. We can trace the production growth back to those prioritized interactions, and also to knowledge being passed along, say, from a pumper with more experience to one with less.