Crescent Energy (CRGY) Q4 2025 Earnings Transcript

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Date

Feb. 26, 2026 at 11 a.m. ET

Call participants

• Chief Executive Officer — David Rockecharlie
• Chief Financial Officer — Brandi Kendall
• Chief Operating Officer — Jerome Hall
• President — Clay Rynd

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Takeaways

• Production -- 268,000 barrels of oil equivalent per day, with 106,000 barrels of oil per day, reported for the quarter.
• Levered Free Cash Flow -- approximately $239 million generated in the quarter, attributed to operational execution and capital allocation.
• Adjusted EBITDA -- approximately $536 million recognized in the quarter.
• Capital Expenditures -- $226 million invested during the quarter, contributing to efficiency improvements and asset integration.
• Dividend Declaration -- $0.12 per share declared for the quarter, equating to an approximate 5% annualized yield.
• Debt Repayment -- Over $700 million of debt repaid in the quarter, supporting ongoing deleveraging objectives.
• Share Repurchase Authorization -- Buyback program authorization increased to $400 million, aiming to provide repurchase flexibility during market dislocation.
• Value-Accretive Portfolio Activity -- Nearly $5 billion in total transactions executed: over $4 billion of acquisitions completed at less than 3x EBITDA and almost $1 billion of non-core divestitures at more than 5x EBITDA; the $5 billion figure includes both acquisition and divestiture activity.
• Drilling and Completion Cost Reductions -- Drilling and completion cost per foot declined 15% year over year due to operational initiatives and efficiencies.
• Permian Basin Synergy Target -- Synergy projections for the Permian acquisition have doubled from original targets, with $40 million+ synergies already captured, and an updated annual synergy run-rate target of $190 million; out of the total increase, management indicates 50% originates from operations, with the remainder sourced from overhead, marketing, and cost-of-capital improvements.
• Base Decline Rate -- Post-merger, the pro forma corporate decline rate stands in the high twenties percentile, with an explicit goal to reach 25% or lower within 12 to 18 months.
• Rig Program Guidance -- Plans to run a six to seven rig program across all assets, split as four rigs in Eagle Ford, one in the Uinta, and one to two rigs in the Permian, intended to maximize free cash flow and maintain operational flexibility.
• Minerals & Royalties Platform -- "Crescent Royalties" platform announced; current minerals portfolio delivers approximately $160 million of annual cash flow, with intent to continue scaling and compounding value at a historical 20% annual growth rate over the last five years.
• Operational Improvements in Eagle Ford -- Increasing lateral lengths and simulfrac adoption, with 70% of pads in South Texas region transitioning to simulfrac, to raise capital efficiency.
• Permian Production Cadence -- Management expects relatively flat oil production in both the Eagle Ford and the Permian for the full year, citing absence of new wells added since October and a decline in newly acquired assets.

Summary

Crescent Energy Company (NYSE:CRGY) detailed a year defined by scaled portfolio expansion, operational cost reductions, and reinforced capital returns, emphasizing the significance of its new position in the Permian and the launch of the Crescent Royalties platform. The company signaled full integration progress on significant acquisitions, with doubled synergy targets and immediate accretion to key financial metrics, while highlighting the durability of its free cash flow model and flexible rig allocation across premier basins. Management underscored the capacity for further deleveraging, disciplined portfolio management, and the continued scaling of its minerals franchise with 20% annual historical growth, all supporting a multifaceted approach to long-term shareholder value creation and capital deployment.

• CEO Rockecharlie stated, "we are now a focused and scaled operator in three premier basins: the Eagle Ford, the Permian, and the Uinta," and cited specific upside opportunities created by recent portfolio moves.
• CFO Kendall confirmed, "Our balance sheet remains strong, our liquidity is significant, and our capital allocation framework is disciplined, flexible, and focused on long-term per share value creation."
• The company reported management's intent to "continue to build long-term value through strong free cash flow and returns from our base business," while leveraging operational and minerals catalysts.
• No operational or market constraints were cited for accelerated growth in the Uinta; management indicated the pace of activity is a deliberate strategic choice.
• Throughout the call, Crescent highlighted its ability to maintain a flexible reinvestment rate, shifting capital allocation between oil- and gas-weighted inventory as commodity returns dictate.

Industry glossary

• Simulfrac: A well completion technique enabling simultaneous hydraulic fracturing of multiple wells from a single pad, increasing efficiency and lowering costs.
• LOE (Lease Operating Expense): The ongoing costs required to operate and maintain oil and gas properties after drilling is complete.
• Artificial Lift: Methods used to increase the flow of crude oil or natural gas from a well when reservoir pressure is not sufficient to bring the fluids to the surface.
• PDP (Proved Developed Producing): Petroleum reserves that are both proven and currently producing, representing the most certain cash flows for an oil and gas company.
• ESP (Electric Submersible Pump): A common artificial lift system used in oil wells for enhanced hydrocarbon recovery.

Full Conference Call Transcript

David Rockecharlie: Good morning, and thank you for joining us. 2025 was a transformational year for Crescent Energy Company. Our team delivered strong performance by executing on our consistent strategy and capitalizing on our leading combination of investing and operating skills. As a result, we entered 2026 better positioned than ever, with more scale, more focus, and more opportunity. As always, I would like to begin with three key takeaways. First, our base business continues to deliver impressive results. In 2025, we generated significant free cash flow, exceeded expectations on both production and capital, and demonstrated the durability of our investing and operating model. We are bringing that significant momentum into our 2026 plan.

Second, we are now a focused and scaled operator in three premier basins: the Eagle Ford, the Permian, and the Uinta. We see tremendous upside potential across our portfolio. Our investing and divesting activity materially upgraded the quality and scale of our portfolio. In total, we executed nearly $5 billion of transactions in 2025, closing over $4 billion of acquisitions at less than 3x EBITDA and divesting nearly $1 billion of non-core assets at over 5x EBITDA. This is how we compound value, recycling capital out of non-core positions and into higher return, scalable assets, where we can apply our operational playbook to drive value for years to come.

You have seen us successfully execute our strategy in the Eagle Ford. Over multiple years, we have built a top three position while generating strong returns and hundreds of millions of annual synergies. It is just the beginning for us in the Permian, but we are off to a strong start, and we are doubling our original synergy target. Third, our equity value proposition is even more compelling. We will continue to build long-term value through strong free cash flow and returns from our base business. We also have significant upside catalysts embedded in our business. We are excited to introduce one of those key catalysts today, our world-class minerals platform, Crescent Royalties.

Let me now discuss our strong fourth quarter in more detail. We produced 268,000 barrels of oil equivalent per day for the quarter, including 106,000 barrels of oil per day, and generated approximately $239 million of levered free cash flow. In the fourth quarter, our activity was focused predominantly in the Eagle Ford gas and condensate windows to capitalize on strength in the natural gas curve. Early performance has been strong, and our ability to allocate capital across both oil- and gas-weighted inventory enhances the durability of our returns in a volatile commodity environment. Operationally, we continue to raise the bar across our asset base.

Over the past year, we have increased drilling and completion efficiencies, extended lateral lengths, and expanded the use of simulfrac operations across our footprint. These initiatives drove a 15% reduction in drilling and completion cost per foot year-over-year and contributed to full-year CapEx outperformance. Our operational expertise is foundational to our strategy of buying assets and making them better, and we intend to apply the same proven playbook to our newly acquired Permian assets, which gives us confidence in our increased synergy target. Our entry into the Permian was a defining step in Crescent Energy Company's evolution.

Today, we operate scaled positions across three premier basins: the Eagle Ford, the Permian, and the Uinta, which is complemented by a substantial and world-class minerals portfolio. This combination provides inventory depth, commodity flexibility, and a durable free cash flow profile that positions us to outperform through cycles. Turning to our new Permian assets, integration has progressed seamlessly. As we have spent more time with the assets, our conviction in the value creation opportunity has increased. This acquisition remains one of the most compelling we have evaluated, with immediate accretion across key metrics and highly attractive cash-on-cash returns. Importantly, our synergy targets are now 100% higher than what we underwrote, which meaningfully enhances expected investment returns.

That increase reflects clearer visibility into incremental operational efficiencies, overhead optimization, marketing improvements, and additional balance sheet opportunities as we implement the Crescent Energy Company playbook. Looking ahead to 2026, our plan reflects the consistent execution of our long-term free cash flow strategy. Our focus is on maximizing free cash flow while maintaining operational and capital allocation flexibility. We expect to run a six to seven rig program across our asset footprint. Four rigs in the Eagle Ford will span multiple phase windows, providing flexibility to pursue the highest returns across commodity cycles.

One rig in the Uinta will target our core Uteland Butte formation and continue prudent delineation of the upside across our significant resource base, following the success of our Eastern JV. In the Permian, consistent with our acquisition announcement, we are right-sizing capital and operational intensity with a disciplined one to two rig program. Our upgraded portfolio, enhanced capital efficiency, and commodity flexibility position us to generate some of the strongest development returns we have seen in recent years, despite the current commodity price volatility. In addition to upgrading our operated portfolio, we are excited to announce the formation of Crescent Royalties. This is a major milestone in our strategy to build a leading royalties business.

We have been active buyers of minerals and royalties assets for nearly 15 years, and have built one of the largest and most established minerals and royalties platforms in the sector, anchored by a core position in the Eagle Ford under world-class operators. Today, our minerals portfolio contributes approximately $160 million of annual cash flow. By placing these assets within a dedicated capital structure, we enhance strategic flexibility and create additional pathways for long-term value recognition. With Crescent Energy Company's differentiated knowledge, experience, and sourcing pipeline, we see meaningful opportunity to continue scaling this platform in a value-accretive manner. Our transformation in 2025 was significant and a testament to the power of our consistent strategy.

We are relentlessly focused on building a great business with a great team that talented people feel proud to be a part of. With our success in 2025, we are well positioned to continue on our trajectory with more scale, more focus, and more opportunity than ever before. With that, I will turn the call over to Brandi.

Brandi Kendall: Thanks, David. Crescent Energy Company delivered another quarter of strong financial performance, generating approximately $536 million of adjusted EBITDA, with $226 million of capital expenditures and approximately $239 million of levered free cash flow. These results underscore the significant free cash flow generation capacity of our portfolio and the strength of our lower capital intensity operating model. Our free cash flow enables what we view as an all-of-the-above return of capital framework. First, it provides substantial coverage of our fixed dividend. We declared a $0.12 per share dividend for the quarter, equating to an approximate 5% annualized yield, and our cash flow profile provides significant cushion to support and sustain that return.

Second, it allows us to meaningfully strengthen the balance sheet. During the quarter, we repaid more than $700 million of debt. We retained the capacity to continue deleveraging throughout the course of 2026. Third, it gives us flexibility to repurchase shares when market dislocation occurs. We increased our buyback authorization to $400 million, providing the ability to repurchase a meaningful amount of shares when we believe doing so represents an attractive use of capital. Our balance sheet remains strong, our liquidity is significant, and our capital allocation framework is disciplined, flexible, and focused on long-term per share value creation. With that, I will turn the call back to David.

David Rockecharlie: Thanks, Brandi. Let me close by reiterating our three key messages. First, our base business is strong, improving, and generating meaningful cash flow, and we are bringing significant momentum into our 2026 plan. Second, our 2025 investing and divesting activity materially upgraded our portfolio. We entered the Permian at compelling value with significant synergy potential and exited non-core assets at attractive multiples. Third, Crescent Energy Company's value proposition has never been more compelling. We combine investing discipline with operational expertise, we generate substantial and durable free cash flow, and we have multiple pathways to drive long-term per share value creation.

We are larger, more focused, and better positioned than we have ever been, and we believe we are just getting started. Thank you for your time this morning, and I will now open it up for Q&A.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question is from Bertrand Donnes from William Blair. Please go ahead.

Bertrand Donnes: Morning, team. On Crescent Royalties, could you maybe help us understand where we are in the value creation process? It seems evident to us that the value is not really showing up in the shares, if you use peer multiples. You noted scaling the business is probably maybe the next step. What options are you open to, or what options are you not open to eventually monetize the assets?

David Rockecharlie: Hey, it is David. Great question. I think the most important place to start is that this has been a core business of ours. We have built a scale portfolio over the last 15 years. It is world-class assets, and there is significant embedded value in the company, and we want to make sure that investors in Crescent Energy Company understand what they own. The other couple key messages I would give, these assets that we have put together are among the lowest cost in the lower 48. We think they have got tremendous upside potential in just what we already own, but we see significant future growth potential just like we do in the rest of the business.

I will let Clay give you a little bit more color on that.

Clay Rynd: Hey, the only thing I would note is, we view this as really step one in terms of value creation, in terms of allowing our shareholders to recognize the value that we see embedded in the business. As David mentioned, we see a clear pathway for growth. We have been able to compound this business at 20% annual growth over the last five years. We continue to see a pathway for accretive growth for the business. We are committed, in 2026, to continuing to unlock value for our shareholders with this business.

Bertrand Donnes: Sounds great. Maybe this one is for Brandi Kendall. On the, maybe the vanilla upstream M&A, we have heard both sides of the story, that this is a seller's market. Prices are reaching high water mark, but also that inventory is drying up, and you should probably be grabbing inventory while you can. Just wondering if Crescent Energy Company thinks this is a time where maybe you do whatever it takes to win a bid, like maybe the Canadian curling team, or is it smarter to just take a step back and catch a few low-price silvers like the hockey team?

David Rockecharlie: Hey, Bert, it is David. I will take that one, thanks for an amazing setup. What I would say, a couple things. Your comment just makes me want to communicate how many significant catalysts that we think we have in the company. To run through them on the M&A side, we have just completed a transformational year. We think we made a great entry into the Permian at fantastic value. That integration is going great. As you know, our number one thing when we make an acquisition is to get that right. What you should hear from us today is that it is going really well. We think it is going to be a tremendous long-term opportunity for us.

From a preparedness perspective, we are active in the market all the time, we are ready to be opportunistic. From an actionability perspective, which is very different, what we are telling you is we see a huge amount of opportunity even within the company. We are focused on driving value with what we already own. We are focused on making sure investors understand all the levers we have in the business, including, as we have talked about, the royalties assets, which again, are world-class and scaled. The market, from our perspective, we will be ready when it is there. It is an interesting time right now, but we are kind of always in the market.

The number one thing is, are we prepared to be opportunistic? Yes, we are.

Bertrand Donnes: That is great. Thank you, David.

Operator: The next question is from Charles Arthur Meade from Johnson Rice. Please go ahead.

Charles Arthur Meade: Yes, good morning, David, to you and your whole team there. On the desire to grow the mineral royalty position, can you talk about what advantage Crescent Energy Company has in that process? My impression is it is generally a pretty competitive market, but it is less competitive, there are fewer players as you get to the size you guys are playing in. What do you view are your advantages that let you compound this value 20% year-over-year? And perhaps, is there one geography over another where you think there is the most opportunity?

David Rockecharlie: I would say a couple of things, and it goes back to just the core of who we are as a company, which is, we are investors and operators. We have got the core skill set and activity on the technical and operational side, that we are looking at assets that we operate every day and paying attention to what others are doing. Then on the investing side, not only are we disciplined, we are very active. It is a core competency, we see and we try to see everything. When you put that together, at the end of the day, we are just opportunistic.

There is no difference in how we go about looking at growing or investing in minerals than we do the operating business. It is about patience, it is about sticking to the returns and asset profiles we want. What we found is, we have been able to compound in both of these asset classes over time, as long as we are patient, disciplined, and prepared, and acquiring the assets that we want to own. I do think the track record speaks for itself, but the inherent advantages we have are really who we are as a company, and really what we have built, how integrated a team we are, and how well we combine investing and operating expertise.

Charles Arthur Meade: Got it. Thank you for that. Then, if I could ask a question that drills down on your Midland Basin position. I know it is relatively new for you guys, but there is another operator that made a big, really a big reveal about the Barnett, the prospective of the Barnett in the Midland Basin. I know there have been operators, it is not new that companies have been targeting the Barnett, but there was some new information with some, frankly, impressive rates. I am curious, I know you guys have only had your hands on those assets since December, but do you have any kind of estimate on Barnett potential that you would be able to share?

David Rockecharlie: Hey, David again, and then I will let Joey and Clay also give you some more context on your broader Midland question. Very specifically, I would say two things. We think we have made a phenomenal entry into the basin. We feel really good about it. It is going well, and we think we got it at great value. We do not feel any, what I will call, pressure to do anything other than make sure we get that integration and then.

Brandi Kendall: Synergy captured right.

David Rockecharlie: The second thing I would say, before I hand it off, is if you look at really our strategy in action and what we have been able to do in the Eagle Ford, we put together a very significant position really over a decade. We are now a top three producer in that basin, and a lot of the resource that we are developing today was not thought to be there or thought to be economic at the time we acquired it, which is fantastic. I would just say we have high hopes for our entire business in terms of the long-term inventory potential without trying to comment specifically on the Barnett.

I will let Joey and Clay also give you some more perspective just on how the Midland and Permian is going.

Clay Rynd: Yeah, the only thing I would add, Charles, is clearly, we have mentioned a lot when we talk about M&A, how active we are in the market. I think the same thing would apply to resource expansion. You would expect us to be very actively following where the market is going there and what opportunity we have. As David mentioned, I think one of the fit reasons you are hearing so much excitement for us on the Permian entry is that we think there is a ton of opportunity around that asset base. Really excited about where we sit today.

Jerome Hall: Charles, in regard, we have seen the same announcements on the Barnett, and we just consider that potentially more upside to what we have already highlighted, and so looking forward to exploring that with everybody else and seeing what we can do with it.

Charles Arthur Meade: Great. Thanks for the detail.

Operator: The next question is from Michael Webb Furrow, from Pickering Energy Partners. Please go ahead.

Michael Webb Furrow: Hi, good morning. I would like to stick on Crescent Royalties quickly. We appreciate your comments, and the strategy sounds quite clear towards adding scale. Given that this is a different business model, are the acquisition hurdle rates going to be consistent with legacy Crescent Energy Company, five-year payback periods and a 2x multiple on invested capital?

Clay Rynd: Yeah, that is right. It is the same lens we bring. As you know, this is cash flow orientation on the royalty side, clear focus on 2x multiple of money, and very clear focus on NAV per share and free cash flow per share accretion. What we are excited about on the business is we have been able to build it the way we built it with those as our core focus, and that is the opportunities that we see going forward.

Michael Webb Furrow: All right. That is great. Appreciate the color there. As a follow-up, I was hoping for some clarification on one of your slides in the deck, slide 11 here. By our math, it looks like the implied oil rate for the fourth quarter in the Permian was nearly 70,000 barrels a day. Represent a pretty meaningful step up from the third quarter level of, like, 61,000. Even more impressive is that you are disclosing zero turning lines for the fourth quarter. Are there moving pieces here in terms of what was disclosed, or maybe some M&A or other transactions that occurred? Just trying to square that circle. Thanks.

Brandi Kendall: Hey, Michael. No additional transactions. I would say that our base business outperformed production expectations in the fourth quarter. I think we are carrying forward good momentum into 2026. I will also flag, though, that Vital did not bring on any new wells since early October. That business was in decline, and that ultimately is what is translating into a pretty flat oil production cadence for 2026.

Michael Webb Furrow: All right. Thank you. That is helpful. I will turn it back.

Operator: The next question is from Phillip Jungwirth, from BMO. Please go ahead.

Phillip Jungwirth: Yeah, thanks. Congrats on the successful Vital integration and increase in synergies. On the well costs, I know these numbers are not always apples to apples across companies, I think you are at $700 per foot in the Midland, $875 in the Delaware. I know there are a lot of tough competitors in these basins, it does feel like there is a nice gap you could reduce. I know we are just getting started, just wondering how much runway do you see to lowering Permian well cost beyond what is being underwritten currently in the asset intel?

Jerome Hall: Good morning, Phillip. Thanks for the question. Yeah, we are going to be working the DMC piece of it diligently. We do see some great opportunity for improvement. We have already seen some, even in the short time that we have had things moving forward. The other part of it that I always like to encourage people, or point out to people, is just the value of slowing down. The fact that we have slowed down gives us the opportunity to catch our breath, understand from the past learnings from Vital and apply the things that we are going to do going forward. Just a slower pace gives us a better opportunity for higher capital efficiency and reducing costs.

We are very bullish on our opportunity to reduce well costs in the Permian.

Phillip Jungwirth: Okay. Slowing down is actually going to be my follow-up here. Just on the base decline, Vital used to give us a year-end figure for oil and BOEs. Last year, it was 42% for oil and 36% for BOEs. I am guessing this is a lot lower today, but any sense on where the Permian base decline is now or by year-end 2026? Just to confirm an earlier comment, can we imply that Permian oil production is also going to trend flat through the year, similar to total company?

Brandi Kendall: Hey, Phillip, this is Brandi. I think similar to my prior comment, I would expect relatively flat oil volumes, both in the Eagle Ford and in the Permian throughout the course of 2026.

Phillip Jungwirth: Okay, great. Anything on the base decline or?

Brandi Kendall: Yeah, on a corporate level, we did pick up, post the merger, pro forma for divestitures. We are in the high twenties across the base, the broader business. Expect to get back to our corporate target of 25% or below over the next 12 to 18 months.

Phillip Jungwirth: Great. Thank you.

Operator: The next question is from Jarrod Giroue from Stephens. Please go ahead.

Jarrod Giroue: Hey, good morning, guys. Congrats on a strong quarter. Thanks for taking my questions. My first question is around synergies from the Vital acquisition. In your release, you stated that Crescent Energy Company had already hit $40 million+ in synergies from the deal, and it is causing you to double your annual targets at about $190 million. I was just hoping you could give a little color on what savings you have already seen and what you expect to get to the $190 million. Thanks.

Brandi Kendall: Hey, Jarrod, it is Brandi. I will start, and then I will turn it over to Joey. With respect to the $40 million that has been captured to date, I would say largely overhead, duplicative public company expenses, as well as cost of capital synergies. Of the 100% increase on synergies, I would say 50% of that is ops related, and then the remaining 50% is additional overhead, incremental marketing synergies, and then additional opportunities to further drive down cost of capital.

Jerome Hall: Jarrod, I will. You know, one of the things since I have been here at Crescent Energy Company that has been incredibly impressive, this is going back in history, their 16th asset that they have acquired since going public and have a very good tried-and-true playbook on integration. I have been incredibly impressed at how efficiently we have been able to integrate these assets. The team integrations and operational performance are exceeding our expectations. Just some color on some things specifically. Going forward, we will be increasing the number of wells per pad, which will allow us to implement simulfrac.

We are also increasing lateral lengths by doing land trades, so we will be able to increase our capital efficiency there. The supply chain opportunities are starting to come to us now that we are a company of scale, combining services and contracts. Some specific examples, combining contracts on generators, compression, chemicals, tubulars. As I was explaining to Charles, just do not underestimate the value of slowing down. Slowing down gives us better operational planning, which drives better execution. Also, on the LOE side, huge opportunity on the artificial lift side, with our cash flow focus, free cash flow focus.

We are focusing on long-term value versus short time rates, so that affects ESP sizing and how we do the timing of artificial lift swaps. The list is pretty long. All of these opportunities will be feathering in over 2026, but we are pretty excited and looking forward to getting through 2026 and capturing all these synergies.

Jarrod Giroue: That is great. Thank you for the color on that. Just my second question, with the earnings release, you announced an upsize and extended share repurchase authorization to $400 million. Just curious how Crescent Energy Company prioritizes shareholder return between the base dividend, shareholder returns, and debt reduction in 2026. Thank you.

Brandi Kendall: Hey, Jarrod, it is Brandi. I would say no change to key cap allocation priorities. The balance sheet and the base dividend are top. We are prioritizing deleveraging while also retaining the flexibility where we talked about an all-of-the-above return of capital program. Again, I think in the immediate term, it is all about balance sheet. The increase in the buyback allows us to be opportunistic. It allows us to move the needle with the authorization program if the stock is significantly dislocated.

Jarrod Giroue: Thanks for taking my questions.

Operator: The next question is from Jonathan Mardini from KeyBanc Capital Markets. Please go ahead.

Jonathan Mardini: Good morning. Thank you for taking our questions. Just given the capacity or the ability for minerals companies to run at higher leverage ratios, does the latest spotlighting of Crescent Royalties change the way you think about leverage over time, or would you target that 1.5x ratio at the minerals level? Also, just how we should think about leverage on a consolidated basis trending through this year?

Brandi Kendall: Good question. I would say no fundamental change to how we think about leverage across the broader business. Long-term target continues to be one time. We do believe that we were pretty conservative financing these latest minerals acquisitions. We expect to be below 1.5x by year-end. There is clearly significant asset coverage, just given where this asset class trades relative to that leverage target.

Jonathan Mardini: Okay. Appreciate the details. Just moving to upstream, on your Eagle Ford asset slide, you show laterals in your central and southern regions increasing by about 2,000 feet compared to 2025. Can you just talk about what is driving this expected step up and maybe how we should expect this to impact D&C cost per foot in 2026?

Clay Rynd: Jonathan, this is Clay. I am happy to start, and then I will turn it to Joey. I think part of that is, as we have talked about, our ability to build scale in the Eagle Ford has given us a huge opportunity to continue to drive capital efficiency by extending laterals, asset swap, joint ventures, just blocking and tackling in terms of putting the position together and giving ourselves the best shot at capital efficiency. I will turn to Joey to also opine.

Jerome Hall: Yeah. Yeah, Jonathan, obviously, one of the simplest ways to become more efficient is to drill longer laterals. It is really as simple as that. I also point to the fact that we are increasing the pad sizes as well, which allows us to increase the percentage of simulfrac. We will be up to 70% of our pads in the South Texas region will be on simulfrac. Those two things combined really push our capital efficiency higher and higher. It is all good things happening.

Jonathan Mardini: Okay. I appreciate the context. I will leave it there.

Operator: The next question is from John Holliday Abbott, from Wolfe Research. Please go ahead.

John Holliday Abbott: Hey, good morning, thank you for taking our questions. I will just jump to the Uinta for a moment here. I mean, part of your program this year is sort of delineating the other zones in that area. When you think about that asset, how do you think about the optionality of the Uinta at this point in time, that is not as a significant part of your portfolio as in the past? Appreciate it. My follow-up question is really on maintenance CapEx and long-term oil. Based off your current plans, I guess you exit the year with one rig, maybe in the Permian.

Let us say maintenance CapEx, long term, I was talking to Brandi Kendall about last night, is $1.3 billion–$1.4 billion long term. Well, maybe about 130,000 barrels per day. I guess my question is if we do see a more constructive environment in the second half of this year, as we look out to 2027, 2028, could you decide to plateau at a higher level? Is one rig in the Permian really where you want to be, or could you decide, hey, if we have a more constructive environment, let us just be a little bit higher than 130 long term?

David Rockecharlie: Yeah. Hey, John, it is David. Great question. I would say a couple of things, just to hit optionality, immediately and succinctly, entirely HVP, entirely in our control, how we want to handle it. That is just a fantastic asset to have. It is obviously intentional on our part as well as part of our strategy. We feel really good about two things in that area. We can deliver really strong returns in a, what I will call, normalized oil market. We are making great returns there in base Butte now, just the resource potential there is incredible. We have seen our offset operators continue to expand that opportunity.

We entered there at below PDP value, we feel great about, what I will call, just methodically going through the opportunity and expanding that over time. As Joey said, the ability, operationally, to just go at the pace you want to go just provides tremendous optionality. We think of it as, more or less, a one rig area for us, and just slow and steady, continued expansion of the opportunity is what we expect. Long story short, we feel really good about running the business at a target reinvestment rate, and we have done that all the time. Our key goal is returns and free cash flow. Yes, back to your topic of optionality.

We have the ability to do more everywhere, which means not that we are going to do more everywhere, but we can allocate our development activity to the best return. If oil development is higher returning, you will see us allocating more capital towards oil and vice versa. As you have seen the gas market strengthen, we have had more allocation there. I think it will be purely a function of rate of return. We actually have oil opportunity in the Eagle Ford and the Uinta and the Permian. I think we could do it anywhere. But yes, you are correctly pointing out that we have good optionality in the Permian.

John Holliday Abbott: Appreciate it. Thank you very much for taking our questions.

David Rockecharlie: Yeah, thanks, John.

Operator: The next question is from Lloyd Byrne from Jefferies. Please go ahead.

Lloyd Byrne: Hey, good morning, David, Brandi, team. Congrats on all the progress. Can I just go back and get a couple clarifications? I do not know if it was Joey that was talking about cost, but another way to ask it, is there an optimal scale for you guys going forward? I am just thinking about in the Permian or the Uinta. You have done such a good job in the Eagle Ford with scale.

David Rockecharlie: This is David. I will give you a simple response and then give you maybe a little more context strategically. What we are seeing is that we have got the scale we need to continue to drive value within the current business around operations. We see tremendous upside in continuing to drive efficiencies across these assets. In particular, as you know, the newest assets in the company are some recent, call it 12 to 18 months ago, Eagle Ford acquisitions, and then the entry into the Permian. We feel like we have got plenty of scale there to continue to drive value. We think this industry, through cycle, presents significant opportunity for our business strategy to grow through acquisition opportunistically.

We also see significant scale potential beyond what we already have, in particular in the Eagle Ford and the Permian. I think that is what we are looking for. Those acquisitions are all going to stand on their own, and they are going to be because we think the value is right, because we think we are ready to do them, and we see an ability to do what we do, which is buy assets and make them better. I think we would tell you, we have got the scale we need today to drive significant value on our existing footprint.

Lloyd Byrne: Okay, that makes sense. Then let me come back to the Uinta a little bit, and I know it is a nice, steady growth going forward, but are there any bottlenecks at this point: takeaway, rail, permitting? Could you grow it faster if you wanted to? I guess that is my question.

Brandi Kendall: Hey, Lloyd, I will start. We could grow it faster if we wanted. I think we have always thought about this asset as kind of a one-rig asset. The basin has really transformed over the last couple of years, given rail, given debottlenecking on the gas side of things. I would say no constraints from an oil or gas midstream perspective.

Lloyd Byrne: Okay. That makes sense. Thank you.

David Rockecharlie: Thanks a lot.

Operator: There are no further questions at this time. I would like to turn the floor back over to David Rockecharlie for closing comments.

David Rockecharlie: Perfect. Thank you all again. We really appreciate, again, the opportunity every quarter to share how we are doing, and hopefully, the key takeaways all came through, which is base business, high performing with a lot of momentum. We completely transformed the portfolio last year into a much more focused and scaled business. Again, we think the company has a tremendous amount of catalysts, both on the existing assets, but also one of the things we really are highlighting this quarter is the opportunity in our minerals business in that segment. We will continue to keep you updated as we move forward. Again, thank you for the support.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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