Northern Oil (NOG) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Evelyn Leon Infurna
• Chief Financial Officer - Chad Allen
• President - Adam Dirlam
• Chief Executive Officer - Nick O'Grady
• Chief Technical Officer - Jim Evans

TAKEAWAYS

• Total Production -- 156,239 Boe per day, representing a 19% increase from the prior year and a 7% sequential improvement.
• Adjusted EBITDA -- $444.5 million, a 15% increase year over year driven by record production volumes and improved realizations.
• Free Cash Flow -- $148.6 million, increasing 25% versus the third quarter of 2025 despite higher capital spending levels.
• Oil Production -- 74,837 Bbls per day, a 10% sequential increase from the second quarter.
• Natural Gas Production -- 488,391 Mcf per day, a 39% increase year over year and a 5.2% sequential increase.
• GAAP Net Loss -- $111.8 million, primarily reflecting a $308.0 million non-cash mark-to-market loss on the derivatives portfolio.
• Adjusted Net Income -- $142.2 million, or $1.32 per adjusted diluted share.
• Organic D&C Capital Expenditures -- $190.7 million, reflecting a pickup in activity from the second quarter.
• Ground Game Capital Expenditures -- $56.5 million, covering 19 transactions that added approximately 1,060 net acres and 2.9 net wells.
• Liquidity -- $1.6 billion, including $26.4 million in cash and approximately $1.58 billion in availability under the revolving credit facility.
• Total Debt Reduction -- $100 million, leading to a net debt-to-annualized adjusted EBITDA ratio of 1.47.
• Stock Repurchases -- 667,989 shares, purchased at an average price of $23.96 per share for a total of approximately $16 million in the quarter.
• Quarterly Dividend -- $0.45 per share, paid on Oct. 30, with a subsequent $0.45 per share dividend declared for January payment.
• Normalized AFE Costs -- $739 per lateral foot, a 2.9% improvement sequentially and more than 5% below the 2025 average.
• Oil Differentials -- $2.84 per barrel, improving 27% year over year and coming in lower than the guided range.
• Natural Gas Realizations -- 98% of Henry Hub, a significant improvement from 90% in the second quarter.
• Permian Gas Realizations -- 85% of Henry Hub, recovering from 39% in the second quarter as Waha takeaway constraints eased.
• 2026 Production Guidance -- 147,000 to 150,000 Boe per day, raised from the previous range of 143,000 to 148,000 Boe per day.
• 2026 CapEx Guidance -- $850 million to $900 million, with management expecting to land toward the high end of the range.
• LOE Guidance -- $9.75 to $9.85 per Boe, revised from the previous $9.70 to $9.80 range due to higher processing costs.
• Cash G&A Guidance -- $0.85 to $0.90 per Boe, adjusted to reflect costs incurred year to date.
• Williston Basin CapEx -- 33% of total third quarter capital expenditures.
• Permian Basin CapEx -- 31% of total third quarter capital expenditures.
• Appalachian Basin CapEx -- 16% of total third quarter capital expenditures.
• Duvernay and Uinta CapEx -- 11% and 9% of total third quarter capital expenditures, respectively.

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RISKS

• Allen stated, "Production expenses ran a bit higher in the quarter, above our full year guidance range," noting that elevated processing costs in the Williston Basin driven by higher NGL prices impacted the results.
• O'Grady noted that the Bakken region enters a seasonal period where "it is always slower in terms of completions," potentially impacting operational timing.

SUMMARY

Northern Oil and Gas, Inc. (NYSE:NOG) reported record total production and adjusted EBITDA for the third quarter, driven by operational leverage and improved pricing realizations across its multi-basin portfolio. The company achieved its goal of reducing leverage below 1.5 times net debt-to-adjusted EBITDA a full quarter ahead of schedule while generating its 27th consecutive quarter of positive free cash flow. Management reported that the company's assets are self-funding their own growth, providing the flexibility to return capital through dividends and share repurchases while maintaining a robust $1.6 billion liquidity position. The company raised its full-year production guidance and tightened its realization outlooks, reflecting strong well performance in the Permian, Uinta, and Duvernay regions.

• O'Grady stated, "Our assets are self-funding their own growth while still generating substantial excess cash."
• Management is currently evaluating 14 asset packages across seven different regions with an estimated total market value exceeding $15 billion.
• Dirlam reported that the recently closed Duvernay position is outperforming initial expectations in terms of well productivity, D&C costs, and operating expenses.
• O'Grady noted that the Uinta assets represent approximately 8% of total production and remain on track with internal performance estimates despite regional takeaway expansions.
• The company increased its share buyback authorization in July by $150.0 million to take advantage of the equity trading at a discount to the marketable value of its assets.
• Management confirmed plans to host the company's first Investor Day in the coming months to provide a deep dive into its long-term business strategy.

INDUSTRY GLOSSARY

• AFE (Authority for Expenditure): A budgetary document used in the oil and gas industry to estimate costs for drilling and completing a well.
• Boe (Barrels of Oil Equivalent): A unit of energy based on the approximate energy released by burning one barrel of crude oil.
• D&C (Drilling and Completion): The process of drilling a well and preparing it for production.
• Duvernay: A major shale play located in the Western Canadian Sedimentary Basin in Alberta.
• Ground Game: Small-scale, tactical acquisitions of non-operated working interests and mineral rights, typically one well or acre at a time.
• Henry Hub: A natural gas pipeline in Erath, Louisiana, that serves as the official delivery location for futures contracts on the New York Mercantile Exchange.
• Mcf: One thousand cubic feet of natural gas.
• NGLs (Natural Gas Liquids): Components of natural gas that are separated from the gas state in the form of liquids, including ethane, propane, and butane.
• Waha: A natural gas hub in West Texas that serves as a primary pricing point for Permian Basin production.

Full Conference Call Transcript

Operator: Greetings, and welcome to the NOG's Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Evelyn Leon Infurna, vice president of investor relations.

Evelyn Leon Infurna: Thank you.

Operator: You may begin.

Evelyn Leon Infurna: Good morning. Welcome to NOG's third quarter 2026 earnings Conference Call. Yesterday, after the market closed, we released our financial results. You can access our earnings release and presentation in the Investor Relations section of our website. At noginc.com. We will be filing our September 30, 2020 10-Q with the SEC within the next few days. I am joined this morning by our chief executive officer, Nick O'Grady; our President, Adam Dirlam; our Chief Financial Officer, Chad Allen; our chief technical officer, Jim Evans. Our agenda for today's call will be as follows.

Chad will provide an overview of our financial performance, followed by Adam, who will share an overview of NOG's operations and business development activities and Nick will close with remarks about NOG's positioning and value proposition. After our prepared remarks, the team will be available to answer any questions. Before we begin, let me remind you of our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results, to be materially different from the expectations contemplated by our forward-looking statements.

Those risks include, among others, matters that we have described in our earnings release as well as in our filings with the SEC. Including our annual report on Form 10-K, and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During today's call, we may discuss certain non GAAP financial measures, including adjusted EBITDA, adjusted net income, and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release, or earnings presentation on our website. With that, I will turn the call over to Chad.

Chad Allen: Thanks, Evelyn. The power of the NOG platform was evident in the third quarter. As the company set new quarterly records for both adjusted EBITDA and production. Adjusted EBITDA was up 11% from the 2nd quarter and 15% from a year ago. Total production was up 7% sequentially and 19% year over year. Oil volumes were up 10% from the 2nd quarter, and natural gas set another record up 39% from a year ago. Production expenses ran a bit higher in the quarter, above our full year guidance range. That largely reflects elevated processing costs primarily in the Williston Basin, which run higher with stronger NGL prices.

Year to date, we are at $9.77 per BOE, and our updated guidance range of $9.75 to $9.85 implies a fourth quarter in line with the third. Higher production expenses did not hold back our results. Cash margin and adjusted EBITDA both improved in the quarter. Contributing to the improvement in margins were tighter oil differentials, which came in under $3 per barrel, while gas realizations improved significantly to 98% of Henry Hub. Up from 90% from the 2nd quarter. The improvement was led by the Permian, where gas realizations recovered to 85% of Henry Hub, compared to 39% in the 2nd quarter.

As Waha pressure eased The improvement of realizations added about $12 million in the quarter or about $0.85 per BOE, more than twice the increase in our production expense rate. Cash margin per BOE improved sequentially to $30.74. Budgeted capital expenditures were $247.3 million, including $190.7 million on organic D&C, and $56.5 million on ground game activity. The increase from the second quarter reflects the pickup in activity we discussed last quarter. Free cash flow was up 25% from the 3rd quarter of last year, even while funding that higher level of activity. On an LTM basis we have generated $381 million of free cash flow. from $351 million at the end of the second quarter.

Just as a side, the third quarter of 2026 marks the 27th consecutive quarter of positive free cash flow for NOG, Exceeding $2.3 billion over the same time period. Moving on to the balance sheet. We ended September with over $1.6 billion of total liquidity. In August, we issued $500 million of 7.5% senior notes due 2034, and use the proceeds to pay down our revolver, which ended the quarter at $223 million Total debt came down by just over $100 million and net debt to LQA adjusted EBITDA was sub-1.5x within our stated range, 1 quarter ahead of our year end goal.

On shareholder returns, we purchased about 668 thousand shares in the quarter at an average price of $23.96. Giving about $227 million on our authorization. Our board declared a $0.45 per share dividend for the quarter, or about $48 million paid on October 30th. Our dividend remains well covered with third quarter free cash flow exceeding the payout by more than 3x. Turning to our guidance. With 3 quarters behind us, we are updating our full-year 2026 outlook, Given the record third quarter volumes and strong well performance, we are raising our annual production guidance to 147 thousand BOE per day. We are also updating our cost guidance including production expenses, cash G&A, and production taxes.

Stronger realizations year to date allowed us to tighten our overall differential guidance and raise gas realizations. Our capital budget remains $850 million to $900 million and given higher activity and continued ground game success, we expect to land toward the high end of that range. You can find additional details on the guidance page of our earnings presentation. With that, I will turn the call over to Adam.

Adam Dirlam: Thanks, Chad. Our third quarter results demonstrate our ability to capital across the portfolio. Driving record total and natural gas volumes and with oil production up nearly 10% from the 2nd quarter. We went on to again beat our internal expectations on oil, and Permian volumes rebounded as Waha takeaway constraints eased. In Appalachia, our 2025 joint development program culminated with strong performance and expected returns well above our underwriting while our jointly owned Ohio assets with Infinity are gaining momentum. Our recently closed Duvernay position is also running ahead of initial expectations with well productivity, D&C costs, and operating expenses all outperforming. Activity picked up modestly relative to our expectation.

We turned in line 23.9 net wells during the quarter, nearly double that of the second quarter and almost all within our oil weighted basins. We also added 18.1 net wells to our D&C list, and well costs remain in check. Recent normalized AFE costs are down 3% quarter-over-quarter and more than 5% below our 2025 average, as drilling efficiencies are realized and lateral lengths continue to increase. Turning to business development and our ground game. NOG's execution has been exceptional as we continue to expand our opportunity set and allocate capital compelling investments. During the quarter, we closed on 19 transactions bringing our year-to-date ground game to 15.4 net wells over 8.5 thousand net acres.

Large M&A opportunities have also accelerated. And the team has been evaluating roughly 14 asset packages across 7 different regions with an estimated total value of over $15 billion This expansive opportunity set gives us the ability to be discerning. We will only focus on the opportunities that command a compelling risk adjusted return net to NOG. Whether through acquisitions, divestitures or trades, our focus will always be to enhance NOG's overall portfolio. Take a returns first approach, and allocate capital that will drive long term value.

Nicholas L. O'Grady: Thanks, Adam. and thanks everyone for joining us this morning and for your continued interest in our company. I will cover 4 pillars that reinforce the strength of our business and build on Chad's and Adam's comments. Number 1, record results. Our third quarter results speak for themselves. We delivered record total production and record adjusted EBITDA a testament to the depth and quality of our portfolio we have assembled over the past several years. We generated approximately $150 million of free cash flow, and we did so even as capital spending rose, which tells you something important. Our assets are funding their own growth while still generating substantial excess cash.

Margins expanded as well, driven by improved pricing differentials and record gas production. Rising volumes combined with better realizations is exactly the operating leverage our model was built to capture. Number 2, a strong balance sheet. We have used our balance sheet to acquire high quality assets over the past several years. And we know debt levels have been a focus for investors. We are delivering on our commitment to improving our leverage metrics. Total debt fell by more than $100 million in the quarter and our net debt to EBITDA ratio is now below 1.5x.

Aided by our recent notes offering, total liquidity stands at approximately $1.6 billion, giving us the flexibility to act when opportunities arise, whether that is the form of acquisitions or share repurchases. We enter the final quarter of the year with a strengthened balance sheet significant firepower. Number 3, games are won on the ground. The headline transactions get the attention, but a great deal of our value is created at the ground-game level: 1 acre, 1 well, and 1 trade at a time. We continue to optimize our assets region by region, adding, trading or executing small asset purchases that enhance our overall holdings.

For instance, in Canada, we see a line of sight to significantly growing our existing footprint. In the Uinta and Appalachia, our teams delivered significant ground game success expanding our position in 2 basins we believe have long, price-resilient runways ahead. These are capital efficient additions that rarely make headlines, but they compound into meaningful inventory and value over time. Importantly, our team is hitting the proverbial Q4 ground running, with this period often the most seasonally productive time of the year in what is already been a very strong year for our BD efforts. Number 4, portfolio optimization on multiple fronts. Guidance is increasing for the year while capital efficiency shines. Activity across our portfolio is stable to increasing.

And every 1 of our regions is performing well. This is momentum we expect to carry into next year. At the same time, we remain relentlessly focused on optimizing our portfolio which could include a myriad of strategies. Including divestitures that bring value forward, Additionally, we maintain an unyielding focus on the ground to add value to our existing asset base while also evaluating longer term strategic acquisitions that improve our portfolio and add financial benefit to investors. We also continue to invest in our own shares, repurchasing additional shares of stock in the third quarter at prices below $24 per share, We continue to view our shares as 1 of the most compelling investments available to us today.

Like many upstream companies, our shares trade at a deep discount to the underlying after tax marketable value of our assets. We do not see that as a setback. We see that as an opportunity. and 1 we intend to seize. We have the assets, the balance sheet, and the team to close that gap and we will take deliberate steps to do so. The records we set this quarter are not a ceiling. We believe the best is still ahead for us. there is a great deal more potential yet to be unlocked. We have catalysts and options in front of us to further unlock value over the coming months and years.

And we will focus on the results that drive the highest long term returns for the business. That is what a company run by investors for investors does. Before we open the call to questions, I would like to note that NOG is planning its first Investor Day in the coming months. Specific details on exact time and location will be shared soon. But we are looking forward to using this event as an opportunity to connect with the investment community and share a deep dive on our business and our long term strategy. With that, we can turn the call over for questions.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Neal Dingmann with William Blair. Your line is open. Please go ahead.

Neal Dingmann: Morning, Evelyn and the rest of the team. Nick, my first question is for you or Adam. Just wondering how. Specifically, how often would you say Northern these days goes nonconsent versus the historical average? I guess what I am trying to figure out is twofold. First, are there areas you own that you believe still do not compete for capital and you would rather not have operators drill? And secondly, do you believe that there is some well costs that are too high even in today's environment, and you would rather not have the operator drill those.

Nicholas L. O'Grady: Yeah. So our nonconsent rate is around 3%, Neal. it is largely focused to what I would describe as some of the weaker operators in areas in the Williston And so, you know, on a on a net basis, it is relatively low. We spend a lot of time on the front end-- we spend a lot of time on the front end buying you know, buying properties that we know will be competitive. What I would say, though, is if you think about the stack of returns, I mean, we obviously benchmark everything on a risk adjusted basis versus our own cost of capital or our own return thresholds.

But you know, there are some that are lower in that stack than others, and so oftentimes, there is the ability to potentially trade some of the ones that are in the lower quartile that stack for those that are in the higher.

Adam Dirlam: Yeah. Neal, I think 1 thing that I would add there is, a lot of these wells that are nonconsented, I think it is less than a handful, frankly, or delineation type wells, more science experiments. And we are taking a look at the AFEs that are coming across mine and Jim's desk on a daily basis and comparing that way and that against the ground game. And if we are able to, you know, source significantly better returns on the ground than that is a trade we are going to make all day.

Neal Dingmann: And that is what I was thinking, Adam. You have a much bigger portfolio, so I figured you could be a little bit faster these days. But my second question, Nick, is for you or Chad on capital allocation. Specifically, has the capital allocation strategy changed now that you have reduced debt certainly to more than a manageable level? And, you know, the dividend yield, you know, obviously, continues to be over 8%. Would love to hear your thoughts on the allocation.

Nicholas L. O'Grady: Yeah. I mean, open window opens on Monday, Neal. And so as I mentioned in my prepared comments, our equity is as compelling as it has ever been. And look, markets are what they are in any given point in time. You know, I been watching the last few days of what is been going on and I am. I have to remind myself that oil is still 90. And when I look at what is happened with the equities, But at the same time, what I tell you is, look, we want to take leverage down further, and we will do that. So it is all about doing, like, everything in life, doing it in moderation.

But I think the equity is a very. We have increased our buyback authorization on purpose, which is really to give us the flexibility to take advantage of periods like this. Look. I mean, you mentioned the yield, the cost of the equity and where it is today. You know, our dividend represents, you know, and it has, if you go back over the last 3 years, you know, roughly a third of the cash that we have been generating and it does not really fit with where the yield is today. And, ultimately, that creates a big advantage for us. But we will be. Perfect. Thank you. I will say that, you know, it is to.

Neal, just to quote our chairman, you know, he would tell you high stock price, happy face, low stock price, happy face because it creates an opportunity.

Operator: Your next question comes from Scott Hanold with RBC Capital Markets. Your line is open. Please go ahead.

Scott Hanold: Yeah. Appreciate it. Thanks. You know, Nick, I think some of the you know, turbulence in NOG stock, especially this week, is related to the Uinta and what the operator said, you know, about its outlook there and performance. Now, can you just give us a sense of, like, how that impacts Northern and how you go about, putting things like that in your guidance?. And I guess that would not only apply to the Uinta, but, like, all your assets just to give us some comfort in your outlook.

Nicholas L. O'Grady: I mean, number 1, Scott, the Uinta represents about 8% of our total production. Number 2, if you watch carefully, we have done about a $150 million of additional acquisitions in the Uinta since we acquired those properties outside of our partner. And so our numbers are not necessarily directly tied to theirs. And number 3, each company risks their, you know, their potential performance accordingly. And I just say that we take great pains to try to risk that. So I do not think this is, quite frankly, from our perspective--, our Uinta performance in the third quarter and as we head into the fourth is right on track with where we thought.

The final thing I would just say is, you know, I have had the time now. I have been traveling, but to read through those comments, this is a transitory issue. there is massive expansion going on there. So, you know, even if it slows the basin down for a quarter or 2, you know, by first quarter, we are gonna be. You know, frankly, we are increasing our rig activity. So if you can look beyond 90 days, we are gonna be seeing significant growth in that basin, something we never underwrote when we acquired it.

Scott Hanold: Okay. that is good to hear. You obviously talked about the analyst day coming up. And within that, I guess, we will hear more about the opportunities to, at least, look at your portfolio and what makes sense to optimize. You mentioned divestitures and potentially other ways of optimizing the portfolio beyond? Like, what. Are there other ways that you could evaluate, optimizing that just at a high level?

Nicholas L. O'Grady: Yeah. I mean, I think I will reserve some comment on this in the sense that we have a number of private things we are going through today. That are not ready for prime time, but there are numerous ways. Everything from how we source our capital to how we partner to how we trade and divestitures are certainly part of that. But we also. You know, we are an analytically driven place. Right? And so when we do these evaluations, we do not do it lightly. You know, what I would tell you is that many companies, when they feel they are undervalued, will sell a high value asset they will show accretion to Wall Street.

But ultimately, they might have just sold their best asset or sold something in which they would given away a lot of future upside that they are they are not being paid for even in that scenario. So the key thing about all this stuff is to do the research, to do it right, and to do it in a way that ultimately creates the most long term value. Okay. Appreciate that, sounds like this is. That next evolution of the NOG business model then. Yeah. Look. We have built tremendous scale, you know, and I do not think it is fully appreciated. You know? As a non operator, we benefit from diversity.

You know, I think it is harder for an operator to efficiently allocate capital in multiple places. But for us, it creates a huge flywheel effect. So the statistic I would give you that we gave to our board in midyear is that on the on the small and large asset transactions, because we are as broad as we are our footprint was up 4.86 thousand% in those 2 categories respectively year over year. And so where I am going with this is that the most the best way to be able to efficiently allocate capital over time is to have more shots on goal, and that is exactly what is happened as we have expanded the footprint.

So but we wanna make the business better. You know, we wanna grow our profits per share, but there are a lot of ways do that. That can be through reducing share count. That can be through acquisitions. It can be through the drill bit. But at the end of the day, what we are really looking at whether it is divestitures, acquisitions, or anything else, is making the business better and more capital efficient as we grow those profits per share.

Operator: Your next question comes from Charles Meade with Johnson Rice. Your line is open. Please go ahead.

Charles Meade: Yes. Good morning, Nick, to you and your whole team there. Adam, you made some comments or you offered some details in your prepared remarks about AFEs being down. And, Nick, I think you mentioned that activity in most of your basins is stable to up. I wonder if you guys could talk about what you are seeing, what you expect to see for 2027 across all your different operating areas and operators. And, you know, particularly, Nick, maybe you can wrap in, it is-- there is been a lot of shocking things in the market. 1 of them is that the '2027 gas strip is $2.90 now.

And so I would think they would have to bias activity lower in gas spaces. But I wonder if you could just give us what 2027 looks like to you right now.

Adam Dirlam: Yeah. I mean, I think as we have prosecuted 2026, we have seen a shift since, you know, expectedly so from, you know, maybe some of the gas weighted, you know, activity more towards the oil weighted activity. You know, looking at the AFEs that we consented just here in the third quarter, the Williston was leading the way. I think some of that is a function of concentrated working interest And if you think about, you know, AFE costs, the Williston has been, you know, 1 of the leaders in terms of kind of reduction on a normalized cost per foot.

So I would expect, you know, the Permian will continue to be impacted as it ever has been, Williston, Uinta,, will continue to be steady as it goes in the Duvernay You know, while it is early days, you know, the conversations that we have been having there has been accelerating ahead of expectations. And so I think we will continue to see that, obviously, notwithstanding any sort of material change in commodity prices. I do not think you are necessarily gonna see a massive acceleration from any of our operators, at least from the conversations that we have had, maybe some of the privates, and a little bit more than the public.

But that is exactly what we are seeing on the ground right now and expect that to continue.

Nicholas L. O'Grady: Yeah. And I would just say seasonally, Charles, as you head towards the end of the year, things tend to slow down a little bit, that is just because people are getting close to exhausting their budgets, and to the extent that they are ahead, they will move that activity into next year. So, you know, it is not totally linear. Right? You are also gonna go into, like, a seasonal period in the Bakken where it is always slower in terms of completions.

But where I am going with that is that if you actually look at the rig count in our basins, you know, quarter to quarter, month to month, it can vary, but the overall activities continue to rise. Our Uinta, as Adam mentioned, are you into Canadian operations? Are poised for growth. I think our Permian and Williston are steady as they go.

As for Appalachia and gas, I think the 1 thing you have to take in mind, you know, it may mean that you do not see tremendous growth, but keep in mind that in Appalachia, our cost, 1 of the reasons we acquired those properties is that our cost basis, meaning that our breakeven levels are some of the lowest in the industry. And they will be very resilient, and so you are not necessarily gonna see a huge variability in activity like you might in the Haynesville or some of the higher cost plays.

Charles Meade: Got it. That is. that is helpful elaboration. And then Nick, I wanna go back to a point I think you have already addressed a little bit, but I wanna see if I am understanding it correctly. I think this is about acquisitions and, how you would fund acquisitions?. And maybe the right way to think of it as a relative priority. I think what I am hearing is that you want debt levels to move lower mostly, maybe on an absolute or a metric basis. You can review your equity as, you know, as an expensive currency in the sense that you do not wanna you do not wanna use your equity.

So that kind of to me, at least, leads me to think that any future acquisitions would have to you know, that some of the funding would have to be from some you know, some kinda asset sale. Is that is that the right is that the right, you know, I do not wanna say. I am not to get you committed to anything, but is that kind of the right read on your posture? Now?

Nicholas L. O'Grady: I would give that a maybe. I mean, I think, look, we you know, our focus this year, you know, we will we. We have spent roughly $150 million on the ground in an environment. In a price environment like we are in right now. it is. You know, I talked about this yesterday. I was speaking at a heart event, and what I tell you is that a tale of 2 cities. When prices are low, we and everyone else would like to buy oily properties. You know, we tried very hard last year, but what tends to happen is in low price environments, the quality of the opportunities available to you tends to be lower.

We spend a lot more money on raw land and leasehold, bringing forth to today. There are a lot of high quality prospects out there. The backlog is as big, if not bigger than it is ever been. But the risk skew is not great for the acquirer. Right? It does not mean you cannot hedge that stuff, but you take activity risk and other things. Alongside that. So our desire to do large scale M&A and when you put it into context of, yes, our equity is precious as it is always been. Though, can you still do things accretively? Of course. but is it the level of accretion that our board deems to be you know, fair?

The answer is no. And so I think look, we have plenty of liquidity available to us. I mean, we have got $1.6 billion. Our revolver is barely drawn. And so we certainly have the firepower to do so. But I do not think we are interested at this point in doing a levering transaction. And so that should point you to the fact that most of our acquisitions will be on the ground in the regular course budget. And or on a small scale, which is not going to make a material dent in leverage. And I would say this, that,, we think we can do all of these things.

It does not mean, though, if the answer is yes, would an asset sale potentially provide those proceeds in order to do that. Yes, of course. that is true. But we will we will see, you know, if-- but getting those 2 stars to align at the same time is also something that is not necessarily, you know, a given. Right. that is helpful, Nick. Thank you.

Operator: If you would like to ask a question, please press 1. And to withdraw your question, press 1 again. Your next question comes from Paul Diamond with Citi. Your line is open. Please go ahead.

Paul Diamond: Thank you. Good morning, all. Thanks for taking the call. Just want to touch on the trajectory of your capital expenses. You are trending towards the high end of the range at the year end. Do you see that carrying into. it is the same trend carrying into 2027, or is it too early to tell?

Nicholas L. O'Grady: I think it is. I think as it pertains to 2027, it is just too early to tell. We are working on a number of initiatives, some of which could drive significant growth, some of which would be more in the maintenance model. And I think between the volatility and prices and, you know, ensuring that these projects get signed up or do not, I think it is gonna really make a big difference in that outlook. So I think we are gonna have to wait. What I would say is that I do not see an outcome that is a bad 1. So either,, either we can, you know, maintain the status quo and everything's great and we.

Our capital efficiency should be similar. Look. I think in general, well costs are rising, but I would say to Adam's point, on a per-foot basis, our lateral length continues to increase. So on a normalized per-foot basis, I am not sure we are going to see anything that meaningful.

Paul Diamond: Got it. And then can you just talk about so on inflation outside of steel and diesel, are you seeing any meaningful, I guess, movements or meaningful tailwinds into the end of the year? And following the next.

Adam Dirlam: I think the 2 places I would point to is ThermoFrac and, you know, just drilling time. I think that is probably where our operators are most focused in terms of, you know, trying to mitigate, you know, any sort of inflationary pressures that we are seeing. And then, obviously, lateral lengths being, you know, the biggest of the 3.

Paul Diamond: Got it. Understood. Appreciate the clarity. I will leave it there.

Operator: There are no more questions at this time. I will now turn the call back to Nick O'Grady, CEO, for closing remarks.

Nicholas L. O'Grady: Thanks, everyone, for joining us today. We are really thrilled with the Q3 results, and we look forward to delivering more Please reach out to Evelyn with any questions.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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