It’s a great thing for our margins. But when you look at some of the other metrics like LOE, we don’t have a lot of low value BOEs that we get to spread our cost over. So if you looked at some of our peers and with their mix of product, again, if we had a similar economic kind of mix, again, we’d be in that 85,000 BOE a day range to generate the same kind of EBITDA. And if we did that and looked like our peers with that mix, our LOE would be in the $5 range, amongst the best of any of our peer group. So again, we’ve got some more distance to go, and we’ve got some things in place that are going to continue to drive it down, but somewhere in that $7.50 [ph] range kind of average next year, I think, is a really good number for you.
Jeff Robertson: Thanks. Jack, you talked about capital return to shareholders. And I know that the term loan has, I think, a $30 million per quarter amortization feature that begins at the end of the first quarter of next year. Can you talk about how you think about the best outcome for shareholders in terms of maybe paying down more of the term loan, if you have the opportunity, in your cash flow and weighing that against the dividend and potentially share repurchases?
Jack Hightower: Yes. Jeff, it’s hard to differentiate between the three. We look it more as a basket, and we think that we can accomplish pieces of all of that. And so definitely, we will be retiring debt through the amortization. We also have a cash sweep opportunity. And so when we’re building cash sitting on our balance sheet, we might as well get good utilization of that cash, and two ways to do that is to support our share price by having a stock repurchase and then also returning more capital back to the shareholders by increasing our dividend. So it’s a combination of things that we’re going to balance as we go forward, recognizing that our debt is going to be going down. And we’re going to be so healthy within the midyear of 2024 from a financial perspective. It gives us that luxury to do that, especially when we’re not trading for a price that we feel like is fair in the marketplace.
Jeff Robertson: Thank you for that.
Operator: Thank you very much. One moment please. Our next call comes from Nicholas Pope with Seaport Research. Your line is open.
Nicholas Pope: Good morning, everyone.
Jack Hightower: Good morning.
Steven Tholen: Good morning, Nick.
Nicholas Pope: There’s been a lot of moving parts the last few months. I want to make – you talked about guidance on production. I just want to make sure I’m clear on where – what your expectation is right now for, I guess, exit rate or fourth quarter, what the expectation is right now for production here in the near term?
Jack Hightower: Yes. Nick, we’re not changing our guidance. As Mike mentioned, with the wells to be completed in the fourth quarter and with the momentum we have right now in increasing our production, we fully expect to accomplish our exit rate that we provided in prior guidance of 57,000 barrels a day. Now those numbers could change on the upside. I don’t think they’ll change on the downside simply because of having lumpy production and how many wells are being fracked and what wells have to go offline, it’s very hard to predict that as we go forward. But undoubtedly, we’re going to hit the 57,000 barrel a day exit and then production will continue increasing into the first quarter. And of course, adding the third rig, and we may even add another rig once we get down to less than 0.75 debt-to-EBITDA, 3/4 of a turn.
We can increase drilling, but we’re going to do that with very much adherence to capital discipline and not get out over our skis, so to speak.
Nicholas Pope: Got it. That’s great. I appreciate that. And then looking at kind of the progression of working capital for you over the last few quarters, obviously, it got very negative lead into the refinance. It looks like really kind of brought that back into balance here this quarter with everything completed. Is this kind of the run rate you’re expecting with working capital going forward? Because you have this big cash number for CapEx relative to kind of the accrued number. Just trying to get a sense of what those – what that movement might look like here in the near term, and what the kind of plan is?
Jack Hightower: Well, if you’ll think back, looking back, we had six rigs running. We had a real substantial decline in oil prices. And so a lot of things hit us there that were out of our control. But now we know that where we have oil prices, we have a considerable amount of our production hedged. We know that it costs us roughly $200 million a rig. So if you take $600 million to $700 million of capital and you’re already at 52,000 barrels a day at over $1 billion run rate, you have plenty of free cash flow to do all those things that we said we were potentially going to do as objectives in 2024. So unless we have a precipitous decline in oil prices, and if you recall in the past, we never obligate ourselves, we can drop a rig in 30 days if we want to.
So we’re going to maintain capital discipline and maintain control over our working capital and not ever get ourselves back in that position again now that we have grown the company. We’ve reached a plateau of growth that we didn’t have in the second quarter of last year. We were only making 27,000 barrels a day, and now we’re up to 52,000 barrels a day. So this has truly been a transformational quarter for the company.
Nicholas Pope: That’s great. I appreciate the time, everyone. That’s all I had. Thank you.
Jack Hightower: Thank you, Nick.
Operator: Thank you. I am showing no further questions at this time. This does conclude our question-and-answer session. Thank you for your participation in today’s conference. This concludes the program, and you may now disconnect. Have a good day.
