Adam Dirlam: Yes, I mean, as far as the criteria qualitatively, I think, we’re relatively agnostic in terms of overall structure. It’s really going to boil down to the overall rate of return and asset level returns there. So, we are never going to change our stripes in that regard. Big deal, small deal all take the same amount of time. And so, I think where that probably comes into play a little bit more is the ground gain side, right, is a 1% working interest really going to move the needle for us? And frankly, when you get into the larger ground game deals, the higher concentration the competition is relatively limited, right, when you think about your competition and what their capital pool is and how they want to diversify kind of their capital allocation.
So, we’ve definitely stepped up in that regard. But as far as overall structure or quality, those types of things, I think, we are going to continue to just stay the course with what we’ve done in the past. And as far as where those opportunities are located, let’s say primarily that’s going to be in the basins where we are at. Permian, obviously, with the rig level activities there and the Delaware, to be a bit more specific is generally where we are seeing those opportunities. But we’ve been surprised about some of the things that have come to market and we’ve been approached on in the Appalachia, as well as the Bakken.
Neal Dingmann: Okay.
Adam Dirlam: Not to mention, the Haynesville, does that work in this particular price environment, maybe, maybe not. Then you’ve got, the Eagle Ford, that’s been an area of interest, but given the maturity and the way things are blocked up there, we just haven’t found the right asset. DJ, Great Rock, got to obviously take into consideration the political environment there. And so I think, a lot of these other places – I forgot the Utica, that’s been interesting. Obviously, you’ve got to be under the right operators there. And so kind of those four areas are areas where we’re obviously keeping our ear to the ground, but they’re going to have a much higher bar than to get things turning.
Nick O’Grady: Yes, I think the one thing you have to take into account is the commodity environment we are in. I mean, commodity prices are relatively high. And so we generally stick to our knitting. We want resilient assets, right? You really want to focus on lower breakeven assets, especially in an environment like this, because whatever the discount rate is, the sensitivity on the discount rate is going to be very different depending on if you see a pullback in prices as well activity. So, not all returns are – they might be underwritten alike, but the resiliency of them are different. And that’s why you’ve generally seen us focus on higher quality assets in areas that are always active.
Neal Dingmann: No, it makes total sense. And then, Nick, just secondly, maybe I am trying to get an idea of how do you – you gave some good ground game update, as well as your dividend growth, you recently just talked about that. And I am just wondering, kind of going forward, how do you sort of balance that the production and shareholder return growth?
Nick O’Grady: Yes, I mean, I think, that is the special sauce. And I think that in general we want to be more conservative by nature, Neal. And so, I think that in terms of raising the dividend early, it’s about $2 million additional capital this year than we’ve previously planned. I think the board was very confident that we were there. And we’ve obviously done a ton of hedging and de-risking of the assets we bought over the past quarter. But over time, I think, we view there is upside to dividends. I mean, I think you can easily look at the environment we’re in today and say, well, why aren’t you paying out a lot more capital? And I think it’s because we’re not just thinking about the environment we’re in, we’re thinking about the environment that could be, because I think, there is a fine balance in our business about giving everybody what they want right away versus, being a good steward of capital and thinking about the potentiality of outcomes.
And so, I think we want to be purposeful. I think is there upside to our current dividend plan? Of course, there is. And we will take that in stride as we achieve goals and as we get there. But I think we want to be careful. I also think, and you’ve heard me say this quarter after quarter, but we really do think about capital allocation and total return, which is that – personally, I love dividends, I love every time we pay a dividend, I am a significant stockholder. But at the same time, we want to see – we want the flexibility to dynamically allocate that capital so that we can create more dividends for the future, not just as much as we can get today. And so, it’s a fine balance. I think we’ve done empirical studies with our investors.
And I think that the view is that one, a dependable, regular dividend is the way to go. I think that’s been proven out over the last year. That wasn’t very popular when I said that a few years ago, but I think, people have come around to that. And I think the second thing is that you want something that’s sustainable and has a path to grow. And they want to see us grow our profits, because I think, ultimately, that’s been the driver of why our stock has performed better than peers. Not just because we are paying a dividend, but because we are providing a dividend and providing some growth. And as a non-operator, we don’t really run the same risk. We don’t have the same inventory concerns that some operators may have, and we don’t affect overall supply.
Neal Dingmann: Perfect. Thanks, guys.
Operator: And our next question comes from John Abbott, Bank of America. Please, sir, go ahead.
John Abbott: Hey, good morning. And thank you for taking our questions on a very busy morning. Yes, so in the opening remarks, there was some commentary related to seeing some contracts, potential costs going lower – due to contract – moving lower, as well as some operators potentially being squeezed as contracts sort of roll off. So, how do you think about, what are your thoughts as you sort of look at the Permian, and the Bakken, and maybe the Marcellus, as far as how you think costs play out next year for operators?
Nick O’Grady: Yes. I mean, I think that operators are always finding ways to be more efficient, grow faster, and find ways to get more bang for their buck. And I think that’s productivity improvement, it never really stops. And so, there is always some benefit to that. I think that you have to take the practical reality, which is that you’ve had the rig count come down the completion piece, the fracking piece is the most – it’s 70% of the well cost, right. So, rig rates are down, ancillary costs from tubulars to sand are down, water handling down. But at the end of the day, those really don’t move the needle all that much unless the cost of completions go down. And that’s really going to be dictated by the number of wells being drilled and the rig count.
And the number of wells being drilled don’t always foot with one another. Certainly, there is a lot of static costs in between there. And so, you have to think about the commodity environment that we’re in, right? We’ve seen commodity prices trough this year and then come back up. And so, if overall levels are stable, and you do have inflation to labor and other costs over time, I think, we view that costs are going to be relatively static unless something materially changes. If gas prices, for example, were to stay weak for another year and you see a gas activity falling off, those completion crews may have to move and compete for services, and you could see some further costs, but I don’t think we necessarily want to count on that.
And so I think that, where we are now, I think things are stable. Our costs were up quarter-over-quarter, but that’s a bit of a misnomer because it’s really a function of the Permian making up a higher proportion Permian wells cost more. And secondarily, the lateral length on our wells were much longer. So on a kind of curved lateral foot basin agnostic basis, they were relatively flat. I don’t know if you want to add to that.
