Bobby Riley: Yes, this is Bobby. Let me take it to begin with, and let Philip give his comments also. Obviously, most of the production or most of the history of this building is through organic drilling and development. So when we look at acquisitions, we’re looking for something that has actually strong inventory available, something that’s close to or in the same neighborhood as some of our existing assets, so we can optimize efficiencies. One of the advantages that we have this year is with the integration of the New Mexico assets, we’re able to high grade our drilling inventory and actually shift some of our development, if we choose, to the New Mexico Yeso Trend, which really gives us, I think, a real keen advantage on being at the right place at the right time.
But we continue to see numerous bolt-on opportunities, and like I say, the key thing it is not so much a PDP acquirer, basically, but buying something that has a large inventory and especially held by production or something like that is something that we’re focused on.
Philip Riley: Yes. That’s exactly right. I’ll just add on to that, and that — we earn our best returns on development. And while the cash flow is nice, you got to pay for the cash flow, you got to capitalize that. So, if we can find acquisition with a disproportionately larger amount of undeveloped inventory, that’s attractive to us, allows us to earn those higher returns.
Jeffrey Robertson: Bobby, you mentioned the Yeso. Is a part of what’s driving the production growth at a lower capital spend in 2024 in your plan? Just the performance of those wells and the way — how they impact the overall weighted asset base.
Bobby Riley: So basically, I want to say that we’re very detailed in research before we go spend a bunch of money drilling wells. I mean, we gather a lot of geological engineering data to put together the plan that we see is going to get the best results from efficiencies and higher EURs. We’re excited about what we’ve seen in the first four or five wells that we’ve drilled in that play. And as we did when we started in the Yoakum County deal, the first thing to do is to make sure you have the correct infrastructure in place, gas takeaways, and things along that nature that make it a much smoother deal. So where we are at this year is just basically, we have two assets in front of us, they’re pretty comparable, really, on where we are right now on rate of returns and production profile, but it just gives us an opportunity to be selective.
Jeffrey Robertson: And then lastly, just on the CO2 project in Yoakum County, is the feasibility study one of the key elements, Bobby, to being able to go talk to industrial emitters and convince them that you’re — to participate in your project?
Bobby Riley: Most definitely. I mean, basically, we know we have, we’re offsetting the great Wasson Field, where that’s contiguous to our East. It’s been CO2 flooded for decades. And I think what we’ve demonstrated is we have the ability to store a lot of CO2 also by enhancing oil recovery. So, we’re hoping those opportunities open us, but we’ll be ready with our feasibility to be the sync or the storage.
Jeffrey Robertson: Thanks. I’ll jump back in the queue.
Operator: [Operator Instructions]. Your next question comes from the line of Noel Parks from Tuohy Brothers. Please go ahead.
Noel Parks: Hi, good morning.
Bobby Riley: Hi. Good morning, Noel.
Noel Parks: Just wanted to check on a couple of things. You mentioned that you were seeing some benefit on cost from casing, tubing and chemicals having come back. Where do you think we stand in sort of the leveling off of inflation? Do you think your current pricing is pretty much stabilized? Do you think there’s any more to go?
Philip Riley: I can try to address that, Noel. I hate to try to predict the future here. It does feel like it’s stabilized. It feels like we’ve — we’re seeing either flat to down on most of the costs. Some of that was efficiency, like I said, some of the items like casing and tubing, clearly you can type in a Bloomberg and see how much hot rolled steel has come down. So some of that is certainly material. Some of that’s impacted by China, of course. Other areas though, I think the chemicals is something that feels pretty material, other areas we’ll see. We’ve tried to lock-in prices and services as much as we can for the year, and feel pretty good about that, but you’re always going to have some floating aspect out of our control.
Noel Parks: Sure. Fair enough. And, I’m just curious, related to the larger sort of service environment, what are activity levels like across your neck of the woods in the conventional Permian? Is this sort of a flattish year as far as overall rig activity for the industry or do you see it creeping up?
Bobby Riley: Well, specifically where our assets are located, I would guess it in Mexico would probably be pretty flat to last year. We’re in constant communication with the offset operators in our area, trying to share some services and drilling rigs and stuff like that. So, I kind of think I see a pretty flat drilling profile for that area. The Texas asset may, as far as our immediate area, probably be a little bit slower than it has been in the past. But that’s what I’d see. Philip?
Philip Riley: Yes. The Texas area, our neighboring assets are more developed than what we have. We’ve got more running room with inventory, and we’re just finding that our neighbors have either mostly drilled up what they have, or have chosen to slow down for different reasons.
