David Deckelbaum: Good deal. Thanks for the responses.
Travis D. Stice: Thanks, David.
Operator: Alright. Thank you. One moment for our next question. Next question comes from the line of Scott Hanold of RBC Capital. Your line is now open.
Scott Hanold: Yes, thanks. If I could go back to the M&A topic a little bit differently. When Kaes, Travis, when you step back and think about like where Diamondback’s inventory depth is and to be a long-term successful large scale play in the Midland. Like, do you think that more large scale M&A is necessary over time? And just remind us like where you think your inventory life is, and where ideally would you like it to be?
Daniel N. Wesson: Yes. I mean, I don’t think it’s necessary, Scott. I think we’ve positioned the business through both large scale and small scale M&A. It’s just kind of been in our DNA for the last 10 years. I’d kind of go back to thinking about what positions in North American shale or in the Midland Basin would be envy, and there are very few particularly with where we sit today and the amount of deals we’ve done over the years. So, I think it’s a fortunate spot to be in with the inventory duration and depth that we have relative to what’s out there. I just think Travis’s comment is really about knowing who you are. And this Company has been a, acquirer and exploit company that’s been able to execute on acquiring and exploiting assets through our low cost structure.
And, generally we have had a philosophy that the low cost operator in a commodity based business wins. And, our cost structure is what has created this business to be as big as it is today. Travis, do you want anything to that?
Travis D. Stice: I think that makes sense. We’ve talked about the high bar for entry into the Diamondback portfolio. And, there’s just, that’s just how we view it. And, we’re very proud of the inventory we have. And I think what goes along with that durable inventory is how we convert that inventory into cash flow. And again, you see this quarter flawless execution from our teams in converting rock into cash flow. And that’s, our cost structure is enviable. Our execution prowess is unmatched. And that makes that makes a big difference when you talk about a profitable oil and gas company like that.
Scott Hanold: Yes. And then and just as part of that was the inventory life kind of conversation more of like where you think you’re at now and what do you think is ideal?
Kaes Van’t Hof: Yes. I mean, I think I kind of said this that we put our next five years up with anybody in North America, and I still stand by that. I think we have another solid, five or ten years beyond that. It’s very logical that at some point you’re going to have to move down the quality of your inventory. We don’t see that in the forward plan today, but if we retain our cost structure and our ability to drill wells $1 million or $1.5 million or $2 million cheaper. Well, as the shale cost curve goes up, we continue to stay at the low end of that cost curve. It’s kind of been our mantra for 10 years now. And we started with 50,000 acres an hour at [55000] (ph). And, as that culture and mantra has not changed. And I think that sets us up well for a world, where assets are getting more and more sparse.
Scott Hanold: Got it. Understood. And if I could follow-up on our conversation we had last night, just on the shareholder returns and stock buybacks. And I thought it was an conversation we had on just where it FANG’s intrinsic value is now and the opportunity to grow that over time. And so, like when you step back and think about the current oil market, obviously, we’re in a little bit more heightened oil price versus your intrinsic point. But, like as you see yourself progressing over the next years, I mean, does it seem to make sense that buying back stock at higher prices in this heightened market relative to what you did in the past still make sense from a value return standpoint?
Kaes Van’t Hof: Yes, it’s really all about value, like we talked about last night, if you run your business conservatively from an oil price perspective and accrete value quarterly at $75 to $80, $85 crude, if you’re actually building equity value on a conservative basis, right. I kind of said last night to you that, I think generally if you run a quarter like last quarter versus the $60 base case, you’re basically building $3, $4 a share of extra intrinsic value. And I think that’s what we’ve done here over the last couple of years in this up-cycle. And, as Travis mentioned, we want to be conservative when buying back stock. We think capital is precious and capital discipline not just applies in the field, but it applies, to returning capital to shareholders. And that’s why we’ve had this flexible return of capital program since we put it in place two and a half years ago.
Scott Hanold: Thank you.
Travis D. Stice: Thanks, Scott.
Operator: Alright. Thank you. For your question one moment for our next. Next question comes from the line of Roger Read of Wells Fargo Securities. Your line is now open.
Roger Read: Yes. Thanks. Good morning. I think I’ll skip the obligatory share repo versus a variable dividend question for a moment, and just go back to the operational aspects. So, can you give us an idea, as you mentioned, the sort of accreting value into the shares through operations, what we should be looking at over the next, say, 24 to 36 months for what else you can do operationally that’ll accrete value. And thinking that we’re not going to have some of the asset sales that have been going on that have certainly helped on the sort of cash flow generation assets?
Daniel N. Wesson: Yes. That’s a good question, Roger. No, I think it’s interesting, we put it to slide in, slide 10 about operational track record in prowess and, I think we sat in this room two or three years ago saying, hey, the drilling guys, they’re near the asymptotic curve of drilling these wells. Well, you look at the top left of that chart, they’re still taking days out of the average well on a much bigger program, right. These guys are drilling 280 wells in the Midland Basin, two, three, four days faster than they were even two years ago. And, the culture that we built accretes that value to our shareholders. It’s not something we model, but it certainly comes our way. So in the field, I think that’s part of what is coming our way.
I also think, generally we’ve tested some other zones in the Midland Basin that looked very, very good. We got a couple Upper Spraberry tests in the Northern Midland Basin that looked very good relative to our Middle Sprague Road, Jo Mill development. So, we’re excited about that. I think the Wolfcamp D in the Midland Basin is starting to become a primary development zone in some of the basin. And, certainly, there’s a lot of excitement about deeper zones in the Midland Basin as well the Barnett and the Woodford that we’re on the testing. So I think, the Midland Basin, the [stacked bay] (ph) and the amount of oil in place, just provides a lot of opportunity for future value to accrete to our shareholders that they don’t know about today. Travis, do you want anything to add?
Travis D. Stice: Yes. Roger, if you back cast 10 years ago, when we first started this, we’re still drilling a few vertical wells. And, I put in the letter that we released last night, just a couple of data points on a 7500 foot lateral well, which has a total depth, total major depth of about what we were drilling vertically when we started. But drilling, we drill those 7500 foot lateral wells in under four days. And when we started, we were drilling it, sometimes it’d take us over 24, 25 days to get down to that same measured depth vertically. And so, probably the most repeated question that we get, is what is the secret sauce, what is the magic that Diamondback does that allows execution quarter-over-quarter to just far exceed the competition.
