Diamondback Energy, Inc. (NASDAQ:FANG) Q4 2023 Earnings Call Transcript

Diamondback Energy, Inc. (NASDAQ:FANG) Q4 2023 Earnings Call Transcript February 21, 2024

Diamondback Energy, Inc.  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to the Diamondback Energy Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Lawlis, VP of Investor Relations. Please go ahead.

Adam Lawlis: Thank you, Daniel. Good morning, and welcome to Diamondback Energy’s fourth quarter 2023 conference call. During our call today, we will reference an updated investor presentation and Letter to Stockholders, which can be found on Diamondback’s website. Representing Diamondback today are Travis Stice, Chairman and CEO; Kaes Van’t Hof, President and CFO; and Danny Wesson, COO. During this conference call, the participants may make certain forward-looking statements relating to the company’s financial condition, results of operations, plans, objectives, future performance and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors.

Information concerning these factors can be found in the company’s filings with the SEC. In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I’ll now turn the call over to Travis Stice.

Travis Stice: Thank you, Adam, and I appreciate everyone joining this morning. I hope you continue to find the stockholders letter that we issued last night, an efficient way to communicate. So obviously a lot of the material is in that stockholders letter. So with that operator, would you please open the line for questions?

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Q&A Session

Operator: [Operator Instructions]. Our first question comes from Neal Dingmann with Truist Securities. Your line is now open.

Neal Dingmann: Well, good morning, Travis and team. Thanks for the time. Guys, my first question is on Endeavor specifically, just want to go back to this. You all highlighted about 344,000 acres with about 2,300 locations, that compares to 494,000, 3,800 for you all. And I’m just wondering, does this slightly smaller current core footprint provide a material amount of immediate incremental locations, Travis. And I’m just wondering or potential upside and I’m wondering how you would thinking about I know it’s still a while until this thing likely closes but how you will attack these assets.

Travis Stice: Yes, Neal. I mean listen, we wanted to be conservative and how we laid out the inventory counts for both us and them sub 40, I mean I think there’s been a lot of aggressive inventory counts put in deals lately. And I think for us to be able to say that combined we have about 12 years of sub 40 breakeven inventory is truly a best-in-class number in North American shale and that’s kind of why we put it there. I mean I think generally as with Diamondback’s position, there’s a lot of inventory that breaks even well above those numbers. I think there’s a lot of testing going on throughout the basin. There’s probably some zones like the Upper Spraberry that we’d probably call a sub 40 breakeven zone today. But I don’t think they’re ready to fully put it in the location count.

So I think it’s just conservatism. And I think on a relative basis not all locations are created equal and within that combined 6,000 location count, there’s some that breakeven below 30, right. I mean it’s all about what we’re developing today and saving the upside for later. And we know that that upside is going to accrue to us with the size of the acreage position pro forma.

Kaes Van’t Hof: Neal, just to add to that point if you think about a company’s future two things are really important for the oil and gas sector. One is kind of this durable inventory in case just walked you through some numbers there. But it’s also the conversion efficiency of that inventory and I think now with the announcement of this Endeavor merger, we’re in control of both the numerator and denominator of that ratio. So our durable inventory greatly extends and then our conversion efficiency that we’ve been known for a long time actually gets to come to bear on a larger asset base. And I think to give you a little bit more color and comfort; we didn’t put our thumb on the scale as we looked across the barbed wire fence.

And what I mean by that is we simply applied what Diamondback is doing today on drilling and completion and operating wells and then physically adjacent. This case was just explaining, made the assumption that that can be applied across the barbed wire fence. So I wanted to give you a little bit more color there, Neal. Thanks for your question.

Neal Dingmann: No, I appreciate both and I definitely appreciate the conservatives. And I think your right case has been something inflated. And my second question is on your current Slide 11 of today on the multi-zone development strategy specifically. Really like that you all for 2024 had — sorry, for 2023 had the average project size of around 24 wells. And I’m just wondering will that be approximately the same this year? And I’m just wondering with that how do you all continue to mitigate the frac hits that seem to plague other operators so much when they do these larger projects?

Travis Stice: Yes. Well, I mean I think generally Neal; the project size is up, I mean 25 is not an exact number. It’s going to be different, different counties where you have different spacing within different zones. We’re not — we don’t use a cookie cutter strategy to develop the asset. We use a unique development strategy for each area. I think we’ve had a lot of experience with practice over the years. I think we’ve learned and our planning group has gotten significantly better at looking around the corner and seeing what issues might arise. And certainly, there’s a benefit of size and scale, right? If we have one of these 24 projects coming on every quarter, well, there’s a lot of risk in that one particular project. But here we have four, five, six of these coming on every quarter.

And that allows us operational flexibility to move around and plan our business. And that’s just one of the other benefits of size and scale that will only be magnified with the potential with the Endeavor merger.

Kaes Van’t Hof: And Neal, when you look at our 2024 budget, you kind of see that the capital efficiency shining through because we’re essentially maintaining the volumes profile that we had in the fourth quarter, but we’re doing so with 10% less CapEx. And as case we’re just talking to our development strategy yields the same well performance. So I think as we look across the industry universe, capital efficiency for this year is going to be very, very important. And I like the way that our budget execution is shaping up in terms of that capital efficiency.

Neal Dingmann: Agreed times, and seems even better next year. Thank you all.

Travis Stice: Thank you.

Operator: Thank you. And one moment for our next question. Our next question comes from David Deckelbaum with TD Cowen. Your line is now open.

David Deckelbaum: Thanks for taking my questions, Travis, Kaes, and team. I appreciate the time.

Travis Stice: Thank you, David.

David Deckelbaum: I was just curious, Travis, if you could provide an outlook. I know when you announced the Endeavor deal; I think you said that you weren’t going to sell anything, obviously, until the deal closes, which makes plenty of prudent sense. But I’m interested just with all of the minority interest that you have in various pipeline investments. How should we think about just where that pipeline cycle is right now relative to investing versus harvesting? Is that something that we might see if we think about the risk for probability around 2024, seeing some of those investments being harvested? Is the market kind of ripe for that right now or you kind of expect these to be more long-term investment harvesting Endeavor?

Kaes Van’t Hof: Yes, Dave, I mean, some are — some are able to be harvested today. Some are probably further down the line. I mean, we’ve done a pretty good job selling some of these non-core, we call them non-core, but equity method investments over the last 12 months. We sold the Gray Oak Pipeline interest. We sold our interest in the OMOG oil gathering JV. I think it’s logical that some of our assets that we can control the sale of will likely pursue a sale, but there’s others that we’re probably someone who would tag along with a bigger sale, and I can’t control when those happen. But it’s certainly an asset that we are assets that we have on our side of the ledger that will be used to reduce debt quickly on a scale basis, or through the indefinite merger.

So I think that’s certainly on the table. I think Travis’ point on not having to sell significant assets is important, right? When we structured the cash stock mix of the deal, we didn’t want to be a forced seller of assets to pay down debt. And I think we’ve done that with the mix we presented last week.

Travis Stice: Yes, I can’t emphasize that point enough, David that we’re not going to be forced sellers of any of our assets. We’re going to be very thoughtful as we move forward post close in looking at monetization strategy for these minority interests, particularly relation to debt reduction. So we’ll be very thoughtful and do the right thing.

David Deckelbaum: Appreciate that. And just maybe a little bit in the weeds on this one, but the 2024 plan, when you lay out the Midland Basin development, this year maybe coincidentally or not, there’s a more — a little bit more on the margin going to Wolfcamp D and some of the other zones. Is that just more coincidence of geography where you’re developing this year and presumably years beyond? Or are there some things that you saw in 2023 that are sort of increasing your confidence of wanting to allocate more capital there and if there’s any color you could provide?

Travis Stice: Yes. I mean I think both from our drill bit and from others drill bit, we’ve seen really good results in the Wolfcamp D. I think it makes sense to put it into the stack today, maybe not in every situation, but in more and more situations. So more Wolfcamp D in the plan, and then in the other bucket, we have more Upper Spraberry in the plan. So I think generally, if we’re able to add these zones to our development plan and see similar productivity per foot, that only extends the inventory duration that we have both on a standalone basis and pro forma with Endeavor. They’ve been developing a lot more Wolfcamp D than us and we talked a little bit about that last week, but I think it just shows the beneficial nature of the Midland Basin and stack bay that we’re adding zones like the Upper Spraberry and the Wolfcamp D that we didn’t talk about three, four, five years ago and now becoming core development targets.

Operator: Thank you. One moment for our next question. Our next question comes from Neil Mehta with Goldman Sachs. Your line is now open.

Neil Mehta: Yes. Good morning, team. Thanks for doing this. I guess I have a couple pricing related questions, and the first, would love your perspective on just hedging as standalone and then also pro forma once you roll in the Endeavor assets. Historically, you talk about trying to maximize upside exposure while protecting extreme downside. Just curious what that means for you as you think about hedging in 2024.

Travis Stice: Neil, I mean I think we need to protect our side of the ledger through the period between signing and closing, so we can generate free cash that reduces the cash portion of the purchase price. I think we’ve done that. We’ve historically bought funds in the kind of $55 WTI range. We now kind of stepped it up to kind of that $60 range. And we’ll probably be a little more hedged on our side between sign and close than we have been in the past, closer to — I don’t know, two-thirds, three quarters hedge, so that we can make sure that, that, that cash is there to reduce the cash portion of purchase price. I think longer-term, it all depends on the strength of the balance sheet and the break-even that we have with our base dividends.

We’ve always kind of tried to buy hedges at kind of 50 to 55. And that protects free cash flow, balance sheet doesn’t blow out and the dividends well protected in that extreme downside scenario. So I don’t expect us to move to a non-hedging company because we just believe that it’s prudent to protect the balance sheet and our base dividend which we see like debt.

Neil Mehta: Okay. That’s helpful. And then the follow-up is just on natural gas. I know it’s a smaller part of your economics, but gas prices have been under a lot of pressure. And in the Permian, we’ve been surprised to see associated gas supply up as much as it is two fees year-over-year. So just your perspective on how the gas market rebalances and the Permian in particular, do you see this as a structural challenge of continued associated supply or as we move towards more oil discipline gas markets can calibrate with it.

Travis Stice: I think generally, regardless of oil discipline the gas curves in the Permian Basin always exceed expectations. I think we’re always pretty conservative on the gas side. And that almost universally beats expectations, which is why you’re seeing on a basin level more growth than we all expect almost on an annual basis. So I think that’s going to continue, Neil. We don’t — we could run the gas price at zero in the Permian and still make great returns on oil wells. For us personally, we try to protect our gas price by through hedging as well as through some pipeline commitments to get our gas to bigger markets as well as protecting our basis exposure. But generally I think the Permian, even if you stay disciplined on oil, eventually you’re going to have to move to gassier zones and there’s a lot of gas and associated gas left to be produced in the Permian.

Neil Mehta: That makes sense. Thanks again.

Travis Stice: Thanks, Neil.

Operator: Thank you. One moment for our next question. Our next question comes from Arun Jayaram with JPMorgan Securities. Your line is now open.

Arun Jayaram: Good morning, gentlemen. Travis, Kaes, I’d like to know if maybe you could walk us through kind of the path to get to the $10 billion net debt target in terms of timing and how do asset sales, would that influence timing of reaching that target?

Kaes Van’t Hof: Yes, Arun, I think we kind of laid out in a $75 world generally the two businesses throughout the course of this year will combine to generate about $5 billion of free cash flow. And if we’re looking at a late 2024 close, just high level, half that number $2 billion to $2.5 billion will be used to reduce the cash portion of the purchase price. That kind of puts you in the kind of $12 billion of total net debt at close and with the business continue to generate more free cash in 2025, with the numbers we laid out. You could see that $10 billion number by middle of 2025. That excludes any asset sales or acceleration, and I think we try to be an under promise over delivered company, and there’s a lot of things that we can do to accelerate that outside of commodity price because I don’t think we want to put the entire bet based on commodity price. So we’re looking at what’s available to sell down in the next couple of months here and beat that target.

Arun Jayaram: Got it. And just maybe a follow-up. If you do plan to do something in the Delaware Basin, would you wait until kind of reaching close on the transaction or talk us through maybe the timing when you would contemplate doing asset sales?

Kaes Van’t Hof: Yes. I think we’re highly focused on deal certainty and getting the deal closed, and we’re not going to do anything that derails that process. So I think the Delaware Basin is great cash flow for us, great free cash flow and a very low decline rate. And we’ve reduced our capital commitments there and necessary wells we need to drill for lease holding purposes. So I think it’s a good asset to have for the time being and its good option value over the long run, but certainly not looking to do anything in the near-term.

Arun Jayaram: Great. Thanks a lot.

Travis Stice: Thanks, Arun.

Kaes Van’t Hof: Thanks, Arun.

Operator: Thank you. One moment for our next question. Our next question comes from Derrick Whitfield with Stifel. Your line is now open.

Derrick Whitfield: Yes. Good morning, all. Wanted to —

Travis Stice: Good morning, Derrick.

Derrick Whitfield: Wanted to start by really commending you guys for the leadership you’re demonstrating on capital discipline, as many of your peers are treating the environment as if it were naturally balanced today.

Travis Stice: Thank you, Derrick.

Derrick Whitfield: With my first question, I wanted to focus on the service environment. In light of the collapse in gas directed activity that is underway now and the preexisting lower utilization rates the service industry experienced last year, is there an opportunity to revisit service prices on some of the higher spec equipment?

Travis Stice: Yes, Derrick, good question. I think we expect that we’ll see some softening in the service market this year if the gas basins do kind of remain muted in their activity levels. We are not — we don’t set the price of the service market. We’re price takers. But we’ll certainly continue to push on our end on finding the market prices for all of our service lines where we don’t have existing commitments in place.

Derrick Whitfield: Terrific. And as my follow-up, wanted to touch on Endeavor, since you guys have been out meeting with investors since the deal was announced, are there any aspects of the transaction that are underappreciated in your view?

Travis Stice: I think the first question that came up was on the synergies of the $3 billion worth of synergies, most of those underpinned by our existing cost structure, applied to the Endeavor assets. And so those are usually the entry questions. But once we explained that the cost assumptions that we embedded are the same cost assumptions we’re currently doing today, a lot of comfort was gained, and then we went to the more kind of strategic questions with the shareholders. So I think probably the cost efficiencies were the first, and then secondarily, were some of the debt retirement strategies that case just went through were probably the two most topical questions that we dealt with.

Derrick Whitfield: Terrific. Thanks. Great quarter and update.

Travis Stice: Thanks, Derrick.

Kaes Van’t Hof: Thanks, Derrick.

Operator: Thank you. One moment for our next question. Our next question comes from Roger Read with Wells Fargo. Your line is now open.

Roger Read: Yes. Thank you. Good morning.

Travis Stice: Good morning, Roger.

Roger Read: I just wanted to come back, you talked earlier about some of these other benches that might work, and it’s a question of whether they’ll be as productive and efficient or the productivity and efficiency in those benches. Give us an idea of maybe some of the, let’s call it science or just applied efforts that you’re seeing that can open up some of these other benches. And I’m thinking within your footprint, as well as what will be an expanded footprint here before you’re in.

Kaes Van’t Hof: Roger, I mean I think for zones like the Wolfcamp D, we’ve had some testing on our assets, but also seen a lot of results across the fence line. Diamondback doesn’t spend a lot of time. We spend a lot of time looking ourselves. We also spend a lot of time looking across the fence line at what other people are doing, either through M&A process or just general competitor analysis. And we’ve seen that the Wolfcamp D has been very competitive, particularly in that kind of Midland Glasscock County line area. And also, as you get into Southern Martin County, so that’s getting more attention. I would say the Upper Spraberry, we’ve done a lot of work on ourselves, actually, an old energy well drilled in the Upper Spraberry in 2016 or 2017, and we revisited that well recently, last year, and some of the Upper Spraberry wells that we’ve completed, one in particular is probably one of the best wells in our portfolio.

So I’m not ready to say that the Upper Spraberry exists across our entire acreage position, but it’s certainly getting more capital and attention this year, and particularly with the co-development strategy and the fact that these zones talk to each other in some form or fashion means we’ve got to get it now. And so we’ve added the Upper Spraberry into our kind of Northern Martin County development plan. And I think the results speak for themselves because you haven’t seen a degradation in productivity. I think that’s the key to this exploration resource expansion story is, if you can expand your resource without impacting productivity, that’s a win for our shareholders.

Travis Stice: Roger, I’ll just add a comment from a high-level on what Kaes just mentioned. In my experience, as companies get bigger, the more inwardly focused they become. So they focus more on their own results and less on what others are doing around them. And it’s been a hallmark of Diamondback since the very beginning. One, you could say, out of necessity when we first started, but it’s been a hallmark of ours to really pay attention to what goes on around us. And so right now, it’s culturally ingrained not only to rigorously examine our own internal results, but also spend intellectual capital on looking across the barbed wire fence at what others are doing. And as we move into a much larger position post close, I promise you that culture will stay intact. We will continue to look and find what others are doing potentially better than we are and adopt accordingly.

Roger Read: I appreciate that clarification. That’s my only question. Thank you.

Travis Stice: Thanks, Roger.

Kaes Van’t Hof: Thanks, Roger.

Operator: Thank you. One moment for our next question. Our next question comes from Jeoffrey Lambujon with TPH & Co. Your line is now open.

Jeoffrey Lambujon: Good morning, everyone. I appreciate the time.

Travis Stice: Hey, Jeoff.

Jeoffrey Lambujon: My first question — hey, my first question is on the step change in capital efficiency you are looking forward to into 2025. Could you talk more about the pathway there? I know you’re already there for the legacy portfolio of, well cost, as you mentioned, Travis, but can you comment maybe on the larger buckets or moving pieces you’ll be focusing on the Endeavor side, both in terms of that well cost reduction and in terms of the non-DMC line items that you think about as we shift from this year into next.

Kaes Van’t Hof: Yes, Jeoff, I think generally there’s two big buckets on the DMC side that we see across fence Endeavor that we’ll probably look to put in place with the team there as we start to integrate on the completion side, it’s really the SimulFRAC development plan, as well as probably half of that plan being a SimulFRAC e-fleet, which only reduces the cost of the completion side of the business. I don’t even think we’ve modeled the benefits of a much larger supply chain to these numbers. This is just us getting their cost down to our costs on the capital side. So there’s probably some upside there at some point. And then on the drilling side, we’ve been a big proponent of clear fluids not using oil based mud to drill these wells.

It saves time and money. That was something we put in place and learned from the QEP team three or four years ago. And so I think that’s just a decision to make. That saves significant dollars. And what I’m excited about is to get under the tent with the Endeavor team and learn what they’re doing that we can do better, right? I think that’s not modeled in this pro forma business. And we’ve learned something from both energy and QEP are two large mergers that we’ve done to-date. So I think there’s some upside there. But really, all we’re doing is looking to put in place what we’re doing today on a larger asset base.

Travis Stice: And, Jeoff, since I spoke just a second ago on some of the cultural elements of Diamondback, another cultural element is when we combine assets in our history, we’ve done a really good job of checking our egos at the door and finding out what’s really working. And it’s a culture of seeking first to understand as opposed to being understood. And as Kaes just mentioned, when we put the two companies together, we’re really excited about understanding what they do, why they do it, and making — collectively making improvements both on our side and on the incoming asset side.

Jeoffrey Lambujon: Perfect. And then for my follow-up, I wonder if you could just speak to how the philosophy around the balance sheet longer-term will evolve, if at all, once the deal closes. We appreciate the commentary on the path to get to the $10 billion net debt level, but we’re just thinking about how the pro forma math continues to push Diamondback to new levels in terms of weight class within the space.

Kaes Van’t Hof: Yes, I mean that’s a question we got on the road a lot last year, kind of from investors saying, hey, listen, you’re in a different weight class now, and you probably need to reassess your long-term leverage profile. And I think that resonated with us and fits with what we’re trying to do. I think we eventually want to get to kind of a $6 billion to $8 billion net debt number, keep real cash on the balance sheet. I think the concern that Diamondback is going to go do every deal and use all cash to do deals has probably been removed with this merger. And in my mind, that leaves us flexibility in terms of capital allocation to lean into a buyback in a down cycle or lean into an acquisition in the down cycle and be — be pro cyclical — not be pro cyclical in how we look at allocating capital on the repurchase side or the deal side.

So long-term, $6 billion to $8 billion would be a good number. If it gets to zero, that’d be great. But I think generally running in that half a turn at strip is a pretty good place to be.

Jeoffrey Lambujon: Great. Appreciate the time. I have to turn it back.

Travis Stice: Thanks, Jeoff.

Kaes Van’t Hof: Thanks, Jeoff.

Operator: Thank you. [Operator Instructions]. One moment for our next question. Our next question comes from Paul Cheng with Scotiabank. Your line is now open.

Paul Cheng: All right. Thank you. Good morning, guys.

Travis Stice: Good morning, Paul.

Paul Cheng: Last week when you announced the deal, you gave the 2024 and 2025 CapEx pro forma and also the [indiscernible]. It was 2005 the pro forma compared to 2004 with the above say call you wrong number $700 million lower. Can you breakdown that how much relation because you think the antipathy will be lower or that asset because you’re not going to grow as fast and how just truly is just —

Kaes Van’t Hof: Yes. Sure, Paul, you kind of cut out a little bit, but I think I get your question. Question is, how do we bridge the gap between the combined 2024 CapEx guide with us and Endeavor separately, and the combined business in 2025, which is down $700-ish million? I would say most of it is running our cost structure on the Endeavor DMC. And so that’s basically 175 wells at $1.5 million, $2 million cheaper, it gets you to about $300 million. I think combined business is not going to need as many wells to hit the production number. Endeavor was growing last year. They started slowing down mid-year, but their decline rate is shallowing. So that’ll help. Our decline rate continues to shallow. That’ll help. I think we’re going to allocate capital to the best combined resource probably in North America, which will help.

And so that kind of gets you to needing probably 50 less wells at $6 million, $6.5 million a pop. That’s about another $300 million. And I think generally we’re spending some dollars this year, probably about $50 million on environmental CapEx. That is kind of one-time in nature and will be reduced on our side as well. So you put all that together and that’s a very, very capital efficient business in 2025, assuming existing well costs, and that can move around. But that’s how we’re thinking about 2025. We might have lost Paul. So we’ll go to the next question.

Operator: Thank you. One moment for our next question. Our next question comes from Leo Mariani with ROTH MKM. Your line is now open.

Leo Mariani: Hi, guys. Wanted to just ask about the Endeavor FANG combination here. Do you guys see any tax benefit for the combined entity where you might be able to defer some of the cash tax payments as a result of combining these two companies? Have you had any preliminary look at that?

Kaes Van’t Hof: I mean there obviously be some benefit with the cash portion of the transaction and the associated interest expense, but we’re continuing to do our combination work. I mean we’re a full cash taxpayer, essentially. I mean they’re pretty close as well. So I don’t think there’s going to be too much to do there, Leo, but certainly, the cash piece is going to shield a little bit of taxes on our side.

Leo Mariani: Okay. That’s helpful. And then just jumping back over to M&A, obviously you guys got the big prize and the Permian, and the market has clearly rewarded the Diamondback shareholders here. As you look at kind of the remaining landscape, do you think there’s anything out there left to do that’s kind of chunky that would be of interest to FANG? Or is it maybe just kind of more little stuff over the years to kind of tie everything together?

Kaes Van’t Hof: Yes. Listen, Leo, we’re on the sidelines here. We’re fully focused on getting this deal closed as soon as possible and we can assess the landscape when that happens. I mean I am confident that the landscape will look different whenever that time does come.

Leo Mariani: Okay. Thanks.

Travis Stice: Thanks, Leo.

Operator: Thank you. One moment for our next question. Our next question comes from Doug Leggate with Bank of America. Your line is now open.

John Abbott: My question is, does that have any impact on integration, planning, or does that go ahead anyway.

Kaes Van’t Hof: Hey, Doug, you have to speak up.

John Abbott: This is John Abbott on for Doug Leggate. Apologies I was on mute. Just one more, just one question going back to Paul’s question on the difference in CapEx between 2024 and 2025. That’s about $725 million. And then you talk about the $550 million in synergies. So when we think about that $725 million is there an addition on top of that, as were we sort of thinking to 2025? Just sort of trying to reconcile the two numbers?

Kaes Van’t Hof: Yes. I think the difference between the two numbers is really activity between the $550 million and $725 million, right? The combined business has less activity in 2025 versus 2024, which is helping, but we kind of see the $550 million as more of a longer-term run rate, John.

John Abbott: Appreciate it. And that’s really it at this point in time, but thank you very much for taking our questions.

Travis Stice: Thanks, John.

Operator: Thank you. I’m showing no further questions at this time. I would now like to turn it back to Travis Stice, CEO for closing remarks.

Travis Stice: Great. Thank you. I really appreciate everyone listening in this morning and asking questions. And if there’s any follow-up, just reach out to us and we’ll address them then. Thank you. And you all have a great day.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.