Davis Ravnaas: Yes, John, it’s a fair question. Given the dramatic growth we’ve had this year, candidly, that analysis that you’re asking for, it’s challenging. We have to work with accounting firms and it takes time to come up with that. In fact, I think we’re one of the only firms that’s ever provided multiyear tax guidance, at least in our sector, let us reflect on that. Given the M&A growth that we’ve had this year, obviously, the dynamics of the company have changed pretty meaningfully. But that might be something that’s worth our time to revisit and point taken that, additional disclosure is always great. So that’s on us, let us circle up internally and figure out next steps on providing additional guidance, if that’s fair.
John Abbott: That’s fair. Thanks you very much for our taking our questions.
Davis Ravnaas: Yes, my pleasure. Thanks John.
Operator: Thank you. Our next question comes from the line of Trafford Lamar with Raymond James. Please proceed with your question.
Trafford Lamar: Hi guys. Thanks for taking my questions.
Davis Ravnaas: Hi good morning.
Trafford Lamar: Yes. Good morning. And I guess the first one I have is leverage is now below 1x and continues to move directionally lower. Should we anticipate a 75% payout ratio moving higher over time? Or how should we think about that? How are you guys thinking of that?
Davis Ravnaas: Yes. Excellent question. Always the best question for us is how do you manage the cash flows and how do we think about rewarding shareholders in the most efficient way. I would say that at the Board level, we want to keep the ratio – the payout ratio consistent at 75%. We like paying down debt, particularly when we’re paying 8% interest on it with 25% of our cash flow. So, I think you’ll see us continue to do that for quite some time. There will be a point at which we want to start to redeem the profit that we have. So bringing up additional capacity on the revolver, just gives us more flexibility to do that. So I think that’s where we are at this point, but it’s something that we constantly evaluate. And your point is very well taken, which is that the balance sheet is in great shape.
There may be a point in the future where we decide to increase that payout ratio because it’s just unduly conservative. We just don’t feel – at least at this point that we’re at that point yet. Matt or Bob, anything you guys want to add?
Matthew Daly: No, I’d say that our borrowing base continues to increase. We’re going to have a solid [ph] determination meeting later this month, and we – right now, we’re at $400 million on our credit facility. We expect that to go up in Q4, which is adding additional liquidity. But as Davis says, right now, the plan is to, over the next quarters to continue to paydown the credit facility to be in a good position, call it, this time next year to redeem a big chunk of that Apollo [ph] preferred so…
Trafford Lamar: Awesome. And kind of on a similar note, regarding hedges, that’s where you’ve all kind of proportionally added oil and gas hedges in ’24 and ’25 and got some higher swap price in the second half of ’24. Similarly with leverage kind of below the 1x number, kind of how do you all think about hedging moving forward?
Davis Ravnaas: We systematically do it. We – it’s always a question of how do you think about hedging as a royalty company. For us, we look at – we don’t have to protect the CapEx budget like a driller does, obviously. But for us, we do have the built-in financial leverage vis-a-vis debt. And so what we do is we take our debt. We divide it by enterprise value, and we hedge that ratio on a rolling two-year forward basis. So if I’m not mistaken, I believe that’s at 17% right now, Matt, I think, for the next two years on average.
Matthew Daly: That’s correct, yes.
Davis Ravnaas: Yes. So, I think we’ll just continue to do that, just keep a consistent strategy. We’re not trying to predict movements in oil and gas prices, people historically get a lot of trouble doing that so.
