Right? When you have 10 times the amount of things coming at you that you’d ever want to underwriter go through, you can afford to be. Right? And so it’s pretty robotic. And what we found is that there’s a lot of cyclicality within all of the different businesses that we — business lines that we have. And we – that hit rate goes up and down and oftentimes it really comes down to risk. We find when oil prices are 100 and convexity is weak, we’re highly uncompetitive in most things. And when things get ugly and crude breaks $60, I promise you it will be the last game in town and there you you’re dealing with situations where we can extract more value. So that convexity plays into that decision making and our own competitiveness.
Paul Diamond: Got it. So makes more sense to think it more or think of it more as like counter cyclical to the aggregate price of in the commodity?
Nick O’Grady: I like to think of us as a counter cyclical investor in general. I mean, I think that the most active we ever were as percentage of our size on the ground was in 2020 when things were pretty ugly.
Paul Diamond: Understood. Makes perfect sense. Thanks for your time.
Operator: Our next question comes from the line of Phillips Johnston with Capital One. Please proceed with your question.
Phillips Johnston: Hi, guys. Thanks for squeezing me in. I’ll keep it short with just one more question on the 14 opportunities. Just wondering if any of those are located outside of your existing three regions?
Chad Allen: The majority of across the Delaware Midland and Bakken, as well as Appalachia. We’ve seen a number of properties in the Eagle Ford as well. And we’ve been looking at the Eagle Ford that we’ve alluded to and in prior calls haven’t necessarily found the appropriate fit or assets for us, but it’s definitely one basin that we keep an eye on.
Phillips Johnston: Yes. Okay. And then, I realize you guys don’t typically do PDP only types of deals with no real upside. But you guys ever look at conventional non shale types of packages with low PDP decline rates that would be accretive, but we’re also to help keep your overall PDP decline rates down?
Nick O’Grady: Yes, I mean, we have bought a handful of PDP assets, that you may remember, we bought some assets from Comstock a few years ago that we owned about 90% of already, and they were low decline PDP. And so, the decline rate for a PDP only asset is really important. I’d say on the conventional side, the one challenge there are that typically, if you took like a C02 flood asset or something like that. It might have low declines, but it also probably has $20, $25 LOE cost. So it’s going to be much more sensitive to oil prices. And so that’s another risk factor. It may have less operating risk or need for growth from an underwriting perspective, but it’s going to be more sensitive. One of the things that we talk to our investors a lot about and particularly as it pertains to PDP assets are that — you really have no upside to your returns besides pricing when you buy a PDP asset.
And so you really need to think about where you are in the cycle. Ultimately, what we find is that undeveloped assets in a period of traumatic pricing, the NPV of those undeveloped assets comes very low, and that’s when you can ultimately underwrite things based on PDPs and get that upside for relatively a de minimis amount, conversely, buying a PDP asset when the crude strip is a $100, you really don’t have a ton of anything but downside.-
Chad Allen: In a lower price environment, it’s going to be seller dependent and what is their balance sheet and financial health look like, right? Because you’re going to be looking at a pretty big Bid/Ask spread. The majority of the time to the extent that they’re healthy.
