And so we try really hard to take a skeptical lens and be conservative about this. And I think that’s why generally, our reserves have been conservative, and we tend to do well. So I want to give a lot of credit to our team that we tend to see better results, but also it comes down to a philosophy, and I talked about this in my prepared comments, of assets Novo, which is that you can’t engineer bad assets, which is that you can try to pay a high discount rate for really bad assets. But at the end of the day, those assets aren’t going to be resilient. And when I was a stock analyst back in the day, I would always rather pay a premium for a really good management team and a really good company than pay a low price for a really bad stock because the chances were over time that bad stock or that cheap stock is something bad is going to happen because it was a bad company, and it was not going to be resilient.
And it goes the same thing for oil gas assets, which is that you buy really high-quality reservoirs and really high-quality operators and chances are they are going to do good things with that. And I think that’s what our team really focuses on here, which is focus on the best operators in the best areas, and you tend to be pleasantly surprised. I don’t know, Jim, if you want to add to that?
Jim Evans: Yes. I think the other thing to think about, too, is that operators are always trying to innovate and be more efficient. So it’s not just about getting more EUR more reserves out of it. They’re also trying to optimize their artificial lift operations. So that’s constantly changing, and we’re constantly updating our tide curve based on what the operators are doing. So some of it is they’re just getting oil out faster. It’s not necessarily that they’re going to get more EUR over the life of it. They just found a way to get more out, more efficiently through the first 12 to 18 months, which is a big driver of NPV and IRR, which is what we want. And so we’re constantly taking that into account like I said, we want to make sure that more often than not the wells outperformers versus underperformance.
So that’s just part of our culture here at how we look at things, and we do constant look backs on performance, how wells they doing versus what we originally underwrote. And over the last three, four years, we’ve been less than 5% off in terms of that. So we feel very confident about our underwriting here. This is just a pleasant surprise by some of our operators in really good areas, and they come to a way to just do better than what we had expected.
Donovan Schafer: Okay. Great. Thank you. Very helpful. And then as a follow-up. So Nick, in your prepared remarks, you called out, and I thought this was a good thing to call out and a good insight, is the potential for increased the volatility. And you’re talking about with respect to your own positioning as a company and the importance of kind of financial flexibility because of opportunities, it gives you different leverage or other things to pull or opens up opportunities. But I’m curious just specifically because I think you were saying, well, with such low gas prices and also I think maybe you mentioned just that it’s an election year or maybe it’s like a just a geopolitical dynamic. But it does seem like a setup that we could see more volatility between now and November, December.
And so I’m curious, were you specifically talking about like in terms of thinking about what might happen with the own volatility of stock and like other securities you could potentially bring in? Or are you talking more broadly like commodity prices as well, and the potential for any type of wild swings around anything like that? I want to be clear because I thought that was a good point. But I’m just curious with your thinking, what things are the volatility you’re talking about, price commodities, stocks, bonds, all of it.
Nick O’Grady: I think volatility means volatility, I think if you look at our track record for the last few complete years, we bought our bonds, we bought our stock. We have bought assets, that we bought gas assets, we bought oil assets. We’ve done a lot of — I would say, we spent $200 million buying distressed assets during 2020, it was 90% of our capital. Our organic capital basically went to zero during 2020. And so I think during, you want to be in a position to be able to act if extreme events happen. Now, obviously, you’re at an extreme point in natural gas spot pricing. I’m not sure you’re at an extreme point in terms of the strip or in terms of asset pricing or you haven’t seen distress, certainly, in natural gas. For the assets themselves, necessarily yet.
But I think the overall market, to the extent we see a change in the interest rate cycle or things like that, we could definitely see things happen. And so I think we have to see what happens with the overall economy. And yes, it is an election year and typically you can see changes in policy and other things that could potentially happen. But I think we just always want to be in a position to act and I always use that same dynamic and I think its because we want to have flexibility to make changes to those decisions. And that’s why having a business, walk softly and carry a big stick, to have that cash flow, to be able to make those dynamic decisions and make changes. We’ve been able to buy our bonds in the low 90s. Now they trade well north of par.
