John Freeman: First question, you mentioned on the AFEs, how we went from the $9.6 million in the first quarter down to $9 million in the second quarter, and we’re sort of seeing some deflation is starting to kick in. Is there any color you all can give on just where we stand on AFEs maybe on a leading-edge basis?
Nicholas O’Grady: Yes. I mean I think I would just caveat all this. I mean I think that our view, and I think it’s one that’s been proven by the test time is that oil prices and service costs will move in sync with each other, right, from a margin perspective. And you’ve had a kind of unique environment over the last year where you’ve seen oil prices go down pretty materially. Natural gas prices going down materially. And activity has been coming down, but costs were taking some time to come down to meet that. And on believing it, you started to see that, that’s also juxtaposed against a period where we’ve started to see oil prices rally. And so I think as we look forward, I just want to caveat it and say that well the last shoot of fall really where you’re going to see — where you would see a material change to savings is going to be completions.
And the completion cost is only going to materially come down to the extent that the rig count ultimately stays down. If prices rise, I would anticipate you’re going to see the rig count come up modestly. And thus, with that, I think your chances of seeing material savings from here are going to be reduced. So I would say — as I’ve said to a lot of our investors, you don’t need to look really any farther than to the price of oil to think ultimately where the direction of service costs are going to go. But more specifically to your — I’ll let Jim or Adam talk specifically to any leading-edge changes versus that $9 million.
Adam Dirlam: Yes. And I think antidotally, the conversations that we’ve had with our operators, we’ve generally seen it in more of the tangible casing, for example, even some of our smaller operators have seen reduction anywhere from, call it, 20% to 40% based on some of the conversations that we were having earlier in the year. And so I think some of that’s got a little bit of room to give. Some of that also has to do with logistics and some of the issues that we’re running into from a sourcing standpoint last year. Some of the other larger operators that we’ve been talking to have been laying down rigs and some of that is strategic and going back to the service providers in order to kind of cut better deals, drilling rates seem to be coming down marginally as well. But to next point, I think we’re going to stay relatively conservative, especially with the volatility that we’re seeing in the commodity market.
John Freeman: Great. And then just my other question on the leverage slide that you referenced, Nick, that Slide 13, we basically show of where you all sort of view leverage in that 0 to 1.5x range and how you talked about kind of flexing leverage in the near term if needed for certain growth opportunities, which obviously you have done in speeds here recently with a number of big transactions. So you — in that slide, it talks about on the lower end, it’s kind of harvest mode towards the 0 leverage, upper end is invest. And Nick, you used the word harvest in your prepared remarks. So I guess I have kind of 2 parts: a, I guess, should we assume that, that means you start targeting the lower end just given what you said about large-scale M&A, et cetera, your comments on harvest, but then also what’s not on that slide is how does just a commodity environment kind of overlay on this chart.
If you were at a $90 world, I assume that your leverage, what you view as acceptable leverage is probably different than if you’re in a $60 world?
Nicholas O’Grady: Yes. I mean I would say that generally speaking, we’re not running our leverage kind of — just the one thing that this doesn’t really point out to, which probably should is that we’re not thinking — we’re thinking about this on a normalized ratio, right? We’re not running spot $80 through and making the assumption if we’re 1.5x at 1x lever at $80 forever, right? We’re using a discounted price to that. We’re kind of using a mid-cycle price in our mind. But — so I mean, I think to answer your question is like the one thing I would point out to, specifically, look, I think when you think about the uses of cash flow as you kind of reach those targets is obviously share repurchases, right? And share repurchases to us, it’s not to suggest because we haven’t done them recently that we don’t think our equity is inexpensive at all, right?
I think that, that’s not the case. The reality has been that we’ve been able to buy assets at a material discount. So like I said in my call, an already discounted stock price. So going back to my car loan analogy, whether or not that you’re just getting a better return for the investors by doing so. But obviously, to the extent that the environment winds up being less so, that’s an obvious default, we can afford it, but I think you need to have the risk metrics and kind of both a cyclical and oil price perspective as well as an aggregate leverage perspective to a point where you really want to do that. And obviously, that we have to have a view internally that, that is a good use of that capital, because there is also the default always if there’s piling cash and waiting for a better day.
