Adam Dirlam: That’s the reason why we focus on partnering with the larger operators. The conversations that we’re having right now and you’ve seen the rig levels fall. A lot of those guys are going back to these service providers, laying down rigs in an effort to kind of keep cost low. And if you’re running 17 to 20 rigs or whatever it might be, you can still keep and maintain your operations plan, but still be able to kind of flex your muscle. And we’ve got to manage the volatility. I think Nick mentioned it last quarter on the call. If commodity prices go higher, then we’ll expect to see well costs do the same. And likewise we see a gap down then something’s got to give there. And I think as we manage all of this volatility, we’re going to stay conservative, especially as we’re going into 2024 planning.
John Abbott: Appreciate it. And then for our follow up question, I think this is for you there, Chad, is just with the acquisition, with the deals that you’ve done, how do you see the trajectory of cash taxes over a multi-year basis at this period of time for Northern?
Chad Allen: Yes. I talked a little bit about it on the last call, addressed in my prepared remarks. I mean, it hasn’t really moved. We contemplated Novo in that – in that last year. We kind of knew what we had. So I think it’s still a 2024 item. It’s going to be to a lesser extent in 2024, and then obviously, it’s going to be a bit more fully loaded in 2025 and beyond.
John Abbott: All right. Very, very helpful. Thank you.
Nick O’Grady: Thanks John.
Operator: [Operator Instructions] We will move on to our next question, which comes from the line of Paul Diamond with Citi. Please proceed with your question.
Paul Diamond: Good morning all, and thanks for taking my call. Just a quick one from me, talked a little bit about the shifting CapEx. I just wanted to get your idea on how that goes – how that goes forward into 2024? Should we think about this as more of a quickening of cadence over the course of the year? Or is it something that’s more that there was that one-time opportunity that kind of brought that block forward?
Nick O’Grady: It’s a little bit of both, Paul. So, I mean, I think we saw some kind of 2024 pull forward and obviously some ad hoc capital I think. So in a sort of in a vacuum it’s in many ways a pull forward of 2024 activity. I think we still look at 2024 and our target CapEx is sort of what we want to target. And I think, look I think we can address 2024 without explicitly endorsing. We have not guided or anything like that but we’ve looked at the 2024 ranges of consensus from sell side analysts. I think it’s around 111,000 to 117,000 barrels a day equivalent and call it around 840 million in CapEx. And I said, I would say based on current pricing, et cetera, I think those are very plausible. I think the reason that we wait until the reporting year end before we share guidance.
First, I think, and foremost and this is important to your question is that we’re return driven, not growth or production driven. So we want the time to take a look at all of the drilling proposals and projects in front of us and then look at the timing of those and everything from completions to overall costs to provide the optimal plan. I do think those numbers are achievable, though. And to the extent that we produce less and spend less, obviously we generate more cash. To the extent we spend more, we’d likely produce more, but generate less near-term cash. So we’ll make allocation judgments for optimal total return, whether we feel, we have those projects that meet our hurdles. But I will say, given the opportunities we’re seeing every day, it’s always a balance of meeting what we say we’re going to do and juxtaposing that with our fiduciary duties to grow and deliver profits.
So, I also, just as a side note, one of the things that I always am concerned about is that we will report our year-end in February, and a lot can change in the commodity market between now and then. And so I don’t think we want to be in a position where we have to do this twice. And given how volatile it’s been and given how wacky the macro has been, it’s never been more important to do this once and to do it right.
Operator: Thank you. We’ll move on to our next question, which is coming from the line of Charles Meade with Johnson Rice. Please proceed with your question.
Charles Meade: Good morning, Nick, Adam and Chad and the rest of the NOG Team there. Nick, I want to go back. I’m not sure it was comments that you made or that Adam made either in prepared comments or earlier in the Q&A. But you referenced about how interest rates are higher and, and that moves the hurdle rate up across the board. And I’m curious, I’ve talked to some other companies who are active in the A&D market and they have mentioned that there’s a little bit of an issue between what they were saying is a little bit of issue in the Bid/Ask spread and that the Ask side hasn’t really or had not really adjusted for this higher interest rate environment and consequently you need to use a higher discount rate on the PDPs. And so I’m curious if you are seeing that and if so, if there’s any kind of movement to a resolution or any other – anything other, any other dynamics that may be surprising given the move in the risk free rate?
Nick O’Grady: Yes. I mean, I don’t think I’ve ever met anyone who didn’t think their children were more beautiful than everybody else. So is that a surprise to me that the social issues around A&D are the most important and most difficult to come over, which is that we feel like we generally have a pretty good pulse of where things are going to trade for and what they’re worth. But you can lead a horse to water, you can’t make a drink. And we spend a lot of time banging our heads against the wall with people who have wildly unrealistic expectations. You’ve seen a flurry of M&A this year at the operated and non-operated side. But there have actually been a number of failed processes that we’ve seen go dormant just because people had completely ridiculous assumptions of what their assets were worth.
And so that is the thing we have to navigate, and honestly a lot of times on the front end we’ll decide or not decide to participate in something because of the counterparty and whether we think they’re a realistic seller. I mean, look, really good assets are going to still sell for good prices and weaker assets are going to get weaker prices, but I think, I don’t know, that’s the art of the deal.
Adam Dirlam: Different base and same stuff, right? I mean, I think we try to be as transparent as we can in order to educate our current parties as to where we’re coming from. Maybe that’s a way that you can help bridge some of that Bid/Ask spread in terms of kind of the overall expectations that Nick alluded to, but, yes, that works.
Nick O’Grady: Yes, I mean…
Adam Dirlam: 30%, 10% of the time.
Nick O’Grady: Yes, I mean, 60% of the time [indiscernible]. I’d be remiss if I didn’t feel a movie quote or something. So I’m always reminded of the movie Trading Places and he’s trying to pawn his watch and he says, well, Philadelphia, it’s worth $50 and so we deal with that every day.
Operator: Thank you. Our next question is coming from the line of Donovan Schafer with Northland Capital Markets. Please proceed with your question.
