Donovan Schafer: Okay. And just so to be clear, for collars versus swaps, is it pretty much one to one from the covenant standpoint? They’re just — it maybe changes the math on how they sort of underwrite things that they have there and sort of formulas. But €“
Ralph D’Amico: Yes, they are all sort of formulas.
Chad Stephens: Yes, it meets the same requirement. I mean, we’re pretty careful on how we structure our collars, they are cost less collars, number one. And number two, the floors are above the price deck that the bank uses, right? So we want to be very transparent with all of our counterparties, right? And I think the bank group has very happy with what we’ve done and they like our plan going forward.
Donovan Schafer: Okay. That makes lot of sense.
Chad Stephens: Donovan, let me add to that real quick. Just from an overall hedging strategy macro, at the minimum, the bank credit agreement as Ralph said requires us to, but they are our real lifeline to growth. We need to grow and we’ll continue to grow and they’ve been a great partner with us as we found some really attractive acquisitions and they’ve helped fund those acquisitions. So with — we want to protect our balance sheet and with that debt even at certain sensitivities if commodity prices — we feel pretty good about our volumes because the Haynesville is economic, the operators in the Haynesville will continue to drill and our royalty volumes will continue to grow at almost any even a black swan event natural gas price scenario, their wellhead economics at $2 are pretty decent.
So our royalty volumes, we think, will continue to grow. So the only thing that could hurt our balance sheet would be some sort of black swan event if gas prices drop. So we want to hedge to protect our balance sheet and protect that bank credit facility as we continue to grow. And as Ralph said, if commodity prices do drop, we’re still in good shape even at 2 times debt to EBITDA and we continue to manage it pretty €“
Donovan Schafer: It occurred to me if you wanted more commodity — if you wanted to be lower hedge, you could lower the commitment that the banks are providing for the revolver. But to your point, what you’re sort of saying is, it’s more valuable to you as sort of a key driver for growth to say, no, no, no, we want to keep that in place so that we can be opportunistic and take action as we see appropriate. And so, the trade-off of that — the trade off to that is a bit more hedging than like the minimum amount you could get away with, but it gives you that access and gives you that ability to be opportunistic. That’s the logic.
Chad Stephens: Exactly. And the collars give us a good upside exposure.
Donovan Schafer: Yes, okay. I want to ask just kind of as a housekeeping question. For what we might expect, how we should think of like a runway for G&A expense? There’s a bit of a jump this quarter with transaction activity and then — but also the last two quarters are a bit elevated from transactions there. And then I know next — the current quarter, I guess, calendar year fourth quarter right now that we’re in, I know you’ve already done a $10 million in acquisitions there. So if we just — if we stripped out kind of the acquisition, again, I know you plan to do them going forward, but just for — as a way to get some kind of bearings around as you could call it normalized or just like the strips down, what should we see as G&A without kind of ongoing legal expenses for mergers and acquisitions and things like that?
And also for depreciation, DD&A, just with the Fayetteville divestiture, but that’s going to move things down, but then you have the recent acquisitions. So just how to kind of think about that going forward?
Chad Stephens: Yes. Let me address it from a real macro perspective first, then I’m going to let Ralph get into the weeds a little bit. So as we moved — when I took over as CEO in 2020 and really it was a whole new management team and a whole new technical team that I brought in, we were — the compensation was set at what was kind of the old Panhandle regime and with the environment we were in 2020, salaries and overall comp was at the bottom. We were a tiny, we had to work through some issues. And so, we’re at the kind of the bottom of the pay scale, so to speak, for a company our size. And then we moved out of COVID into 2021, and by the second half of 2021, we’re having great success. The overall industry success was that, everybody was doing well, commodity prices are moving up and there was a lot of competition out there from private equity groups that we’re trying to fund their management teams and fill their positions that these private equity groups were building out management teams.
So there was a natural wage inflation and just an industry competition for employees. And I really liked the team we had put together and I didn’t want to lose anybody and it can cost a company a lot more if you lose somebody than to just pay them a fair wage. So between €˜21 and kind of this year €˜22, we were bringing our team up to kind of what was market to make sure we don’t lose them and reward them for the good work that they’ve been doing. So that led to some of the percentage increases you’re seeing in the G&A. I don’t see it going to be as dramatic. There will be some natural, but I don’t — we’re not adding people. We’re paying the existing employees more and they’re worthy of — and I want to retain them and keep them as we have this success and build this thing over the next three, four, five, six years.
I want to build a real legacy here of high quality employees that have ownership, believe in what we’re doing, have ownership in the strategy and the model and they’re the ones bringing the shareholder value to you guys. So we just want to reward them and it’s market. But I don’t see it year over year increasing the way it has over the last few quarters. But Ralph can —
