Eric Cremers: I would separate out the Waldo project, Ketan. When we plan that $200 million authorization that we put in place last year, we knew about the Waldo project. So they’re really two separate thoughts. It really comes down to for us repurchasing shares opportunistically. We’re going to do it when the share price is at a significant discount to NAV. It’s a very important part of our capital allocation strategy. We do believe we’ve increased our NAV over the past several years. And along with it, we’ve increased our share repurchase limit price over time. But a couple of things here. In Q1, we put a new 10b5-1 plan in place and that takes, we call it seasoning, you can’t be in the market buying when the 10b5-1 is seasoning, that’s like a 60-day period.
And then also we’re out of the window, two weeks before we release our results. So we were kind of had to be out of the market for much of Q1. The other important thing to highlight here, to comment on, is that we’re always comparing our capital allocation options one against another. And so a lot of the stuff that we work on is kind of predictable but there is stuff like M&A that’s not predictable. And so to the extent that we see an M&A opportunity that may or may not be on the market, by the way, and we’re looking at it, we’re thinking about, okay, is this going to be a user of our capital and would this be a better way to use capital than share repurchases? So sometimes we have to go to the sidelines to evaluate M&A opportunities, and that can take us out of the market too.
But the bottom line is we’re never going to be fast movers when it comes to things like share repurchases. We’re going to be very thoughtful, very judicious, and we’re only going to buy when we think we’re on sale.
Operator: We’ll take our next question from Kurt Yinger with D.A. Davidson.
Kurt Yinger: I just wanted to start off on Southern harvest volumes, and two questions. I mean, first, pretty big increase in stumpage in Q1, maybe you could talk about the drivers there. And then second, perhaps stumpage is included in kind of the sawlog mix that you’ve guided for the full year. But if not, it would kind of imply you’re going to sell a million tons of sawlogs in the south in both Q3 and Q4, which is pretty significantly above what we’ve seen in the last couple of quarters, even including CatchMark. So can you just talk through that and any risk you see to what looks like a pretty big back half on Southern sawlog volumes?
Eric Cremers: So stumpage prices are going to bounce around quarter-to-quarter, simply based upon mix of what the stumpage deal is. So it’s hard to read too much into stumpage price trends whatsoever. And stumpage was high in the first quarter. We were very opportunistic with our stumpage deals that we completed in the first quarter. So I don’t think we’ll have a similarly high number the rest of the year. Most of the quarters are in the 200,000 to 250,000 ton range Q2 through Q4. The typical sawlog harvest fee harvest for us for the rest of the year will be between 600,000 tons and 750,000 tons more or less. And that’s a relatively stable outlook for our timberlands business in the south.
Kurt Yinger: And then Eric, you touched on home center demand being pretty strong still. I guess could you maybe talk in a little bit more detail about the trend as the quarter progressed and here through April, and whether that’s been similar in terms of the progression relative to what you’ve seen in the past or whether there’s perhaps been some delay in terms of an inventory build ahead of spring?
Eric Cremers: Kurt, I would say that home center demand was probably weaker at the start of the quarter than it was at the end of the quarter. But I think that’s also kind of a natural phenomenon in that when it’s winter weather outside, especially in the Northern tier of the country, home center demand is a little on the weaker side just because people aren’t outside doing yard work and fences and decks and things. So I wouldn’t say that — I wouldn’t try to read too much into that. But I would say the demand probably progressed as we move through the quarter and it’s very consistent with what our plan was for the home centers.
Operator: We’ll take our next question from Mark Weintraub with Seaport Research Partners.
Mark Weintraub: First is a quick follow-up. You mentioned that it’s been very wet down in the south. Sometimes that can have impacts on people they almost get into the woods and that then on pricing itself. Has that happened yet as well or not so much?
Eric Cremers: Well, we struck a really sweet pulpwood deal with one of our large pulp mill customers that managed to get themselves cut short. So we’ve seen a little bit of a price response but not entirely across the whole south, Mark, and not really seeing it much in sawlogs yet.
Mark Weintraub: And so no real weather impact though from the wetness yet?
Eric Cremers: Yes, I would say no real impact other than we had a really strong deal in Q1, in fact, with the pulp mill.
Mark Weintraub: And then there’s been a pretty wide divergence during the first quarter and what happened with Southern lumber prices versus what was happening out west. Do you have kind of any thoughts on that and what might happen going forward on a relative basis in those regions?
Eric Cremers: It’s amazing to me what’s happened with lumber prices depending upon the different regions. The traditional price premium of Southern Pine to SPF is like normally in this $50 to $70 kind of range. And today, the spread is more like a whopping $150. So it’s really, really broken out. I think there’s a couple of different reasons why Southern Pine is outperforming here. First, Southern Pine is proximate to where consumption is in the US. I think I read the other day that something like seven of the top 10 housing markets in the US are in the south. So relatively close to Southern Yellow Pine mills, think about Florida, think about Texas. I think even Tennessee is one of the — Nashville, I think is one of the top 10 markets.
So those mills are close to where the demand is. And builders, they frankly, they just don’t want to be exposed to lumber price swings. So they’re utilizing increasingly this kind of a just-in-time lumber delivery strategy. And if you’re going to use a just-in-time lumber delivery strategy, you can’t wait to get it from a railcar from Alberta that takes a month. The second thing that I would say regarding this price spread is the north had a really long winter and that impacted home construction in the north. And that’s, of course, the traditional home for SPF lumber. So I think that’s probably also pushing down SPF lumber prices and relatively speaking to the benefit of Southern Pine.
Mark Weintraub: And you guys are obviously much more heavy in the south. And so I mean, is it reasonable to expect — and I think the numbers you provided suggest that — so your average pricing 2Q versus 1Q, at least at this point, is better than like the random length composite. Is that fair?
Eric Cremers: Yes, we’re doing a little bit better than the random length composite and our Southern mills are doing better than our Northern mills. And I think pricing, if you compare the spread, it’s like versus our plan, the south is ahead by like $40 a 1,000, and the north is behind like $40 a 1,000. So it’s interesting how the stuff you read about is actually — it’s feeding right through to our mills.
Mark Weintraub: And then one last one for me is, where are we in process in terms of new capacity or new sawmills starting up in regions where you produce? And sort of relatedly, because you actually at least historically have bought a bit more than you’ve sold, I don’t know if that’s changed in the US south in terms of timber. I mean are there certain submarkets where you’re long versus where you’re short, which are worth highlighting as we think about the possibility of timber prices going — moving up in the future?
Eric Cremers: Well, all of our mills in the south are in Arkansas. So if you think about outside of Arkansas, so the acreage we acquired from CatchMark, for example, our acreage in Mississippi or Alabama, all of that is — so that’s roughly 600,000 acres, that’s not going to our own mills. So I would say that if you step back and look at the mills, our mills where we operate at we’re internal at the three mills in the south. We’re using about 50% internal logs and 50% external logs. And there really hasn’t been much of a change in that regard.
Operator: We’ll take our next question from Paul Quinn with RBC Capital Markets.
Paul Quinn: Just to see your performance in real estate was interesting and the guidance for acres of rural land in 2023 with a little bit of a surprise. I thought it was a couple of quarters ago that you were seeing now that you sold Minnesota, it was going to go to about half the run rate of what you were doing at the time, which was about 23,000. So just wondering if ‘23 here with the 18,000 is a novelty and then ‘24 will go back to something significantly lower, or where do you sit on that?
Wayne Wasechek: I think when we — you’re right, I mean when we look at — in ’22, we sold over 10,000 acres of land in Minnesota. And so we’ve essentially completed that process to liquidate our Minnesota holdings. So I think now our regional mix shift in ’23 is — and along with the CatchMark merger, that provides new opportunities in new markets. So we’re really excited about that. We’ve got markets in South Carolina, Georgia and Eastern Alabama. So really, I think we’ll see that kind of shift more to the south. And I think moving forward, over time, I think we’ve have a proven track record of say, approximately 1% of our holdings that will — or 1% of our acres that we’ve been able to find opportunities for. So you think about that and that’s about 20,000 acres or so.
We’re slightly below that this year. But rural sales can be lumpy and it takes time to develop some of these opportunities. But over time, we have a track record of finding these opportunities. So I really think this is sustainable and we kind of look to that 18,000 to 20,000 going forward.
Paul Quinn: So that is sustainable at that level. And then just flipping over to some of the things you’re doing on the carbon side and the solar opportunities. I mean lots of companies are announcing these things, no companies yet to come forward on any kind of economics or financial metrics around them. Maybe you could just sort of help us understand what the potential upside could be on some of those?
Eric Cremers: Well, I think that’s a tricky one, Paul. We had a solar deal last year. As you may recall, that one was done for $7,500 an acre, that was in Mississippi. It was a $13 million transaction more or less. I think that’s representative of what the potential is for solar. Every deal is going to be a little bit different. The economics are going to be a little bit different but I think that’s representative of where the market is.
Paul Quinn: And then what are you expecting on the carbon side?
