So my impression is that is the type of thing that you would not put out there publicly if you weren’t prepared to back it in a court of law and, you know, provide that evidence, emails, whatever, and so forth. And, you know, they haven’t come at you as, like, a defamation lawsuit or something like that. So it doesn’t appear to be the case that they contest it. And that chronicle on its own seems pretty damning in my view in terms of, you know, at least — you know in terms of evidence or at least, just generally indications that these guys are not really people you — a lot of us would necessarily want to do business with. So my question is, am I right on that that chronicle that you put out in that appendix? Is that something that you guys would stand behind hypothetically in a court of law?
Because in my view that’s kind of all you would need to make your point here. But just could you answer that?
Sean Woolverton: Yes. No. Appreciate your thoughts there. A core value for our company is to really work with all stakeholders, from our employees, our service providers that we partner with, our mineral owners and our shareholders. And I would tell you something that we really pride ourselves on and we’ve received this feedback is, hey, we’re honest and transparent company and we view that’s how you do business and it’s really driven a lot of our success. So our focus is we want to stay really driven around adding value and engaging with all stakeholders in good faith and that’s we can stand on that and we think we can. That’s the way to deal with this type of situation. Stay focused on what you do and what you believe and the results will speak for themselves. And we think this quarter should more than demonstrate to investors the strength of the company. So appreciate that question and comment.
Donovan Schafer: Okay. And then turning to scale. So I do appreciate the point with respect to scale and so I’m not pooh poohing or discounting that. But it is — it’s not a perfect straight line in linear relationship, right? Like, you hit these sort of, step changes or inflection points where, if you’re so small, you can’t even keep a rig running on a continuous basis or — so then, like, the first threshold is hitting that point. And then, you know, hypothetically, someday, maybe there’s, like, a threshold where a company is so big it can validate or justify moving upstream or, I mean, downstream and having a refinery or something like. These big step changes, but it’s not this continuous linear thing. And here we’ve got, you said your own words, the completion team’s really crushing it.
So it sounds like you’ve got the scale for bargaining to get fantastic crews and teams and to keep them in your basin and to keep them busy, all these good things. And so, yes, like a 10x scale benefit, like, if you were acquired by an ExxonMobil or something, yes, they can squeeze other things out of it. But is there is there anything I’m missing in terms of is there some scale benefit, like, an uptick, that would just be sort of right around the corner that if you guys were only, you know, 50% bigger or whatever size you’d get with someone like Kimmeridge, like, that there’s just some genuinely thing that would be unlocked by that? Or is it at this size and scale going from one increment to the next? Does it really make such a difference?
Sean Woolverton: No, great question. I think it is the old argument of you just scale for the sake of scale. And I think that’s a dangerous approach to pursue. A company has to be very thoughtful and diligent around doing transactions. You don’t want to do transactions that are destructive to your balance sheet. We’ve said all along that, hey, if we do a deal and we use leverage to do it, we will have a leverage in and around 1.5 times. And we’ll only go to that level if you show a clear line of sight of bringing that leverage down. And that’s what we did with the Chesapeake transaction. We got to 1.6 for maybe 30 days and within a quarter brought it down two clicks. So you got to think about, hey, the way you do scaling is important.
You got to protect the balance sheet. It’s got to bring — you don’t want to pay — what we’ve really loved about our deals is we don’t pay for locations. We look at some of the deals that are out there and some that have been proposed and people are wanting $2 million to $4 million a location or people are paying $2 million to $4 million a location for wells that you won’t drill for six, seven, eight years as you’re waiting for higher commodity prices. That’s just destructive to a balance sheet to do that. So we’ve never paid for locations, which we think is imperative when you scale. And it just has to improve margins and reduce costs. So those are the criteria that we have. I think if you do the right scaling, to your point, it starts to see that uplift and there is a clear trend that investors want scale and/or bigger companies looking to acquire one scale.
But the criteria I took through on an acquisition really successful companies employ that same thought process. So listen we’re going to continue to stay focused. We continue to be open to scale and big cheerleaders of scaling in the Eagle Ford. And we think SilverBow will play an active role in that as we move forward.
Donovan Schafer: Okay. And then if I can squeeze just one more question in. It’s around the idea or the notion of sort of valuation gap as a point of focus. So with public markets and the way the stocks are valued, there are sort of the things you can control and the things that you can’t control. And, I’ve seen — and I think a lot of us on this call, we’ve all seen cases in the past where focusing on “closing evaluation gap” as a point of focus turned out to be the wrong thing. Maybe something could be done for optics. The Whiting acquisition of Kodiak or merger with Kodiak comes to mind. I mean, that was, as far as I can tell, just so that they could say, hey, we are the largest producer in the Bakken. So they could leapfrog Continental and just get that, like, almost literally just for a headline, because they were at a discount to Continental.
