Chuck Yates Needs A Job

0:03 fatty here come join me at the oil bunker the premier place to watch the Texas Children's Hospital golf tournament we're gonna play poker we're gonna eat some great food we're gonna have a cold drink

0:15 all with the coolest people in the energy

0:42 Hey, everybody. Welcome to Chuck Yates needs a job. The podcast. Very interesting. Got a text. Somebody said, Hey, this guy wants to go on your podcast. I said, who is it? They said it's a

0:53 man with two first names.

0:56 Doug Chris. That's right. Doug nice to meet you. The pleasure to be here. So we were talking earlier. We have met. We haven't met. Where did we check out? I think we met in passing many, many

1:07 moons ago at both of our in both of our former lives, right? On the US. one of your former employers and one of my former employers. So we can actually say their name. I think the restraining

1:20 order is worn off. We can say gain. Actually, I still get along with the cane guys, talked with them, talked with them a few weeks ago. Yeah. Yeah. Okay. So we did meet. Good to see you Yes.

1:36 I've gotten to the point in life where it's just, I just say good to see you. 'cause I can't remember who I've met and who I haven't met. So I know nothing about diversified energy, except that

1:47 y'all get ragged on in the press periodically. So pitch me the stock. Why do I wanna end this thing? Absolutely. Yeah, like I said, glad to be here. Glad to be in 75 degrees in sunny. I came

2:00 from the New York City metro area where it was 21 degrees and there was oranges of snow on the ground when I left this morning, so my girlfriend's British and we spent, I don't know, call it. I

2:14 was five out of seven weeks or six out of eight weeks and she was there the full eight weeks over in London kind of over Christmas and it was so cold and I was standing on the driveway of her best

2:27 friend's house and I must have been shaking and I didn't even realize it and she comes up and hugs me and says, Oh, is my little Texan gonna make it today? And I was like, I just want to go home

2:37 and eat a taco. Let's just let me go back home. Yeah, no, good to be here. Yeah, so diversified energy. We are definitely a different company than a lot of the traditional EP companies based

2:50 here in the US. And what I mean by that is we liken ourselves to be a solutions-based energy provider. And what I mean by that is really, we're not a driller So we acquire mature existing producing

3:07 assets from other operators or private equity companies or out of bankruptcy and manage those assets under our stewardship model, which is highly focused on improving the emissions as well as the

3:22 long-term production of these assets. The company started out in 2000 by a gentleman by the name of Rusty Hudson He's from West Virginia, born and bred. And he had wells on his property as he was

3:38 growing up, his dad and his grandfather were involved in the business. And he was a commercial banker and saw an opportunity during that time for what we would. I know you and I are probably of the

3:51 same age group, but the generation Xers or millennials would call like the side hustle. That's what he did, right? He's like, all right, I'm gonna acquire some of these wells. I'm gonna go out

4:01 and take out a home equity loan and acquire some more of them, 'cause there were cash flowing assets, right? These mature assets that produce in perpetuity with very low decline don't take a lot of

4:13 maintenance but have 50 year production lives on them are good steady cash flowing assets. That's what he saw. And ultimately what he saw after he built that up and got to a point where it was big

4:25 enough that it couldn't just be his side hustle anymore. It was, all right, I gotta make a decision I think his wife helped him along with that decision at some point along the way.

4:36 He also saw that a lot of these names or companies in the Appalachian Basin, we're not focused on this area. When you think about your traditional GNA structure of an EMP, it's all structured

4:51 towards the drill bit. It's what's the CapEx going to be. I've got petroleum engineers, I've got land guys, I've got drilling engineers, all focused on getting the highest return, whether you

5:04 believe the PowerPoint presentation is a hundred plus percent return out of those assets at the drill bit level. What he saw was they also had these mature assets, some conventional, some longer

5:16 term shale assets that nobody was focused on. But there was life in those wells because they have a long producing life. So it was really his opportunity to go out and acquire those assets from

5:30 those producers and make it into a business. Yeah, I mean, it's the end of life stuff used to, I mean, pre-shell revolution actually used to be something that people would spend some time with

5:44 'cause they'd go fix up things and they'd sell it to somebody else and then shell came along. Nobody wanted to buy that stuff anymore. Why touch it? Yeah. And drill one well and put on 1, 000

5:56 barrels a day of oil. It's a lot more exciting than being a plumber. That's right. No, that's right. And it's what your returns profile is What you're looking for, right? It's a lower returns

6:06 profile, but it's a steady returns profile. And what we've been able to do, the company went public in 2017 since public is establish a track record, really, of managing these assets, growing

6:22 production. Company went public. We had roughly about 50 million cubic feet a day of production. We're just shy of a B right now, seven years later. We've done12 billion of equity raises and

6:37 returned almost800 million in capital to those shareholders through dividends and strategic share repurchases. So it's a highly reliable cash flow stream. Wow, so you're big. So what's maybe the

6:52 market value of the equity? So we're right as of now, roughly about US dollars, 600 million. 600 million Yeah, not off of a, we're a natural gas company, predominantly. So our production is 85

7:07 natural gas. So we've gotten some headwinds from that over the last year as well as primarily being listed in the London stock market, which has had 39 months of outflows and the knock-on effects of

7:22 Brexit and fund redemptions that have been challenging But what we did see more recently is the opportunity to come to the New York Stock Exchange. So we listed our shares on the New York Stock

7:34 Exchange, was an arduous process. It took about six to nine months, but in December we listed in the New York Stock Exchange. So now we have got a US listing as well. A dual listing. A dual

7:47 listing. There you go. But it a accomplished couple of things, Chuck. I've been told of, I'll marry the girlfriend, I get a British passport, so I'm kinda, there you go. A dual listing, if

7:58 you will What did it accomplish? Real quick, how much debt do you guys have? So we've got about 12 billion at that. Okay, so I'll told about 18 billion and enterprise value, got it. That's

8:10 right, that's right. And I won't even ask you if it's dog numbers and all that, 'cause it's ridiculous at a buck 50 gas. I mean, we

8:19 put out our pre-release for

8:23 2023, right? So kinda the preview numbers and, again, all public, but we had 540. to 545 is our range that we kind of put out there of EBITDA, so again, it's a steady cash flowing asset. Do

8:39 you guys hedge a lot? Yeah, a lot. So we've got about in 2023, we were about 85 hedged. 2024 will be about 80 hedged. Part of that is, again, focusing on the cash flows and reliability of

8:55 those cash flows as part of the return of capital strategy to pay dividends or buy back shares. Part of it is, as well, we utilize that construct to really lean into ABS structures to finance our

9:11 debt profile. Okay, you're going to have to explain this to me because I actually did a podcast with a guy spending an hour and a half talking about this. I was more confused at the end. Okay.

9:21 Then I was at the beginning. So what's an ABS? Sure. ABS, or as we call them, special purpose vehicles. is an asset-backed security. So basically what we've done is we've taken a group of

9:35 assets, for example, wells that produce in Eastern or Western West Virginia, but put those all into a special purpose vehicle and asset-backed security. Those assets have cash flows. They have

9:53 the profile of being very low decline Our corporate decline as a company is just under 10. Holy cow. But in Appalachian, those assets in particular would be four to five percent decline, and

10:08 they've got perpetuity. The engineered life by third-party nettle in the tool is roughly about 75 years. Yeah. So you take those assets, you put them into this ABS structure. The buyers of these

10:21 are generally insurance companies You hedge a good portion of that over the first three to five years out.

10:30 little lighter in the back end, but it's all, the cash flows are all using the curve, right? And so you've got predictability of cash flows. It's an elegant way to finance through debt the

10:44 business because it's got a low cost of capital. So we've done seven of these ABS structures. It's roughly about five and a half percent cost of capital or coupon. And they've got, let's call it

10:57 roughly between eight to 10 years of maturity. They're all investment grade rated and they're all the last three that we did are also sustainability linked. So, Fitch has come out and give us

11:10 sustainability rating on those and you get a little bit of a kicker for safety metrics or other attributes that are in there. So, let's put some math to this to see if I can understand this. So,

11:24 let's say PDPPV10 of those assets is 100. Right. pick a number. Back in the day, I could go to a commercial bank

11:36 and kind of twist their arm a little bit and beg and plead and maybe get them to loan me60 million on that, something like that. They'd say, Hey, I need you 80 hedged for at least three years, or

11:48 something like that. I can get you60 million and the rate was kind of whatever, LIBOR plus, whatever, the rate was. It sounds like what I just heard you say, and then I'm going to guess at what

12:04 the answer needs to be, is your rate is potentially lower than comparing it to a commercial bank today, which is crazy to me, but good for you guys. And then number two, am I getting a higher

12:21 advanced rate? Yes, ballpark is what so so what instead of 60 am I getting? Well, so. If you were to get 60 on an RBL these days, I would say go do that all day long because you're not getting

12:35 that. You're not getting that. If you're getting 40 to 45, it's a good day. Okay. You're also having to deal with higher interest rates in this environment, right? It's so for a plus. And

12:48 people sit there and used to say all this, oh, well, I've got this bank deal in place. They can review the

12:57 borrowing base anytime they want I mean, that is the other - Don't act like that's secure capital. No, that's right. And that is the other aspect of it, too, that makes what we've done a little

13:07 bit more advantageous for us, because we're not drilling. So there's no

13:15 HUD value, right? Or kind of undeveloped acreage that gets potentially put on some of these assets that you kind of bring up over time through a development program, because we're just focused on

13:26 the PDP So you're only going to get - 40 to 45 and you've got that redetermination risk and depends on, you know, how the wind blows that day, what the commodity price is going to be with natural

13:39 gas, sometimes it's pretty punitive. So, so you don't have a lot of those risks. Now, to be clear, we still utilize an RBL. So we still have an RBL. We, as a matter of fact, have changed

13:51 that to a sustainably linked loan as well because of the the stewardship attributes that we have with our company in terms of reducing emissions and safety metrics. And so that's what it is now known

14:05 as is a sustainably linked loan. Oh, really? Yeah. Interesting. And is that something I can get from any bankers out of special bank these days? No, no, it's, I know, I mean, it's your

14:15 typical bulge bracket banking firms out there that are in our RBL grouping, right? And there's not a specific, but you get rated by It's usuallyfitch sustainable.

14:28 that rates that product. Yeah, we didn't have that back. No, this was the newest thing, for sure. So going back to our ABS deal, we have the 100 of PDP, PV10, we put the hedges on place that

14:46 the insurance companies want, we go to Fitch, we get our ratings, we're getting, let's call it 55 interest rate, how much money are we getting instead of the 40 to 45? You're getting 60 to 70.

15:03 Something like that, okay. So you've got a big difference in advanced rate. That's one of the big attributes to it. It is, and then does the - And they're fully amortizing. Okay. So you're

15:15 paying off those notes over the life of the tenor of those assets or of the tenor of that note. So for example, as I mentioned, Most of them are 8 to 10 years. hot tenors. So at the end of that

15:31 period, you've got no debt. Right. So it's fully amortizing. It amortizes down the whole thing. The biggest part of this is that you've got, let's say, a 50-plus year asset that you're

15:45 financing with a 10-year instrument. So after 10 years, there's still a lot of value left in these assets And I mean, are you paying more than five or six years cash flow on an acquisition? No.

16:00 So our framework has generally been to be within two to three times cash flow, PV 16 to 20. And in terms of the acquisitions that we've made, that's kind of the framework. More recently, it's

16:17 been two and a half to three times cash flow But we actually did sell an asset, not at the beginning of this year, through a structure such as this.

16:30 that we actually realized almost six times cashflow. So we were able to buy an asset cashflow for four years and then sell it for two and a half times. And then cashflow for four years, sell it at

16:39 six times cashflow. And so is the asset backed, it's a loan it amortizes and then it reverts back to you? That's right, yeah. 'Cause we're the ultimate owner of it. Okay, gotcha, gotcha And

16:53 y'all just, and the situation you just said was, now we turn around and sold it. That's right, 'cause there's equity value, just like you would have in your house, right? You pay down your

17:03 mortgage after a certain period of time, you've got equity value in it, and you can sell that equity value either by taking a loan out of it or taking money out of it, or someone will buy it from

17:13 you. So the ABS market for the energy space is growing dramatically. And why is that? I just, you know, I would have thought,

17:27 the ESG cloud or whatever you want to say, would contaminate that capital as well. And it just doesn't seem to be. No. That was what this guy, Robert Smith came on the podcast about two years ago

17:41 and he had done, worked on one of the first ones. Right. And he said, no, it doesn't, because you securitize somehow, it makes everybody feel much greener. Right. Well, you know, as I

17:52 mentioned, we do have some sustainably linked attributes to these. So that's helpful. But really, the insurance companies, let's be clear, right? At the end of the day, they want cash flow.

18:03 So they've got low risk, investment grade cash flows that

18:08 they could lock in. And it's a new asset product, really, for them to. And I think the other reason why it started to evolve more is there's more mature producing assets out there the marketplace

18:22 these days, right, that have come off of their their hype. hyperbole decline, right? And they've kind of are in more of the terminal decline aspect of their production. So the, so more

18:33 companies have utilized them. I mean, when our treasurer and others started going to these ABS conferences, there's the big one in Las Vegas. And then there's another big one in Miami. Um, yeah.

18:46 I mean, they went not too long ago. They had like 45 meetings in one day. Crazy. Yeah Because everyone wants to meet with us, because we've done these and done them successful and have seen the

18:59 other aspect is for we also have partnered with, uh, another company, Oak Tree Capital, um, to help us in terms of financing, some of these assets on kind of a working capital or working

19:13 interest construct. So in other words, the assets are there. They kick in half the capital. We get a, you know, 52 48 split on those assets Yeah, no oak tree loves. low multiple. Yes. They

19:28 always have been, and they've always found a, found a way to play it. It was back in the. com era when we were doing all these fly wells and fuel cells and all this crazy energy stuff back in the

19:42 late 90s. Oak tree was running around going, hmm, do those guys have inverters in their fuel cell somewhere? Or do they have this little, this little switch they need? Oh, where's that business?

19:55 Oh, I can buy it for three times even though they were always great at being able to figure that out. So, so this is kind of cool. Do you guys, I mean, you guys don't pay a dividend at this

20:06 point, do you? We do. We do. We do play. The stock has sold off over the last six months. So the rate is pretty high, but it's been it's a fixed dividend that we've had. So, the target that

20:20 we had targeted is roughly around 10ish, but it's it's increased with the shelf off in the share price, but I think for us, there's really a couple of ways that we think about capital allocation

20:34 and return of capital to shareholders. One of them is paying down debt, and so continuously delevering the business as we can is with priority probably number one, return of capital to shareholders

20:48 either through dividends or - How's the debt structured? I mean, is it all kind of revolver type stuff with senior banks or do you have some structure and term to it? No, so it's all RBL. So

21:01 there's, you know, of the one point, you know, call it2

21:10 billion, we've got125 billion outstanding. There's about a couple hundred on the RBL and then the balances in the ABS structures. Okay. Yeah. And that's it. And those ABS structures, like I

21:20 said, have anywhere from an eight to 10 year life at this point where how they're kind of stacked by 2030, all the debt will be off the balance sheet. And as you go out to 2026, and actually

21:35 because of the way the cash flows are structured, and we did a number of these when commodity prices were high, that a big portion of the payoff actually happens by 2026, so you'd be half of that

21:48 amount on the books by 20, at the end of 2026. Anything weird happening there, or it's so hedged up that you're gonna get all that paid off. No, no, it's all hedged up, yeah. Okay, cool,

22:01 yeah, cool. So, okay, so got a dividend, you got that. Now,

22:10 so is today kind of when you're sitting there in the corporate offices, is it, you know, great day, prices are low, great time to buy, all that, or is it. Does it just put such a strain on

22:25 running the business and looking at it that

22:32 it's yucky time? It really just depends what lens you're looking at it through, right? I mean, I tend to be a glasses half full guy, so I view it as an opportunity. I think a number of our

22:43 executives view it as an opportunity. They've lived through low commodity prices and that's really where the business started and was built in that low commodity price environment. As I mentioned,

22:55 we grow through acquisition, right? We're not growing through the drill bit. So we've got fixed cost, we've got low operating expenses. We've got no CapEx really to speak of, right? Our run

23:08 rate CapEx on the sustainable longer term is roughly about50 million. So it's, which is all large workovers or other capital projects

23:18 that we're working on so it's not a lot of capex spend. So change out a plunger lift, whatever it wants in a while. That's right, so those type of things are what we're spending capital on. And

23:31 it allows us to really focus on growth through acquisition. And there are a couple of different buckets where those acquisitions come from. One of them is coming from majors. So for example,

23:47 Conoco Phillips, last fall, we bought an asset from them for about225

23:55 million. They've constantly got a list of assets that they're looking to sell. And we don't pay for any of the undeveloped or anything that comes along with it. It's strictly, what's the PDP

24:08 cashflow? That's kind of our mantra and construct. So we worked with them, bought that asset. But as we were talking about earlier, The structure in the GNA and how this business started was

24:20 really around. people not focusing on that. And so if you if you're working for a conical Phillips, or they've got something that's in their divestiture portfolio, they're not spending any money

24:32 on these assets. They've got no well tenders, no operators out there on those assets. So we that asset package was 1800 wells. There were 400 wells that were just not turned on, not because they

24:46 weren't productive or had issues or operational problems, because there was nobody in the field to manage those. Nobody to monitor the emissions that were coming off those assets, which were

24:56 primarily natural gas assets. So that's the low hanging fruit that we're not paying for, because they're not producing that we get upside for free. You know, another. So that's one kind of bucket.

25:08 That's real. Yeah. I mean, I saw that throughout my career all the time. I mean, if you're, I mean, think about it, if you're the young engineer at Conoco, do you want to go out there and

25:19 mess 15, 20

25:23 MCF a day well, or do you want to get drill three-mile lateral? Right. That's right. Yeah. So that's one bucket. Another bucket is when there's kind of stress in the market, either from high

25:36 leverage or other attributes from a company. One of the examples I would point to, so we bought some assets from a company called Edgemark up in Ohio and Pennsylvania,

25:50 and the company was going through a bankruptcy reorganization. So we were able to buy some of those assets at a fairly cheap price, those assets came with undeveloped acreage. There was a power

26:03 plant that was just starting up in Ohio that needed feedstock. So we bought the assets for, let's call it pennies on the dollar And then we turned around and made a contract with this power plant.

26:19 they, we contributed to the acreage, they contributed to the dollars, we operated it, drilled some of those wells for them, then operated them. That feedstock went to the plant to go feed their

26:30 natural gas power plant. So we turned at that, when we bought the assets, it was a PV 22. We turned that into from ultimately selling off some of those, that acreage and completing some of the

26:44 ducks and some of these undeveloped wells for them to PV 40 relatively quickly. Another example, from a private equity firm. So they had some assets that were for sale in the Hainsville Cotton

26:58 Valley area, right? So East Texas. They put those assets on the market. Again, we just paid for the PDP value. There's a number of undeveloped acres and a number of drill sites that were kind of

27:12 pad ready We bought all those, right? Again, it was a small package, but we bought it. We turned around and sold the undeveloped acreage in those kind of drill ready sites to another operator

27:25 for70 million. We paid200 million for the assets. So we turned that from a PV 18 into a PV 30, relatively quickly by selling those undeveloped assets. So those are kind of the three, you've got

27:40 your private equity sellers, you've got your distressed environment sellers, and you've got your majors looking to offload some of their non-core assets. So I will tell this story in you a pine on

27:53 it. It used to be way back in the day, maybe we'll queue up Bruce Springsteen's glory days or something, I'm from New Jersey, we like Bruce Springsteen. Yeah, glory days. But it used to be that

28:05 you kind of made the assumption that an act of well bore, it's gonna cost you to PNA it about what the equipment's worth. that's in it that you yank out. And so those were always kind of a net zero

28:23 and then think about them. Well, then at some point we were kind of like, well, maybe we need to pay more attention to these things. And at least we had a PA schedule that we would put together

28:36 with an acquisition, but it was the last page of the book. We always broke for the board dinner before we went through the PA schedule, all that, man, the last two years at Cane, we were

28:49 probably, that was probably the first schedule we were looking at. And we were actually asking questions about, no, no, no, really, when are we shutting in this well? Right. Don't tell me 20,

29:02 57 or whatever the case may be. It would seem to me that would be, if you guys mess something up, that's where y'all would mess up underestimated what PA costs would be, you pushed it out to and

29:18 historically it's coming due. Talk to me about that, what's your process around that? Yeah,

29:24 so it's a very evolved process and candidly what I would say it's one of the fascinating attributes of our business because what we've done is turned what would be a liability into an asset at the end

29:38 of the day. So when you think about PAing a well and retiring that asset or retiring that well, when the company first started going down that path and needed to retire some of those wells, they

29:52 were doing what everyone else in every other basin did, which was kind of roll that cost into their completions cost or roll it into a longer term oil services cost, right? And it was always, yeah,

30:07 you know, what is it going to be? 120, 150,

30:11 000. Nobody cared because everyone was so focused on. All right, we're getting a good completions contract, that's it. What the company found out, and they did a couple of those wells by those,

30:21 you know, larger third-party oil service field companies, and what they found out was, it seems like a lot, right? This isn't drilling a brand new unconventional five-mile long well, right?

30:35 This is a conventional well that's been here for a while, doesn't have a lot of moving parts, it should be simpler. So they brought in some professionals and started doing them themselves, and all

30:46 of a sudden it went from 100 and 120 to 30, 25. What we did is we built out our own asset retirement company within our business. So we now, through acquisition and organic growth, we've got 17

31:06 rigs, 15 full-time crews that are not only retiring our own wells for diversified, but we've also partnered with the states of West Virginia. the state of Ohio, more recently, the state of

31:20 Pennsylvania, to retire their orphan wells, which I'm sure you know, is a big, you know, topic, hot topic now, the number of times I had Sarah Stodger on my podcast talking about zombie wells.

31:35 Yeah. So, so there, I mean, when you look at that, that map, I mean, you know, there's, you know, call it 20 to 30, 000 in West Virginia, call it 30 ish thousand in Ohio In Pennsylvania,

31:48 the numbers are all over the map. You could, you've heard numbers as high as 200, 000 roofing wells. So, so we partner with those states to help them with that process. So last year, we have,

32:02 for ourselves, retired 200 of our own wells, we've got long-term agreements with the states to require between Ohio, West Virginia and

32:13 Pennsylvania 90 wells. So we did 200 of our own, so we more than doubled what we're actually required to do. And we did another 184 for the state of West Virginia and the state of Ohio. That's all

32:28 third party revenue. That offsets any of those costs that it's gonna cost us to longer term to retire our own wells. So our costs before any of the offset,

32:42 we haven't put out last year, but the year before was roughly about23, 000 all in to retire our own

32:49 wells. So yes, it's a longer term liability, but we've managed it in such a way that we've turned it into an asset for the company by building out this asset retirement company with Indiversified.

33:01 So you can actually price it and not me, 'cause you guys are doing it. Yeah. Oh, cool The, so the criticism on you guys as I understand. Well, there's a lot. Yeah.

33:16 Well, welcome to Iowa, dude. Listen, we live in the fossil fuel world and there are naysayers, right, on that. And, but it is out there on us as well as other companies. Yeah, and my

33:30 question on all of that stuff, 'cause I've got, I have a dear friend who literally like chained herself to a refinery, you know, as a member of Greenpeace and all this and that being said, she's

33:43 adorable and wonderful and she's come on the podcast and said her part. And the thing we just just fundamentally disagree on is I think at the end of the day, if you're making something better,

33:55 that's a worthy thing that we should undertake. And I think her point is we have to stop now, 'cause if we don't stop now, we just become more dependent and we, you know, continue the climate

34:11 disaster, et cetera. So just disagree. When I read the criticism of y'all, having never done deal with y'all, haven't never been out into your field or all that, I can't tell the difference

34:24 between, these guys are buying the bottom of the barrel, last end of life wells that were drilled 40 and 50 years ago, they're just bad wells. And the fact that they're P and A in them, they're

34:37 doing this stuff, reducing methane emissions, is actually good. I don't know if it's that, or are y'all just having to watch every nickel that maybe you're being cheap operators? So how would you

34:51 frame y'all's approach? Sure, so I think as we kind of started out, we're viewing ourselves and our approach is really a solutions-based business, providing solutions to the energy transition, if

35:05 you will. And there's a wedge of production, right? We all know that there's this mature production, existing production out there that on. any given day is probably 10 to 13 of the energy

35:21 produced in the US. That can't go away without major consequences. So we're providing an opportunity for these existing assets that are out there to put them in hands that are going to manage them

35:36 in a more stewardship manner. And what I mean by that is, when we buy these assets, we will go out, address the pad sites, address emissions, fix any leaks. I mean, we've got a zero leak

35:51 policy, right? And we go out, if there's a leak, we fix it. Some of these leaks are as simple as, all you gotta do is turn a wrench on a weapon, right? I mean, these are not highly, but if

36:03 there's nobody out there in the field to do that, yes, there's issues with that So we bring them under our own entity and manage them in a better way. through life, right? So literally from

36:16 production, through end of life. We've spent,

36:21 last year we spent over15 million

36:24 on emissions detection and monitoring equipment for the company. We've been cited by the oil and gas methane partnership, which is the global standard for emissions reduction. We've been awarded by

36:40 them for two years in running the gold standard, not just because of what we've done in the past, but the path that we have to reduce emissions longer term. And the key focus of that is actually

36:55 measuring emissions. We have the opportunity to do that because the GNA structure, we've got operators out in the field that are going to these wells, maybe not every day, but every other day, or

37:06 every week, depending on the size of the production They are empowered from this15 million. They've got handheld equipment. We do LiDAR flyovers. We do through Bridger Photonics, which does

37:22 helicopter in Appalachia. And we've got a number of what I would characterize as innovative technologies that were partnered with a lot of emissions providers. Right now there's an arms race on all

37:35 of this stuff. Like who's going to have the next best gimmick out there or the next best technology out there. And we're utilizing a lot of these and giving them feedback. Do y'all have any content

37:50 on this? In terms of like sent camera crews out and filmed it. I thought that'd be cool. Yeah, no, so we've been heavily engaged with the regulators in our different operating areas. So our

38:05 operating areas are Appalachia, right? So West Virginia, Ohio,

38:11 Pennsylvania, Kentucky, and then what we characterize as our central region. So Oklahoma, which is really Western Anadarco Basin, Texas, which is East Texas, Cotton Valley and Hanesville and

38:24 Louisiana, and then a little bit in the Barnett as well. So yes, we've had regulators out to our sites. We've had state legislators from those different environments out to our sites and done a

38:38 number of tours for them So they understand we had the Department of Environmental Protection out to our site to see a asset retirement job that we did and retired the well. And here's how it's done.

38:52 So I think there's always going to be naysayers out there. But I think we're doing our part to really kind of manage our assets in a stewardship way. And it's really a focus of the company. And

39:08 there's a couple of other things we focus on and it's the culture too that we have. installed in our employees. So we've got 1, 600 employees. The vast majority, let's call it 85 of them, are

39:20 out in the field. Not guys like me working in the office, right? They're on the ground managing these assets on a day in, day out basis. And a lot of them have come from bigger or Chesapeake be

39:31 it whether, companies EP

39:36 EQT or some of these others and have gone through either downsizing or have been experienced with bankruptcy problems in their assets. So they look at us and they say, here's an operator that's got

39:50 sustainable cash flows that has a longevity of life that provides opportunities to the communities which we work in. I mean, one of the interesting aspects of last year when we did our

40:03 sustainability report, we did an economic impact analysis So in that 10 state operating area. We've returned510 million to royalty owners in

40:17 that last year alone. And some of those areas are fairly impoverished in Appalachia, so they need the money. We, as I mentioned, employ 1, 600 people, but, you know, ancillary employment,

40:30 employment from service operators, or other contractors, it's over 5, 500. We paid250 million

40:44 in

40:48 taxes So when you add up all of these economic impacts, it's, you know, again, it's publicly disclosed. It's roughly a billion dollars worth of GDP impact that we have on these operating

40:52 communities. We talked about this yesterday on the other podcast, a big digital energy that actually in the United States, higher energy prices are a net positive to the economy. For all the

41:05 things you just listed out in it, where historically it was a drag on the economy. et cetera. But we, you know, the shale revolution, what we've done in energy over the last 25 years has

41:18 actually reversed that. We, it seemed like we were always going out to the dedication of a softball field or a baseball field that one of our companies had put in and the like because it's, it's

41:31 amazing how you can really impact these areas by running a responsible organization in operation there. So, yeah, we're, we're heavily involved in the communities, especially in, in Appalachia

41:44 and especially in West Virginia because that's where Rusty our founder is from and still owns property out there. So he's, he's heavily involved. We give back, you know, we, we do, you know,

41:55 sponsor to your point, you know, the 4-H, different organizations, West Virginia University, West Virginia State University. We partnered with them to, they've got an environmental science

42:08 program and we partnered with them to plant trees. because we, through part of the state, we put in a new gathering line. So we kind of had to, we had an easement that we had to address and we

42:23 put, we're planting trees to kind of

42:27 reforest what we kind of took away. Nice. Yeah. Nice. So, all right, so I need one kind of crazy oil and gas story. How do you? I'll go first with mine because it kind of has to do with what

42:41 we're talking about. I am blanking on the guy's name, but anyway, he had a classic old school Appalachian production company in Kentucky. And we went and looked to invest in it. And you could

42:57 tell this guy was really good with taking the dump and ants guys around in the field. So we're driving around. And anyway, so we're going and looking at wells and we drove. somewhere and there was

43:12 a sign for one of his wells pointing up that way and he goes, yeah, we don't go to that one. And I'm like, why is that? And he goes, well, Jim Bob has his still, right next to the well. And

43:24 we keep telling him, you don't want your still next to the well 'cause it might explode, but he shoots at us every time we go there. So we just leave that one well alone. Yeah. And

43:36 so there is some of that Oh, absolutely, in let's call it rural Appalachia, there is definitely that type of stuff that goes on. So I'll tell you two stories. All right. So one was when I was

43:52 the newer guy, right, and on the banking side in my previous life, I got tasked with doing a due diligence trip. So then I find out where the due diligence trip is. So it's in January, third

44:06 week of January We've got a fly to Dickinson, North Dakota. So it is, we take off from Colorado that we're coming into the airport there. We're about 15 minutes out and the pilot calls up.

44:21 They're like, Start up the cars. We go into the hangar. Don't even, right into the hangar, they close the door. The cars are running. It's negative 40 degrees outside. Nice. So that was kind

44:33 of the young guy getting

44:37 the, the low man on the totem bowl due diligence trip The other thing that I would say that was an interesting aspect of my career as a move to the corporate side was we did an analyst day at one of

44:51 my previous companies. And we were heavily focused on drilling what we characterized as the super long lateral. So I worked for a company called Eclipse Resources. So we drilled a number of the

45:05 longest laterals onshore at the time in North America. 22, 500 feet. And that's just a lateral portion. So we did an analyst day in New York. And they put together the PowerPoint presentation,

45:21 picked a spot in Central Park to where we were doing it at the New York Stock Exchange and said, That's how long the lateral is for the well that we just drilled. Oh, that's cool. Yeah. So it was

45:33 an interesting aspect Oh, I like that presentation because I mean people don't realize outside the industry just how incredibly technologically sophisticated we are to be able to do that stuff

45:46 because I mean you're talking a whole this big, you know what I mean? It's not. And you're putting it within 50 feet of something, which is pretty amazing. Yeah. I

45:59 had one of the funny banker meetings early in my career when I was the the young associate on the deal we were sitting there and we were looking to take a company public and they put up their drilling

46:11 schedule for the next year. And I could have asked this question, thank God I didn't. But the young associate next to me from a firm that shall not be named Morgan Stanley, actually said, hey,

46:26 have these wells that you drill next year in the drilling schedule? Which one of them are gonna be the dry holes again?

46:34 Interesting. FME.

46:38 thought he was actually being snarky and sarcastic, but now I just kind of flew right over the head. Well, so what I wanted to do before I left, I would be remiss if I did this. So as I mentioned,

46:50 we focus a high degree on culture at our company and the culture, especially of our employees and how we kind of live work every day. And one of the things we present to our employees when they

47:03 start is the challenge coin. So I don't know if you know about the history challenge coins, where they came from. kind of a token of appreciation for people that, you know, it started with the

47:16 military that have done service to their country or given portions of, you know, their service to others. And so we're giving you this. Oh, cool. It's a diversified energy challenge coin that

47:31 just that's the new one for this year. It's got on it. It is really focused on our main aspects, which is production, transport, and retirement of our assets. And it's got our four daily values

47:47 on there, which is enjoyment. We want employees to enjoy coming to work, focus on production, focus on being good stewards of the environment. So be it for you and in this podcast and doing your

47:59 part for the energy space and for having me on. There's your challenge. Very, very cool. Now, how do people find out more about they want. So we've got a website out there, divenergy. That's

48:12 out there in the marketplace they could go to. There's obviously a number of articles that have been in trade journals about us as well, and a number of research analysts right on us. So very cool.

48:25 Since we concluded earlier that we hadn't met before, it was really good to see you. Good to see you again. Yeah, absolutely. Thanks for coming on. Absolutely, it was great.