Good day, and thank you for standing by. Welcome to Civitas Resources First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded..

I would now like to hand the conference over to Brad Whitmarsh, Head of Investor Relations. Please go ahead. .

Thank you, Allis. Good morning, everyone, and thank you for joining us. Yesterday, we issued our first quarter earnings release, our dividend release and a buyback announcement, along with our 10-Q, and we provided some supplemental materials. Hopefully, you've had a chance to review those items, which should all be available on our website.

I'm joined today by our CEO, Chris Doyle; CFO, Marianella Foschi; and COO, Hodge Walker. After our prepared remarks, we will conduct a question-and-answer session. As always, please limit your time to one question and one follow-up so we can work through the list efficiently..

We will make certain forward-looking statements today, which are subject to risks and uncertainties that could cause actual results to differ materially from our projections. Please make sure and read our full disclosures regarding these forward-looking statements in our most recent SEC filings. We also may refer to certain non-GAAP financial metrics.

Reconciliation of these items to GAAP measures can be found in yesterday's release and in our SEC filings..

With that, I'll turn the call over to Chris for opening comments. .

Thanks, Brad. Good morning, everybody, and welcome to our first quarter call. 2023 was truly a transformational year for our company. Now in 2024, this is the first quarter that all of our new businesses are put together, and our results highlight just the beginning of Civitas' bright future ahead.

Today, we're benefiting from a scale and more diverse portfolio our teams are finding innovative ways to drive capital efficiency. There are a couple of key takeaways..

First, our Permian team and assets are performing very well. Through successful integration, we're already reducing drilling and completion cycle times and lowering cash operating costs. Now it's only one quarter, but I'm super excited about the results this team is already delivering.

Next, our teams continue to optimize development of the DJ Basin, and we achieved our $300 million divestment target ahead of schedule. These divestments are accelerating value to Civitas, peeling away assets that simply don't compete for capital..

On an annual basis, the $300 million of assets would have generated approximately $70 million of EBITDA at $75. Now connecting the dots here, these noncore assets traded at a material step-up in value from where our remaining core assets currently trade.

Importantly, the quality of our portfolio, our strong operational execution and our confidence in achieving this year's targets will allow us to maintain full year volume guidance despite selling 5,000 BOE per day. This is essentially a 1.5% increase in our sales volume guidance for the year with no CapEx change..

Also during the quarter, we continued our strong shareholder return program, returning $215 million between our peer-leading dividend and share buybacks.

Hopefully, you saw our press release yesterday announcing another share repurchase agreement where we're buying back more than 1 million shares from Vitol is now down to under 2% of our outstanding shares..

Since the beginning of last year, we've repurchased $462 million of our stock at $63.30 per share. And our total return, including dividends is approaching $1.3 billion over that same time frame. That's approximately 18% of our market cap returned to shareholders in a little over a year.

In addition to our capital return, we paid down debt in the first quarter, reducing our borrowings by $350 million. Our first quarter operational and financial performance drove a significant beat on both consensus earnings and cash flow..

Sales volumes for the quarter were higher than planned, averaging 336,000 barrels of oil equivalent per day and oil was 156,000 barrels per day or 47% of total volumes. This was driven by strong well productivity along with accelerated turn-in-line timing in both the DJ and Permian..

Cash operating costs were in the lower half of our annual guidance at $9.19 per BOE. LOE was the primary driver here, totaling $4.31 per BOE. Capital expenditures were $650 million or approximately 1/3 of our annual guidance.

This is slightly higher than planned, but largely due to the acceleration of drilling and completion activities in the Permian as well as certain long lead items purchased for the DJ in the first quarter. As a reminder, we'll likely spend 60% to 65% of our full year CapEx in the first half of the year..

As we progress through the remainder of the year, our focus remains on maximizing free cash flow, enhancing the balance sheet and returning capital to our shareholders as we build a long-term and sustainable business. Now let me turn to some operational highlights..

Starting with the Permian. We'll be investing about 60% of this year's capital in the Permian. We're continuing to show that assets are better in our hands. In today's supplemental slides, we provide a number of helpful comparisons that highlight this exact point.

On the drilling side, we've increased average footage drilled per day by nearly 30% from prior operators. And according to third-party data, we drilled more footage per day per rig than any other operator in the Permian during the first quarter of the year..

A particular note, we recently drilled a 3-mile lateral in the Midland Basin and under 10 days spud to rig release. We've also had similar achievements on the completion side. Our teams have increased daily fluid throughput by 20%. Accordingly, cycle times are coming down as our D&C costs.

So far, we've captured approximately 5% cost reduction on a per foot basis and there's much more to come. We're also finding ways to lower cash operating costs.

In the first quarter LOE, we were more than $1 below expectations, driven by ongoing field-level synergies, primarily labor-related and the optimization of chemicals program, particularly in the Delaware..

In March, we commenced production on a large number of new Delaware wells. Early production performance is in line with expectations. Production from these wells along with additional TILs through the summer should drive oil growth in the Permian through the year.

The first well is fully drilled and completed by Civitas are anticipated to commence production in the third quarter. We continue to find ways to optimize our portfolio through asset trades, acreage swaps and small [indiscernible] acquisitions.

Our ground game has added valuable inventory, extended laterals and increased working interest in near-term development..

As a result of this success, we've now lowered our 2024 expected Permian well count by about 10 while still completing the same lateral footage as our lateral lengths have increased by more than 10%. Now switching to the DJ. The highly prolific Watkins area comprises about 70% of our 2024 DJ investments. We continue to be encouraged by performance.

And you can see on our slides, how production continues to track well versus our recently uplifted type curve. During the first quarter, we completed 13 4-mile laterals in Watkins. These are the longest wells ever drilled and completed in the Basin.

These wells allow us to access additional resource while reducing surface impact, and we're looking forward to production results in the second half of the year..

We have 320 remaining development locations at Watkins and majority of which are covered by comprehensive area plans. The [indiscernible] cap is approved and represents much of our 2024 and 2025 planned activity. And we're working on the Lowry cap approval, which we expect to happen later this summer.

Also during the first quarter, we drilled our first U-turn wells in the DJ. So another accomplishment in our strategy to maximize returns and resource development with longer laterals..

Briefly on the Colorado regulatory front, I want to thank the governor and the legislature for their work to reach a compromise that will withdraw the competing ballot measures and in-process bills regarding oil and gas development.

While the new compromised bills are not yet finalized, they're aligned with our emissions reduction commitments and they raise important funds for low carbon transportation options for all Colorados..

Importantly, for producers, it provides certainty that the government will oppose any future ballot measure and any legislative attendant that would upend this certainty at least through the 2027 legislative session.

This is a win-win for all parties, including our shareholders as it removes risk of near-term regulatory changes in the state into 2028..

Wrapping up, our first quarter performance reflects the benefits of a high-quality portfolio and the team's ongoing ability to make the most out of our asset base. We're encouraged by the early efficiency gains and strong results we're seeing in the Permian and the DJ Basin continues to perform exceptionally well.

Civitas has all of the key ingredients to deliver long-term shareholder value, high-quality assets, inventory depth, a strong balance sheet, significant free cash flow and a track record of returning cash to owners through cycle..

Thank you for your interest in Civitas. Operator, we're now happy to take questions. .

[Operator Instructions] Our first question comes from Neal Dingmann from Truist Securities. .

Congrats on the nice quarter. My first question, is really on the notable upside you all already seen on the Permian. And specifically, what I'd like to add to Chris, is for your [indiscernible], just on the well productivity in the play, it appears to be advancing very quickly. I'm just wondering.

Are there a few items I know we've had a number of companies now with earnings this week talked about the well productivity and what's driving that? What's most impressive with yours is just a short amount of time.

And so maybe you could talk about the type of drilling or completion ups -- what we're seeing there and maybe future D&C upside the remainder of the year?.

So thanks for the question, Neal. It's very easy and what we've done is point to very notable capital efficiency gains, drill time, cycle times, turn-in-line cycle times. All of those are hitting on all cylinders. I think what's not necessarily out there quite yet is what this team is doing in terms of how we're developing this resource.

And to your point, there's additional zones of interest uphole in the Delaware. We've talked about the Wolfcamp D in the Midland..

The reason that we targeted entering the Permian is exactly what you pointed to. There is tremendous resource up and down the whole. We're testing those zones. Some of those zones, candidly, while there are upside, we did not underwrite value for these acquisitions. We're seeing how they perform. That will inform how we allocate capital going forward.

I'll say we're very excited by early results that we're seeing in many of the secondary zones, and that will have impacts on how we allocate capital going forward. .

Great point. And then, Chris, since you've come in, you've done a tremendous job only doing what you're going to say, but just on the shareholder return.

And I'm just wondering now, when we look at sort of Civi going forward, do you still think sort of the flat growth makes the most sense now that you've got these high-return Permian assets to go along with the DJ assets.

Maybe just talk about what you think -- what strategy you believe is still best for shareholders going forward?.

Yes. And I would point to the collective at Civitas really executing on this business model that was put in place, formation in November of 2021. We think it still makes the most sense long term, not to focus on production growth, but focus on cash flow, focus on maximizing free cash and returning that to shareholders.

Now some years, that may mean a little bit of growth, whether you saw that early in 2022 when service costs weren't necessarily aligned with commodity prices. You saw the run-up in commodities. So what did we do? We accelerated and we grew production..

The flip side was true as well. In 2023, where there was a mismatch, and we pulled activity back. Again, this is about how do you maximize shareholder value over the long term. And I would say right now, there's still a lot of flux in the system.

And this is -- that's why it's a difficult question to answer for us right now as we stand up operations in the Permian. So much of that capital efficiency equation, so much of what this team can deliver and what these assets will deliver is still yet to be determined..

I think what's truly exciting for our team is there are a lot of folks that wanted to see us execute. They wanted to understand, could we integrate three new businesses in the Permian and not stumble and -- look, again, it's one quarter. We're not spiking the football or anything like that.

But we're super proud that this team has started out of the gate as strong as we have. I think what you'll see year-over-year is likely to be broadly flat production and how do we peel out as much capital as possible..

Now I will say another hallmark of our Board and the hallmark of our executive leadership team is that we are always in the lab trying to figure out how to improve our business. And if that means we grow a little bit. We'll look at that as a potential option. My gut is it's going to be broadly flat production, minimize capital. .

Question comes from Tim Rezvan from KeyBanc Capital Markets. .

I want to start first, I guess, the Colorado legislative news, obviously, a really big deal.

Can you give any more insight on the timing when we -- is that like how it works being sort of passed through the legislature right now? And then while we're talking about time lines, can you give any more details on what you think for the Lowry CAP and then the third CAP in Colorado?.

Tim, this is Hodge. With regards to the legislation that you referenced, that legislation is moving through right now as we speak. The session ends here next week. So expectation is that we'll move through the process and get voted on here by the end of next week.

As far as the application, as I think you might be aware, there's a sliding scale that's associated with pricing on oil and gas separately that sliding scale will go into effect in 2025..

One of the benefits of this discussion, this compromise is really through the work of the governor, the legislature, ENGOs in the industry and the governor's announcement on Monday through companies were named and we were one of those companies through the work that we've been doing over the last few weeks.

What we've agreed to through this compromise is that the governor and the legislature is stacking is to say that there will be no negative legislation. They'll come out against legislation and ballot initiatives that have a negative impact on this industry. And that's through the legislative session of 2027..

So for all intents and purposes, that clears until the 2028 legislative session. On Lowry CAP, we're expecting Lowry CAP to be moving through this summer. And then next one is our Arapa CAP, and that will be probably at the end of this year, beginning of next year. .

And Lowry CAP, we've got a schedule in June, gearing -- so we're feeling good about that. I think the only thing I'd round out is the sliding scale at current price, about $0.50 a barrel of oil, about $0.15 for gas. If you apply that to our production stream over the entire Civitas production street is about $0.25 BOE.

And how we made more than that, it's peeled more than that out of LOE in the first quarter. Now we're not happy about paying additional taxes, but we are happy about building a coalition that shows the importance of this industry in the state, and removing regulatory uncertainty for the foreseeable future..

And as Hodge mentioned, we work the Lowry through the process. We roll Arapa CAP through the process, we have a real line of sight to developing one of the great resources in the DJ over the next 3, 4 years without that overhang. So we're excited and happy to work together with the governor, the legislators and NGOs to get this done. .

Okay. That's great color. And then as my follow-up, I wanted to shift gears a little bit. I know you all have been out meeting with investors more this year. There's a growing debate out there about your differentiated dividend outlook. Obviously, repurchases have been in favor.

And I know for you all, it's a little more complex issue because it is a sort of meaningful part of the comp structure that's been put in place..

So Chris, I don't know if you could put your director hat on and address this or if Marianella, you have some views.

But just kind of curious what you're hearing from investors on repurchases versus this differentiated dividend? And maybe how the Board is sort of thinking about this going forward now that you've -- you're digesting these acquisitions?.

Yes. I'll kick this off and then maybe see if Marianella to smooth out the edges. This is an executive team that's very well aligned with shareholders. And so this is a debate that we have internally to say nothing of what we hear from investors.

At formation, we felt like it was important that the commitment to getting cash back to shareholders was real. And I think what I'm really proud about is as a company since November 2021, we've really lived up to that commitment..

Now the really interesting thing in my view is because of the strength of the assets, the cash flow generating power of these assets, we've been able to really deploy in all of the above strategy.

And so we've been able to hit the dividends at the same time deliver on buybacks in tandem return a significant portion of our value back to shareholders just over the past couple of years. It's something I would say we consider as a capital allocation decision. And so it's something that the Board debates.

It's -- management will continue to debate it. To this point, we've had the strength to be able to do all of the above, but it is something that we evaluate. .

Tim, I would add that as you know, we've been in the conference circuit out a lot over the last 45, 60 days or so.

I'd say the feedback from the buy time in general has just been the flexibility in our capital plan, how do you think about committing to returning a certain percentage of our cash adjusted dividends versus thinking about a more flexible framework..

I would argue that based on our balance sheet, based on the strength of our cash flow and based on the caliber of our asset base. We do retain that flexibility, right? And you've seen us do a lot of everything. Consistent with the comments we made last quarter, I think it's important to remember that. We continue to return cash through the cycle.

We definitely want to position our company to do that over the long term. And if you look at what we've done to date, we have an extremely strong track record of doing that as good as anybody..

Going forward, you can expect us to continue to execute on that. We like our [indiscernible] philosophy, we believe this strategy tuck us as well. And on the buyback front, you've seen us do a lot of that, certainly over the last couple of quarters and even more so over the last 15 months. We'll continue being opportunistic and countercyclical.

One thing you know very well is this industry is full of examples of companies that buybacks are occurring at the wrong time, right?.

And some of the frameworks out there that are just leverage based that just by definition, they -- because your leverage would be low and higher commodity prices and that's where your stock would be high as well, you just get yourself in trouble with buying at the wrong time. So from our perspective, we have a $330 million authorization outstanding.

We're extremely in the money in terms of the weighted average price we repurchased those shares at. And we will continue to be opportunistic. We're going to be patient, and there will likely be some lumpiness in how we deploy the remaining authorization of the results. .

Our next question comes from William Janela from Mizuho. .

Chris, I wanted to ask one more on the Colorado fee proposal. I know you've been very involved in the process here.

So I'm curious if you could give us a sense of where that bill stands in terms of legislative support, if you're seeing any opposition to it coming in from anywhere? And how likely you think it is to be passed when that vote happens next week? I think that removes a pretty big headwind for your stock certainly for next 3.5 years?.

Yes. Thank you. Thanks, Will, for the question. And really, it's a tip of the CAP to Hodge and his team. We've been involved over the past few weeks.

It was critical and the governor, I would say, did a good job making sure that both sides of the aisle within legislature, the NGOs and industry were together and ready to stack hands on we can go forward with this.

And so we believe that it will work through the system that, that coalition was developed over the past few weeks with an agreement that works for all. I think importantly, and our industry brings in a lot of tax revenue for the state and to individuals. And a lot of our dollars go into hitting local communities in a very, very positive way..

I think what this tax does and the governor was very clear, that it starts to build a coalition at the state level. And when you fast forward to the legislative session of 2028 as the state will be looking to balance its budget. Now all of a sudden, an extremely important industry within the state in terms of jobs and tax revenue.

It also has this additional fee. And I think we'll strengthen the coalition, will there be noise 4 years from now? Probably. But this, I think, will go a long way to really strengthening the ties between the state of Colorado and is the great industry that we're blessed to work in. .

Question comes from Oliver Huang from TPH. .

On the outside, it seems like the efficiencies have come in a bit faster than you all would have envisioned, which looks to be pretty much across the board, which is good to see.

Just wanted to kind of see if there's anything else that we should be keeping on a radar for -- that could drive further efficiency gains in the near term? And any initial takeaways on kind of getting the venture side up to the same speed of the Hibernia assets? Just kind of given how you all had the keys to that one for a few extra months? The same that it will just be a bit more expedient if you're not already there, but just any comments there would be helpful.

.

Yes, we're there. We had TSAs for the -- covered all 3 of the transactions. We exited the TSA with Vencer late last month. And so this is real-time news, but these assets are all in our hands. I think to your point, we saw some real encouraging results towards the end of the year as we're pulling our budget together.

We rolled in some of those efficiency gains into the '24 plan. But to your point, we did not anticipate nor did we assume that this team would hit the ground running..

And again, I want to reiterate, this is only one quarter in, but the DNA of this team that we pulled together in the Permian is so much like the team that we have in the DJ, super hyper competitive. We want to lead industry in both basins that we're operating in.

And I'm just so proud to be a part of the team that has been able to knock down those results as quickly as they have..

I think as we go forward, and into the next quarter or a couple of quarters as we continue to gain confidence in our ability to extend laterals and drive cycle times down.

If the first quarter is any representation of what we're going to see in the next 3 quarters, we're going to have some decisions to make on do we want to redeploy some capital to the drill bit and potentially increase going into 2025, we want to extend the inventory through our ground game or do we want to get that cash back to shareholders..

I think it's going to be a fun discussion to have because any of those 3 options is a win for our shareholders. And we're just super excited to see what this team continues to deliver. .

Awesome. That's helpful. And maybe a follow-up. Just on the asset sales, good to see the completion of that midyear target on divestitures front.

Are you all pretty much done on this front for the time being? Or are there other assets that kind of remain within the portfolio, which you might have looked to kind of print that bring some more value forward?.

Yes. I think with this executive team and the broader team, I don't know that I'd say wherever truly done. I think when -- we are always looking for ways to optimize shareholder volume, value and how to optimize our portfolio. And sometimes that we mean assets are more valuable in other hands.

It was important for us when we announced the first 2 transactions to say, look, we're essentially about to double the size of the portfolio, let's make a commitment to ourselves and to our shareholders that we're going to take a hard look at what is core and what is noncore and commit to hitting $300 million by midyear..

To be able to do that ahead of schedule and honestly, at the value for noncore assets that I would have taken the under on a year ago is, again, a testament of a very capable, very strong team. So I'd say we will continue and always look at ways to optimize our overall portfolio.

And -- but I will say that we're happy with what we've achieved and excited to get this behind us. .

Oliver, I'll also add that for us, like Chris said, our focus is to create shareholder value, there's an opportunity to do that. I mean a lot of the noncore just further back in the schedule of strained acreage, we could use that to sell it, right, like we did. We can also use it to trade it, right? And Chris alluded to the ground game.

I mean I will say that is an incredibly huge opportunity for us to create value and I'll give you an example. I mean some of the traits we recently did in the Permian specifically, we traded into net -- more acres that allowed us to extend laterals. .

And you saw about a 10 gross load decline in account for this year, but that was for a extending lateral lens from 2 miles to 2.2. That trade, just to put it in perspective, that was 4 million BOEs of proved reserves that we got for 0 cost.

And so if we can do that for no cash, I mean imagine what we could do with some cash, which -- this is all within part of our budget. But just wanted to underpin that because it's something that we don't spend a lot of time necessarily talking about, but it's creating a water valley just behind the scenes, if you will. .

Our next question comes from Kevin MacCurdy from Pickering Energy Partners. .

It's actually Kevin MacCurdy. Yes, I would agree you got a pretty healthy price on those asset sales. In fact, it looks like you sold those assets at a higher valuation than where your stock is currently trading. My question is on efficiencies. You brought online more wells than we anticipated, specifically in the DJ Basin.

You talked about balancing growth and free cash flow.

But I guess, at what point does it make more operational sense to keep activity steady which could be an acceleration of your capital plan? And is that a decision that's driven by cost or commodity price?.

Yes. Thanks, Kevin, for the question. I think you're hitting on a key part of how you ultimately drive capital efficiency. And if you're yo-yoing activity, sometimes that can be difficult. We did accelerate activity in both basins actually because it was a more efficient use of capital.

And so it created a little bit of lumpiness and pulled some capital into the first quarter..

In many respects, the level set activity across both basins will lead to the most efficiency gains. I think in the Permian, the issue that we have right now is you have a team that is rapidly changing the equation by peeling out days on the drilling side and completion side..

All good things, but it is leading to a little bit of lumpiness.

I would say that we look at this on a continual basis and whether that is -- we're going to level load and keep things flat and just see if we can run harder that way or if we can -- or if we add in a little bit of lumpiness, whatever is the best, most efficient way to generate cash flow and get that back to shareholders what we're going to do. .

Comes from Leo Mariani from ROTH MKM. .

I wanted to follow up a little bit on the regulatory environment here. Obviously, good to see that there's a compromise between NGOs, the legislature, the governor and industry here. But just wanted to kind of clarify a couple of things.

So I know there was a bill going around that essentially would put some kind of summer stipulations on sort of largely on frac activity. And just wanted to verify that, that's going to be going away as a result maybe it already has. I don't know if it passed any committees..

And then just with respect to ballot initiatives, I'm not an expert in Colorado Civics or anything like that. But presumably, there could still be groups that could put forward a ballot initiative, I think under the current kind of rules of the state, certainly, I guess the governor can oppose it publicly and legislature can oppose it publicly.

But is it just a matter of having kind of enough signatures at the end of the day and kind of getting that approved by the right agencies in the state, where there still could be anti-oil and gas balance initiatives? Just wanted to get some more color on that. .

Leo, this is Hodge. Thanks for the question. With regards to the one legislation piece that was out there that had the potential for the pause during the summer. That has been -- that is a part of this compromise and will be pulled down as a part of this broader compromise. So that is in motion as we move through this legislative session.

Good question on the ballot initiatives and to your point, from the position people can bring forward ballot initiatives part of what we've agreed to with this broader discussion not only with the governor and the legislature, but also with the NGOs is that we are going to stand down the ballot initiative efforts, meaning them being -- bringing forward ballot initiatives against the actions of this industry..

And quite honestly, the industry putting some countermeasures out there. So that is a part of the broader agreement. To the same point, having the governor come out and say that he's against these types of ballot initiatives gives even more strength behind this compromising agreement. .

Okay. I appreciate that. And I guess just on well costs in the Permian. I just want to make sure I understood the comments correctly, I think you guys said that you're down about 5% year-to-date on D&C cost per foot. Obviously, that's great progress here in one quarter.

I just wanted to verify, is that mostly just kind of related to efficiency gains? I don't know if there's any OFS changes in that number? And it sounds like you have a lot of momentum there. So that 5% reduction, it sounds like that can get a lot better during the year. Just want to get a sense of where that might go in the second half. .

Yes, Leo, this is Hodge again. To your point, 5% down, this is one quarter. We're very excited about where we are. I think we're seeing efficiencies faster than where we thought we would be at this time. But at the same time, we're doing a few high fives, but we're not spiking the ball. There's continuous work to be done here.

We've got a team that is focused on and has a foundational DNA of continuous improvement. They're challenging themselves on how to do things safer, better, faster every single day..

Most of the cost savings we're seeing here are attributed to operational and equipment that we're using. We've changed out some rigs, and we've added horsepower on our completions so that we can increase our ability to do work and do it in a timely manner, and we're shortening our cycle times associated with that.

We are seeing some reductions in pipe costs, but the majority of the savings we're seeing here are around processes and equipment that we're using. Excited to see where this team is going to go. We will continue to focus on continuous improvement, and we'll see how this progresses over the course of the year. .

We haven't rolled those savings all the way through our '24 plan and don't know where we will be 1 quarter, 2 quarters, 3 quarters from now. And I think that is going to provide a tremendous amount of flexibility in terms of how we can redeploy that capital. I think there is a lot of noise in the system.

We're being conservative, rightfully conservative because it's early to Hodge's point, but super excited about what this team is already delivering. And I'm more excited to see what we can talk about next quarter and the following quarter. .

Our next question comes from Phillips Johnston from Capital One. .

Most questions were asked and answered, but I'll just leave it with two quick housekeeping questions.

First, do you guys have any material infrastructure needs over the next 12 to 18 months? And then secondly, NGO realizations were stronger than I would have expected in Q1 at about 30% of TI or so that's towards the high end of your annual guidance range.

I realize the range is unchanged, but can you maybe talk about the dynamics there and what your expectations are for the rest of the year?.

Sure, Phillips. I'll address your first question and let me know this is not what you're trying to get at in terms of infrastructure and gas takeaway, Permian wide specifically, so everything that we think we need to spend is in our budget, right? I would say from a Permian takeaway perspective, we have two very supportive strong partners.

And those partners have their budgets for what they believe they need for infrastructure for this year. I will say to underpin that over the last couple of quarters, we've seen planned and unplanned maintenance and some of the planes down there, and we really haven't seen any impact on flow..

Obviously, we felt the pricing impact on WAHA widening base, but no constraints itself.

This just speaks to the strength of who you partner with, right? [indiscernible] enterprise, again, just the two largest [indiscernible] gas, they really provide a lot of flow assurance in that regard just because those entities just need their wide grade for their frac complex is an export doc downstream.

And so from our perspective, after these 3 acquisitions, we just have very limited exposure, some of the smaller processors that to your point, like a lot of times just pass on some of those infrastructure budgets to their producers..

And then on your second question on the NGL realization that this trend quite a bit, quarter from Q4. A lot of that is related to the fact that if you think about the propane seasonality in Q1 that we saw, which is about 30% to 40% of our product mix, a lot of that is what drove those higher NGO realizations relative to Q4. .

We don't have any questions as of the moment. I'd now like to hand back over to Brad Whitmarsh for final remarks. .

Yes. Thank you. Appreciate everybody joining us today for the Civitas call. We continue to look forward to sharing our continued progress on upcoming calls. And certainly, we'll see you all at the conference circuit here in the second quarter. Hope you have a great rest of the day and a safe weekend. .

Thank you, everyone, for attending today's call. We hope you have a wonderful weekend. You may now all disconnect to this session..