Q4 2023 Northern Oil and Gas Inc Earnings Call

Participants

Evelyn Inferno; VP of IR; Northern Oil & Gas Inc

Nicholas O'grady; CEO; Northern Oil & Gas Inc

Adam Dirlam; President; Northland Oil & Gas Inc

Chad Allen; CFO; Northern Oil & Gas Inc

James Evans; CTO; Northern Oil & Gas Inc

Neal Dingmann; Analyst; Truist

Charles Meade; Analyst; Johnson Rice

Scott Hanold; Analyst; RBC

John Freeman; Analyst; Raymond James

Phillips Johnston; Analyst; Capital One

Donovan Schafer; Analyst; Northland Securities

Paul Diamond; Analyst; Citi

John Abott; Analyst; Bank of America

Presentation

Operator

Greetings and welcome to the Energy's Fourth Quarter and Full Year 2023 earnings conference call. (Operator Instructions)As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Evelyn Inferno, Vice President, Investor Relations. Thank you. You may begin.

Evelyn Inferno

Good morning and welcome to NRG's Fourth Quarter and Year End 2023 earnings conference call. Yesterday after the close, we released our financial results for the fourth quarter and full year. You can access our earnings release and presentation on our Investor Relations website at NOG, Inc. Dot com. Our Form 10 K will be filed with the SEC within the next several days. I'm joined this morning by our Chief Executive Officer, Nick O'Grady, our President; Adam Durham, our Chief Financial Officer, Chad Allen, and our Chief Technical Officer, Jim Evans.
Our agenda for today's call is as follows. Nick will provide his remarks on the quarter and our recent accomplishments. Then Adam will give you an overview of operations and business development activities. And Chad will review our financial results and walk through our 2024 guidance. After our prepared remarks, the team will be available to answer any questions. But before we begin, let me go over our Safe Harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by our forward-looking statements and Those risks include, among others, matters that we have described in our earnings release as well as our filings with the SEC, including our annual report on Form 10K and our quarterly reports on Form 10Q. We disclaim any obligation to update these forward-looking statements.
During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release.
With that, I will turn the call over to Nick Thank you, Evelyn.

Nicholas O'grady

Welcome and good morning, everyone, and thank you for your interest in our company. I'll get right to it with four key points to start the year. Number one scoreboard execution, delivering growth and profits.
On our second quarter call, I spoke about the importance of delivering growth in profitability year over year. I'd like to use that framework today to put the results from the fourth quarter into context, our fourth quarter adjusted EBITDA was up 52% year over year, and our quarterly cash flow from operations, excluding working capital was up 55% year over year over the same period. Our weighted average fully diluted share count was up about 17%, significantly less, reflecting the impact from our October offering, but not the impact of our fourth quarter bolt on deals, we achieved outsized growth in profits despite a more challenging commodity backdrop than the prior year.
Oil prices were down over 5% and natural gas prices were down 52% versus the prior period a year ago. Even more impressive is the fact that our LQA debt ratio was 1.1x this quarter, down about 17% versus the prior year. So in summary, our leverage was down our per share profits up markedly even as commodity prices were down the point I continue to make is that our Company is focused on the same simple philosophy, finding ways to grow profits per share through cycle and over time for our investors we believe that is the path to driving sustainable share price outperformance, while oil and gas prices go through down periods that can and will affect our profits.
Again, it is our job to find ways to grow the business through such times. The scoreboard we share with you is something that keeps us honest, being a cyclical business does not afford us. It perfectly linear path and we will have our ups and downs, but we are actively investing hedging and looking to drive consistent long-term growth, profits and cash returns. This has and will drive dividend growth and share performance. I'm pleased to say, as Chad will highlight in a bit that our guidance for 2024 reflects 20% production growth on a budget that is very similar to last year's, but across the upstream sector, and you'll find very few companies offering that once again, we stand out and I believe we have a lot more levers to pull, which brings me to my next point number to be greedy when others are fearful to Q4 was ground game one oh one, highlighted by what happens when people run out of money.
We saw operators pull-forward activity even as budgets were exhausted. We chose to turn the ship directly into the storm and take on some of the best returning small-scale acquisitions we've seen in some time, and these should help capital efficiency as we head into 2024 and beyond. We are diligently chipping away one opportunity at a time. And Adam and his team continue to innovate with creative structures of every kind to solve for our operators' needs. This doesn't mean we will spend money countercyclically at times, but spending money is what provides longer-term growth opportunities for our investors. Growth isn't free. And as a non-operator, sometimes our capital commitments will accelerate and come sooner. And the timing of our projects can vary somewhat as we saw in the fourth quarter, but it doesn't change the soundness of these investment decisions as we track well performance through our look-back analysis and review our return parameters internally, we continue to see excellent results across the board.
Number three, shareholder returns. I typically leave this category for last, but I'm going to address it sooner this quarter, particularly as I've observed weaker relative and absolute performance for our equity out of the gate for the start of this year, we talk a lot of energy about dynamic capital allocation and we get asked about share repurchases and where they rank in the stack. As I've said before, and I'll say again, we tried to seize on opportunities and allocate capital accordingly, our valuation has compressed in recent months. So in 2024, our stock may well be front and center in our capital allocation stack.
We don't buy back stock with reckless abandon only when flushed with cash and when times are good and when our valuation is high, instead, stock repurchases legitimately compete as a use of capital to maximize the long-term returns on the capital we employ, which by nature means focusing on the point of entry and being discerning on when we do. So you've seen us be aggressive in repurchasing equity during times of value compression.
And like in early 2022, we tried to allocate capital efficiently and seize on the opportunity when the time is right from this vantage point it certainly seems as though this is the moment on the macro outlook has been more in flux and commodities have been more range-bound and volatile, and our own value has compressed if the market gives us lemons for the first time in a while for more than happy to make some lemonade.
Number four, I have not yet begun to fight sailor, John Paul Jones immortalized that defiant phrase during the American Revolutionary War when asked to surrender by the British and the Naval battle. My use of it here is meant to convey that while our team has grown our business tremendously over the past six years, you'd be mistaken. If you think our growth story is over far from it, but we've worked hard to claim the mantle of the nonoperating partner of choice. Given the opportunities and landscape in front of us, I believe we can with thoughtful execution, double the size of our company.
Again, if not more over the next five years. And this time, I believe we can do it more accretively. It's an enormous goal and will pose a tremendous challenge. But I believe the opportunity is there for the taking. We will stay humble to our roots as a small company, but we have great ambition to grow the business to the benefit of our stakeholders. And our Board has incentivized us and aligned us with our investors to do so for the long term and to do it the right way and done, right, it will add tremendous per share value, grow dividends significantly to drive market outperformance, all while continuing to lower the business risk.
It would be stating the obvious to point out that it's been an active time in the M&A sphere in oil and gas of late, as we've seen many mega merger transactions as well as many private to public transactions in 2023 fallout from these mega transactions is likely to create even more opportunity for our company over time, providing both improved cost efficiencies on our properties and a broad variety of potential acquisitions as combined portfolios are rationalized, we're already seeing signs of significant cost benefits on our properties from some of these mergers.
While I just spoke about our dedication and focus on shareholder returns. I also want to highlight that Energy's path to grow through acquisition also remains very, very strong. We are involved in as many, if not more conversations today than at any point in my history of the Company and the quality of these counterparties is very different as are the nature of these discussions. That is largely because our company today has become de facto the only viable entity for complex solutions for our partners that is truly of scale and commercial. We believe we've built a reputation as creative problem solvers. Our balance sheet is locked and loaded with capacity for deals in 2024. While we remain selective, I have no doubt there will be a myriad of opportunities in front of us. This year, but it should go without saying that our main goal is to grow our business the right way.
One of the first questions we always ask ourselves when we look at an opportunity is will this make our company not just bigger, but will it make it better? We passed on a lot of things that would certainly make us a lot bigger but we question whether it will make us a better company asset quality governance if needed value operatorship, inventory and commodity price resilience are all factors that go into driving these transactions.
These questions have driven us to where we are today and will continue to drive us as we move forward. Adam will fill you in further on the deal front, but expect an active 2024. I'll close out, as I always do by thanking the NOG engineering, land, BD. finance and planning teams and everyone else on board, our investors and covering analysts for listening to our operators and contractors for all the hard work they do in the field that actually creates what you see in Energy's results quarter after quarter. We entered 2024 formative, equally positioned with our strongest balance sheet, the highest level of liquidity and larger size and scale since our formation.
And as always, our team is ready to pounce on the opportunities to drive the best possible outcome for our investors, whether that's growth through our ground game through our organic assets through M&A or through share repurchases in our quest to deliver the optimal total return. That's because we're a company run by investors for investors.
With that, I'll turn it over to Adam.

Adam Dirlam

Thanks, Nick, for as usual. I'll kick things off with a review of our operational highlights and then turning to our business development efforts and the current M&A landscape.
During the fourth quarter, we saw production increase to over 114,000 BOE per day, driven by the closing of Novo in the middle of Q3 as well as an acceleration of wells turned in line during the quarter, we turned in line 27.6 net wells, evenly split between the Williston and Permian, which included roughly half the net wells in process acquired through our ground game in Q4.
While well performance has been in line with expectations, we have been encouraged by the outperformance of our mascot assets, the new wells completed since closing Forge and the New Mexico results from our Novo assets as we navigate the rest of the winter, we expect to see a typical seasonal deferral on IPs from the Williston in the first quarter with a reacceleration in completion activity as we move into the spring and summer. Overall, we expect a relatively balanced completion cadence in 2024 as activity is more heavily weighted towards the Permian, which accounts for about two thirds of the estimated sales.
Our drilling program has remained consistent over the last three quarters as we spud an additional 20.8 net wells in Q4 with our organic acreage seeing continued focus from our operating partners, our Permian position pulled roughly 60% of the organic net well additions. And if we include the contribution from our ground game. We saw three quarters of our activity come from the Delaware and Midland Basins. Our acquisitions over the past few years are driving growth in the Permian because locations are converted and we head into 2024.
At the end of the year, the Permian wells in process were sitting at all-time highs of 35.7 net wells and now account for more than 50% of our total wells in process and over two thirds of our oil weighted wells in process, we expect this trend to continue as the Permian accounts for the majority of expected new drills in 2024 as our drilling program has remained consistent. So have our inbound well proposals during the quarter we evaluated over 180 AFEs with our Williston footprint, contributing over 100 proposals in every quarter of 2023. Our net well consent rate remained at over 95% in Q4.
However, we continue to actively manage the portfolio by comparing what's in the market at a ground game level and what is being proposed. For example, given the commodity market volatility, we non-consent at approximately 16% of gross AFEs, which collectively accounted for just half a net well in the Williston during the quarter as certain operators have stepped out. We have redeployed that capital into our ground game at higher expected returns. This highlights our flexibility with capital allocation and our ability to quickly react to changing environments in contrast to operators that have to stick with their drill schedules. With that said, our acreage footprint continues to produce some of the highest quality opportunities available as our 2023 well proposals at expected rates of return north of 50% based on the current strip.
Looking ahead, we have seen cost reductions come through with our operating partners, yet we remain conservative with our budgeting process for 2024 through 2023, well, costs were relatively flat. However, as of late, we have seen some of our larger operators coming in below their cost estimates from original well proposals. Notably, we have seen evidence from our planning sessions and recent AFEs have a potential 5% to 10% reduction in well costs related to our mascot, Novo and forge properties as gas prices remain under pressure. Some drilling and completing resources may also be reallocated to our oily basins where we could then expect some additional tailwinds.
Shifting gears to business development and the M&A landscape. The fourth quarter capped off another banner year for NOG, both on our ground game and in larger M&A. As Nick alluded to earlier, we were able to take advantage of the dislocations we were seeing during the fourth quarter, executing on a number of short-cycle ground game acquisitions, while competitors' budgets were running dry, we were able to step in and deploy meaningful capital consistent with our return requirements during the quarter, roughly half of the locations we closed on were also turned in line, which will contribute to our 2024 plans and growth profile.
Our small ball focus was almost entirely in the Permian during the fourth quarter and caps off a record year for our ground game, where we picked up roughly 30 net wells in 2,500 net acres. But we buy non-op interest day in and day out. We've also used our coal buying structures, joint development programs and have acquired operated positions with our ground game to generate these results.
During the quarter, we expanded our footprint as we signed and closed our Utica transaction. Similar to our approach in building scale in the Permian, we've elected to walk before we run deploying a modest amount of capital in the core of a new play under some of the top operators. Since the Utica announcement, we've been inundated with additional opportunities, and we will methodically review each of those as we think about our footprint in Ohio and Appalachia.
In general, in January, we closed our previously announced non-operated package in the Delaware, where we have significant overlap with our current positions and grossed up many of our working interest in New Mexico with new burn as the operator on 80% of the position. We've aligned ourselves with one of the most cost-efficient and active private operators in the basin, what should drive future growth for NOG?
The scale that we've been able to achieve over the past few years has opened doors for us that were previously unavailable and the creative structures that we've been able to implement have created mutually beneficial outcomes with alignment for both NOG and our operators. Given the ongoing consolidation in the industry, we have been engaging in more frequent and substantial conversations with our operators.
To put the landscape in perspective, there are currently $46 billion of assets that we are reviewing both on and off market even more than that. We've been in discussions with some of our large independents and smid cap operators about how we can be helpful, whether they are pursuing assets for digesting recent acquisitions. As consolidation continues, we can provide capital to help rationalize combined portfolios, accelerate high quality, longer dated inventory for facilitate debt reduction initiatives through sales to NOG.
These off-market transactions can be tailor-made for both parties and with our growth in size and liquidity could be as large or larger than any of our recent transactions. Simply put the option to deploy capital on top tier assets is in no way slowing down for NOG, depending on the needs and wants of the operator. The solutions could include simple nonop portfolio cleanup, joint development agreements, coal buying operated properties, minority interest carve-outs have operated positions for any combination thereof. At NOG, we pride ourselves on finding win-win solutions through creativity and alignment. Our priority is not to chase growth for growth's sake, but to remain returns focused over the long term and doing right by our stakeholders.
With that, I'll turn it over to Jeff.

Chad Allen

Thanks and I'll start by reviewing our fourth quarter results and provide additional color on the operating update we released on February 15th. Average daily production in the quarter was more than 114,000 BOE per day, up 12% compared to Q3 and up 45% compared to Q4 of 2020 to market in other energy record oil production mix of our total volumes was lower in the quarter at 60%, driven primarily by gas outperformance.
Adjusted EBIT in the quarter was $402 million, up 52% over the same period last year, while our full year EBITDA was $1.4 billion, up 32% year over year. Free cash flow of approximately $104 million in the quarter was up 19% over the same period last year. Despite lower oil volumes. Capex pull forward to fund accretive 2024 investments as well as commodity price volatility and widening oil differentials.
Adjusted EPS was $1.61 per diluted share. Oil realizations were wider as expected in Q4, with the increased production and other seasonal factors in the Williston driving wider overall pricing. Permian differentials, particularly in the Delaware, were modestly wider. Natural gas realizations were 97% of benchmark prices for the fourth quarter, a bit better than we expected given better winter NGL prices and in season
Appalachian differentials, LOE came in at $9.70 per BOE, which was driven by a few factors we had highlighted in the third quarter. We expected more normalized workovers in the fourth quarter after a lighter quarter in the prior period. We also incurred approximately $4 million of firm transport expense as a result of refining our accrual process based off historical data and Westel curtailments at our mascot project that had the effect of artificially inflated the per BOE numbers. As we reach midyear 2024, we expect our LOE per BOE to trend down as production ramps.
On the CapEx front, we invested $260 million in drilling development and ground Gain Capital the fourth quarter with roughly two thirds allocated to the Permian and one-third to the Williston as a result of having access to high quality opportunities. Success on the ground game, along with a pull forward of organic activity, has shifted more investment into the fourth quarter from 2024. The pull forward in activity is most apparent as we are seeing a 5% to 10% decline in expected spud to sales development time lines. We ended the year with over $1 billion of liquidity comprised of $8.2 million cash on hand and $1.1 billion available on our revolver for net debt to LQA EBITDA was 1.15x. Can we expect that ratio to remain relatively flat throughout 2024.
I want to point out that we did build our working capital significantly in the fourth quarter and expect that trend to continue through the first quarter of the year and then begin to ease for the rest of the year as we convert a tremendous amount of capital. It is currently under ground into revenue producing wells. We have remained disciplined on the hedging front and have been adding significant oil and natural gas hedges for this year through 2026.
Given the increased commodity price volatility we've seen over the past several months, our oil portfolio consist of over 40% collars in 2024, maintaining material upside exposure while providing a strong floor near $70 per barrel with respect to shareholder returns in 2024, everything's on the table. As we've shared in the past, we adhere to a dynamic approach with the objective of achieving optimal returns for our shareholders. And while Nick alluded to potentially an active year for NOG, those activities may include share buybacks. If there's a dislocation in our share price and if returns are competitive with other alternatives we are evaluating.
Turning now to our 2024 guidance. We are guiding to 115 to 120,000 BOE per day with 72 to 73,000 barrels of oil per day. You'll see typical seasonal declines in the Williston in the first quarter, exacerbated by some freeze offs in January, but our production cadence will build throughout the year. We anticipate adding about nine details and 70 spuds, reflecting the midpoint of our guidance after a significant build in our D&C list in 2023. The conversion of IP. wells in 2024 should materially help our capital efficiency as the D and C Cadence returns to more normalized levels. This will bring some large amounts of working capital that we have drawn back on the balance sheet starting in the second quarter.
On the CapEx front, the 2023 pull forward lowered our 2024 CapEx from our prior internal estimates. So we are making the assumption that the pull forwards are likely to continue given the acceleration and pace of drilling that we're seeing across our core basins for CapEx expectations this year are in the $825 to $900 million range. This level of CapEx will be driven by ground game success. Commodity price driven activity levels throughout the year and overall well costs for the time being are forecasted to stay flat.
Despite recent evidence of savings in ASCs, particularly from our larger JV interests. We have significant capital in the ground right now and expect our larger ventures, specifically Mascot Noble to ramp materially in the first half of the year. So the capital will be first half weighted around 58% to 60%.
On the LOE side, our guidance is purposely wide at $9.25 to $10 per BOE. This is due to the inclusion of our firm transport charge on a quarterly basis as well as the anticipated ramp we just discussed. We expect LOE to start on the higher side before trending down throughout the year, but believe there will be room for improvement. We want to be conservative out of the gate and with the firm transport charges being accrued for quarterly, our LOE expense run rate will be less lumpy than in the last several years.
On the cash G&A front, we've seen a modest tick down in average cost per BOE, driven by increased production volumes year over year, offset by some inflation in costs and services.
On the pricing front, given the low overall price of natural gas. We expect lower gas realizations year-over-year even as NGL prices have thus far been better than we expected due to seasonal demand for propane used for heating in the winter months. So we'd expect higher realizations of 85% to 90% in Q1, benefiting from winter NGL prices and differentials. However, we remain cautious based on the typical patterns for pricing as we enter the spring and summer, if we were to see material curtailments from natural gas producers to benefit the overall Nimex price in 2024.
Obviously, this could help guidance throughout the year. As a reminder, our two-stream reporting embeds transport costs and pricing instead of a separate GP&T line item and the fixed costs that are absorbed make realizations go down when the absolute price is so low to the extent gas prices rise materially or a flat prices and NGLs stick around there is room to the upside, but for now. This is where we're starting. Thankfully, we are well hedged on the gas front, which offsets much of the weakness in the near term. On the oil front, while we're guiding wider on differentials to start at $4 to $4.50. We will reevaluate this in the second half of the year. Williston volume growth has widened differentials materially over the past five months versus what we have enjoyed over most of 2023. But we believe the Canadian TMX pipeline may pull away some demand from Canadian crude as it comes online in the coming months will remain conservative until then, but this could lift pricing in the back half of the year.
Overall, Midland Cushing differentials have been solid. So in the Delaware realized deduction slightly wider. I'd like to touch on some other items related to guidance. Our production taxes will be tracking an estimated 50 basis points higher in 2024, given the shift in production volumes towards the Permian, where production taxes are generally higher than our other basins, and our DD&A rate per BOE will also be higher in 2024, reflecting over $1 billion of bolt-on and ground game acquisitions completed in 2023. This, of course, does not impact free cash flow as it's a non-cash item but it does impact EPS and is provided to help with analyst modeling.
Before I turn the call over to the operator for our Q&A session, I'd like to provide an update on cash taxes, given the volume of acquisitions and organic growth completed in 2023 for oil and natural gas properties balance has grown by $1.9 billion year over year, which in turn impacts the magnitude of our tax cost depletion deductions, which reduces our taxable income. We are now anticipating becoming a cash taxpayer in 2025 with a potential tax expense of less than $5 million over the following two, three years, which is a significant reduction from our prior forecast. This is a material improvement for our shareholders with potential of over $150 million in additional free cash flow over the next several years with over 20% growth in year-over-year production, a broad opportunity set available in front of us and a strong balance sheet now is well positioned to execute in 2024 and beyond.
With that, I'll turn the call back over to the operator for Q&A.

Question and Answer Session

Operator

Thank you.
(Operator Instructions)
Neal Dingmann, Truist.

Neal Dingmann

Morning, guys. Thanks for the time, Mr. Maia question really just on that. I mean, could you just go over, I guess, timing or cadence that is you talk about maybe just looking what the 4Q CapEx and maybe why that doesn't translate into, I'll call it immediate production.

Nicholas O'grady

Maybe just talk about timing with you but I'm sure, sure. Morning, Neil. I definitely think on the one to answer this because I know like a lot of that sell-side analysts, I'm not an accountant. I'm a former buy-side analysts and you know, I can read the financial statement, but the nuances of accrual accounting versus cash CapEx accounting, and I should be clear, a lot of operated companies like Diamondback or in a lot of the operators follow cash CapEx were an accrual CapEx company.
And so that means we're going to account for our wells by well status and percentage of completion. And just to be clear, you know, 70% of the cost of a well is in the completion. So as the wells become more complete, the cost of a well, we account for those weigh up. So in the fourth quarter, as an example, we have say 30 wells that we budgeted to go from, say 25% in the third quarter to go to 50% in the fourth quarter. And instead they went to 75% to 90% complete. That's a lot of capital and it doesn't necessarily translate into any incremental production in that quarter. And it's just an accounting exercise is not any more capital over the long run. It's just you have to account for that capital in a given quarter. So it's not that we choose to outspend it. You just have to account for that in that period.
So in Excel, you might think, well, why did you choose to spend. That is, and that's why we put this in our release. Our TIL count didn't really change that much. And now the ground game spending that was elected the $25 million, and we capitalized on that. And some of those did turn to sales towards the end of the quarter. But when they come online in December, they're obviously not going to contribute much. They will help in Q1 somewhat of. But of course, you know that seasonally, that's one of our slower quarters. If you look at the overall midpoint of our '24 guidance, you will see a partial benefit to the midpoint of.
Clearly we it's about a $25 million benefit from the pull forward of it, but and from that sort of overrun. But the reason it's not the full sort of $50 million is because our assumptions are that the shorter spud to sales times that we've been seeing on average in our total portfolio, you're talking about a full 7% acceleration of spud to sales times. Is that we're assuming that that continues sort of in perpetuity so that means that all of the capital in perpetuity going forward. So you've got 2025 capital that we would have assumed is also coming into 2024.
So there's sort of a half cycle effect to that. So I would also just say, you know, for all the listeners out there, we have sort of a mark accrual model that we can make available for anyone that can walk through how the D&C list and the percentage of completion will actually drive CapEx versus the till this and model this better. So if anyone would like to reach out to everyone should be happy to walk them through what I can assure you that over time, these are just moments in time and the overall spending won't change a ton over it.
It's really just a function of timing in the first fourth quarter until King's is right on track. And we can't really control how we account for Wellstat as we can, of course, control our capital decisions. We made the decision to spend the $25 million on the ground game because those were great economic decisions and relatively modest dollars. But the $50 million plus is not really incremental the timing of the production cadence of the stuff. Frankly, we're more focused on making sound investment decisions with their budget than the optics of the timing on a three month time horizon when on a 12 to 18 months, you know, for the longer-term investors that will come out in the wash number, the wells are the same.
The cost is roughly the same. The amount you're accounting for in a given quarter is different. That's about it when we're not sure. And also can I just say we're not cherry-picking single are well IRR plots. You know, we did publish in our in our earnings presentation, the cume of our well pads year over year. And if you look at the data in aggregate in our earnings presentation, 2023 was amongst our best well performance years in history. So you know, optically, I recognize it's a bit noisy, but it's just noise. And I want to reassure people. I am sympathetic because I don't like the optics of it anymore than anyone else. And I can understand what you might draw the wrong conclusions, but they be the wrong conclusions because the well performance is a testament to everything is going according to plan and you know. So over the long term, everything's going great.

Neal Dingmann

So it does sound like that capital in the ground is going to really pay dividends. So I'm glad to hear about the timing. And then my just follow-up, could you just talk a little bit about when you say opportunities that you and Adam are seeing out there right now for me in versus budget, and that's it's pretty split. Or could you just talk about is there one region that you're seeing predominantly more more of the French aircraft potential things?

Adam Dirlam

Hey, Neal, this is Adam. I would say that the opportunities that we're seeing right now are generally weighted towards the Permian in the Permian, most of most of that's in the Delaware. So I don't think anything's necessarily change. I think one emerging theme that we've seen kind of evolve has been around Appalachia and kind of the commodity price. There's been volatility there. You've obviously seen the pain ongoing for the last 12 to 18 months.
Some of those conversations in our table a couple of years ago or a year ago when you're seeing seven bucks and then now you're obviously on the inverse of that. And I think with things settling out and having some of these operators truly feel pain, I think there's some ability for us to potentially capitalize there. But I think it's across the board in terms of the conversations that we're having, we're certainly seeing things in the Bakken that are interesting. Looking at our deal tracker right now, I think we've we executed about 10 NDAs.
There's about 17 different immediate processes that are either in market or coming to market shortly. And so I think we'll obviously parse through that. A lot of that might just go immediately into the garbage. So I don't think we're necessarily changing our stripes in terms underwriting, Maria that but I think you've got a few different dynamics that are going on that are in interesting, especially on the consolidation front with operators and then having to kind of wrap their head around their new assets and then potentially rationalizing those assets, whether or not those are core assets to them regardless of the economics?

Nicholas O'grady

Yes. I the only thing I would add to that would be on the Williston front. I think you're not seeing as much small-scale activity, but I think there's the opportunity for bigger chunkier transactions over time. I think there's there are bigger things that could move over time there, which does give us some excitement. I think it's we did have record volumes in the fourth quarter. You know, it's been amazing how resilient, it's frankly surprised even us how our Williston asset just keeps growing both organically and frankly, inorganically. We've continued to find ways to grow our footprint.
You know, our small foray into the Utica. We have been inundated with Unica opportunities. And we've actually, even in the last month or two, we probably got another half a dozen shop to us. So and we have been building up our technical expertise and are evaluating through those. We would you view that at this point as an extension of Appalachia, it is technically the Appalachian Basin, but that's a clearly a distinct play. And obviously, the Utica is a broader play in the sense that there's a dry gas, wet gas and oil part of it. So it's a couple of different plays in some ways, but just having planned that, our flag there to some degree, by doing so, we've suddenly found ourselves in another set of deal flow.

Neal Dingmann

Thanks, guys. Congrats.

Operator

Charles Meade, Johnson Rice.

Charles Meade

I'm just wondering, Nick. Good morning, Nick, Adam and Chad and Nick, I want to go back to this question of the 4Q CapEx, and I know you've already spent a lot of time on it, but I wanted to maybe take a slightly different different angle. I think I understand the dynamic of the opportunity set with the ground game was looking good at year end, and I think I understand the dynamic of of your your accrual accounting. What I don't get is the magnitude of it particularly well, particularly with respect to kind of what you knew on November one when you reported 3Q and so you've made I'm wondering is there something that I don't understand like maybe that, that would you call your ground game theory and see if that that what gets loaded into that line item is everything you've done from the ground game year to date. I don't know. Maybe you could just address it from that angle.

Nicholas O'grady

Well, Charles, I mean, as a non-operator well, status updates come from the operators on delay. And so we're only as good as the information that is provided to us, right? So oftentimes they can you know, it can be we can provide this stuff sometimes months on delay, right? So we can be told that a well is as we've been even spud and then you'll get a report that has been completed and so I don't have any answer beyond that.
Same thing could be said with the ground game, right, depending on the complexity and the due diligence that's going around that some of these deals can get closed within weeks and some of them take months and then you get up into year end. And there's differed from a seller standpoint, different tax consequences and so different levels of urgency there. And so we're trying to be as accommodating and commercial as we can with us, obviously sacrificing any of their protection from a due diligence standpoint, but these things ebb and flow on a real-time basis coded.

Charles Meade

So if I understand correctly, it's going you've got both volatility and also maybe would be fair to characterize this on was out of period adjustment catch-ups.

Chad Allen

So I'll just say I don't think it's I don't think it's necessarily out of period adjustments like we mentioned earlier. It's the pull forward. I think look, we had record D and C levels at Q2 at Q3 and the timing of when those come up come off really depends on like Nick mentioned that the well status and where it's at. I think we'd look we went from a typical D&C list percentage of completion of 40% all the way up, excuse me all the way up to, you know, just over 60%. So I think you're going to see you'll see that build that kind of ebbs and flows each quarter as we as we receive well status from operators.

Nicholas O'grady

David, Charles, maybe just to put it into perspective in terms of the accrual accounting and operators collecting all the service invoices and everything else, and they have to aggregate all of that and then fill it out to the various non-ops and every operator, does that at a different cadence, right? And so you have these accruals out there until we're confident that all of the costs that have been incurred from actuals have been appropriately billed. And so those accruals, depending on the operator can paying out there a few months, however, long relative to the IPO date because we need to make sure that we've got coverage that we need.

Chad Allen

Yes, at the end of the day, it doesn't really change the aggregate dollars. It's not anymore wells.

Nicholas O'grady

It's just a factor of time looking at it on a three-month basis, really, we've been looking at about 1230.

Chad Allen

So sorry, what I can tell you is we're not electing to anymore. We're not making any different capital decisions were electing to the same number of wells we're electing were killing the same number of wells. It's just a matter of how much money is being spent. It's not a matter of the well is costing more or performing worse. It's a matter of truncating. The amount of capital. And when you're accruing for it when I mean optically, I'm not any happier about it than anybody else sort of dovetails into '24. Right?

Nicholas O'grady

And what the projected well costs are we've had some great conversations with our operators and what we're seeing in field estimates. And we alluded to as much rather that we expect 5% to 10% kind of underrun from these AFEs, but we're going to take these ASPs at face value. And depending on the operator, those ASPs might be it's 3 months old. They might be 12 months old, but we're not going to change our accounting practices based on what that mix looks like.

Chad Allen

Yes, and let me walk you through how that works, Charles. So let's just say Midland Petro center AFE. gross AFE for $12 million in November. So they sent us that and we're accruing for that $12 million on a percentage of completion starting in November through the completion of that?
Well, let's just say it's in April and will continue and then data tools held until probably. And then there's a period where it's held out until the final billing, which is probably at least 90 days until after the well is on sales. And then if there's no more billing after that accrual falls out and it's finalized. We're getting field reports along the way that that well, maybe it's costing $10 billion, right?
But so there's a $2 million savings, but only at some point later in 2024, will you see in our results that that reduction to the capital? So there's a lot of conservatism built into this. If you're your typical cash operator, when they tell you when they guide to you and they say we're going to spend $12 million in this quarter and then they actually spend [$10 million]. They're giving you the immediacy of that benefit or not. And so what I would tell you is there's inherent conservatism and how we're doing this. But over time, you will see the benefits of those And so while it obviously is the inverse certainly in the fourth quarter over time, I think you'll see it doesn't really change the outcome in the long run and in some ways I think throughout 2024 and certainly into next year, you will see the benefits of our accounting. And like I said, it will all come out in the wash.

Charles Meade

Got it. Thank you for all that that added detail in if I can transition away from accounting and more towards pictures. But on the other hand, our appetite and very soft, yes, I like I like pretty pictures on Slide 10. I appreciate that you guys put this this gun barrel view of your Mascot Mascot project in one.
Sure. Question one bigger question. To the first question is it doesn't look at the first question is those yellow circles? I'm interpreting that as kind of a completion batches is what it looks like or is that. Right.
And then the second thing I want to ask you guys are more open ended up. I really like this picture. It helps fill in the that the dynamics for me, but what I guess when you guys first looked at this, you recognize it may be as much as a year ago, but what what are the lessons there and what insights did you generate? What insights can be you when you first looked at this?

James Evans

Yes, hey, Charles, this is Jim. Yes, what you're looking at there, the kind of the yellow amoeba. Those are completion batches, so they will do. And then the other two, three, four wells at a time on. And then what we're showing is you've got several rows where you need to shut wells in behind it, whether it's due to the drilling or fracking you want to protect yourself. So when we looked at this about a year ago, really all you saw here on terms of wells that were producing with the charger unit until the Mustang, Revel and Bulldog units were all undeveloped at that time, discussions around how your development time and completion with NPDC at that time was that we were going to smaller batches.
And so where you see the yellow dots, we maybe do three wells at a time and complete those wells turned online go another six months to complete the next three to four wells. What we saw with the first batches is that we start to see some interference issues, some frac hits because we are drilling and fracking all the same time as we move from west to east across this project. And so the decision was made let's do bigger batches. And so what that did is it a policy causes delays. And when we thought the value of the project was going to peak in terms of production but what we're seeing is that because we're doing that we're getting better well performance overall, the project is outperforming by 5% to 10% versus our original estimates.
Obviously, there's delays but we think in the long run, it's actually going to benefit from a return on investment are our overall project economics. And so what we're learning is that obviously things change over time. And this is a big working interest projects was more impactful than our typical non-op package would be. So our learning is just make sure we're in full communication with the operator at all times and that we're all in agreement on how the development plan is going to go forward. And like said, we're accessible to the changes. Obviously, that hurts us from a guidance standpoint and trying to understand when these wells are going to come coming online. But overall, we're very happy with the project, and we're comfortable with how things have changed.

Chad Allen

And what you can see in this, Charles, is that you're pretty much almost all the way there, right. You're down here last pretty much eight wells to be drilled there and your frac schedule, you're really all. And when you can see it where the charger and Mustangs, which are really the ones that are remaining there, you're going to have fewer shut-ins on the back end you're going to have to in terms of you will have to shut some in when you go to frac those wells later on. But in the last wave of shut-ins, which will be sort of towards the end of this year into 2025, it will be reduced. So the one thing I can tell you about this project is it while it won't produce that peak rate that it would have, it will produce it will consume way more barrels and a much flatter production profile than it ever would have before.
And so the total ROI on the project will be much more superior to what it would have been originally. And we've obviously, we're also saving because you're doing much more continuous drilling and fracking. We're saving a lot of money. I mean that's still be to be determined until we finish the project. And I think we want to be a bit tight-lipped and conservative on that and we're done. But I think we feel very confident at this point that it's gone swimmingly and obviously, you know, it doesn't feel that way. But strip was about 70 bucks this year when we underwrote this program. And obviously, we're in the mid to high 70s today. So we're earning higher returns than we would have otherwise underwritten by great detail.

Charles Meade

Thank you, Paul.

Operator

Scott Hanold, RBC Capital Market.

Scott Hanold

In your prepared comments, you mentioned about wanting to accretively double the company in five years. Can you give us a sense of how you achieved that? I mean, you since you kind of came on you first pivoted out of the Bakken into other basins. And obviously your next significant move was doing JVs. On what's next? Is there other basins you're looking at? Would you consider being an operator? Like how do you double the Company from here.

Nicholas O'grady

I guess I'm curious what's a wonderful music in the background that's got a site FFFFS. lots of calls going on today. I think what you see is what you get.
I think what I would tell you is we still see the same and I think we still see a lot of the same stuff. We still see a lot of regular way of the ground game book. We did almost $300 million of the ground game. It was a record year. I mean, I think we did several thousand acres over there, which included over 30 locations, which is, you know, frankly, a monstrous record, and we're doing it in a different way. We're solving we're doing it in.
We've moved out of the sort of fractional small-scale stuff into much larger. We're solving major operator problems, and it's mostly dealing with our mega operators. Obviously, we have moved into the JVs, but that's more a function that we can actually do that. They were they were dealing with private equity groups that were noncommercial in the past because they were the only ones that had that capital and they'd much prefer to work with an actual true oil and gas concern. That's a permanent owner of the assets. And so we've really become the first oil and gas concerned that can actually do that.
And so I do think that that will be an avenue that goes there. I think there are still we know of a half a dozen regular-way non-op transactions that are going to come to market either on or off market in the next within this year. And so obviously, we will be looking at those. But I can tell you the data point you said we've signed 10 nondisclosure agreements this year. It just keeps coming. We we will continue to be contacted and people coming to see us saying I have this problem or I need to buy this or I want to do this.
Can you help us do this and we are trying to solve solutions, whether it be rationalize their assets, whether they have an asset that cannot be sold and they would like to sell a portion of it like what we did with Midland Petro, there are all sorts of solutions that we're trying to provide. And with that, we can create the scale that I'm describing. But I am extremely confident that we can grow it and create a return for our investors.
As for other basins, there are other great economic basins. There are certainly ones that I would very much like to avoid, but I think you can we can solve for the risks around them. We certainly have technical expertise. We've looked at a handful of other basins that we'd be interested in and there are some that I think are going to be a challenge. I think there are some that we would, of course, for the right opportunity.
Go to I think there are some that we would have to, frankly, create governments or other things to get around those risks. And I don't know, Adam, if you want to add to that Yes.

Adam Dirlam

I mean, I just feel like a broken record quarter after quarter, but it's the scale that we have now, it's the optionality and the deal structures and the blueprint that we've created. And then frankly, it comes down to our reputation and our ability to execute and our ability to be commercial. And so we've got it's more than we can shake a stick at in terms of the inbounds and how can we solve a problem together. And so those are the conversations that we're having.
And yes, I've talked about the stuff that's in the market. And that's everything from the non-op packages to the tune of DrillCo like joint development agreements as well as the coal buying. But now you've got this different theme emerging with the operators merging and the rationalization coming in there. And so you can add another kind of arrow to the quiver in terms of how Northern can be helpful and so if you've got all of those options and you've got the balance sheet, you've got the reputation, you can use all of those to your advantage in order to execute Okay.

Scott Hanold

Appreciate that color. And my follow-up question is on shareholder return. You mentioned that you'd be willing to kind of step in and lend the buybacks with market dislocations. I guess could you give us a sense of like how aggressive are you willing to get there and how do you think about intrinsic value? I mean, it seems like you think the stock price is attractive today. But like where is it going to get a sense of where is that sort of point where you really get aggressive and and how deep can you go?

Nicholas O'grady

I mean, I think that I can't give away too much of our playbook, Scott. And you know, obviously, it's a Board decision. We've been in discussions with the Board. We are watching, I would say, as an ex hedge fund manager, we have a fairly sophisticated internal modeling of this, and we tried to use it and we model it internally and compete and compare it and competed versus generic M&A and all that stuff. When we run all of these things versus, you know, we are we effectively market against where that capital does go elsewhere, right?
Because it is you have to sit there and say to yourself if I spend this money today working to go elsewhere. And but frankly, no as we look to the first quarter, this represents that, you know about the worse relative performance we've seen in about three years and we view it as relatively inexplicable given the fact that our growth profile, as we look to this year is one of the best in the space. And, you know, perhaps it's because I'm actually come up with a hair brand long-short thesis of some sort or whatever on. But regardless that generally, like I said, like beauty lemons, you make lemonade that creates opportunities for us, and that's how you allocate capital when when when you see that.
So we'll be watching. And if the opportunity presented, we're ready to act, we have we certainly have availability in our buyback authorization. We can always create more and go to the board if necessary. And so you know that we I think we have over $80 million today available. We can always ask for more if the Board is willing and that's a Board-level decision.

Scott Hanold

Thanks.

Operator

John Freeman, Raymond James.

John Freeman

We also have a follow-up on the last comment there were Eastern that you would consider looking at I guess there's a handful of other basins that you've looked at or considered. I would assume that you all do anything outside the three basins at year end, does it work or it would require a pretty substantial position? I mean, not something the all-in sort of build into, right. You need enough scale for it to be it makes sense to add a forward and kind of leg of the stool that correct?

Nicholas O'grady

Yes. Yes. I think that's a fair point. And I think there's a handful of different dynamics that kind of come into play, obviously, the land and the regulation around that and what that means for a non-operator. And then when you think about coal buying or buying down that your minority interest in an operated position, you're kind of linking arms with an operator that likely already has that expertise in that basin to the extent that, you know, we need to have two sets of eyes taking a look at things. And so I think that's an interesting dynamic in terms of taking a look outside of the in our own backyard and being able to link up with some of the best in class operators that we want to partner with.

Chad Allen

I think there are some base effect that would be a real challenge challenge either. I think there's some patients that may have some risk to them that could be solved if you had the right operator, that may have the right rock, but have other risks associated with them that could be solved if you had the right operating partner, Pennington.

John Freeman

And my final question, obviously, we spent a lot of time on the year, the accrual aspects on the CapEx. And it looks pretty clear that whether it's late this year or next year that, yes, the cost improvements that you're seeing at some of those major properties eventually that'll that will show up.
If I shift gears and think about the guidance as it relates to production, you've got a slide in there that shows the productivity you're seeing in the Permian and the Williston. And I think the wealth in particular was pretty surprising for me, just you think of it as a mature one of the older basins. And now it looks like obviously still early here, but '24 results look like there meaningfully outperforming. Is your guidance on production related to the Williston, does it assume more like 2023 type well results?

James Evans

Yes, hey, John, this is Jim. Yes, we always go into a year. You're kind of assuming there's going to be some well performance degradation. Obviously, we've got about nine months of wells in process. We already have a pretty good idea what we think the performance of those wells will be both. We do always assume there's going to be some degradation, but really that plays into our our portfolio management, right, as we're thinking about which wells we want to participate in which operators we think are the best performers where we're going to target our activity levels.
And so that's really how we kind of manage our activity and our well performance make sure that year over year, we're doing a good job in participating in the best wells. Obviously, 2024 is off to a great start, but it's pretty early on. We'll keep an eye on that and see how it changes over time. But we're obviously very encouraged. We're happy with the Permian 2023 outperformed a little bit versus 2022, even as we move more into the Midland, which is less productive than the Delaware side.
So we're very happy there as well. And again, 2024 is off to a great start console overall, well, performance has been as good or better than expected, but we'll stay true to our roots. And you'll expect some some low degradation, which is what we built into our guidance and our forecast, so potentially some upside there. But and we'll wait till we get more information as we go farther into the year.
If you're looking for optimism from a non-operator, you're not going to get a job.
So I'm going to give you a little bit different perspective. I think you know, from our ability from a wireless standpoint, it is generally concentrated or Continental Marathon and flaws. And so some of our best operators in 23. And if I'm looking at the D&C list as well as some of the near term feel AFEs. You've got a similar setup with Conoco and Slawson, United Continental all kind of leading the pack in terms of what that makeup is. So encouraged by where these guys are operating and how they're performing.

John Freeman

Appreciate it, guys. Thanks a lot. It's done.

Operator

Phillips Johnston, Capital One.

Phillips Johnston

You gave some pretty good color on LOE. In your prepared remarks. You mentioned the run rate should start to fall in mid 24 as production ramps. And obviously, you've got the FT. charges tapering off by the middle of next year. So wondering where we might be by Q4. And as you look out into '25 was $9 a barrel be a good placeholder for our models? Or would you Durus to something above that or below that?

Chad Allen

Yes. I mean, I think I think that sounds in the ballpark follow-ups here. Like I mentioned, you know, we're going to be already run a little little hot as we kind of catch up the FT. charge. We will only have sort of a year to accrue for we want to have six months. So that will be a little bit heavier in the first quarter. So you have and as I mentioned, we will trend down probably towards the bottom end of our guidance range, maybe even a little bit lower as we as we close out the back half of the year.

Phillips Johnston

Okay. Sounds good. And then maybe just a question for Adam. It looks like the plan involves 70 net spuds and 90 turn-in-lines. Can you talk about maybe what's driving that 20 well gap and what that might mean for the trajectory of production capital efficiency into 2025.

Adam Dirlam

You've got obviously the middle Petro project in those kind of finishing up. That's a 40% working interest. So you've got concentration there. And then you will as we for steam throughout the year, we're going to be getting these well proposals coming in the door and so what that looks like. And so I think it will depend on obviously that working interest mix as well as kind of the cadence and activity levels of kind of the Permian as well as the Bakken?
Yes. So I think it's a function of both Novo and some of the other larger transactions that we had and where that activity levels are concentrated. We're having these conversations on a quarterly basis with our operating partners.

Chad Allen

And so that can change, I mean, sells for and for our normal course, our D and C listen usually roughly equate to about our TIL count. And obviously, it's been elevated. We've been building it because we've been growing organically so over time and it will imply the ruling could be about half. And that's partly why our tenant base and elevated. So it it masks some of the capital efficiency of the business. And so that's why you will see our capital efficiency markedly improve.
And if you go back to say, 2021, where our D&C list was declining, you would see material improvements to free cash flow yield and other things. And that's because you were you are running a leaner D&C list. And so it's more just a normalization of it. So I wouldn't make the assumption that at least a material declines or something like that. It's just more a normalization of the D&C list because obviously we've been going through for I mean, think about it last quarter, our production grew at 53 oil production grew 53 hundred barrels.
And not all of that was just Novo that a lot of that was organic. So you've been seeing volume growth from material, right. So you're you're just really flattening out that growth production effectively as you as you exit the year December.

Phillips Johnston

Great. Sounds good, guys. Thank you.

Operator

Donovan Shafer, Northland Capital Markets.

Donovan Schafer

Hey, guys, thanks for taking the questions. So first, I want to talk about the reserve. So I'm out of the reservoir engineer. My first job out of college segment is that biased on this? But I do I do think you can make a lot of you can draw a lot of meaningful conclusions are plus some insights from you versus each, you know, if you know how to make some adjustments because obviously there are there are a lot of adjustments to make in order to show real a true sort of economic reality.
But so and the PV-10 was $5 billion, which is almost exactly in line with where you're trading in terms of enterprise value. And that's on an SEC pricing basis, and that can cause crazy distortions this time around. It does, at least in my view, look like the SEC pricing happens to not look too crazy in the kind of sort of close to what we could expect going forward. But there are a lot of other things for where you are right now at the company where the reserve work may not be accurate and I need more adjustments. So know one is Utica and Delaware acquisitions. I don't think those have been included. So if you can confirm that.

Chad Allen

I mean, we don't we don't really book tucks in our non-op. We don't book our PUDs, right? So we are unlike an operator, you're an operator can book a full plus booking for five years, actually, I mean, energy and how many plots that we put in there,

Nicholas O'grady

We generally book about 2 to 2.5 years of activity, right? As a non-operator, we still need to show that we're converting more than 20% of our funds every single year. And so in the projects that we've been doing, de novo and forward, we have a more definitive drill schedules so we can book more more plus there. But on your typical typical non-op where the operators are providing us with their actual drill schedules. It's hard for us to show that high level of confidence that certain locations will get drilled over the next five years.
Now we're obviously going to have the activity that you guys have showed last year almost 80 net tills, but we can't book those specific locations because we need to make sure that we're converting those locations and we have a lot more locations than what we're booking in our reserves. So it's a very conservative reserve set that you're seeing there.

Donovan Schafer

Right. And then another thing is just this is coming from kind of my recollection of how things work. So looking for what your thoughts are on kind of the relative impact of this? Is that the other thing about how the way if you do have that with the SEC on the pricing gets locked in on a historical basis. And so like in this case, with the current reserve report that you just put out are the numbers I just shared and you're kind of stuck with the current commodity price, the 2023 commodity prices.
And when they do the same thing on T. and C. prices or D&C costs, the D&C costs follow commodity prices on kind of a lagged basis, like you're only just now, it sounds like the more material decline in D&C costs, you're kind of only just now starting to see that yet you're sort of locked in at a level of D&C costs that honestly may have been more reflective of commodity prices in 2022, right. So that also kind of creates a am I right in that? Am I remembering that correctly?

Nicholas O'grady

Yes, you're correct there, right. We have to use trailing 12 month prices. So that's locked and we have to hold that constant going forward, simply for LOE. And so if you think about where we were last year, as you see prices were in the mid 90s. Now we're in the high high 70s. So that has an impact on our reserves. We lose a lot of reserves, just cutting off the tail. And those reserves that we had replaced was about $30 million barrels that we lost due to pricing.
And then also on the well cost because we're not an operator we look back at historical ASPs that we've gotten over the last year, which is more of an $80 $90 kind of price environment, and that's what we have to bake in going forward versus an operator, they can model their current cost going forward because they have a fee, they have actual well costs to model that. So we're again, we're being kind of double conservative there because we're holding lower price from a commodity standpoint, but then they have to use higher well costs, higher LOE than what we're kind of expecting on a go-forward basis?

Donovan Schafer

Yes. Okay. And I'm moving on just I may have some more follow-ups on that afterwards, but for now the other one, just as a quick modeling question, with Q1 with the freeze in the Williston in Q1 and you're having an impact on production there. Is that going to have an impact on the oil mix when I kind of triangulate out full year guidance.
Is that something where we can see oil mix come down a bit or higher, like in a way that would materially be material at all I'm just trying to think I want to avoid a situation where, you know, somebody just models a slight production dip in Q1 by year, you end up underestimating the impact because of it, is that more weighted towards oil or naphtha change in the oil mix or something? And then does that mean in Q2, Q3, Q4 you could have a higher oil mix than what is necessarily in the guidance for the full year?

Chad Allen

I mean, I think I would expect I would say from a guidance standpoint, we feel pretty confident in the numbers that we put out there, we put out both total production and oil. And so you can kind of infer an annual oil cut there?
Yes, in Q1, most of the shut-ins were in the Williston, which has a higher oil cut. So you could potentially see lower oil cut in Q1 and then it will rise as we go throughout the year. And obviously, our Midland petrol project is a very high oil cut. And so that will also improve your OpEx throughout the year there.
And I don't think I mean, I don't think because I mean, I don't think it's going to be into military. I don't think it's going to be material because there were also some mild curtailments in the Permian as well. So I don't I mean on the margin, not that I don't think it's going to be, you know, you're talking about a 10 point difference between seven point difference between the Permian and the rest of our oil basins. So I don't think it's going to be P&L massive in any material way.

Operator

Paul diamond, Citi.

Paul Diamond

Good morning.
Thanks for taking my call. Just a couple of quick ones. I'm talking about some outperformance on Forge. Can you just talk a bit more about that and do you guys are that as an assumption that trend, I guess what you're expecting out of that this year?

James Evans

Yes. Thanks, Paul. This is Jim. Yes, we're seeing the same thing of vital announced yesterday, they're seeing about 30% to 35% outperformance on the new wells versus kind of the legacy forward assets. We're seeing something similar versus what we underwrote, it's around 30% outperformance. I think it's around yield optimization on on spacing, completion design, production uptime on artificial lift that is now baked into our go-forward plan on we're still modeling based on what we originally underwrote for the acquisition. So we do see potential upside there.
As we as we continue to go throughout the year, we think we'll see that and we'll adjust as we get more and more data. Typically, we'd like to see six to nine months of history before we feel confident in adjusting our assumptions. But so far, we're very encouraged with what we're seeing out there.

Chad Allen

Yes, and they've also just done one out there. Main initiatives when they bought the asset was really to work on the PDP itself. It's really the work on lowering cost of the actual OP on the existing assets. And I think you have done a good job.

Paul Diamond

Got it. Understood. And I just had a quick follow-up. Bob, you had talked about having a lot of conversations with the small mid cap operators. We talked about scale being similar to prior deals. Just dig down a bit more and that is there you're a pretty wide range to that scale you're seeing or is it all pretty much locked in somewhere to Mascot for de novo things of that sort or could we go but smaller but larger, what do you what do you assume?

Nicholas O'grady

Can you just share with the partners or daily? I think we are seeing. It's all deals either in London. I mean, I think a lot of that a lot of this, Doug, you know, from from the mega transactions, we have a lot of conversations with the largest of the large. Certainly, we have a lot of interest from small-scale people as well because they always need money just like everybody else. But I think in terms of the asset rationalization, we're also seeing the conversations are very large and MidCap and upper mid-cap companies as well.
So I think it runs the gamut. I think what I would tell you from our perspective and I'd rather let out and talk about this and me is that from our perspective, it's not a it's not a one. You know, not one one-size fits all our methodology is going to change depending on what type of counterparty it is meeting that we're going to adjust our and structure based on what type of party is probably going to become more. I mean, spirited, depending on we're doing.

James Evans

But that's right. And just to put it in perspective, in terms of deal size and partners, I mean, on a ground game level, we're doing this on a unit by unit basis. We've also got, for example, private equity groups that have just raised capital that are looking to participate in both the $100 to $200 million transaction size levels that are looking for a partner so that they can use some of their dry powder for development on a go forward basis. And then you've got obviously the ones that we prosecuted last year that were significantly larger than that. So it runs it runs the gamut like Nicholas.

Paul Diamond

Understood. Thanks for your time.

Operator

John Abbott, Bank of America.

John Abott

Very good morning and thank you for taking our questions. Sticking with the home, the $4 to$ 6 billion of opportunities that you're seeing out there being you look at the balance sheet, you look at your share price. I mean, what are your thoughts on potentially financing transactions at this point in time?

Nicholas O'grady

Yes. I mean, John, we raised $290 and million last fall. And for a reason which was that we felt that we saw a great opportunity in front of us, and we wanted to be prepared to act and we've got over $1 billion of liquidity. And frankly, with all of the transactions that have happened. I think something like 10% of the revolvers have been recalled across the board. And Chad is the most popular girl at the prompt right now. He is has banks begging him to take money.
And so we certainly have some capital available to us. I don't think that's the case for everybody. But I think for scaled companies like ourselves, the ability to raise additional capital is there. Certainly, we've so my point being that I think we have that capacity on balance sheet to offer upwards of $1 billion so without raising any additional capital. And I think that would say see it as quite quite easily for the time being obviously beyond that, we'll see. But as you do those you know, we haven't really done much more than $1 billion in the year. So I think we're in pretty good shape for 2024.

John Abott

Very, very helpful. And I mean, it was a lot of conversations earlier on accrual accounting, but I guess the real question here is, you know, looking beyond the noise as you sort of think about the exit rate for this year. So yes, nothing necessarily specific. Where do you kind of see the exit rate for 2024 in terms of production?

Nicholas O'grady

Yes. I mean, I as a non-operator. I Jim Evans will stab me with a large knife. If I if I talk about that because we just talked about how the timing can be early very And the truth is that if if we see acceleration of projects and we see everything come on early in the third quarter will produce a lot more barrels and our guidance will be raised for the year.
And so if we see our production peak in the third quarter, that would be a great thing. And so theoretically, we'd see peak production in Q3 and your quote, unquote exit rate would be lower. Of course, we would find ways to redeploy capital and exit higher. So I'd be I'd be hesitant to see that, but I would say, as we described in our release, we obviously believe we'll be we'll be down modestly in the first quarter. We would expect a material jump in the second quarter.
Another jump in the third quarter and then you know, a mild jump in the fourth quarter. So I think you know that I would just leave it at that for now, but I would say that obviously, based on our guidance that is substantial. And I'm sorry to punt on that, but I would say February, February, but things can change with Mountain Laurel.
Yes, so I'm sorry, but as an operator, that's just that's the best I can do for you. But I would say this that like we're in the business to grow our Company and you know, there's a reason in our business. Look, there are great things about being an operator, a lot of great things. And but the timing of it we know is the part of it. And honestly, to the extent that it gets accelerated, we're going to produce a lot more barrels this year. So that's a that's a good thing. But the exit rate is we're not a laundromat, right? So this is something right that it's not a machine. The exit rate is sort of one of those things that people like to hang onto, but it's really about it's not about a moment in time, it's about the number of barrels you produce over the life. And so I just say this that and we are in the business to grow the business over time. And I think that that's the most important thing.

John Abott

Very helpful. Thank you for taking our questions.

Operator

Noel Parks, Tuohy Brothers.

Hi, good morning. I just have a couple of you know, you talked a little earlier about you can't really do one size fits all in terms of just how you look at different acquisitions. But is it fair to say that you're pretty agnostic between private operated versus publicly-traded operated on non-op interest? Right now either for the ground game or for larger and you put it?

Nicholas O'grady

I would say that I mean, I think it depends. It depends on the quality operator, meaning there are great privates. But I'd say it's the largest. You know, there are really large operators that are bad. I mean, I think it just it really does operator specific, there are really good operators and they're really bad operators that are big and small right out of my head.

James Evans

Give me the differentiator for private rooms. Are you talking about private equity? Are you talking about true private rights and those business models are run very, very different way. You've got one that's renting an asset one that had and will continue to have it for very, very long time. And so their viewpoint on a short term or long term basis could be very, very differently.

Nicholas O'grady

I mean, you burn as a private company and it's one of the finest operators in the world. And I can think of many private equity-backed operators that are renting the asset and looking to flip it.

James Evans

And so I would say typically we're looking at people who have a similar view as us in terms of the long term. But that's not to say that there are great private equity operators that are out there as well that would be willing to partner with Castle from.

Great. Well, thanks for the clarification. And on I guess I was wondering a bit talking about the Williston and we have seen a deal there, the first one, maybe in quite awhile of any size. And I'm just wondering, I have not paid a lot of attention to the state of sort of the land management out there. Have you leases some of those leases probably 15 years old, if not longer at this point. So I just wonder, you know, you've been there so long are things pretty cleaned up there or is there still so tough to do? Just in terms of I don't know, neglected Boxer, you know, absent non-op positions that you can still, you know, still it's pretty blood.

Nicholas O'grady

It's pretty blocked up now, but there are still some there are still things to do. I mean, it's just going to be more about people when they're ready there are there things that are owned that when people are ready to sell will be sold. But I don't think it's like the wild west where there's lots of open land ready to be sold. Is that fair at a good spirit.

James Evans

And the other thing that I would add to that is just the evolution of the completion methodology, right? You've seen a lot of operators. We'll refine those techniques and step out. And so the rate of return and the economics on some of those projects that you wouldn't even look at I'll call it two, three years ago are things that are certainly viable now and then that changes the landscape from a land standpoint. So you can do some of the blocking and tackling in terms of picking up some whitespace acreage and bringing in appropriate operators that, you know, are going to do a good job.
And as a non-operator. We're not beholden to one particular area, right? So we can get in to the core day-in and day-out and continue the growth of our working interest as we get 100 AT.'s a quarter as we did in 2023. So there's always wood to chop it just it's a different dynamic.

Operator

And that concludes the question and answer session. And I would like to turn the conference over to Nick O'Grady for closing remarks.

Nicholas O'grady

Thank you, everyone, for joining us today. We'll see on the next one. I appreciate your time. This is the way.

Operator

And this concludes today's conference call. Thank you for your participation, and you may now disconnect.