Magnolia Oil & Gas Corp
NYSE:MGY
Earnings Call Analysis
Q4-2023 Analysis
Magnolia Oil & Gas Corp
In the face of industry-wide price decreases, particularly for natural gas, the company showed resilience with a solid financial performance in the fourth quarter. It generated a net income of $98 million and an adjusted net income of $108 million, equivalent to $0.52 per diluted share, an encouraging indicator of its profitability. The company also sustained strong production volumes, showing a significant year-over-year growth of 16% to 85,400 barrels of oil equivalent per day in the fourth quarter, and a full-year growth of 9% to 82,300 barrels daily.
Determined to enhance shareholder value, the company bought back 9.6 million shares, reducing its diluted share count by 5% from the previous year. Share repurchases since the second half of 2019 total 61.9 million shares, which led to a more than 20% decrease in diluted shares outstanding, showcasing the company's commitment to returning capital to shareholders. In addition, the announcement of a 13% increase in dividends to $0.13 per share quarterly, resulting in an annual payout rate of $0.52, signals a continued priority on growing shareholder dividends.
The company ended the quarter in a remarkably strong financial position, with zero net debt and $401 million in cash. This healthy balance sheet is pivotal as it provides the company with significant flexibility in maneuvering through market uncertainties and capitalizing on growth opportunities.
Despite the revenue per barrel of oil equivalent (BOE) declining due to lower product prices, the company has made concerted efforts to reduce its adjusted cash operating costs, thereby sustaining its profitability. The optimization of costs underscores the company's ongoing dedication to maintaining robust operating margins in a fluctuating price environment.
Having invested $422 million in drilling and completion in the previous year, the company recorded a 40% drop in organic proved developed F&D costs, down to $9.60 per BOE. Looking ahead, 2024 D&C capital spending is forecasted to range between $450 million and $480 million, with production expected to grow in the high single digits, predominantly driven by developments in the Giddings area. The first-quarter forecast anticipates a production of 84,000 to 85,000 barrels per day, and crucially, the company is unhedged, fully exposing it to market prices which could lead to significant upside amid price recoveries.
Magnolia sets forth an optimistic guidance for 2024 with an estimated effective tax rate of approximately 21%, while the cash tax rate may range from 6% to 9%. The clear guidance on tax rates combined with the strong financial groundwork lays down a dependable path for strategic endeavors in the coming year.
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Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation Fourth Quarter 2023 Earnings Conference Call. My name is Andrea, and I will be your moderator for today's call. [Operator Instructions]. As our call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question-and-answer session. Please go ahead.
Thank you, Andrea, and good morning, everyone. Welcome to Magnolia Oil & Gas' Fourth Quarter Earnings Conference Call. Participating on the call today are Chris Stavros, Magnolia's President and Chief Executive Officer; and Brian Corales, Senior Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. Additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10-K filed with the SEC. A full safe harbor can be found on Slide 2 of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's fourth quarter 2023 earnings press release as well as the conference call slides from the Investors section of the company's website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Chris Stavros.
Thank you, Tom, and good morning, everyone. We appreciate you joining us today for a discussion of our fourth quarter and full year 2023 financial and operating results. I plan to briefly speak to our results, which closed out a strong year for Magnolia and during which we took several actions to improve our overall business. I will also discuss our business model and our corporates also in the context of some of last year's accomplishments and note how Magnolia stacks up compared to many other E&P companies on several key financial metrics. Lastly, I will provide an update on Magnolia's 2024 capital operating plan, which follows the same principles on which the company was founded nearly 6 years ago. Brian will then review our fourth quarter and full year financial results in greater detail, along with some additional first quarter guidance before we take your questions. Starting on Slide 3 of the investor presentation and looking at some of the highlights. Magnolia ended 2023 on a high note with fourth quarter production volumes at 85, 400 barrels of oil equivalent per day bringing full year 2023 production to 82,300 BOE per day. This represented year-over-year production growth of 16% for the fourth quarter and full year 2023 volume growth of more than 9%. Production at our Giddings asset grew 55% compared to the prior year fourth quarter, reaching 63,000 BOE per day, which included oil production growth of 59%. Giddings production represented approximately 71% of overall Magnolia volumes last year and the Giddings area continues to see operating efficiency improvements in the field, such as fewer drilling days per well and realizing significant gains in stimulation stages per day. D&C capital totaled $91 million for the quarter and $422 million for the year, representing 47% of adjusted EBITDAX for the year and leading to free cash flow generation of $413 million or roughly 10% of our current enterprise value. We returned 74% of this free cash flow to shareholders through our dividend and share repurchase programs, with the remaining allocated to our balance sheet, which helps support attractive bolt-on oil and gas property acquisitions geared toward improving the overall business. Turning to Slide 4. Magnolia's business model remains unique since it was devised in 2018, but the objective to create a highly investable attractive E&P business that is enduring and focused on generating absolute per share value over the long term. As we have often expressed, Magnolia's primary objectives are to be the most efficient operator of best-in-class oil and gas assets generating the highest returns on those assets while employing the least amount of capital for drilling and completing wells. Our high-quality asset base allows for a low reinvestment rate while still providing moderate growth for the business over time. This results in significant free cash flow generation, and we strive to return a significant portion of this to our shareholders in the form of share repurchases and a safe, sustainable and growing dividend. Some of the excess cash may accrue to the balance sheet, helping us to opportunistically pursue bolt-on -- attractive bolt-on oil and gas property acquisitions that improve the business, which helped to sustain our returns and enhance the dividend per share payout capacity. We continue to adhere to our core principles and believe this is a sound formula for creating long-term shareholder or value for our shareholders. I'd like to spend a moment reviewing how this model has helped us achieve our goals over the past several years and as our operating program has shifted more to our Giddings asset. Slide 5 shows that Magnolia has had one of the lowest capital reinvestment rates compared to most other E&P companies, while achieving a superior compound annual rate of growth in terms of production per share over the past 3 years. This is a powerful combination allowing us to maximize our free cash flow generation. Turning to Slide 6. Our corporate level returns or return on capital employed continue to be some of the best in the upstream energy sector highlighting our strategy of disciplined capital spending, including last year's success in reducing our well cost and the beneficial impact of our ongoing share repurchases. Our cost reduction efforts in 2023 helped further support these returns as we were able to meaningfully grow our production per share with capital that was 17% less than what we had expected at the beginning of the year and 8% below full year 2022 levels. Two key elements of our business model are maintaining our low leverage and generating high operating margins. Slide 7 and 8 demonstrate that Magnolia is best-in-class when coupling one of the lowest leverage profiles in the industry with some of the highest operating margins. This is compared to E&P companies of similar size to Magnolia as well as much larger companies and is a testament to our underlying asset quality and the characteristics of our overall strategy and philosophy. Turning to our 2024 guidance shown on Slide 9. We expect this year's plan to deliver similarly strong results at current product prices. Magnolia's capital and operating plan is expected to deliver high single-digit percentage growth this year or approximately 7% to 9% on both an oil and on a BOE basis with a capital budget estimated in the range of $450 million to $480 million. This would result in a spending level below 55% of our EBITDAX for 2024, assuming current strip pricing for products. Total production for the first quarter is estimated to be approximately 84,000 to 85,000 BOE per day, which includes production of facilities downtime caused by severe winter weather conditions during the portion of the January. Despite the transitory weather impact last month, our production is fully recovered and is running normally, and we are confident in our full year plan and guidance of high single-digit production growth for the year. We expect this -- we expect first quarter D&C capital expenditures to be approximately $130 million and anticipate this to be the highest quarterly rate spending for the year. Most of the full year 2024 production growth is expected to come from our development program in our Giddings area and as the main driver will receive approximately 80% of our overall capital and include some activity on our recently acquired assets. We plan to operate 2 drilling rigs and 1 completion crew during 2024 and expect to maintain this level of activity throughout the year. While this activity level is similar to last year's operating plan, lower well costs, combined with improved operating efficiencies, allow for more net wells to be drilled, completed and turned in line, helping us support Magnolia's overall high-margin growth. Most of the development activity will consist of multi-well development pads in Giddings with a smaller amount of development planned in the Karnes area in addition to some appraisal wells. For this year's development activity in Giddings, we currently expect to drill multi-well pads with somewhat longer lateral lengths of approximately 8,500 feet. We continue to run a focused business and in an industry where operational execution and financial discipline are essential. The actions we took last year to reduce our well costs helped to significantly reduce our capital improve our operating margins and generate additional free cash flow. Together with the acquisitions completed last year, these accomplishments have strengthened our position into 2024, and we expect high single-digit growth, high margin -- and high-margin total company production growth with our oil volumes growing at similar rates. We have a strong 5-year history of demonstrated operating financial results and expect our business model to enhance per share value over time. I'll now turn the call over to Brian to provide more details on our fourth quarter 2023 financial and operating results.
Thanks, Chris, and good morning, everyone. I'll review some items from our fourth quarter and full year results and refer to the presentation found on our website, also provide some additional guidance for the first quarter of 2024 and the remainder of the year before turning it over for questions. I know you closed out 2023 on a high note as we continue to execute on our business model. During the fourth quarter, we generated total net income attributable to Class A common stock of $98 million, with total adjusted net income of $108 million or $0.52 per diluted share. Our adjusted EBITDAX for the quarter was $240 million with total capital associated with drilling, completions and associated facilities of $91 million or just 38% of our adjusted EBITDAX and below our guidance. For the full year, adjusted EBITDAX was $899 million, with D&C capital representing 47% of EBITDAX. Fourth quarter production volumes grew 16% year-over-year to 85,400 barrels of oil equivalent per day. For the full year, production volumes grew 9% to 82,300 barrels of oil equivalent per day. During the year, we repurchased a total of 9.6 million shares, and our diluted share count fell by 5% year-over-year. Looking at the annual cash flow waterfall chart on Slide 11, we started the year with $675 million of cash. Cash flow from operations before changes in working capital was $872 million, with working capital changes and other small items impacting cash by $59 million. During the year, we paid dividends of $102 million and allocated $205 million towards share repurchases. We added $355 million of bolt-on acquisitions, primarily in Giddings, and spent $425 million on D&C and facilities capital, and we ended the year with $401 million of cash. Looking at Slide 12. This chart illustrates the progress in reducing our total shares since we began our repurchase program in the second half of 2019. Since that time, we have repurchased 61.9 million shares, leading to a change in diluted shares outstanding of over 20% net of issuances. This is one of the largest decreases in the upstream energy space, but the majority of the company is increasing their diluted shares outstanding over the past 5 years. Magnolia's weighted average fully diluted share count declined by more than 2 million shares sequentially, averaging 206.5 million shares during the fourth quarter. We have 9.2 million shares remaining under our current share repurchase authorization, which are specifically directed towards repurchasing Class A shares in the open market. Turning to Slide 13. Our dividend has grown substantially over the past few years, including a 13% increase announced earlier this year to $0.13 per share on a quarterly basis. Our next quarterly dividend is payable on March 1 and provides an annualized dividend payout rate of $0.52 per share. Our plan for annualized dividend growth is an important part of Magnolia's investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend per share payout capacity of the company. Magnolia has the benefit of a very strong balance sheet, and we ended the quarter with 0 net debt and $401 million of cash on the balance sheet. Our $400 million of principal debt is reflected in our senior notes, which do not mature until 2026. Including our fourth quarter ending cash balance of $401 million and our undrawn $450 million revolving credit facility, our total liquidity is approximately $850 million. Our condensed balance sheet as of December 31 is shown on Slide 14. Turning to Slide 15 and looking at our per unit cash costs and operating income margins. Total revenue per BOE declined due to substantial -- declined due to the substantial decrease in product prices and especially natural gas prices when compared to fourth quarter of 2022. Our total adjusted cash operating costs, including G&A, were $10.55 per BOE in the fourth quarter of 2023, decrease of $1.60 per BOE or 13% compared to the year ago levels. The year-over-year decrease was primarily due to lower production taxes and GP&T. Our operating income margin for the fourth quarter was $17.56 per BOE or 43% of our total revenue. The year-over-year decrease in pretax operating margins was driven by the significant decrease in commodity prices. On Slide 16, Magnolia had a very successful organic drilling program during last year. The total proved developed reserves at year-end 2023 were 135 million barrels of oil equivalent. Excluding acquisitions, sales and price-related revisions, the company added 44 million barrels of oil equivalent of proved developed reserves during the year. Total drilling and completion capital was $422 million in 2023, resulting in organic proved developed F&D cost of $9.60 per BOE and reflective of our drilling program. Our organic proved developed F&D cost declined by approximately 40% compared to last year as a result of our well cost reduction efforts and strong well results. Turning to guidance. We expect our 2024 D&C capital spending to be in the range of $450 million to $480 million, which includes an estimate of nonoperating capital that is about the same as 2023 levels. We expect first quarter D&C capital expenditures to be approximately $130 million and expect this to be the highest quarterly rate of spending for the year. Total production for the first quarter is estimated to be approximately 84,000 to 85,000 barrels equivalent a day, which incorporates the impact of production and facilities downtime caused by severe winter weather conditions in January. Despite this impact, our production has fully recovered, and we are maintaining our guidance for high single-digit production growth in 2024. Most of this growth is expected to come from our development program in our Giddings area. Oil price differentials are anticipated to be approximately a $3 per barrel discount to Magellan East Houston or MEH, and Magnolia remains completely unhedged for all of its oil and natural gas production. The fully diluted share count for the first quarter of 2024 is expected to be approximately 205 million shares, which is 4% lower than first quarter 2023 levels. We expect our effective tax rate to be approximately 21%, with most of this being deferred. Our cash tax rate is expected to be between 6% and 9% for 2024. We are now ready to take your questions.
[Operator Instructions]. And our first question comes from Neal Dingmann of Truist.
Chris and team and guys, another nice print and guide. My first question is on Giddings. Specifically, can you all talk about the recent Giddings acquisitions and how these assets are looking? Definitely realizing it's early days. And then maybe, Chris, anything we should be thinking about on the development plan, specifically there?
Yes. Thanks. Giddings is one of those fields, old fields that it sort of just keeps getting better. And my level of confidence now versus, say, 5, 6 years ago is quite a bit better. And a lot of that is borne out of the results, obviously. And certainly, what we've learned and what we've been able to do with the field. So the subsurface and as I said, it's one of those deals that where you -- it's gone through different phases of its life over the last several decades. And we happen to get involved really prior to it going through this latest phase and utilizing modern frac techniques and design. So where this is headed is we've got a sizable position, more than 0.5 million acres. And we've done some recent acquisitions, and I think that's improved our position and will help us learn some more. There's some gassier areas of Giddings. There's some oilier areas of Giddings, but I think the proof is in the pudding in terms of the results having been borne out when we picked it up with the original acquisition, the field and the asset was producing maybe 10,000 a day equivalent or so. As I said, it's producing more than 60,000 a day now, and that will continue to grow. And this is really what the returns -- the quality returns that we've seen in the business are really, in many cases, a function of the outcome of Giddings. So where does it go? Frankly, I think there's more for us to go after here and there. I mean, some of them will be a little bit smaller. Some things might be a little bit larger like in similar terms of what we did or -- size -- what we did back in the fourth quarter of last year. We'll just have to see. I can't tell you that we'll go after everything or anything and everything, but we'll go after some things, and we're starting to integrate the assets that we recently acquired. Early days look good. It's -- this particular asset happens to be a bit oilier. The wells that we plan to drill are shallower -- several thousand feet shallower. As I said, a little bit oilier with the economics broadly quite similar to Giddings as a whole overall. So I remain really optimistic about our prospects going forward for the field and what it's going to mean to Magnolia going forward.
Yes, I definitely love the footprint there. And maybe following up a little bit with Giddings. Noticeable, as you pointed out, the operating margins are certainly notable. And I'm just wondering, when you look at the expanded getting results, I mean, is that potentially -- and will that even lead to you think even lower reinvestment rates because certainly notable how good your reinvestment rate and as you highlighted, the operating margin. I'm just wondering -- baked on maybe a higher Giddings plan, could we see even potential increases in this?
Yes. That's a tough one. I mean, I think the results are pretty good over a 3-year, 5-year type period. And if you want to say it's almost through a cycle, if you will. I don't think it's going to be meaningfully different. I mean there might be some things around the edges as we learn more. But I think the outcome, if I had to look out, I think the outcome is not going to be meaningfully different, which I will take that sort of any day of the week.
The next question comes from Leo Mariani of MKM Partners.
I was hoping you could provide maybe a little bit more color on the increased activity in 2024. I think in the press release, you guys alluded to the fact that some more wells this year. Is there any way to quantify that? Is it kind of 5 or 6 wells? And just kind of any detail around any of the split here? Is it primarily more of a development drilling program? You did mention there would be some appraisals. Is it a fairly similar appraisal split versus last year? And I guess there's going to be some drilling on the newly acquired acquisition from the fourth quarter. Do you also consider that kind of appraisal drilling? And is it just a handful of wells? Any color around the kind of complexion of the program this year versus last would be helpful.
Yes. Thanks, Leo. I think you repeated some of what I said and answered your own question in some ways. But anyway, yes. So we'll probably drill maybe a little more than a half dozen additional wells this year versus last year net wells. Most of that is -- or part of it anyway is some of the new assets that will be brought or integrated into the plan. Some is just the ongoing development in Giddings. Keep in mind that the average lateral length is a little longer in this year's program compared to last year. I would tell you also that the working interest in the wells is also a little bit higher. As far as appraisal goes, no, I wouldn't consider the drilling on the new assets as appraisal and Giddings. But there may be -- depending on product prices, there may be some appraisal drilling in Giddings just to sort of see if we can learn a little bit more around other areas. So we'll see how that goes. And so that's, by and large, some of the color I would tell you. The current program will be fairly similar to what it had been, not really very different generally.
Okay. That's helpful. And then just do you have any color you might provide on a few of the big picture expense items. I think that perhaps the new [ oily ] asset had a little kind of higher cost, any kind of range at all? You can kind of throw out there if LOE is going to continue to tick up a little bit and maybe DD&A and maybe G&A has not really changed? Is there anything you can have high level on some of those kind of key cost items?
Yes, sure. Well, the new assets, especially the latter acquisition that we did in Giddings, considering that it is oilier in nature. Yes, there is a little bit more in the way of LOE as would be common or typical as we're also sort of bringing it up to Magnolia standards, if you will. We're owners of the assets where the prior folks might have been viewed as more renters of the assets. So there's some things that we need to do or probably will do to bring it up to our standards. However, I will tell you that my choice and my view is that we're going to pursue sort of a program to focus a little bit more on LOE broadly through the year to try to get that down a bit. So as we transition with the new asset into the first quarter, you might see a little bit more in terms of bump in LOE, not very meaningful, frankly, but a little bit. And then my hope and view is that we're going to try to attack this and manage it to the point where we could see some decline later into the year.
Okay. That's helpful. And I guess just anything on any of the other costs? Is the G&A per barrel is still pretty flat? I don't know if there's any impact on GP&T from the new asset either. Is that pretty ratably flat?
Not really. I mean, GP&T, actually, I think we're doing a pretty good job there, and we'll see how that goes. I'll just say we're doing a good job around that. G&A, I -- not going to change very much, frankly, at all, not meaningfully on a per barrel basis.
The next question comes from Charles Meade of Johnson Rice.
Chris and Brian and the rest of the Magnolia team there. Chris, at risk of frustrating you. I'm going to ask one more question about the -- about your activity on the recently acquired...
That's all right. You wouldn't be the first one.
Well, maybe I'll be the best. I would want to -- presumably, I think you indicated actually that you guys had a slightly different view of that asset or maybe you thought you had a differential insight on that asset. And so I'm curious if you could tell us for the activity you have, maybe you just kind of characterize the number of wells that you're going to drill -- a number of the pads you're going to drill on that new on the newly acquired asset. And if there's any aspect to the well designed that's going to test perhaps some of those differentiated ideas that you have? And in which case, what's kind of a time line for any kind of results or update there?
Yes. Thanks, Charles. It's a little early days to be too granular specific around how we're going to drill the well or wells. There will be a handful of wells that will be drilled later this year where we'll have some results that probably through some of these data sets, you will be able to see over time. I just don't know. We're still sort of studying it and looking at prior results to see how this -- how it's gone. We may make some smallish modest changes going forward. But we're not at the point, frankly, where these are going to be probably more single wells, frankly, at this stage. So we're just not quite there yet. Frankly, we closed on the deal about 3 months ago. So we're still integrating it and devising it, developing it, folding it into the plan. So it's still somewhat early days.
Okay. And then a second question, this is about A&D and the Eagle Ford more broadly. How do you -- how would you characterize the opportunity set for Magnolia? And how much of your attention are you spending on looking at opportunities right around Giddings? And how much of it is directed to the larger Eagle Ford and also talk trend across Texas?
Yes. It's a fair question. Percentage of my time, it's pretty meaningful. I mean because it's -- there's a lot of things out there. And again, as I said earlier, much of this is borne out of our own experiences and knowledge and as we gain further understanding of the wells that we drill and directionally where we want to go and what excites us, what is more attractive for us. And I said this to folks before, at the end of the day, we're trying to -- and maybe this is why we're not overly open about what our plans are, but we're trying to build a little bit of a mosaic around the asset and fill in some of the blanks and improve the business based on some of the quality areas that we see. So we won't go after everything. It's not like I say, well, I'd like to own all the acreage everywhere. It's not that. But there are some areas that look interesting and will help us and will help the business where I can see this enhancing the runway, if you will, and provide more sustainability for the business over time. So I think the opportunity set is reasonably good.
The next question comes from Oliver Huang of TPH & Co.
Just wanted to hit on the 2024 outlook really quick. I think you all did a great job last year in being able to exceed initial expectations, CapEx, 17% lower for nearly in line production volumes. And I know last year is probably a unique year just kind of given the misalignment to start the year on service costs. But as we kind of look forward into 2024, what are some of the key levers or upside catalysts that you all foresee or are most excited about that could drive better-than-expected capital efficiency? And also, any sort of color on what drives the lower and higher end of the CapEx guidance range would be helpful as well.
Thanks, Oliver. I don't know how much of a disconnect there was. But we got after this early and I credit our teams, both on the supply chain side and on the operations side, drilling completions and working with everyone to make it happen. But it didn't just happen. It took a lot of work talking with the vendors and creating some linkage between us and them as being true partners. And we did benefit from some of the weakness in large gassier fields to the north, east of us that where activity was slowing up, and we saw some benefit from that proximity to us. So it did take a lot of work. In terms of what's left, we've locked in our costs for the -- certainly for the first half of the year. So I'm very comfortable with where things are headed in the first half of the year in terms of our outlook. For the second half of the year, it doesn't seem to me as if activity is just going to soar away higher. In fact, maybe you sort of see things flat to a little bit lower or softer considering where gas prices are, it's not all that pleasant. And so we'll just have to see. It may provide us with a little bit of wiggle room for the back half of the year. But generally, things feel pretty good. On the specific areas or items. We did a terrific job around efficiencies last year, especially on the completion side and completion stages per day. I'd like to think that we could see some improvements on the drilling side, and we'll work towards that with some, hopefully, some efficiencies and maybe something on the cost side as well, but we'll see. So I hope that gives you a little bit of color.
Yes, that's definitely helpful. And just a quick follow-up on a comment you made earlier about potentially higher working interest in wells this year. Just wondering if there's any way to kind of quantify the magnitude of that shift, really just trying to get a sense of how the net lateral footage might have increased on a year-over-year basis.
We can get back to you and answer that more specifically.
The next question comes from Ati Modak of Goldman Sachs.
I guess you mentioned there's still a lot of opportunity in acquisitions in the Giddings area. Just wondering if these are largely smaller acreages or are there entities that are relatively large as well? And what is the level of interest maybe that those players have to try and replicate what you are doing versus hand the asset over to you? And does that mean that you would be more active in M&A this year versus last?
Well, I don't know what -- I don't know what other operators are looking to do or willing to do or able to do, frankly, if they're looking to replicate our plan or whatever. I wouldn't think that this is necessarily going to be a more active year than what we just had in 2023. We're going to -- our plan is to digest and integrate some of what we've done last year, which was overall a bit of a heavier year in deal-related activity for us, acquisitions. So there is some digestion and integration that needs to occur. So I think it'll -- if there are some things, they'll tend to be a bit smaller, but may hopefully pack a punch and really, again, as I said, filling that mosaic of what we've been trying to accomplish in recent history and going forward. So I don't think it's going to be larger at least that's not my sense right now.
Got it. And then anything around the expectations for well productivity in '24 versus the prior years? If you can talk about oil per foot basis, how should we think about the trends this year?
Yes. I mean that's been talked about, to be honest, and it's sort of an evolution of the program and Giddings over time. I mean early days, there were -- the population set of wells was smaller obviously and much more focused and concentrated with a very, very limited area. And as that's broadened out, there may have been some movement around the productivity. But frankly, not in a major way or a terrible way. I think that this year's program and results should yield similar results to what you saw in '23. I don't see any major change, frankly.
The next question comes from Nicholas Pope of Seaport Research.
A quick question on the reserve details that you provided in the presentation. The price-related revisions, just wanted to make sure, is that -- is there anything specific there? Or is it kind of balanced across the 2 assets? Is it just tail, the tail of some of those PDP reserves coming off? Just trying to make sure I understand that $15 million kind of hit the outlook there?
Yes. And when you roll forward from last year, which had significantly higher pricing, you do lose reserves. So the year-over-year change in the SEC required pricing was relatively significant, both oil and gas.
So it's across both assets fairly...
It's both assets. It's both assets. But I mean, just remember, I think we're at 75-plus percent of our -- or 75% of our production is Giddings. So it's probably proportionate.
And on the Giddings acquisition, can you be a little more specific about what was the timing of the close of that acquisition?
It was right around mid-November.
The next question comes from Geoff Jay of Daniel Energy Partners.
I was just kind of curious, you talked about the efficiency gains, particularly on the completion side. Can you help understand -- help me understand just like how significant that increase is? And if you sort of looked around and benchmark that against your peers? And if you think there's further efficiencies to come this year?
We're looking into that now. I mean we're going through that process right now. As we look to the latter portion or we're trying to think ahead into the back half of the year on our equipment and crews, I don't know how much I can really add on that specific item for you, Jay -- Geoff, I just don't know.
Geoff, I'll just maybe add one thing and Chris talked about a little bit earlier is we did a really, really good job on stages per day on the completion side. One of the focus is on more for this year is on the drilling side to improve more of those efficiencies.
Right. Got it. I guess what I saw in the press release that the cost of Giddings well costs were down about 20%. I'm just -- my curiosity was piqued about sort of how that might sort of break down between efficiency gains and sort of pricing. And I don't know if you could -- if there was a way you can kind of help me understand the interplay there.
Well, a lot of it was, as you know, a lot of it was steel of CTG, but there was -- there were meaningful steps in [indiscernible] frac. So there are meaningful benefits there as well.
The next question comes from Zach Parham of JPMorgan.
I guess first, just could you quantify where your leading edge D&C costs are in Giddings and maybe give us some color on how much cheaper you expect the wells to be on the newly acquired shallower acreage?
The wells now are running about $1,100 a foot, I would say, and that's about 20% lower than a year ago. And so that for the longer -- some of the longer laterals that we'll drill this year, that's maybe $9 million roughly per well. The well costs for the newer stuff -- as I said, they're shallower, quite a bit shallower 3,000, 4,000 feet shallower. But there -- you don't get the exact efficiencies and pad development, too. So that's sort of what I know right now.
And Zach, let's -- we need to drill one first and we can give you a better answer. But it is shallower. So on a per foot, it should be a little cheaper.
Got it. I guess I also wanted to ask on natural gas. Gas differentials have flattened out a bit versus both Henry Hub and Ship Channel over the last couple of quarters. We've also heard some concerns on Ship Channel widening out further given increasing Permian volumes flow into the Gulf. Can you just give us your thoughts on how you expect gas differentials to trend in '24 and going forward?
Yes. Well, to be honest, I mean, all our gas goes to Ship Channel, we are a price taker. I still think it's the second probably best hub outside of Henry Hub to deliver your gas. We're closer to market than the Permian. We have all the infrastructure we need. Is it -- is gas in general challenged? Yes.
Zach. It's going to be interesting to really see what -- how this evolves in the market. You've probably seen already some of the comments from some of the independent producers, the gassier producers here -- maybe reducing their activity a bit. And so this is a market and the operators will respond to the economics. So it will be interesting to see that response. And to the extent that things are pulled in that may, over time, bring things into better balance. So we'll see.
The next question comes from Tim Rezvan of KeyBanc Capital Markets.
I'd like to start on repurchases first. Just trying to understand if we sort of back into like a repurchase amount based on your 1Q shares outstanding kind of information, it suggests maybe a little lower than that $50 million-ish range that you've run. Do you think about it as like not wanting to have a free cash flow deficit in the quarter? Just trying to understand kind of -- you've been pretty methodical with the repurchases. Is anything changing? Or is it just because of the heavy first quarter CapEx that maybe you're pulling back a bit?
Well, we didn't -- we're not forecasting the share repurchases really. I mean I think, if I recall, I think we bought in 2.5 million shares exactly in the fourth quarter. And I think that was about the same, if not exactly the same as the third quarter. So sequentially, then the amount of shares repurchased was the same. The dollar amount might have been a little different because the shares might have been bought in a little bit less expensively, which is fine. I look at the share repurchase, I mean, just a broad comment, I look at the share repurchase program as sort of ongoing and opportunistic. And there might be some shares that come available in the market. And I'm not -- not that I know anything, but if that were to happen, we could certainly lean in. If I feel as if there's a disconnect in terms of perceived value, we could lean in. The share repurchase and the dividend are sort of symbiotic in a way. There's an integral relationship for us with that. The more shares I buy in, the more it supports our dividend payout per share capacity. So that's sort of how I think about it.
Okay. Okay. We're just -- if you do the math on that $205 million for the first quarter, it seems a little light. That's what I was just trying to understand if there's something there. And I guess there's not. So Chris. I appreciate that. And as my follow-up, you -- I thought it was interesting, you said you should have a similar oil cut going through 2024. If we look at the Giddings asset in general, you've seen oil cuts, call it, kind of mid-30s. Is your confidence that you have enough well controlling Giddings that they -- you're confident the oil SKUs you're going to be getting from the 2024 program. Is that what sort of gives you confidence in sort of that oil cut staying where it is? Just trying to understand that a little bit.
Yes. No, Tim, thanks. I'm pretty confident with this year's program on the oil volumes, if you will. I think we ran in the 41%, 42% mix of oil for the fourth quarter right in that range. If I had to take a view, I think it will be somewhat similar through the year, maybe a little movement, but not all that much. The oil volumes they'll grow, as I said, they'll grow year-on-year for each quarter, and they'll grow on a similar basis to the overall BOE volume. So I'm pretty confident with that. That's what the program is designed to deliver. And then just in terms of the well control and the confidence in Giddings, yes, that's how I feel.
The next question comes from Paul Diamond of Citi.
Just one quick one for you. As you guys think about Giddings going forward as far as just the addressable -- the total addressable acreage and kind of your progress to that, what you see as like your -- the right size about what you want to be at. I guess is that something we should think about as like a single year effort? Or is that more kind of multiyear goal?
I see this evolving over years. I don't see it necessarily all occurring at once or in the shorter term. It's the amount of learning that we picked up and experience has been over this 5-, 6-year period, it's not all going to come at once here for us as a result. So we're still -- we have a large position that will -- where we'll continue to learn through our own activity and as an extension of that, we could and likely will pursue some other small opportunities that makes sense.
Understood. And do you think those smaller opportunities are more kind of blocking on existing acreage? Or is there more kind of further flung areas you guys are really interested in exploring up there?
Mainly the former, filling in.
This concludes our question-and-answer session. The conference has now also concluded. Thank you for attending today's presentation, and you may now disconnect.