Participants

Ben Messier; Director, Investor Relations and Business Development; Vitesse Energy Inc

Robert Gerrity; Chairman of the Board, Chief Executive Officer; Vitesse Energy Inc

Brian Cree; President; Vitesse Energy Inc

James Henderson; Chief Financial Officer; Vitesse Energy Inc

John White; Analyst; ROTH MKM

Michael Schwartz; Analyst; Jefferies

Stephen Richardson; Analyst; EVERCORE ISI

Jeff Grampp; Analyst; Alliance Global Partners

Jeff Robertson; Analyst; Water Tower Research

David Shafer; Analyst; Northland Capital Markets

Presentation

Operator

Greetings. Welcome to the Viper Energy First Quarter 2020 for earnings call. (Operator Instructions) Please note this conference is being recorded. I will now turn the conference over to Bob Messey, a Director, Investor Relations and Business Development. Thank you. You may begin.

Ben Messier

Good morning, and thank you for joining today. We will be discussing our financial and operating results for the first quarter of 2024, which we released yesterday after market close. You can access our earnings release and presentation in the Investor Relations section of our website. We will file our Form 10 Q within the upcoming days.
I'm joined here this morning by the Texas Chairman and CEO, Bob Garrity, our President, Brian Cree, and our CFO, Jimmy Henderson.
Our agenda for today's call is as follows. Bob will provide some opening remarks on the quarter after Bob, Brian will give you an operations update, including some additional information on the recently announced near term development acquisitions. Then Jamie will review our first quarter financial results and updated production and CapEx guidance. After the conclusion of our prepared remarks, the executive team will be available to answer any questions.
Before we begin, let's cover 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 the risks and uncertainties, some of which are beyond our control that could cause actual results to be materially different from the expectations contemplated by these forward-looking statements. Those risks include among others matters that we have described in our earnings release and periodic filings. We disclaim any obligation to update these forward-looking statements, except as may be required by applicable securities laws.
During our conference call, we may discuss certain non-GAAP financial measures, including adjusted net income, net debt, adjusted EBITDA, net debt to adjusted EBITDA ratio and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in the earnings release that we issued yesterday.
And now I'll turn the call over to our Chairman and CEO, Bob Garrett.

Robert Gerrity

Thank you, Ben. Good morning, everyone, and thanks for your participating in today's first quarter 2024 earnings call. Management at Vitesse is committed to the dividend as a vehicle to return capital to our stockholders to sustain this return of capital strategy, we must have a very economic return on capital invested. We continue to spend capital in a dividend supportive manner, which led us to raise production and CapEx guidance for 2024. We are sharing the fruits of this labor with our stockholders by increasing our second quarter fixed cash dividend to $0.525 per share to be paid in June, an increase of 5% over the first quarter dividend. This is really a harvest of the really economic deals we have done starting in the second half of last year and continuing into this year. We continue to look at near term development deals and larger act asset acquisitions that would bolster our dividend so far this year, deal flow has been healthy. As Brian will describe, we have agreed to acquire additional self sourced, highly economic interest that will allow us to invest over 40 million of CapEx incremental to our original projection. When we find these highly economic acquisitions, we will take them down. We do not have a fixed budget. It's all opportunistic we will continue to pursue all of these opportunities as that meet our strict economic parameters.
For I turn it over to Brian, I just want to compliment everyone on our team at Vitesse. We are all rowing the boat in harmony. We cluster us every day to allocate capital in a way that supports our dividend, which is really the dividend belongs to our shareholders.
So with that, I'll turn it over to our President and business partner, Brian Cree.

Brian Cree

Thanks, Bob, and good morning to everyone, and thanks for participating on today's call. In the first quarter, we had production of 12,557 barrels of oil equivalent per day. As previously mentioned, in our February earnings call, production was negatively impacted by the severe weather event in North Dakota in January as many of the wells were off-line for more than a week. Despite this event, we are increasing our 2024 production and CapEx guidance. As a result of the additional acquisition activity activity that Bob mentioned, we continued to find highly economic opportunities to invest capital through our acquisition pipeline that we have developed over the past 10 plus years. The majority of these near term development acquisitions are more traditional in nature than those closed during the second half of 2023 Thus, the drilling and completion activity will occur over the summer and fall with production not likely until the fourth quarter and into 2025. As of March 31st, we had 5.9 net wells that were either drilling or in the completing phase and another 10.6 net wells that have been permitted for development by our operators through the first four months of 2024, we've experienced an increase in planned development on our existing assets. In addition to the recent near term development acquisition activity, we're excited about these trends, which are expected to maintain and enhance our return on capital invested over the course of this year and into next.
Our oil differential in the first quarter was greater than it has been historically, which we expect to improve as the Trans Mountain Pipeline expansion comes online in Canada reported to have occurred earlier this month. We have continued to add oil hedges during the year, and we now have swaps in place through the end of 2025.
At the midpoint of our revised guidance for 2024, we have approximately 60% of our remaining oil production hedged at above $78 per barrel and a portion of our 2025 oil production hedged at above $74 a barrel.
Thanks for your time. And now I'll turn it over to our CFO, Jamie Henderson, to review our financial highlights.

James Henderson

Thanks, Brian and Bob. Appreciate the introduction and good morning.
Everyone, I wanted to highlight a few financial results from the first quarter. And as always, all assume you can refer to our earnings release and our upcoming 10 Q for further details. As Brian mentioned, our production for the quarter was approximately 12,500 BOE per day for the 71% oil cut. Our production was affected by extreme winter conditions in January, but thanks to the great work by our operators, we could quickly recover. I just can't say enough about the men and women out there that are getting the job done day in and day out in North Dakota. Lease operating expenses were also negatively impacted by the severe weather event in addition to continued elevated workover expense coming in at $11.8 million for the quarter or $10.32 per BOE for the quarter, adjusted EBITDA was 39.1 million and adjusted net income was 10.2 million. Gaap net income was a loss of 2.2 million, with the difference being primarily attributable to the unrealized non-cash hedging loss due to the increase in oil prices in the quarter.
Cash CapEx and acquisition cost for the quarter were $32.2 million, which included cost paid related to acquisitions made earlier in 2023. As a reminder, our CapEx can be variable from quarter to quarter, depending on activity levels and acquisition opportunities. During the first quarter, 332,840 shares of Intesa's common stock were retired after being exchanged for $6.9 million of tax withholding relating to vesting of restricted stock units. This transaction occurred at a price of $20.85, which is about 8% below our current stock price at yesterday's stock price. While this effectively functions as a share buyback, it does not decrease our repurchasing power under our 60 million share buyback authorization. We funded first quarter CapEx and share retirement with operating cash flows and draws on the credit facility debt at the end of the quarter was 98 million, resulting in a leverage ratio of just 0.6 times on a trailing 12 month EBITDA basis. The elected commitments on our credit facility currently stand at 210 million, but we expect them to increase to 245 million when we complete our semi-annual redetermination in the next couple of weeks. As previously mentioned, we are increasing our original 2024 annual guidance due to the recently acquired or agreed to be acquired near term development assets in North Dakota. These acquisitions are anticipated to result in over 40 million of incremental capital expenditures and are expected to provide material increases to production and cash flows, primarily late 2024 and into 2025. Our expected production for 2024 now ranges from 13,000 to 14,000 BOE per day with a 67% to 71% oil cut, and we have increased our 2024 capital expenditures guidance range, which now stands at one 30 to 150 million. Please note that our oil and natural gas production as well as our CapEx varies from quarter to quarter based on new wells coming online and other operational matters that happen commensurate with this increased activity. The Board has approved an increase in our dividend to $0.525 per share, which demonstrates our confidence in the accretive nature of these investments.
With that, let me turn the call over to the operator for Q&A.

Question and Answer Session

Operator

(Operator Instructions) John White, Roth Capital Partners.

John White

It's Good morning.
Can you hear me okay?

James Henderson

Absolutely.

John White

Morning, Dan.

James Henderson

Good morning.

John White

Could we get a little more detail on the acquisitions? Like what counties are they predominantly located? How much existing production is being acquired? And any comments on the undrilled inventory?

Brian Cree

Absolutely, John, this is Brian. I'll take a first crack at that and let anyone add in if they want. But these are these are different than what we did last fall last fall. Many of the acquisitions that we completed were more very, very developed in terms of the timing of when those wells were going to come online. They were wells that were ducks at the time or we're just shortly ready to come on. These are more kind of traditional in nature. They see they span the entire basin, some in Williams McKenzie, but there with operators that we have a lot of confidence in. But these are wells that are going to get drilled over the summer and the fall. And so there's really no production coming with these unlike the last time where we had a lot of wells that were just about ready to start producing these will these will start producing kind of, like I said, fall sometime in the fourth quarter and so there are a little bit different in nature than what we did last year, but very economic from our standpoint, again, with with some of our favorite operators in areas of the field that we have a lot of confidence in the our higher working interest wells. Typically our average working interest is is in that 3%. If you look at our entire portfolio. These are working interests that are north of 20%. And so they're deals that we've been working for a long time. And just luckily, they came together in April and May we're able to move forward with.

John White

Okay, great. And Bob used the term sales source, does that mean this was not a bid situation?

Brian Cree

Yes, the operators will come out to several different companies. These were not like investment banking, bid processes or anything else or this is just kind of part of our pipeline. We've been doing this for like I said, over 10 years, we've developed relationships with all the different operators and sellers of this, and it is a process where we have to put in an offer. So unlike maybe the deal we did last year with Marathon where it was more negotiated. But these are still deals that have very few eyes on them from the operators. They send them out to their kind of their favorite data potential buyers and we go from there.
Thanks again.
And net acreage involved, most of these are wellbore deals. So there's not really much additional new acreage. This is all wells that are that are really well-bore AFEs that are again being drilled over the course of the summer.

John White

Thanks a lot for the extra sequel through.

Robert Gerrity

Welcome.

Operator

Michael Schwartz, Jefferies.

Michael Schwartz

Hey, guys, congrats on the acquisition. My first question is given the key wells you're going to be selling at the end of the year. How should we thinking be thinking about production and CapEx in 2025?

James Henderson

Yes, it's a little early Mark, we'll be thinking about giving any guidance of any sort for 2025. But clearly, we're confident that it's still with increasing the dividend. It will increase production and cash flow as we exit 24 and 25 and down. So I think you should see no pretty happy with the time the change year over year, but we don't want to get too far ahead of ourselves, but don't we think we can, although it's not our objective necessarily. I think you will see some production growth as we go into next year. And if you think about CapEx sort of returning to a maintenance mode as we go into 2021 makes sense.

Michael Schwartz

I completely understand that it's early, but I just also wanted to ask about the decision to raise the dividend from your comments. It sounds like it's tied to kind of deals and this kind of growth you're seeing what do we need to see to grow the dividend further? Is there kind of any metrics that we should be thinking about after that?

Robert Gerrity

Well, it's really a function of the economics of our drilling where we're capital allocators and when we can allocate capital in a way that gives us a a very high rate of return while we're going to return that money to the shareholders. So that can happen in a lot of different ways. If we continue to find the deals we're finding in the last nine months, that's very constructive to the dividend. Obviously, we hedge those acquisitions up to the degree that we can and stable oil price will certainly be supportive to the dividend. But Michael, this is what we look for. And so the calculus at this is very dense. Ben, you want to add something to that?

Ben Messier

Yes, hi, Michael. Yes, we like to think about our dividend coverage in a flat production environment, really. So when we set this dividend level, we're thinking about sort of a maintenance mode CapEx level of, call it $90 million to hold production flat in the mid to high 13 MBOE per day range. So if you look at our business model in that environment, we're generating more than enough operating cash flow at current commodity prices the current to conservatively cover the dividend and the maintenance CapEx. And so we look at that and feel really good about where we are from from a dividend standpoint.
And then as Bob said, we've been lucky enough to find really attractive acquisitions since we've spun off that have allowed us to grow production more than maybe we originally thought we could. And we're happy to draw our RBL that fund those were 6.6 times levered. We have over 40% drawn on our revolving credit facility. So a ton of capacity there to drive growth at these really attractive rates of return. And on it obviously comes with the short-term hit of more CapEx, but that's to the benefit of longer-term production and free cash flow growth. And so we're not as concerned about the optics of it's looking like we're covering the dividend in the short term because we know that having more free cash flow over the next 30 years is in the end, that's for the dividend. So that's some of the calculus that goes into how we set it. And when we raise it really sounds good.

Michael Schwartz

Makes a lot of sense to me. Thank you, guys.

Operator

Stephen Richardson, Evercore ISI.

Stephen Richardson

Good morning.
Tom, I was wondering if you could talk a little bit appreciate the comments in the prepared remarks about the in-process wells and permitted wells. If you could talk a little bit about what you're seeing in terms of operator activity on your lands, particularly relative to how you guided earlier in the year and how things are playing out just acknowledging that you had weather impacts in Q1, but could you just talk about what you're seeing from the operators at this point?

Brian Cree

Sure, Stephen, this is Brian. We kind of mentioned I made a quick comment on it is that we're seeing a little bit of accelerated activity on our on our asset. Typically, we think about 40 to $50 million a year of kind of organic CapEx. That's what we've talked about in the past. It's early in the year still, but we're actually seeing an accelerated pace. We've received more AFEs in the first four months of the year, that puts us on a pace for to exceed that to 40 to 50 million. So we like that we've seen more three-mile laterals clearly the operators are moving toward the three-mile laterals whenever they can. So we've seen more of that in terms of our of our development work, we've seen quite a few refracs this year, probably on a pace that exceeds what we saw in 2023 and closer to where we were in 2022. So we're excited about that. We think the operators continue to to look at that refrac activity. But yet we've seen an accelerated pace that we're not sure that that will continue. We're excited about it at this point in time. We think the three mile laterals, we know the operators are all very excited about the three mile laterals. We have confidence in their ability to to pull those together and see those as being more economic than the two-mile. Some time will tell exactly how those play out. But the combination of all of that just gives us a a higher level of excitement about 2020 for them than we had at the beginning of the year.

Stephen Richardson

Great. Maybe, Brian, well, got you as well on the acquisitions, could you I appreciate that the activity on these wellbores is going to be in the back part of the year on one based on your risking. And I appreciate that you don't have full visibility but as you looked at it is will you have production contribution from all these wellbores by year end on like will it be in the exit rate or is it does it trickle into Q1, Q2 of next year as you kind of looked at it and rest of it, you know, based off our underwriting, Stephen, we definitely expect all of these wells to be on at some point in time in the fourth quarter.

Brian Cree

But as you know, it's just it's hard to it's hard to tell for sure, that's how we've modeled them. We modeled things last fall when we made those acquisitions with it with the production coming on a little slower. So I think we do a pretty good job on in our underwriting in terms of estimating timing. But as Jimmy mentioned, it's not in our control. It is in the control of the operators. But again, these are operators that we have confidence in. And I think though, Bill, they'll meet our time lines.

Stephen Richardson

Okay. Last one for me. If I could squeeze it in was just on just following up on Ben's previous comment on kind of thinking about financial resources of the Company in terms of the reinvestment opportunity set. So if you think about that 0.6 times levered, can you remind us where you're happy or where you're comfortable taking that considering the depending on how you look at it, this is probably a little bit above kind of mid-cycle oil price, but at least for most investors. So like where are you willing to take that considering if the opportunity set continues to present itself?
Thanks.

James Henderson

Yes, I'll jump in here. This is Jamie and I think we've always said that we're going to remain at or under certainly under one times levered. And I think we are confident that we'll remain there with these opportunities and the ability to further invest. I don't really seeing much increase from where we're at today as we're getting contribution from the acquisitions that we did late last year and for the remainder of the year and then these these acquisitions again. So I think we're in a really comfortable position from a leverage standpoint and a liquidity standpoint, given really within our current resources.

Stephen Richardson

Great. Thanks.

Operator

Jeff Grampp, Alliance Global Partners.

Jeff Grampp

One, I guess was curious with the ad the near term development acquisition market, obviously really, really active here so far. Is that just a function of those being higher working interest? If you guys were to look at it maybe on I don't know, gross deal basis are things pretty consistent or how might you guys characterize kind of current market dynamics versus, say, 2023 or whatever reference period you'd like?

Brian Cree

Yes, Jeff, it's Brian. I'll jump in again on the market remains very robust at this point in time. We see a lot of deals. We still evaluate a lot of deals come in. As we said in the past, our hit rate is probably 10% for these. But I think for us when you look at those higher working interest opportunities. We've had a little more success there. There's probably a lot less competition when you're talking about those kind of dollars versus on in those in the a million or $2 million deal range with smaller working interest. So yes, we've we've tried to take advantage of that. And again, it's always very lumpy, right? I mean, we see a lot of deals in the first quarter, we bid on a lot of things and nothing really came to fruition. And then all of a sudden, you know, some things come together. So that's just it time line that we have to work through these working with the various operators of the various sellers to make sure that we really understand what's going on and bid these at the hurdle rates that we find very attractive.
The one thing I will say is just to add to your to your question is, and while that pipeline is really good when oil prices get higher, you know, from our standpoint, it actually makes it a little a little more difficult to close some of these because I think others will get a little more optimistic. We typically will underwrite these at a price deck that is below strip. And so when prices get a little higher, it becomes a little more difficult for us. So really that 70 to $75 range seems to be a great range for us where kind of our underwriting it does very well on against the competition that's really helpful.

Jeff Grampp

I appreciate that. And maybe a question for Jimmy. Your hedges bumped up nicely, especially first part of 25. Should we expect more more volumes there perhaps as these new acquisitions come online? Or how are you guys thinking about the hedge book here, especially in the context of the increased dividend?

James Henderson

Yes, definitely.
We obviously had hedging is a key component of our dividend decision making and protecting the cash flow so that we can continue to make these investments going forward. And so yes, you'll definitely see volumes added to 2025 as we move forward. We have a couple of things working against us, obviously, the backwardation in the market. So we got to be patient in Canada with that we move forward. At the same time, we're only allowed to hedge a certain percentage of under our credit agreement. So as we move forward in time, we are able to continue to fill that bucket. And so we've tried to methodically push ahead on hedging and these acquisitions as they come online at their PDP level so that we can and entered into transactions to support those. So we always had to have a little bit of room versus our limits so that we can support acquisitions as we do them, but somewhat limited ability to do that, but we we can push it as far as we can.

Jeff Grampp

Understood personal comments. Thanks, guys.

Operator

Jeff Robertson with Water Tower Research.

Jeff Robertson

Thank you. Good morning, Barbara.
Brian, a question on Luminent's. Are you able to adapt that system as you see consolidation in the basin and assets change hands from one operator to another to help you identify acquisition opportunities to target.

Robert Gerrity

Absolutely, Jeff. Luminous gets more vibrant every day. Everybody has a relationship to Luminous and some. We're developing some AI. capacity. Everybody does AI or we can do it with Luminous as well. And it's amazing the amount of information you can get when you've got over 15,000 wells loaded in your system. So we do rely on Luminous, everybody enjoys it, and it just to we call it about a democratize is that everybody in the organization, whether they're a revenue clerk, whether they're a land man engineer or the finance department learns from Luminous every day. And it's a great question. We're thrilled with it. We had a hour-and-a-half meeting yesterday about the other developments that we're that we're looking forward to with Luminous. So it's a important part of our company and it gets better and develops every day. Does the ability to understand not only your asset base, but what's going on in the basin and where opportunities lie? Does that factor into the decision to raise the dividend in the context of understanding what what the potential runway is?

James Henderson

Yes, I'd say that the dividend decision is an output, I guess, from what goes into alumina. So Luminous certainly as Bob spoke, allows us to analyze these opportunities and make smart investments, which of course, drives the ability to increase the dividend. So kind of an indirect output to that, but certainly is supportive.

Jeff Robertson

Thank you.

Operator

David Shafer, Northland Capital Markets.

David Shafer

Hey, guys, thanks for taking the questions. So my first question is just if we can get an update on kind of the original deeper denser expanded thesis on that. I know you guys had when you clearly this company to kind of repeat what had been done before in the DJ Basin, but also if we can connect, I guess, you know, maybe answer that sort of separately, if it's a separate thing or, you know, if the opportunity presents itself does just tie in with the 40 million CapEx increase, you know, are there things you can point to where and some of these specific opportunities themselves tied to either tighter infill drilling or maybe with the three-mile lateral, it allows you to step out a little bit further. I know you guys are probably not, you know, taking risks on a totally Virgin step-out, but maybe infill drilling wells that have been derisked because of more recent and successful step-outs or things along those lines. Just anything just a general update and then if it actually is in any way sort of highlighted or demonstrated with these opportunities?

Robert Gerrity

Yes, hi, David. This is Bob. The deeper denser, cheaper, better expanded concept that we had was really just about the field over the course of time becoming more economic. We saw that in the DJ and we are seeing it in hyper speed in the Bakken, it just seems that every well that's being drilled is more economic than then. It's offset well, simply because technology improves every every day and so this is really when we look at the Bakken, we look at the Bakken through the lens of technology and it's amazing what has happened out in the field. Of course, technology unless it's at a cost-efficient basis, it's meaningless. And the costs in the field have certainly stabilized, if not gone down a little bit. But you're right, the field has expanded and we're getting Tier one economics on a map that not that many years ago was considered Tier three. So we love the position we have in the Bakken. It does get better every day, and we're excited to find out what's next.

Okay.

Robert Gerrity

Great.

And then on another question. So I know I am kind of putting Jimmy on the spot here. So well or I may, I should almost, you know, in a perfect situation and have them leave the room or something. But certainly I don't want to sound quality. And here I know it's a bit odd that you joined a few quarters back, you know, and I did make a point of going through like sort of Islington profile. And as you know, I'm bio from other companies has been involved in Jim's experience, not to his horn, but it was very relevant and I thought it was quite impressive in particular, the there was a strong focus in the Bakken and also sort of the Rockies and were generally on private pretty thick Rolodex there as well.
And so and just kind of curious if we can get to know an update like is I think when Jamie first joined, I thought, gee whiz, you know, maybe this means there's going to be some some amazing, incredible packages and things that gets put together and you know, deals only you don't do deals for them for their own sake, right? So instead we've gotten the sort of acceleration. It is our near term drilling development program opportunities. And so I'm just kind of acutely as Jimmy been an important part of like making the decision of, okay, we're going to focus a bit there instead of.
Yes, like like, you know, kind of maybe what a So John, why it was changing out with like large acreage accumulations like kind of gaming it out and like working that Rolodex and getting the higher working interest. Anything you could speak to it. But I'd also just be more interested broadly from the other guys know a sense of the role and how that ties in?

Robert Gerrity

Yes, you nailed the data and I'm bringing Jimmy on was a win in every wafer tests. You note Jimmy'Z experience is unparalleled and just having that knowledge and scar tissue to understand what works and what doesn't work it invaluable, you don't learn in a book. You just learned by the Hard Knocks of experience Jimmy was a perfect fit for Brian and I he came in and it was as if we were partners for a long time, you can call him the accelerator. And I think it is fair to to give Jamie a lot of credit for for us being able to source additional deals.

James Henderson

So Jimmy, are you switching at or a okay enough of that on I liked as much though, we'd like to take credit for the ability to do what we've done so far in the last few months is really a testament to the team that has been assembled here as well as things we've talked about Lumenos and that on yards, it's really a culmination of all of those things that has been developed over the years of existence for this company and down. I really appreciate all the comments for I'm just here to be able to take advantage of what's already been built and keep it moving forward, but I really appreciate the thoughts.

Robert Gerrity

Okay.

And of course, you guys if you have anything really you'd have to say you can just comment on the later adherence and better.
So then just my one last question is just with the dividend and sort of stress testing that I have to imagine you're presenting we are presenting it to the Board, for example, to get their approval on raising the dividend. And I would assume you do some kind of stress testing, but if you can just kind of confirm that and maybe what type of parameters, you know how you've got a lot of hedging in place for the next year. So do you say, you know, assuming a $60 oil how long can we I'm many years or months or what are kind of some of the parameters that you've done, just that stress touch and backstop?

James Henderson

We identified this German, I take first cut and the guys jump down. But yes, certainly, I mean, the strip itself kind of provides a pretty good litmus test to the way that it's backward dated and we look at, can we maintain this coverage ratio for the dividend, even with the with debt degradation and down? What would happen if we go further than that and knowing that there's a lot of things you have to adjust in the modeling on that a lower for longer type scenario. Costs tend to go down, et cetera. So we do get confidence we're able to maintain that level of dividend in most scenarios and then we can make adjustments to to support as best we can for some period of time. So yes, we definitely run multiple scenarios and probably like most oil and gas companies can have a flat flattish price. We are a little more I'm confident in the strip and then something lower even than that branding step?
Dan, you've done a lot more than I have here.

Robert Gerrity

This is Bob. I'll have a brief comment in the dividend and it is it's very obviously it's what we live for. It's important to understand and we'll get to we've seen it when the price of oil goes down, activity goes down. So when activity goes down, our CapEx goes down so that, you know, you can't just fix a when you're doing the stress test, you just can't fix everything. You have to realize that if the price the price of oil goes down to 50, the activity level will go down accordingly. So the key measure for us is what Ben said earlier is that our maintenance CapEx is around 90 million bucks. So that is a real critical number for us. So above that is where we become additional capital allocators. Our rate of return on that maintenance CapEx is the highest we've got. So for us to spend more money than $90 million a year, it's going to have to be very, very attractive. So we think about all the time Dan And Brian, would you add anything that I would really add there?

Brian Cree

Donovan is again, it's one of the reasons that that the test has always tried to keep that leverage Yes, right. I mean, it just it provides us some flexibility, not that we want to use debt to pay the dividend. But if oil prices were to decline on a short-term basis. We feel like that, that extra capacity there to allow us to keep that fixed dividend. It's something that we're that were obviously very important to us. We've talked about it a lot. And but look, if oil prices went down for for a long period of time, we would have to adjust and look at everything. But clearly that extra our debt capacity is something that factors into our calculation.

Okay. Very helpful. Thank you, guys, and then I'll pass it on.

Operator

Thank you. Our next questions come from the line of Noel Parks with Tuohy Brothers. Please proceed with your question.

Robert Gerrity

Hi, good morning. I just got a couple. It was interesting when yes, I would continuing the era of capital efficiency. There's a lot to recommend the non-operated model, just how diversified you are across many operators and so forth. And I'm wondering, have you seen any signs of any new and trends are other non-ops looking into I get active in the Bakken or the base.

Yes.

Brian Cree

I mean, we constantly see new family offices come in. There's there's been some transactions so far this year where there's been new entrants into into the Bakken and there are some other operators that are looking to sell their assets that, along with consolidation is something that's exciting to us. I mean it's always good to see the consolidation in the basin operators are taking on the best of what each side has looked at. And so, you know, from a pure non-op standpoint, there's always that for smaller deals, we see a little more competition. But again, I think from from what we've been able to accomplish so far this year, those larger deals I don't think we've really seen any new entrants come from from the non-op space.

Robert Gerrity

And this is Bob. It's hard to buy your way into the Bakken. It's really tightly held and has been for seven or eight years. We could never reconstruct the 50 some odd thousand acres we have. We bought it at a very low on cost per acre.
Got you.
Thanks to some helpful consideration. And I'm just curious as far as them well, you described that a number of deals just sort of came together last month and in terms of interacting with potential sellers? Do they tend to be more price sensitive or are they more time sensitive? Just looking to get these interest sold?
We are just looking for sort of whatever price will meet their thresholds?

Brian Cree

Yes, I think I think for the seller's price is always something that's important to them. But but at the same time, I think they just the history. Most of them have had with our station base. They have they have trust that they can move forward with a transaction that we're going to look at it and that we're going to be able to close and a lot of times these guys will get a season. They then have 30 days from which to make a decision and they're trying to move these AFEs a lot of times within that 30 days. So having somebody to deal with that, they have the confidence that that can get it done.

Robert Gerrity

We'll close.

Brian Cree

That number is not going to back out on them in the last minute. It's going to provide them a reasonable offer. I think that all plays into it.

Robert Gerrity

Great.

James Henderson

Thanks a lot and expect of.

Robert Gerrity

Thank you.

Operator

There are no further questions at this time. I would now like to hand the call back over to Bob Gary for closing remarks.

Robert Gerrity

Thank you all for the time you've spent with us this morning if you had any follow-up questions, Ben Mercier is does a great job of filling in the filling in the cracks here. So look forward to seeing everybody or talking to you in three months. Thank you. Bye-bye.

Operator

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time and enjoy the rest of your day.