- [Voiceover] And these are gonna be the somewhat less technical aspects but they really do impact a lot of the projects that we work on and if you kind of don't get some of these issues right then you may have an excellent technical perspective area that you never get to take advantage of. So, let's just delve into some of the land aspects. The basic concept out here is that with lateral drilling, you have really very different land requirements. What we're seeing out here is that the 7,500 foot to 10,000 foot laterals are becoming dominant, they're efficient. Shorter laterals have a lot of fixed costs that the longer laterals have as well but you don't get as many stages or as many productive feet for those set costs. Right now, I think it's, kind of, hands down undisputed that 7,500 foots are working extremely well. Most of everything is permitted out to here 75. We have quite a lot of nine to 10,000 foot laterals that are quite successful too. There's slightly more drilling risk associated with those. So what I was going to model for you today was sorta like what, you know, 60-70% of the operators out here are doing on a regular basis. And that's the 7,500 foot model. For land, you have to be able to put together pieces of land, then, that can at least accomodate 7,500 foot drilling. For ultimate efficiency, what you really would like to do is to take three sections of land vertically and develop them simultaneously and be able to put 7,500 foot laterals north and south of say, a central road. And what you're seeing here on this slide on the far left is sort of the theoretical ideal situation where you have a block of three sections of land, total of 1,920 acres. You're developing North and South in a single bench, 7,500 foot laterals. You're on a very moderate spacing pattern of only six wells or six laterals across the sections from West to East. The importance is that you're centralizing all your pads and services down the central road in the middle of the central section. This is the ideal situation would be where you would have one surface owner who is also the single mineral owner and that they have and control all rights and all depths just for the simplicity of your leasing arrangement. That doesn't happen really hardly at all out in the real world. But we do have some real world near ideal situations and one I'm highlighting here on the upper right is university lands drilling in Texas where you have the university land system is your single surface and single mineral owner and almost always owns all the rights and all the depths. Occasionally, some previous operations may hold some acreage by production, HBP by production, but generally, no. It's straight drilling and so what you see on the right side here is where the operator, all the triangles or your pads, where you're actually drilling your wells and you have this centralized road system. There's some right angle turns but for the most part, everything can be organized along that central road. And why this is all so critical is that centralized road allows you to centralize all your facility services and that's your drilling pads, your frac ponds, water treatment, and the storage of treated water and the distribution of it all, all your gas, electricity, source water supplies or disposal water supplies are all centralized. All your tank batteries are centralized and, you know, you have excellent access for trucking and excellent access for security. All your boat materials can be more centrally delivered. And these are all very serious economic benefits. We already realize something on the order of a million dollar per well cost reduction because of these centralized facilities and has given us the opportunity to probably, for as much as an additional million dollars as we get better at the centralized facilities. And if anybody's ever driven out on university lands on some of these huge pad drilling operations, these are huge manufacturing operations. You know, you'll have 200 people at any one time working day or night in these facilities and it's just really amazing to see. So, your land configuration can drive the ability to reduce your costs in these flights. Now let's complicate the situation just a little bit. Here is what I would call moderately fragmented lease configurations. Upper left is the university lands situation where you have, still, many blocks of land that can be duly 7,500 foot drilled. You can put those together. Some of the land looks like you're gonna have to make some deals like with the pink and the yellow land owners in order to work them into a regional development plan but all in all not that difficult. And you're still just doing what, you know, one land owner, one mineral owner, one surface owner, being that it's on university lands. Lower right corner is a fee land situation where you have a variety of ranchers or farmers, you know, that own a variety of different interests in the land. And what you can see there is it's very difficult straight out to put together a drillable, 7,500 foot block, let alone a duly North and South 7,500 foot block, very challenging. It's gonna be difficult to pull the interests together. You're gonna have quite a few more people involved, both operators and fee interest owners, so what you're seeing here is a land complexity that's moderately high. And this is just map view. Remember that ownership of minerals can be separated in a vertical sense as well. So if you were to take this surface complexity and to replicate that in a vertical sense, then you have what I call that Rubics Cube of a leasing puzzle. And so, it becomes very, very challenging to be able to, you know, put together drilling units in the required benches you want to exploit. Let's look at it a different way. Things can get difficult. The yellow highlighted track in the upper left here is another fee land situation but it's all one block of land but you have approximately 250 undivided mineral or royalty interests under that land. So are you going to be able to lease all the 250 individual entities in there? Very, very unlikely. What you are going for is trying to get 90 to 95% of them together but with that many individual ownership interests, what you have is a terrible time coordinating all of the lease terms that you get from each individual lease. So, you can have a block of land that has all identical ownership but it can be fragmented into so small a set of pieces that it becomes difficult to exploit. In the lower right, we take another, just another variation of what we've been talking about. It's another university land situation but now, in this case, we have a lot of different operators that hold acreage in an area where you want to exploit. And, you know, the lease vintages are a mixture of recent and extremely old leases. You can have lots of those vertical separations even though you only have one mineral owner. Different operators are holding different pieces of the land together. So, you know, if you were to have this in that fee situation as we had in the previous slide. You know, things could get even worse. So, where we're going with a lot of this is this is sort of like Battlefield selection and I know a variety of different authors have said something along these lines. You can lose your battle just simply by poorly picking your battlefield. What you have out here is that, you know, the lease situation can prevent you from being able to achieve a technically achievable objective and so the idea is that you want to minimize your gross number of leases. All the things I've kind of listed in the upper portion of the page there to make the drilling, you know, the exploitation process possible. And I also want to make one another, kind of, regional observation throughout the Midland Basin. We focus on the Southern Midland Basin where we've got large ranches and/or large mineral owners like the university lands where things are far, far simpler. As you move northward into the old Spraberry Trend field area up into the Central and Northern Midland Basin, the Rubics cube experiences take over pretty much universally. It gets very tough and that's because that land has been under production in a variety of different zones for nearly 60-70 years. So as you move northward, your number of surface and mineral owners goes up pretty dramatically. Your vertical and horizontal severance ownerships go up tremendously. It implies a lot more leases to drill the same types of wells and a huge number of increased operators and, you know, HBP tracks. So, that's, kind of, the problems with the land we can present to you.