Financial Data and Key Metrics Changes - The company reported production of 84,000 BOE per day, with a composition of 23% oil, 53% natural gas, and 24% NGLs [22] - Average realized prices were $63.1 per barrel of oil, $2.81 per Mcf of gas, and $22.41 per barrel of NGLs, with prehedged realized prices lower by 11% for oil, 21% for gas, and 17% for NGLs compared to the first quarter [22] - Total revenues, including hedges and midstream activities, amounted to $289 million, with adjusted EBITDA of $122 million and operating cash flow of $130 million [23] Business Line Data and Key Metrics Changes - The company has initiated 24 acquisitions, spending over $3 billion, and aims to maintain a long-term debt to EBITDA ratio of one times leverage [6][10] - The company plans to increase natural gas volumes to 70% post the Savinol and ICAV acquisitions, projecting natural gas to constitute at least 50% of revenue starting in 2026 [9][10] Market Data and Key Metrics Changes - The company anticipates total demand growth of upwards of 25 Bcf of gas per day by 2030, driven by LNG feed gas growth and power generation [16][17] - The San Juan acreage is strategically positioned to meet upcoming demand, with expected supply growth from various regions [18] Company Strategy and Development Direction - The company focuses on maintaining financial strength, disciplined execution, and reinvestment rates to optimize distributions to unitholders [3][5][9] - The strategy includes acquiring cash-flowing assets at a discount and maintaining a low reinvestment rate to enhance operating cash flow [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term rise of crude prices despite near-term headwinds, emphasizing the importance of maintaining leverage goals [4][10] - The company is optimistic about the natural gas market, expecting to pivot towards gas drilling as demand increases in 2026 [39] Other Important Information - The company plans to maintain production volumes through 2027 while spending less than 50% of operating cash flow and using excess cash to pay down debt [9][10] - The company has a robust operations team that has successfully maintained production levels [29] Q&A Session Summary Question: What part of the legacy Mid Con portfolio delivered strong production volumes? - Management indicated that normal operations and a couple of bolt-on acquisitions contributed to the production strength, with no extraordinary factors involved [29] Question: Can you provide details on the Brocklin 3MH well? - The Brocklin 3MH well is part of the deep Anadarko targets, with completion expected to start in late August to early September [30] Question: What led to a lower distribution this quarter? - A legal settlement reduced the distribution by $0.07 per unit, and lower gas prices contributed another $0.07 reduction compared to the first quarter [36] Question: What is the expected natural gas growth trajectory for 2026? - Management expects natural gas product mix to exceed 70% in 2026, with a strong belief in the market despite near-term headwinds [39] Question: How does the company balance its portfolio between low decline rate assets and emerging growth plays? - The company maintains a balanced portfolio that allows for flexibility in reinvestment rates, enabling growth while keeping production stable [47]

Core Viewpoint - Record cash returns are expected to continue growing in China, driven by policies, conservative cash return traditions, strong cash flow, and ample cash reserves [2][3]. Cash Returns and Growth Investment Synergy - Chinese listed companies are categorized into "Old China" (traditional industries) and "New China" (new economy industries), with differing investor preferences for cash returns and growth investments [3]. - For "Old China" companies, a 10% allocation of cash spending to dividends/buybacks leads to a 14% average valuation increase [3]. - "New China" companies see a more balanced capital allocation, with a 10% cash spending on growth investments resulting in a slight 2% valuation increase [3]. - Growth investment is expected to increase by 1% in 2025, driven mainly by AI technology and the private sector [3]. Surge in Demand for Cash Returns - In a low-interest environment, cash return strategies (dividends, buybacks) are more attractive than bonds, helping to attract yield-oriented investors [4]. - Domestic institutional demand for high-stability yield stocks is estimated to reach 4 trillion yuan [5]. Capital Utilization of China's Cash Strategy - The Shareholder Returns Portfolio includes 30 stocks across 16 GICS industry groups, focusing on companies that actively return cash or respond to policies by increasing dividends [6]. - The portfolio has shown a total return of 43% over the past two years, outperforming the MSCI China Index by 11 percentage points and the CSI 300 Index by 34 percentage points [6]. High Dividend Policies Driven by Regulations - Following the "Nine Measures" policy in April 2024, companies with low dividend payments are penalized, encouraging more frequent dividend distributions [11]. - In 2024, over 4,300 companies in the A/H/ADR markets paid a total of 2.7 trillion yuan in dividends, a 7% increase from the previous year [11]. - The dividend payout ratio (excluding loss-making companies) increased to 39% in 2024, up from 37% in 2023 [11]. Expansion of Buyback Scale - In 2024, A-share and offshore companies (excluding financials) executed buybacks totaling approximately 1.6 trillion yuan and 300 billion yuan, representing year-on-year increases of 56% and 79% respectively [14]. - The total buyback is expected to reach 600 billion yuan in 2025, driven by low debt costs and high equity costs [15]. Preferences for Dividends and Buybacks - Traditional industries and state-owned enterprises prefer dividends, while new economy sectors favor buybacks [16]. - A significant number of companies engage in both dividends and buybacks, indicating a non-binary choice in capital return strategies [18]. Lessons from Japan and South Korea - Japan and South Korea have successfully attracted foreign investment by prioritizing shareholder returns and implementing transparent reforms [20]. Investor Preferences for Cash Returns - Domestic institutional demand for high-yield stocks is projected to reach 4 trillion yuan, with significant allocations from insurance companies and pension funds [21]. - Government-owned enterprises increasing dividend payouts can provide substantial revenue for the government, with a potential 10% increase in dividend payout rates yielding an additional 220 billion yuan [21].