Darren Barbee, interim editorial director, Hart Energy: Hi, my name is Darren Barbee. I'm here at DUG Gas and I'm joined by Craig Jarchow. He's the president and CEO of TG Natural Resources and just had a great presentation from him on stage. Really appreciate that.

I guess I wanted to first off ask about the natural gas environment, the macro that you're seeing and where you think we're headed for the year in terms of natural gas prices.

CJ: The natural gas market is turning around and the macro winds are behind us. They're certainly a tailwind. And of course the LNG facilities that are being built on the Gulf Coast already exist, are providing material demand, which we haven't seen in the past. So using even numbers, U.S. natural gas, that markets just over about 100 BCF a day, closer to 105. And now we're seeing LNG demand on just every day now about 16 Bcf a day. And we have line of sight to approaching 30 in the not too distant future. So that's a significant portion of U.S. production and that provides a nice floor for demand and for prices. And then of course we have demand from server farms and we'll see what materializes there. But some analysts are saying 3 to 5 Bcf a day additional demand. So the tailwinds are behind us now and our product obviously is environmentally very friendly, very clean burning, and it's nice to see that. It's nice to be in this position.

DB: Yeah. So speaking of positions, back in December of ‘23, you closed the acquisition of Rockcliff for $2.7 billion. Big deal. How's the integration going with those assets? Can you walk us through some of the optimization you've been able to do with those assets since you acquired them?

CJ: Yeah. Well first I would say that the Rockcliff team did a brilliant job with those assets. They recognized that this rock would work, and that was not at all clear when they started and they demonstrated that it'll work. They developed a completion recipe and a drilling recipe. They got production up to over a Bcf a day, and then they left enough meat on the bone for the next rung in the food chain, which is us. So they did a brilliant job.

And what we've done is we've operationalized those assets, which is what we're set up to do. So we have lease operating costs down by about 30%. We have completion costs down by about half a million dollars per copy. But this is what we do, we're set up to do. And on the operation costs, one of our key metrics is number of wells per lease operator. And the way we manage that is we're very big on remote monitoring of wells. People talk about it, we actually do it. We have almost every single one of our wells, of which we operate a lot. It's on the order of 4,000 plus. We have those hooked up to a control room in Carthage, Texas. And we look at the performance of the wells, well 24-7, but every morning we design roots for our pumpers, our lease operators that are different, they're not the same, they don't have the same milk route. And this is called pumping-by-exception, instead of pumping-by-roll. And because of that, they're much more efficient. They're not working any harder, they're just working smarter.

And so we can take the number of wells, in the case of Rockcliff, from 30 wells per lease operator up to three times that 90 wells per lease operator. And then we have other things that we do on completions and so on. There are cost savings. We don't use the high spec rigs. We use the next rung down. And those rigs are perfectly fine. They have high hook loads the same as high spec rigs, same horsepower for the mud pumps. So we're very, very focused on cost and efficiency, but we're set up to do that.

DB: So I mentioned Rockcliff. I am curious about your M&A aspirations. You talked during the presentation about kind of a low batting average as far as acquiring things, but what sort of opportunities are you seeing in your neck of the woods in the Haynesville on the Texas and Louisiana side?

CJ: Well, there are fewer opportunities, and we're seeing this not only in the Haynesville but also the Permian Basin. And this has been manifested by some of the recent deals that have been done in the Permian in particular. We're seeing the same thing in Haynesville in that inventory is worth a lot now.

And if you look at the value of inventory, if you look at EBITDA multiples, if you have call it, instead of 10 years of inventory, 20 years of inventory, the EBITDA multiple for your company increases by one to one and a half, almost two times. You're just automatically more valuable because you have that inventory. And of course that provides line of sight to investors to understand how you're going to invest your capital with time. And it also allows you to dovetail mesh with the projects that are being built, the LNG facilities, because their financing has to be project finance with investment grade offtakers for 20 years. That's the ideal amount of time. And so for we as an operator to plug into that, then we need to have a balance sheet like that and we need to have duration like that. And inventory is duration, and at the end of this year, we'll have about 20 years of duration. So we'll be a good match. We'll plug into those facilities well. And that's been our strategy all along.

DB: Terrific. Well, Craig, thank you very much for being here and for more information, please visit hartenergy.com. Thanks very much.

CJ: Thanks very much. Appreciate it.

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