Q3 2019 Earnings Call
Good morning, welcome to the Falcon minerals third quarter 2019 earnings results call and webcast today's call is being recorded.
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And it's now my pleasure to turn the floor over to Brian Buckley with Falcon minerals, Sir you may begin.
Good morning, everyone and thank you for joining us for today's call to discuss Falcons third quarter 2019 results.
Yesterday on the call is our president and Chief Executive Officer, Daniel Hers, and our Chief Financial Officer, Brian Gunderson.
Before we begin I'd like to remind everyone that during this call will make certain forward looking statements. In this context forward looking statements often to address our expected future business and financial performance and financial conditions. It also contain words, such as expects anticipates and similar words or phrases.
We're looking statements by their nature address matters that are uncertain and are subject to certain risks and uncertainties, which can cause actual results could differ materially from those projected in the forward looking statements.
Discuss these risks and the quarterly report on Form 10-Q , and our annual report on Form 10-K .
Like the caution you not to place undue reliance on these forward looking statements, which reflect management's analysis only adds up to date hereof.
The company undertakes no obligations to publicly update our forward looking statements wouldn't publicly released the results of any revisions to forward looking statements that may be made to affect events or circumstances. After the date hereof reflect the occurrence of unanticipated events.
Additionally, in our earnings release, we've provided a reconciliation to non-GAAP measures, we referred to in our public disclosure such as adjusted EBITDA and pro forma free cash flow.
Well actually the company will be attending several investor conferences over the next few weeks, including the Stephens investment conference at the Omni Hotel in Nashville on November 13th and the capital One Securities Energy Conference.
Hotels, Izod and Houston on December 12.
With that I'll turn the call over to our CEO Daniel Harris for his remarks Daniel.
Thanks, Brian welcome everyone and thank you for joining the Falcon Minerals Corporation third quarter 2019 earnings call.
I'm joined by a number of are members of the Falcon management teams as well as by Brian Gunderson, Our Chief Financial Officer.
Given the financial report following my brief remarks.
I'm pleased to report that despite the instability in the energy and environmental over the last quarter, we had dalkon had a very stable third quarter.
The absence of our company is simple.
We own minerals in the core of the core of top energy plays.
We haven't Bobby that with our 256000 gross unit acres across the cartons trough in the Eagle Ford shale.
Furthermore, with over 90% of our value coming from Conoco Phillips deep dive in any E. G. We have world class operators, who are executing on their multi year development plans, which do not shift easily.
In fact, these operators have discussed adding rigs in the Eagle Ford.
This core of the core top operator model provides a distinct advantage for us it Falcon.
As we have seen activity levels remain extremely high across our position.
Simply put we do not need to buy minerals and growth and lever up our balance sheet or issue equity for gross our assets will grow organically in fact, one conservative research analyst forecasts, 16% growth for us for 2020 is compared to 2000.
<unk> gene.
This growth coupled with our approximately 10% yield implies over a 25% total return potential from the current trading price, which I believe is a compelling value proposition for investors all without the need for acquisitions.
No.
Let's get into the specifics related to the stability of the business and the upcoming expected growth.
Our production in the third quarter was flat relative to the second quarter of 2019 with 4825 barrels of oil equivalent per day produced with approximately 50% of our companywide production coming from oil or about 83% of revenue.
In fact, our oil production was up approximately 10% as compared to the second quarter of 2019.
Our operators averaged seven rigs running across our position during the third quarter and are currently running the same number of rigs today.
That is up from five rigs during the first quarter and down from nine rigs running during the second quarter.
Many of you will remember that I've said over the course of a year, we forecast seven to eight rigs running on average which is what we continue to see and expect.
The key aspect here is the overall, the majdic current and future activity across our position.
With arguably the best returning wells in the United States and the most stable operators, we're in a very strong position.
Of course as many of you know those conoco NBP have recently stated that they each may add another rig did eagleford in 2020, which we consider further upside.
We're very pleased with our line of sight wells, we have approximately 207 gross line of sight Wells were 2.82 net line of sight Wells. This is an increase of 16% since our last quarterly conference call.
Based on historical average time for each producer from permitting a well to turning into inline we would expect all of these wells to be online within the next nine months.
Even if we add three more months for additional conservatism that would still equates to 2.82 net wells turned in line over the next year.
The 2.82 net wells would be I would be greater than 850% increase in net wells is expected to be turned in line as compared to 2019.
This should equate to meaningful growth from current production levels, which should drive cash flow in dividends in 2020.
In our earnings release this quarter, we've expanded our disclosure with respect to line of sight wells. We have provided the number of gross to net wells in each respective line of sight category to help better understand in model the production trajectory of our business and related timing.
To that end up our 207 gross wells 32 of those wells a 4.36 net wells had been completed in our waiting to be turned in line.
Additionally of the 207 gross wells 118 wells or 1.69 net wells are waiting on completion.
That leaves 57 gross wells up to 207 total gross wells or 0.78 net wells that have been permitted and are waiting to be drilled.
Based on this detail combined with our specific knowledge and historic timing of operators turning wells in line. We have provided guidance for the average of the next two quarters importantly, I'll repeat this importantly to note that that does not.
I mean necessarily that individual numbers during any quarter will not be outside of that range, but rather our expectation is that the average over the next two quarters will be within that range.
Our fourth quarter 2019 in first quarter 2020 average production guidance range is 5000 to 5500 Boe per day.
With the oil contributing between 50% to 55%.
And assumes the hooks ranch wells are turned in line during February which is based upon our current knowledge of timing.
Finally, because of disadvantaged asset base and upcoming growth we approach to acquisitions this quarter extremely conservatively.
With landowners and other sellers, we find that price expectations are slow to change and we will not dilute the great business, we have nor will we put a material leverage on our business.
In conclusion.
We are in a position, where we have significant stability from our core of the core assets and top tier operators with substantial growth now immediately in front of us.
We generate substantial free cash flow, which we are returning to our shareholders and we do this while maintaining a pristine balance sheet.
With that I'll now turn the call over to Brian for our financial [noise].
Thanks, Daniel and thanks to everyone on the phone for joining the call.
As Daniel mentioned Falcons Foundation is built on World class assets that are operated by the premier operators in the United States.
Falcons business benefits from high margins embedded growth low operating costs zero capital expenditures low leverage and premium pricing.
These factors allow falcon to return to free cash flow through a reliable quarterly dividend and for shareholders to benefit directly from our unique value proposition.
Our assets generated 15.9 million in royalty revenue during the period.
That 15.9 million in revenue Falcon will return approximately 11.6 million back to its shareholders through the form of a quarterly dividend payable on December Threerd 2019 for shareholders of record on November 20-F 2019.
As has been previously as there has been mentioned in previous quarters, a key strength of Falcons Eagleford position is our ability to realize premium prices for our barrels out of had a premium to benchmark W.G.I. This premium was evidenced by Falcons net oil realization for the quarter.
Which was $3.57 above the average W.G.I. price during the quarter.
Our net realized price for oil during the third quarter was $60.02 per barrel compared to Debbie Guy, which averaged approximately 56 45.
Our average realized price for natural gas was $2 and 15 per Mcf and our NGL realizations averaged $10.57 per barrel.
Total cash operating costs for $8.28 per be a week consistent with the prior quarter looking at the component pieces add beloranib and production taxes were approximately 5.6 presented revenue for the quarter or $2.01 per week.
Marketing and transportation expense was $1.32 cents per Boe, even for the quarter.
Cash DNA expense was approximately 2.2 million for the third quarter or $4 at 95 cents per BLE.
This cash gionee excludes approximately $1 million of noncash stock compensation expense recognized in the period.
Adjusted EBITDA EBITDA for the third quarter was 12.3 million Falcons third quarter GAAP net income was 2.9 million on a standalone basis, and 6.4 million, including non controlling interests.
GAAP income tax expense was 1.1 billion for the quarter due to a step up in our basis in the asset in our assets that Falcon recognized as part of the transaction with Royal resources in 2018, our effective tax rate is approximately 15% for the third quarter verse.
As a federal income tax rate of 21%.
We expect to benefit from this depletion allowance for at least several years in the future.
At the end of the third corner Falcon at $38 million outstanding on its revolving credit facility and 2.6 million of cash on hand, resulting in a total liquidity of approximately 70 million.
At the end of the period.
Our net debt to LTM EBITDA ratio as of the ended the third quarter was 0.55 times.
Yesterday after market closed, we announced a dividend up 13, and a half cent per share for the third quarter pro forma free cash flow per share was approximately 14 cents for the period.
Well, we define pro forma free cash flow as adjusted EBITDA inclusive of non controlling interests less interest expense and pro forma cash tax pro forma cash income taxes.
Our estimate of pro forma free cash flow for the third quarter of 2019 did not include an estimate for pro forma cash taxes. There were two factors that contributed to this one falcons taxable income decreased due to a decrease in revenue coupled with production.
And the associated depletion remaining static and too.
Approximately 500000 dollar deduction for stock based comp that vested during the third quarter.
Moving to the guidance outlook as described in our earnings release, we've continued the rolling six month forecast of production and related operating costs that we began in the first quarter of 2019 as Daniel mentioned, we continue we currently expect.
Average daily net production to be in the range of 5000 to 5500 B O easy for Q4, 19, Q1, 20, and we expect oil contribution to be approximately 50% to 55% of total net production.
One other thing to note on our guidance range, we've adjusted our Gionee guidance to a dollar range rather than the dollar per barrel number or the dollar per be OE number that we have shown in previous quarters, we anticipate cash DNA to average in the range of $4.5 million to $5 million over the two quarter guidance.
Period with that I will now turn it back over to Daniel.
Thanks, Brian .
Three why don't we open the call up for questions.
Certainly.
At this time, if he would like to ask a question. Please press star and Touchtone phone.
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Our first question will come from Kyle May with capital one.
Please go ahead.
Good morning, guys wanted to start with Youre, a six month production guidance and I appreciate the comments that you.
You had mentioned sometimes the actual quarter may fall outside of the range. So.
Given the number of moving pieces, and then Oaks ranch coming on in the first quarter.
Can you kind of help us understand the cadence of growth that you're expecting in the fourth quarter and then the first quarter.
Sure. Thanks, Kyle its Daniel.
So.
We have we have tried to put forward a conservative guidance range here.
And really did want to highlight.
The timing of hooks ranch as we understand it.
In the first quarter and.
Of course, just mathematically if it comes on mid first quarter that should create elevated second quarter levels and as I'm sure you deduced from our net line of sight Wells. We're also pretty excited about higher and our I wells that have been permitted which should further.
We 2022nd half 2020 production so we.
We see you know we see production rising and then rising meaningfully a in early 20, and hopefully remaining at a high level throughout the whole year I just would point out I guess as an example, BP or excuse me Dab NBP partner mentioned on there.
Call a couple of days ago that.
They would be bringing online 25 to 27 wells.
In the fourth quarter, a those wells would be across our position.
One example of the type of production that should very much help us in the fourth quarter as Ah, Yes, as we then move into the first quarter and Stokes wells coming on line.
Okay got it and then on the M&A front, you had mentioned taking a more rigorous approach to acquisitions can you talk a little bit more about what you're seeing and how you changed your approach.
Sure. Thank you for the question so.
We see every deal.
It's or at least we have it is something the team who I consider to be the best in class.
Takes with them everyday and every night as we do not Miss deals.
That said in this environment.
And with the asset base that we have and the operators. We haven't made clear growth that's immediately in front of us.
It seems for us inappropriate to dilute that with acquisitions and and we coupled that with the reality that it takes yep three months for landowners to get there there.
Checks from the current months production, so their pricing and the change in pricing expectations. When they sell typically lags by a couple of months for us when you have a great asset like we have with great operators, who are prosecuting a multi year development.
Plan.
You don't need to go out to make acquisitions to drive EBITDA.
And drive production.
That's the fundamental view that we're looking at as we sit here today now Kyle you've known I've known you a long time, we know a lot of our investors a long time to the extent and at the right time, when we see great opportunities both small and large we will act on those opportunities in.
As as we like to say.
I would expect those opportunities to be ones that bring our fans out of their seats cheering and driving our share price and free cash flow per share in every metric higher materially.
Okay got it that's helpful. Alright, Thanks, Daniel I'll I'll turn it back.
Thanks, guys.
Oh.
Our next question will come from wireless Fitzpatrick with Suntrust.
Please go ahead, hey, good morning.
Good morning, good morning.
You talked about this a little bit just now obviously acquisitions have slowed a as you guys are are are taking a little bit of a pause. Let this land owners catch up well when do you guys do get back to it has there been any shift and you know.
Moving to kind of core of the core of the core that you're in now to explore other parts of the Eagle Ford or or even other parts of the lower 48.
Thank you for the question just again I want to emphasize the point.
We think we have a unique asset base.
Here yet in that.
We have a highly undeveloped a highly on developed asset base with high and ROI wells coming online and you come on line over the coming years. So that's something that that one shouldn't go out and by Yelp 50 million dollar deals 100000 dollar deals hundreds.
In dollar deals when you have something great. That's our fundamental view and less when you're buying materially increases your value.
As far as leaving the core of the core our experience really is owning owning.
Best in class assets.
In best in class plays is the right approach and so we have organically bought.
Backyard in the core of the core of Eagle Ford and we have looked.
Outside of Eagleford, but only in the core of the core and only as a top oil weighted plays.
And we'll continue to look at that and to the extent that changes, which I don't expect it to we certainly will we'll let you know and let the market now.
Okay, no that that makes sense and Ah Ah you know looking at.
Looking at the store wells that the operator has drilled in karnes vis-a-vis hooks ranch. It seems it seems like kind of three to four months from TD. The first production is about average and honestly I'm, having trouble finding even one example that its longer than five month.
That that that seems to kind of.
These wells so maybe coming on in early one Q is that is that a fair interpretation or is that maybe a little bit too aggressive given you know maybe I'm missing something like the flow back there.
[noise] you are not in so we track in Brian was nice enough to just hanmi. The the page we track each operator and average time from permit to sales and then from.
Spied in total debt and completion et cetera, each area and we actually we consider continuing to revise our disclosure given the simplicity of our business in our asset base is providing more and more transparency and I think youve really pick up on something insightful here is.
That.
If you simply go through that the Conoco average timing.
You would see sooner rather than later.
We of course have.
More detailed knowledge that leads us to what I said was February in our numbers, but again I also said that we've taken a conservative approach.
Because we'd like to meet or exceed expectations as we move forward. So I think.
You're right.
But we've also tried to layer on some conservatism to that.
Okay No. That's that's great looking forward. Thanks, so much.
Thanks Wells.
Our next question will come from Jeff Grampp with Northland capital markets.
Please go ahead.
I guess.
I'm, just hoping to maybe a pick up on on the last topic in regards to kind of how you guys are tracking timeline by operator to TD and completion et cetera have you guys <unk> been seen that that timeline change at all maybe relative to impair goals over the last I don't know your so and I guess thinking in the context of operators going to.
Larger multi well projects and then maybe extending the the lumpiness of of production just kind of curious if you guys are seeing that play out in any of the data you guys are looking at.
So we look at every week updating and tracking.
That timing in that average timing.
And I mean, so one if you look at BP Devin.
As davin put it they are now building momentum in the Eagle third and they expect fourth quarter production to grow as compared to third quarter production BB Devin should and we've seen then move BP a lot faster than the previous owner BHP.
He.
That's number one number two conoco.
Got it conoco.
Well, what I'll say number Q E. G. E. G continues and we were just marveling at their capability in constant improving capability and they had mentioned on their earnings call drilling a well in two and a half days, which was a record for them. So we can do.
You to see their timing compress.
And then number three conoco of course is just fantastic. They spent years honing their capabilities in the Eagle Ford.
And.
While they improve on their timing, it's really their constant improvement in efficiency and enhancing reserves that really stands out.
So while the first two we've seen timing comprise the third we've just seen enhanced.
<unk> continue to enhance results Brian Yeah. Yeah. Thanks. My question is the one the other thing I'd add just to Echo Daniel as we do it yourself on a week to week basis, we do track at very very closely.
From a.
Permit to spot spot completion completion to connection all the different pieces of it and I would just you know add to it by saying.
You know, we make sure that all of those.
Pieces are included in our financial forecasts on an up on a week to week basis, and that's what underpins our guidance range. So.
Okay, great great helpful stuff try follow up cures to kinda talk on the completion cadence side of things now during the quarter. It looked like 20 I think it was 27 gross 0.14 net wells were put online, which I think a little bit slower than what you guys were looking at and in the first half and commentary and what we've seen a line of sight wells you know things content.
You to accelerate yet the completion cadence is a little bit slower in Threeq, which I guess seems a little bit counterintuitive. So maybe can you guys talked about that dynamic and and maybe there were some kind of one off you know occurrences I guess in the quarter, just maybe help us better understand how we should think about getting the line of sight wells turned online.
Yeah and.
And so [noise].
The fact is.
It was a little bit a light as far as 27 gross wells as he said and 0.14 and I'm trying to be sympathetic to the.
The quarterly timing, but the fact is yes BP as an example, AB davin had a has a huge operation in completion timing as I mentioned 25 gross wells, they're turning in line in the fourth quarter that could easily come on in the third quarter, we're going to get the.
Benefited that production within weeks of the third quarter and so yeah, we were very satisfied with third quarter.
Third quarter production in certainly a teased us up very well to an earlier question for fourth quarter.
It's not a it really it's simply episodic it's not of a function of activity or completion or completion timing. Our operators has a our operators have multiyear plans that they're executing on it's not.
Like the Permian or other plays where do you have small operators that yes or medium size operators that may change their timing. These operators have plans that had been developed years ahead of time, which that are executing upon and so we're we're you know we're very pleased with that I guess I'd also point out.
And it's something I'd consider putting in my remarks, which really bodes well for us is that yes.
Third quarter was low on the on the on the net wells and frankly all of 2019 will have been low at around 1.75 net wells for the year, that's the lowest net well number.
Over the last five plus years in quite a long time and that's just bad luck. We've had lots of gross activity. Our gross wells are nearly as good as they've been in five plus years. It's just we had low and our eye units hit now as I really was alluding to earlier on.
We are reverting back to the norm, we average across our current production 1.33%.
That is and our API across the existing wells, we've gone back to that normal and our high level plus then we have this 85% plus undeveloped position in hopes ranch, where we have a 22.5% enter right. So we're it's we think we're extremely well positioned over there.
Next six months and over the next 12 months and really well beyond that with a a fantastic asset base.
Alright helpful color Daniel I appreciate the time.
Oh.
Great. Thank you.
Our next question will come from Betty Zhang with Credit Suisse. Please.
Please go ahead.
Thanks, Good morning, I actually have it on and you follow up to the departure question. So understanding that hooks range is a big driver for production grossing one Q, but given the idea that activity that you're currently seeing on the portfolio do you think based production will be able to grow.
Outside of hooks over the next couple of quarters.
Our base production would grow outside of hooks, and we have that I have that exact chart in the answer is yes, and it's really driven although hooks is obviously you know similar to Vipers Spanish trail, a grade position for us, but we happened to have.
A handful of other.
Higher and our I had coming online over the coming months that don't get as much attention as a hooks, but certainly help add meaningful production growth over the coming over the coming two quarters.
You can give more color on these pads in terms of size and enterprise.
Sure.
We have.
We have.
Two.
I'll give you the two two big wins, we have to five well pads with and our eyes that range from.
From let's say, 3.5% too.
To let's say, 5% I'll, just kind of also say and I alluded to this earlier, we also have a number of wells.
Yeah, I'll call it a handful of wells with and our eyes in the 3% to 9% range that have been permitted.
But we expect to come online in the second half of 2020, which if you just in I know better you're very much mathematically driven Brian forgive me to for handling the math here.
But no of course, it's hooks comes on in the middle of the first quarter that will give us a partial quarter contribution should meaningfully elevate production above current levels with those other wells to.
I will note that shouldn't because it will only be a partial first quarter those production levels should remain at that nice hi elevated level in the second quarter and then the fact that we have these higher and our I wells already permitted that should come online in the second half that puts us in a position which.
Should keep.
US at an elevated level as we move through the second half of 2020.
Got it no. That's helpful. Thanks, and then my follow up just on the recount the third quarter average was 70 rigs and and I believe the rig count was a bit higher than not the time of last call can you give us an update on where it is running right now.
Yes today is seven last week was eight.
And it's in Brian and I were talking about this before the call it's not.
The greatest indicator because it does fluctuate week to week. The most important thing embedding we've talked about this for a year and I know a number of people who are on this call are listening, we've all talked about averaging seven to eight rigs across our vast position in the karnes trough is the right way to model. This.
The it is not a commentary on our position whether we're at seven or eight were 11 years, one should assume seven or eight and you can really break it down by very clearly what operators Conoco Phillips Conoco is a large percentage of our value.
The largest.
You know GE NBP Dab in what they're saying each of them are saying, we're going to be at least at the current rig activity and conoco.
BP Devin each may add one additional rigs they said in 2020, so if that to over 90% of the value of our company, which it is on an NPV basis.
We think that put us in an extremely favorable position.
Great. Thank you for that very helpful.
Thanks.
Our next question will come from Joe Allman with Baird.
Thank you good morning, everybody.
Good morning, Joe So my questions about hosts ranch, but it's actually kind of general question as well so it looks ranch wells come online in the first quarter 20.
My understanding is you won't actually got a production data real time right. So could you just remind is or the methodology to account for the production.
For the quarter in which the production occurs, especially when you've got big swings in production from these for example, these wells coming on at a French.
Thanks, Joe that's a very important point I'm going to let Bryan answer, but just generally.
Point out that with hooks ranch, we actually received that data.
Within 30 days of production. So it gives us a major advantage and.
Effectively should allow us to report actual production data for the first quarter. When we when we report first quarter results, but Brian maybe you have something more specific you one no I mean, I think that covers animated Daniel mentioned in his earlier remarks, I mean Q1 would be a partial contribution from hooks ran.
In the sense that we are modeling it as of February .
February start so you know as Daniel mentioned, we do get that we do get those numbers more quickly than elsewhere and so we anticipate being able to include as much as possible in our one key numbers.
That's helpful answer.
For the operators from whom you don't get the data as quickly.
Just remind US you would include that the production data within the quarter in which it starts are winning which it produces.
Could you just add some level you make your best estimate based on your modeling, but also kind of add a little bit level of conservatism in there that you guys do it.
So we know we have a very strict.
Methodology from an accounting standpoint that takes for any for any production that we don't have actual cash proceeds on we take the trailing three month period to average for that production importantly to note here.
Is that is that.
We have.
I'm, sorry, I lost my train of thought importantly to note we have actual results. When we report a quarter for two usually for the for two of the three months of that quarter and then for for hooks. As an example, all of the third month, so what that.
What really it equates to Joe is only a portion of that third month that were accruing for so it's a pretty small percentage and.
See Polanski, our chief Accounting Officer, who.
He is here with US no we look at it and look back on a quarterly basis, we been within a very very small difference each quarter, because the vast vast majority of our results or actual and not accrued.
Great. That's all very helpful. Thank you guys.
Thanks, Joe.
Okay.
Our next question will come from Jeffrey Campbell with Tuohy Brothers. Please.
Please go ahead.
Good morning.
First question I wanted to ask about the spread between the Eagle for oil and the total oil production I was wondering was that due to Appalachian volumes seems like maybe there were a little bit more meaningful this quarter.
Brian .
Yeah, I mean is the question about the spread on the oil prices Oh, the spread on the oil percentage and the and the press release, you noted that the oil production was 50% and total but the Eagle Ford production was 56% so it's not.
Part of that I mean part of that is the as you know the the wells that we add to our offline in Twoq you are.
Back online the wells offline in Twoq, you is back offline I mean back online that's driving that percentage back up to something that we see as being a more normalized level that 50%.
Okay, great and the other thing I wanted to just make.
Second observation on just what you think about as I thought bearing in mind that you tied in line fewer wells and they were at a significantly lower in ROI in the third quarter versus the second quarter. It seemed to suggest some pretty positive things about falcons decline rate.
Yeah, we agree with that as far as our business in the strength of our business. This quarter really exemplifies that you'd have to your point on the low end, our eye, but position with so many wells 207 gross wells is a lot in line of sight and on top of that the network.
Sales and we can't exclude any well when we think about the net wells into 2.82 level.
I would point out and one of my colleagues and I were doing this before the call is that if we look at pricing just a year ago, and it's hard to conceive of but imagine pricing goes back up on the oil and NGL sides.
Our free cash flow for the quarter would have been.
Almost 20 cents per share. So we think there's not only a grade base here, but there is great growth from line of sight wells, plus asymmetric upside relative to commodity prices.
Yeah those are good points, thanks very much.
Thank you Jeffery.
And we'll take our next question from Jonathan Evans with SG capital.
Please go ahead.
Just two questions first of all just to make sure. You didn't include the hooks Ranch and Ah Guide for the next two quarters right correct.
No host ranch is included in the partnership for the partial period, we would assume I expect hooks to be on line.
Okay and then the other question Daniel I just have for you as you know you seem obviously frustrated that the street doesn't understand maybe this asset base that well et cetera or the.
The power of it I guess instead of taking the $10 million and make an acquisition the each quarter, which youve, obviously stopped <unk> why do you think that 10 million and start buying back the stock, especially if you're at trough production and you think this big accelerations coming on.
Jonathan is a appreciate that question. Good question I Hope my tone doesn't come across is frustrated I understand.
The markets.
Yes, the way I think I understand the way the market looks at us and looks at energy more broadly I think the reality is we offer those who are paying attention a great investment opportunity I as far as buying back stock, we really looked at.
The the stopping activity in acquisitions as potentially the first step towards that now we will evaluate whether that make sense to buy back stock.
And we certainly don't want to do anything that leverages off our balance sheet, but we are cognizant of the fact that we think we're trading both below our fair market value and so.
In the past companies, we've run we have not been hesitant to do that but that's something we'll continue to discuss in debate as a board and I will certainly light you and all of our shareholders now with.
If that's something we decide.
Great. Thanks for your time.
Thanks, Jonathan.
And there appear to be no further questions at this time, so I'll turn the floor back to Daniel Harris for any additional or closing remarks.
Right.
Thank you all for joining the call we look forward to hopefully seeing you at conferences coming up.
Or or speaking to you on the next earnings call.
Bye bye.
This does conclude today's program. Thank you for your participation you may now disconnect.
[noise].