Q2 2020 Ring Energy Inc Earnings Call
Greetings and welcome to the ring energy energy Inc., 2022nd quarter financial and operating highlights conference call.
At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Please note that this conference is being recorded.
Well now turn the conference over to your host Mr., Tim Rochford Chairman of the board of Directors I bring energy. Thank you. Sir you may begin. Thank you. Thank you operator and want to thank all of our listeners today for the 2022nd quarter financial and operational conference call for ring Energy again, I'm, Tim Rochford Chairman of the board.
Joining me on the call today as Kelly Hoffman, our CEO, David Fowler, President Randy Broaddrick, our Chief Financial Officer, Danny Wilson Executive VP and head of operations wholly Lamb, Vice President of Engineering, Garner, whose VP of land adult Parsons head of Investor Relations. So today will provide a quick.
Concise overview of the financial and operational results for the three months as well as a six months ended June Thirtyth 2020.
And as we have done in the past two quarters, we'll spend the majority of this call identified.
<unk> summarizing the factors that directly affect the current and future operations of your company at the conclusion of the second quarter review will turn it back on the operator, we'll open it up for any questions that you may have no without Seth I'm going to turn this over to Randy Broaddrick for just a brief financial.
Please.
Thank you Tim.
Before we begin I would like to make reference that any forward looking statements, which may be made during this call or within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
For a complete explanation I would refer you to our release issued Monday August 10th if you do not have a copy of the release one will be posted on the company website at Www Dot ring energy Dot com.
For the three months ended June Thirtyth 2020, we had revenues of 10.6 million.
Net loss of 135 million.
Net loss per diluted share of $1.99 cents.
No. This net loss included a pretax unrealized loss on hedges of 26.8 million.
147.9 million and ceiling test impairment.
And 1.3 million and stock based compensation expense.
Without these items after the effect of income taxes, our net income would've been approximately 1.5 million or two cents per share.
For the six months ended June Thirtyth 2020, we had revenues of 50.2 million.
Net loss of 91.2 million.
And loss per diluted share of one dollar and 34 cents.
Net loss included a pretax unrealized gain on hedges of 20.3 million.
147.9 million in ceiling test impairment.
And 2 million in stock based compensation expense.
Without these items after the effect of income taxes, our net income would've been approximately 9.2 million or 14 cents per share.
The unrealized gain or loss on hedges is recorded because the value of derivatives changed as a result of the changes in oil prices.
The ceiling test impairment as the result of a reduction in the value of our reserves as a result, as a reduction in oil prices.
During the three months ended June Thirtyth 2020, we had 9.7 million and net cash flow and 1.8 million in capital expenditures for post Capex positive cash flow of approximately 7.8 million.
During the six months ended June Thirtyth 2020, we had 33.6 million net cash flow and 17.9 million in capital expenditures for post Capex positive cash flow of approximately 15.8 million.
For the three month period, we had oil sales of 429751 barrel oil and gas sales of 417491 Mcf for a total of.
499333 deal we.
Our received prices for $24.23 per barrel oil.
53 cents per Mcf of gas.
For 21 30 per be a week.
The six month period, we had oil sales of 1 million 285354 barrels.
And gas sales of 1 million 183052 Mcf.
For a total of 1 million 482528, yeah we.
Our price received prices were $38 in 16 cents per barrel of oil.
98 cents per Mcf of gas for $33, an 87 cents per be a week.
The differential between our oil price received and W.P.I. averaged approximately $2.50 per barrel.
This would have been higher had we not limited our sales during the month of Meg.
We limited sales by curtailing production from late April until early June and storing most of what we did produce to be sold in June.
This will be discussed further later on the call.
Before I turn it back to Tim I would like to highlight a few additional items.
With the second quarter of 2020, we have now recorded three consecutive quarters of positive post capex cash flow.
We intend to use cash flows to continue to reduce the debt under our credit facility.
Regarding our credit facility during their spring Redetermination, our borrowing base was reduced to 375 million.
We reduced our borrowings under the credit facility to 375 million.
We initiated the process yesterday to reduce that by an additional $3 million from cash flows, which will bring our amount drawn on the credit facility to 372 million.
We drew down 21.5 million in April for accounts payable discount program, but since that time with this 3 million dollar payment, we will have paid $16 million down on our credit facility.
We are receiving today, another 3 million related to the divestiture of the Delaware assets, which we will be using to reduce the debt by another 3 million, bringing our outstanding balance down to 369 million.
The status of the Delaware asset divestiture will be covered more in depth later in the call.
In addition to reducing our outstanding debt under the credit facility. We've also reduced our accounts payable our accounts payable balance at year end was 54.6 million that has now been reduced to 19.2 million at the end of the second quarter.
We also had cash on hand at June Thirtyth of 17.2 million.
With that I will turn it back to Tim.
All right Randy Thank you for that overview.
I'm going to turn this over to Kelly and a as Kelly just to give US an update on how things are going out to the Delaware and just generally Kelly.
Thanks, Jim appreciate it thanks, everyone for joining the call Oh wait a minute I'd like to turn the call over that two Danny Wilson Executive VP of operations and Holly Landmark Vice President of Engineering I got to walk you through operational events in the corner and our current activity, but before I do I want to bring our listeners up to date on the status in the Delaware of course.
First and foremost I want everyone to hear me, what I'd say, we're selling the Delaware, that's what's happening and but you know if we if we didnt, it's not life or death I know some of you.
So some of you it might seem so but that's not the case our buyer has multiple groups expressing desires to fund out in this acquisition. We've had a lot of conversation Mcguire bar continues to work forward and spend money and the buyer recently released to prove that justify recently released $1.5 million to us.
And now have asked for an additional time in order to make the best possible deal with these financial entities, they're getting expressed as ours to define what.
Also with that they've recently asked for an additional extension with us, which we have agreed to grant and they've wire does an additional $3 million for this extension.
This is a 60 day extension, we now have $4.5 million of nonrefundable money. This is not an EPS growth this isn't our bank account.
And the buyers continuing to spend money and they're continuing to move the ball forward. That's what we're excited to hear next I'd say.
Yeah, I'm proud to job at my team has done during this process and the collaborative effort that the board has put out in working with us and allowing us the flexibility to get a deal done during a very difficult times just to give you. Some idea from the public record that we can see I think this is all liberal in breast stayed up but when you look out in 2018, you could see what look.
Like a 368 deals that we could see that were done in 2019 250. This year to date 47.
47. These are very difficult times, that's why so I'm really proud.
To be within the group that I'm with both the board and the management the experienced any about a collaborative that given to us so with that I'm going to I'm going to turn this over to Danita Holly and so they can give you an update on operations for the second quarter Danny.
All right. Thank you Kelly.
As mentioned in our operations update in July activity in Q2 was limited.
As a dramatic drop in commodity prices and in particular the oil prices.
As we mentioned in that rate release, we had no drilling activity in the quarter.
Due to these dramatic drop in prices, we took the unprecedented step of shutting in almost all of our production beginning the last week of April.
Prior to shut down we prepped or pickled all of our key wells to limit issues, a when we decided to go back and restart the wells.
In May we limited production to just enough to hold the leases with almost no sales as Randy mentioned.
During this time, we constantly we're monitoring the prices in the differentials.
And as these improved during the month of gene we began to start production back up the first week as a month and must production was back online by the end of that much.
Because of the prep work in April and May there were very few operational issues with the restart.
Due to the lower activity, our Capex spend was only $1.8 million for the quarter versus our original plan to spend between three and three and a half million dollars.
For the quarter, we completed for E.S.P. to Rod conversions and this program continues to yield very impressive results for us our failure rate on our wells has been cut in half from early last year.
And it has allowed us to also dramatically and drastically cut our cat they expand prior to beginning <unk> prior to beginning the rock conversion program. Our average workover cost on a well was approximately $200000 currently over half of our well work is now around $30000 or less.
Today, we have converted nearly half of our horizontal wells on the central basin platform in the north West shelf to Raj and we plan to continue to work as we reach the crossover point, we're rod pumps become the optimal production method.
Which in turn will also allow us to continue to lower our capex spend over time.
Current production continues to run at about 9000 Boe per day.
Oh and with the lower production in Q2 and no planned drilling activity through the ended the year, we anticipate that we will see an approximately 20% drop in.
A year over year production from 2019 to 2020, and what that I'm going to turn it over to a Holly Lamb, our vice president of engineering.
Thank you Danny we've continued to focus on reduction in Capex.
While maintaining our positive cash flow.
As Danny mentioned, we currently have spent $120 million and capital expenditures in the second quarter.
And 17.9 million for the first six months of this year.
Approximately $16 million I've met with spanning Q1.
In Q1 lead drilled four horizontal wells.
We completed two additional wells and overall, we've converted 13 wells into rise as Danny Sad because the economics or are so advantageous.
In northwest South has continued to exceed our expectations and we're very excited to get back to drilling.
Our capex plans for each to have 2020 are minimal based on the current economic environment, but they are subject to subject to change.
As previously stated on our calls.
Oh stabilize price in the mid 40 per BLE would signal and returned to drilling.
And it's still the case as Randy has mentioned our average oil differential is approximately $2.50.
So the markets not there yet, but it's moving in the rights are actually in and we're excited about what's the outlook looks like.
Our internal rate of return.
At the mid Fortys range is from the mid Sixtys to upper Seventys to low eighties, depending on area.
We have modeled a 16 to 18, well drilling and completion program within cash flow at these prices.
With that I'll turn it over to David [noise].
Thank you Holly.
I see that report as Kelly mentioned earlier M&A activity is underperformed.
In 2020, primarily due to the pandemic in the flooding in all markets by OPEC plus.
And.
They are further M&A activities, probably been pushed to either the second half of this year, but more likely that will probably take place more and 2021 and until we see a vaccine approved we would get past collections and see it increased consumer confidence that increases demand that puts a significant didn't have a large global inventory overhang.
It's going to continue to cause evaluations and consolidation talks to remain strength.
Additionally, in the second quarter, we elected not to renew a block of acreage that was predominantly located in northern Gaines County, the acreage was not a focus area. Since it would have required a large upfront capex investment to construct the S. WD facilities, electrical and all the gas infrastructure to accommodate a diverse.
Relevant program to a level, we already had in place or southern and Central basin platform acreage as well as our recently acquired north West shelf assets and Yoakum County.
With the addition of the shelf acreage and just as a reminder, that's 40000 gross acres and 36000.
Net acres, we now have a high quality inventory of over 340 tier one and tier two locations that gives us over a 15 year drilling inventory.
Now that we have these top tier locations in had it was determined that extending these mostly tier four locations that will tier for me.
Unexplored or underexplored, but basically a higher element of risk just wasn't a good use of capital in our current price environment.
Versus the notable economic impact we would see from the growth improved reserves and the increase in EBITDA. If we use the same dollars to drilled a high rate of return horizontal wells shelf.
And occasional wondering if there's no proved reserve ALS there were no proved reserves allocated to this acreage. So we'll not in any way affect our stated and published reserve numbers and with that I'll turn it back to tail alright. Thank you David. Thank you everyone. So this concludes the company's portion of the 2020.
Second quarter in six months to review I'm going to turn it back over to the operator.
Asked Diego to open it up to our listeners for any questions. If we may have.
Thank you Sir at this time it'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tonal indicate that your line is in the question Q you May press. The Starkey followed by the number two key if he would like to remove your question from the Q4 participants do think speed.
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Once again Thats a question press star followed by the number the number one key on your telephone keypad.
Our first question comes from Neal Dingmann with Truest Securities. Please state your question.
Morning, guys I'm, telling my question for your Danny when you guys decided to come back you know prices certainly rising nice could you give us an idea of kind of regionally, but it'll be up in the shelf that you're still targeting and if so kind of what what that plan may or may look like.
Danny go ahead.
Neil that's a great question, it'll it'll be a mix of both areas, but the predominantly it will be in the northwest shelf, we do have some drilling commitments or with the a university lands asset that we bought.
Oh from Tesaro prior to the I wish bone acquisition.
But the bulk of the activity will be on the northwest shelf.
Very good and just one last follow up just on hedging you guys were pretty successful. This year your thoughts Mena will still kind of low Fortys Kelly, how you feel it battered around it or just you know Tim you in general just the team I'm kind of on a go forward basis as you get into 21.
Yeah, well meal. That's a good question and as you know we do have hedges in place for 21 now.
Randy probably has the exact number in front of them, but my my recollection is that we're probably somewhere in the low to mid fortys locked down on about I believe 4000, maybe 4500 barrels a day.
To that extent or would that said I can tell you that as we continue to see the improvement in the commodity space. We are certainly open to add more hedges as time goes on but Oh for now.
Well positioned for the rest of this year as you know where we're locked in a $50 on 5500 barrels and then as we go into 21 as I just explained, but we will be looking to add to that component as we near 2021.
And it is 4500 barrels a day with an average floor 42 22.
Thank you Randy.
Very good thanks, guys.
Our next question comes from done Mackintosh, with Johnson Rice and company. Please state your question.
Morning.
Good morning questionable.
First question is on the our trajectory over the second half of your and your pre release, you talked about production being down about 20% year over year beauty President Court, if that's going to exit to exit or full year versus full year and kind of what you know you say you're up at a 9000 today I'm kind of just where are you kind of <unk>.
Third quarter, maybe too early for for guidance on volumes for kinda third quarter going into fourth quarter, and how you kind of position to start 21.
Yeah, Dan this is Danny.
That that number I gave you a 20% as a year over year number or not not the exit rates necessarily you know I think for this quarter. We're we're looking at something around that 80 909000 Boe per day is probably going to be a good number for us.
And then you know second or third fourth quarter of might be slightly less than that.
Okay, great. Thanks, and then David maybe just a little clarity you talked about.
The closing of as I assume you're talking about the Delaware sale and whether its second of 20 or but into 21, you mentioned deferred 60 days, but you know when you're talking about 21, you're talking about additional asset sales there.
Oh, Kelly just want to go and take that since your yeah yeah.
Yeah, Hey done the 60 day extension is in respect to the Delaware of course, it and I think David was just referencing the market in general Yeah. We're seeing a lot of deals. David you know is Oh jeez things. He hears things all the time, we'll be getting our door dropped on a lot by a lot of different people's matter <unk>. During this process with us talking to this particular.
Buyer of the prospect Weve been turning down calls or even some calls that have come to our general counsel others have come to land people in the company and so we've had to tell people look we're locked in here. We've got a group its pursuing this month and they're spending money doing a good job and they're going to get a closing at the end today, there's just a larger number.
People are starting to line up force that's been that's been Oh interesting to us and exciting but at the same time, David I think was just most are averaging <unk> market in general that Mr. How he sees things.
Things might.
The acquisition market might pick up that might not.
All right. Thank you.
Thanks, Doug.
Thank you just a reminder to ask a question press star one on your Touchtone phone.
Our next question comes from John White with Roth. Please state your question.
Good morning.
John.
On the a impairments or could you provide a an approximate break down by a by area.
Randy can you responded that it's it's not really calculated by area there.
Full cost accounting company the.
The full pool is considered against the value of the reserves. So there's not really any practical way to to break it out.
Understood and.
On Capex Holly was clear.
Are you.
You would start drilling new wells, if you saw sustained prices in the mid Fortys, let's say what would you say.
For the remainder of this year, yeah, yeah prices stayed above 40.
Below 45, what kind of Capex in the third and fourth quarters could we expect.
Yes, so let's kind of look at it this way John This is Tim let's look it up with a drilling a potential drilling program.
Fit between now and yearend and the absence of that in the absence of that I think Danny and only bill touched on that and I'll ask them here in a moment just to review that again, but yes, just you know the question yes.
If prices were to stabilize or sustain here and we felt comfortable that we're going to realize and that's a realized price of in that 42, plus plus or minus range. If we really thought that we're gonna have a solid look at that you know as we as we look down between now and yearend.
We could we could accelerate our thoughts on drilling right now our thoughts are that we're hoping that by year end, we're continuing to see what we're seeing now and some even more improvement and what Holly made reference to on what she touched on we could be we've modeled out 16 18, we even even thought about 20 wells that we could drill.
With a realized price in that 42, plus or minus range and do that within cash flow and yields something north of 60% depending on platform, 60% suicide, 70% plus internal rate of return on the north West shelf.
Danny Oh, Holly did you want to just for for John. It's question, maybe just review again that was capex expenditures in the absence of any really.
Right now and I want to point out that that is Elena you know when Tim is talking about that 40 to 50 range that is a b elite basis. So that means oils gonna have to be up you know in the probably mid do.
No not not up to 50, but somewhere between 45 and 50 when you take into account differential and then the dilution that's caused by the lower gas prices. So that's kind of the range, we would need to be in a in the absence of that we're still sticking with our plan to have our capex spend of $25 million to $27 million for the year.
And once we spent approximately 18 million of that so far so you figure out kind of where the where the remainder is gonna be.
Okay. Thanks very much.
Good job.
Our next question comes from Noel Parks with Coker and Palmer. Please state your question.
Morning.
Good morning, all.
You know you're certainly in good shape with with inventory, but I was wondering are you, particularly active with leasing on the platform or the degree you're you're doing anything is it just on the eastern shelf.
David you want to address that.
Sure I'd be glad to no good to hear from me. This morning, No right now we're you know the acreage that we like of course, we're renewing as it comes up for expiration, but for the most part there's not any new leasing activity going on.
And you know, we're just focused on maintaining the acreage that that we want to keep that shows a lot of good promise for develop a potential you know going into next year and beyond.
Okay, Great and you know along the lines of other questions you've had about.
You know at this price level or or better what would you do I I'm just thinking what's kind of the cheapest way you can position yourself cheapest or and maybe I should say most cost effective way just sort of take.
Best advantage of a rebound in oil down the down the road.
I mean I'm, starting at the mundane and just like permitting but you know what what more can you do you found that you've already got the.
The fixing h., even 20 wells identified.
For.
For what might happen next but anything else in terms of prep work you you can do that so again not too expensive yeah. That's a great question, Danny Holly maybe you could address that funnel.
Absolutely and so we had approximately 30 permits waiting to be drilled you know those are surveyed Ah. We know we have infrastructure and in in those areas to minimize long term capex issues and so we're kind of prepped and ready and just wait.
I mean for that that again to go off and we're gonna be spreading across the finish line.
Right.
Okay, I'm, sorry, with or was there anything anything else about Tim said somebody else my answer.
Yeah, I, just mentioned Danny and okay.
Referencing that but I think she gave a pretty good response.
Great. Okay, I, just wanted to get on jump back in and.
That's that's I mean do you do you have any thoughts or or expectations are.
What do you think you're you're modeling as far as what.
Differentials might look like heading into the rest of year and next year do you think the worst of.
Volatility we've seen is behind us or do you think there's there's still some risk there as we may be as the industry kind of go through maybe kind of a lumpy processing gradually.
Yep.
Getting I guess the rest of the shut in production online, but also maybe heading towards drilling again yep Yep, Danny I know a watches that on a daily basis. So then maybe you can comment on that.
Yeah No no. That's a good that's a good question you know really all I can do is look at the futures a you know as we look forward and right now the differentials seem to be very very steady as you look out into the future, particularly you know we have to a two main differentials that we deal with and that's the C. M a role.
And then the other is the Debbie T W. T.S. differential.
So some information or last week, the I mean, the different wtf WCS differentials basically expected to be zero.
In the foreseeable future.
So as long as the commodity prices as long as we don't see a huge jump up or down in these are just a gradual improvement to see it may roll, which is the other component is is very very minimal compared to some that we saw obviously back especially back in in April. So you know I don't I don't expect to see a lot of.
A big swings one way or the other and though so I think we're looking at some fairly stable stable pricing you know at least differential was.
Between now and the ended the year going into next year.
Okay, Great and and I guess, just wanted to touch back on the extension you gave.
The buyers of the.
The Delaware Basin asset I was just curious if.
Had a did they approached the transaction initially.
With the assumption that there was gonna be a particular funding source and has has that really expanded a lot as far as the.
Folks you know looking to participate since then or or is it more process of they thought they were going to go one way they decided they need to make a change and so now they're kind of in this different processes of nailing down there sources, yeah. Good question, though Kelly once it.
Yeah.
Yeah, no they've had a number of people comment them and you.
You know people are very creative nowadays and a lot of these funding sources are realizing they're having to get created as well in order to get deals done.
And so on this group is fortunate enough to have you know a number of people come with them and you know is your major moving towards or closing if I were in their shoes on I'm speculating somewhat here.
They're seeing and hearing ideas, but might make more sense.
As a result about it gives them the opportunity and flexibility if they're willing to put up risk and they work I mean, it at one of that it's going to key points that I referenced I want to be sure, but he heard me would that we have $4.5 million, it's always possible I still only assets.
Right and right at the end of the day. These guys are not just giving me $4.5 million their spending money I mean, there they're signing additional deals that could help was salt water disposal system, which if you remember a lot of that's commercially permitted so they're going to take some outside water I mean, there given all kinds of things.
There are crossing that money and moving them towards the deal and like I say not only have they add.
Greetings resources coming at them from a financing standpoint, we'd have a number of people surplus on our side.
Probably five or six other said hey, and these are Bible people. These are real people, saying if this deal does a close we want it but the bottom line is its closing and we're selling it and these guys are are coming out it's pretty hard and in the proving that by the stepping up to fight just like wireless and additional noncommittal $3 million I think that's.
That's about as good as you could hopeful.
Okay, Great and just to the degree you can you can comment on it. So then is it safe to assume that the the principles to the folks that are are looking to do the doing you negotiate with their they're basically operating folks and and there are bringing in financing.
Where they're not like are you know private money or a fund or anything that that has like an operating team in the wings or anything.
No. These are guys that have been at the business a long time, we know of several of them involved.
Some of them been around the business 30 years, and so they've been operators in the past and and operate properties now.
Okay.
Great. Thanks, that's a that's helpful. That's kind of get some context for for how it's all unfolding and that's it for me or.
Thanks don't appreciate it.
Our next question comes from Logan Montreal with Domas capital. Please state your question.
Mr. Monitor your line is open.
Okay, well move onto the next question.
Next question comes from John White with Roth. Please state your question.
Hi, I'm just wanted to follow up Kelly you mentioned you had received 4.5 million.
From the cell or the buyer the Delaware asset is that the total amount that you received.
Yes, that's what we've received so far so they originally put up 1.5 million escrow.
And then released the escrow to us.
And then turned around and.
Hey minutes with an idea that we don't if we can help them with an extension in order for them to make a better transaction based on all the things that were happening in there and they're a camp.
And then we're willing to put a $3 million more again, probably from BARDA directly to us I made a lot of sense. So yes, that's what we have 4.5 Dan.
Thanks, I don't say going back through press releases.
And.
Just to clarify once again your previous.
Question you you commented.
The buyer is a is actually doing work on the on the Delaware Basin asset.
Well, they're not working on our Delaware, Delaware Basin asset of course, because you haven't closed on it yet but.
They have been out there number of times I can say that through due diligence process. They no the property almost as well as we do at this point and when I say work I mean to do to take third party water.
You know you're going to need do.
Moving the ball along by taking leases, putting down deposits things like that making contractual arrangements with other parties other than us and what I see happening out there with them as they are making arrangements so moving their spending money over and above what they've given us they're spending money also a in anticipation of getting good close as quickly as possible.
Hey, listen, although we've said, it's a 60 day extension that doesn't mean will take 60 days.
I mean, they could close lead time into amount, but that's just what they asked for.
All right I appreciate that said the work they're gone.
Say offset acreage.
Yeah, there, they're putting themselves in a position to be able to take advantage of not just to get oil and gas assets were possible pursuant to how they want to do that once they acquired but it's also the water assets is a very experienced operators, but also very expense experienced operators in the solar disposal business.
My understanding from some other sources, whether that they are primarily a water company not not any Pete.
I think if you're looking at just one or two names that have several that are out there. So I'm not sure what sources you're looking at.
At the end of the day. These are previous off it was either guys that have operated fields that I'm familiar with some of them are substantial and they have partners with them as part of their organization that are also currently on guess operators.
Okay.
I'm, sorry to keep keep coming at you but.
Oh does does your previous comment suggest there's multiple buyers.
No we have one buyer.
Okay.
And just one more.
Are they looking at that traditional bank financing or are they looking at non bank financing.
I don't have the answer to that I mean, I know that they've had several people that they have worked with in the past are currently working with but I haven't I haven't gotten into the we just do the specifics associated with.
Which group, they're going to they're gonna go with her which group its funding them at this point in time.
All right.
Thanks for taking my follow up.
Sure. Thanks Joan.
Our next question comes were Logan Montreal with film as capital. Please state your question.
Hi, Thanks, guys.
A couple of question first on the the 9000 barrels a day of current production does does that number include the roughly 900 barrels a day or to be divested.
And then second question around the credit facility, how much of the capacity current capacity on the credit facility is tied to the divestiture or in other words.
It would there be an expectation that the.
Credit facility might come down a little bit solely based on on the reserves that are divested with with that Delaware deal.
Yeah. Logan this is Tim I'll take the latter part of that question. It is so when that ultimately closes the sale of Delaware ultimately closes we will be reducing the facility by a minimum of $20 million and that will reduce the base from the 375 to the three.
55.
As explained earlier in the call we now as of as of today, we will be and struggling to wire an additional 3 million Oh, that's on top of what was a paid or was it instructed yesterday's or our outstanding balance as of this next wire will be down to two or excuse me 316.
9 million, so that 369 million will be the outstanding on the 375 days, Delaware closes the base will go down to 355, but the read further reduction or an additional reductions another 20 million will come along with that.
Right and then are calling the thing Dan maybe could address the other part of that question.
Yeah, Tim the and Logan. They the currently we have not been spending any money out on the Delaware in anticipation of this because it was a appointing there where we were no longer spending our money, but we were spending the buyers money and so we've held off on quite a few of the.
Workovers that needed to be done out there. So the currently that production accounts for about 6% of the total so upon closing will drop about 6% overall and so.
So it's not it's not a substantial hit to us, but there will be I'm sure and as Tim mentioned, there will be some value associated with the Delaware that'll come off the line.
Yeah, No <unk> Logan Danny Dante's reference on the spending the buyers money of course, if you did knows you may know that is effective date.
Yep.
The effective days, it's still end of Q2 or is it into Q1, what what was the what does the assumed <unk> effective date.
It's August Onest August 1st Okay, and so like when we when we're looking at Yeah. You mentioned that production in Q4, just kind of giving some color you said kind of expect 89 to nine here in Q3, and then Q4 slightly below that that is.
That's kinda like a is that a pre acquisition number so kind of adjust that but those numbers by about 6%.
As I guess assumptions as for our models, yet low yellow and that is correct a perfect.
Perfect. Thank you guys. Appreciate appreciate it thanks Logan.
[noise]. Thank you there no further questions at this time I'll turn it back to management for closing remarks. Thank you. Okay. Thank you Diego we want to thank everybody for joining US today, we know that it's a busy time and as in the past. We also want everyone to know that our doors are open. So if you have follow up calls you know that bill Parcells [laughter] relations avail.
Mobile and if we need to set up calls with management, we can do that as well so have a good day and appreciate your support.
Thank you. This concludes todays conference all parties may disconnect have a good day.