Q2 2021 Callon Petroleum Co Earnings and to Discuss Acquisition of Primexx Energy Partners Ltd Call
Stanchion financial benefits through a more robust free cash flow outlook and lower capital reinvestment rates that will complement the day, 1 deleveraging impact of the acquisition from the addition of almost 20000 Boe per day of production.
And the equity component of the consideration paid.
Along with the acquisition for <unk> assets, we have agreed with Cambridge energy for the exchange of approximately $200 million over 9% second lien senior notes into common shares which will occur after the closing of the prime ex transaction.
This will require shareholder approval to issue incremental shares to a party of the currently owns over 5% of our shares and we have already secured approximately 30% of the majority vote required.
Once complete this.
This additional step forward will reduce our cash interest expense lower absolute total debt and senior secured debt balances and improve our leverage statistics.
Importantly, the combination of the exchange and the acquisition deliver a tremendous positive positive financial impact while also driving accretion across all key per share metrics.
In the interest of having plenty of time for Q&A, we're going to forego a normal process of walking through each of the earnings slides and speak to the higher level points for the second quarter and layer in additional information around the acquisition beyond what is in the presentation materials and press release.
During the second quarter, our performance against plan was spot on with capital production operating expenses and G&A all tracking in line to better than expected.
A relatively high level of completion activity throughout the second quarter has us off to a great start in July with volumes, increasing nearly 10% from June and our oil cut climbing as well.
We are planning to run approximately 3 and a half rigs on our legacy acreage in the second half of the year as we position operations for a strong hand off into 2022.
Based upon an expected early fourth quarter close of the acquisition, we will fold in the activity from the current 2 rig program being executed by <unk> later this year.
Second quarter cash margins continue to improve as the hedges that were required that we were required to enter into 2020 to continue to roll off.
The addition of the prime mix assets will further bolster the oil content of our current per Permian production and broader development in the Delaware supporting strong operating cash margins and contributing to an increase in total corporate cash margins.
I'll touch on our ESG efforts and the highlights from our recently issued sustainability report before turning things over to Jeff for a discussion of operations.
2020 was a year of tremendous progress, making significant strides forward on emissions flaring and safety.
Some select examples of our initiatives include working with outside vendors to improve compressor run times, reducing back pressure on the gathering systems securing alternative.
I'll take options for natural gas as a contingency in the event of a significant third party facility constraints.
And an increase in our water recycling efforts, which will further benefit from the prime ex infrastructure base that will more than double our daily recycling capacity.
We'll not only have a positive impact on our cost structure, but will also reduce the potential burden on local water resources as well.
Now going to turn things over to Jeff to discuss our current operations and offer some insights on the prime ex acquisition.
Great. Good morning, everyone and thank you Joe as Joe mentioned, we had a really solid operational quarter. Our drilling team has continued to hold the line on costs.
The outstanding drilling efficiency achieved for instance in the Eagle Ford during the first half of the year is very much on par with our 2000 twenty's debts.
In the Midland Basin, we've seen significant improvement and more importantly have been able to carryover the learnings from Howard County to our position in Midland County.
In the Delaware Basin, we continued to make progress on drilling lateral footage per day in both Reeves and Ward County.
This consistent improvement coupled with the rapid progress we're seeing on the completion side as it is very excited about the future of our Delaware opportunities.
The second quarter was incredibly busy with completions and as previously mentioned it materialized in a significant bump in production we're seeing in July.
For 2 fulltime crews and E frac pad in 1 other spot crew.
We were able to complete and turned to production 47, new wells.
Costs have continued to remain in check while we push for even better efficiency stats.
Again, the Delaware has been an area, where we're making tremendous strides with efficiency climbing every quarter and costs continuing to drop.
From the third quarter of 2019 until now we have seen an almost 70% improvement and footage per day those gains along with an improved pricing environment have lowered the cost per lateral foot more than 50%.
Those advancements have clearly improved the future value of our Delaware asset base and as we take those learnings and couple them with the best practices of the Prime mix team continue to refine and adjust our approach we expect to produce even better wells with very high capital efficiency.
Speaking, specifically about the acquisition that the current well results and manner in which the prime mix team has begun developing the acreage really places us in a very enviable position.
We have the opportunity to step into and infrastructure advantaged highly contiguous position that has robust oily results throughout the acreage.
And importantly, we have the associated data to feed into our subsurface models, which has helped us map out the 300 plus core locations that immediately compete for capital in our development program.
This is high quality inventory and I'm speaking, specifically about limiting adjusted the primary zone, so theres other zones available but.
But the primary zones have clear proof of development and repeatable results.
Equally as important is the ability to continue focusing on larger capital efficient long lateral development projects. So with roughly 85% of these core locations at 1 and a half to 2 mile laterals. We can keep the cost per lateral foot low as we shift more of our activity over to the Delaware.
After our combination with Carrizo, we set out to uncover and exploit every available opportunity to improve our operations lower costs and ensure predictability of our development results and I think you've seen that very clearly.
Our team is already looking to leverage our advanced understanding of spacing and stacking implement our geologic NGL geo mechanical models to optimize targeting and fracture geometry, and these larger pad developments and of course optimize facilities to reduce potential downtime and flaring.
And of course, it also doesn't hurt to have a few extra rigs and completion teams running when we're talking to our vendor partners.
To turn things over to Kevin to discuss financials around the quarter and the transaction. Thanks, Jeff It looks like you've got quite a bit to cover on my first quarterly call with Cowen.
Both Joe and Jeff have discussed these assets, but exceptionally well with our growing Delaware position and the opportunity to leverage our development approach across a more robust asset base.
Important are the expected enhanced financial outcomes of both the acquisition and the impending equity conversion of the second lien notes. We have consistently said that any acquisition must advance our strategic priorities as we show on the acquisition slide deck. We believe this combination checks all those boxes or ability.
To deleverage the balance sheet at an accelerated pace through enhanced free cash flow has been 1 of the core focal points for our T. Even at our more conservative planning deck. This acquisition should allow us to be meaningfully ahead of our current expectations by year end 2022, operating cash flow free cash flow free cash flow per share and free cash flow.
Yield should all improve inclusive of the effect of the equity issued with a second lien conversion. This transaction is the fact that we believe benefits, both our equity and debt investors.
Late in June we accessed the high yield capital markets for an oversubscribed Upsized and well received 7 year $650 million senior unsecured notes issuance. We used the proceeds from this to fully redeem $543 million of our senior notes maturing in 2023 and reduce borrowings under the RVO.
After that transaction, we received upgrades from both Moody's and S&P based on our improved financial position and visibility to further deleveraging over time, we now possess the opportunity to advance that deleveraging timetable and in turn continue to lower our overall corporate cost of capital.
With this acquisition, we are prudently moving to secure the associated cash flow and protect against any near term commodity market weakness in the past few weeks, we have added hedges for 2022 oil, including 8000 barrels of Costless Wty collar positions at approximately 60 by 70 and supplemented these with 4500 barrels per.
A day of swaps at approximately $66.50 with this recent hedging activity. We are approaching historical year end hedge levels in terms of percentages, which ensures we are on the path to delivering on our promise of an improved balance sheet with.
With current strip prices for 2022 hovering around 65 per barrel for <unk>, we have made significant progress in securing our conservative planning case price assumptions, but maintaining significant upside if the current strip price improves accurate.
And finally speaking to the financing of the <unk> acquisition, we will be paying $440 million in cash. This is an amount we can place on the credit facility and pay down with free cash flow and divestiture proceeds. However, we will look to the capital markets to see if there are opportunities to term out a portion of these cash needs, allowing us to continue focusing on increasing liquidity.
<unk> and extending our maturity runway.
At this point I'd like to turn the call back over to Joe. Thanks, Kevin I'll wrap up with a couple of quick comments here.
We spent the past several quarters working to reestablish an attractive value proposition for both our equity and debt investors with consistent execution and prudent financial action.
Our second quarter performance once again delivered on our commitment to capital efficient operations and an improved free cash flow outlook that is sustainable over time.
With the Prime ex acquisition, we will put that model of execution to work on a complementary Delaware asset base that will elevate the value proposition for our shareholders through an expanded inventory for repeatable investment several opportunities for operational synergy capture.
An immediate deleveraging that will only accelerate from here with increased free cash flow on an absolute and per share basis.
With that operator, I think we are ready to open up for Q&A.
Well now begin the question answer session to ask a question you May Press Star then 1 on your Touchtone phone.
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First question comes from Scott Hanold RBC capital markets. Please go ahead.
Good morning, Neil Congrats.
Congrats on the acquisition looks like a lot of heavy lifting day to get this to where it is now.
You know just a yeah.
A high level kind of question and observation obviously you know when you when you look at this on the map. The acreage is is more in the southern part of the Delaware and if you just do you know when we just do a kind of a pull of just well data you know it seems a little bit more mixed obviously, what we see is not necessarily.
You know the answer to you know the quality of what you got can you, but can you speak to specifically for those 300 wells how confidence what gives you confidence that they compete in your inventory and if you just could clarify is that most of that stuff just wolfcamp, a and b and can you maybe give us a little bit of a mix of that.
Absolutely. This is Jeff Balmer that you're exactly right, it's primarily wolfcamp a wolfcamp b.
You know that.
The acreage is it becomes a little more complicated from a seismic perspective and other things.
But again the primary scheme has been.
An outstanding very diligent and prudent operator in how they approach things.
And so.
The data that's been gathered.
The initial development program the initial thoughts on spacing and stacking are solid so when we come in.
And roll the this acreage acquisition into our own inventory analysis for all the wells that we have for all.
All the way down to a contingent basis.
It matches up extremely well and while normally you will have some well variability on an individual well results and thats to be expected.
That distribution is going to be very heavily weighted to strong performing wells.
If you roll back again into our very robust full scale development philosophy.
Trying to get everything when you're out there right sizing facilities.
Eliminating flaring those kinds of things.
It's an excellent acquisition.
Scott as a follow on with that.
What we've seen over time with their program with modifying completion designs and reducing.
Profit water loading just like we've done has improved.
Over time as you mentioned that the Wolfcamp, a and b are our the value proposition here weighted to the Wolfcamp, a and while it's a large contiguous footprint it's not like.
We're saying across the whole footprint, we're going to have both of those zones. We've spent a lot of time being very bespoke and picking sticks. So there's some parts of it that won't have 2 zones and we did have an opportunity to.
Lever, obviously, our regional knowledge, but also some of the seismic data as we were doing diligence here and incorporate.
Incorporated that all into our learnings, but you'll see some of the well results.
That we've put into the deck are very strong.
Very oil for.
Biased, obviously increases our Delaware oil production, which is which is great.
As Jeff said.
Something we don't see very often in these asset packages, there's a lot of 1 off test.
There's a fair amount of <unk>.
Co development tests that were put in place in a and B and that helped inform a lot of our type curves are just not working off a parent curves that you can rest of them down appropriately, but even that they've developed it.
A way that's really in line with how we think about it 75% of our locations our parent wells.
Again, something we usually don't see.
At this point of the cycle and in the Permian.
Got it got it and as you look forward and when you started thinking about 2022 and I understand it's going to obviously be.
Too early to kind of delve into that too much but conceptually you know I guess you know this will be sort of a you know.
Question, maybe with a double question here, but.
Is is the development plan going forward with this asset to sort of maintain the mix again say 3 to 4 acre wells on on legacy acreage and a couple on this acreage and so what is the plan going forward. How do you do the mix between legacy stuff and this stuff and then.
Also do you guys see the ability T v's you're expertise to enhance what they've already done.
Yeah, I'll, let me start with a development philosophy, and then let Jeff talk about.
Enhancing completion designs and maybe some other synergy topics there, but from a development standpoint. It looked just becomes part of our broader Delaware operation right, it's going to get folded in half benefits between moving.
Crews across the entire footprint, but.
As we look at this this is an asset that is going to compete for capital is additive to across our inventory profile. So by definition, it's going to get its fair share of capital based on the reinvestment rates that we've talked about.
So.
We've talked about $65, 75% corporate level of reinvestment rate, that's about what's going to go into into this asset base, but importantly is going to benefit from our broader Delaware.
Integration. So I think I mentioned in the prepared remarks, we're going to pick up a 2 rig program.
Follow through on some of the things that they've been working on and then it will sort of morph into the broader Cowen profile, but if you look at page 15 in our appendix shows about.
$250 million plus increase in EBITDA from our stand alone scenario at $60 oil Capex. If you look at the implied Capex free operating cash flow and free cash flow goes up by $150 million.
Somewhere in that 60% type of ballpark, that's going into this incremental asset so ill.
Turn it to Jeff May talk a little bit about.
How we're going to make us better.
And the best thing about it is very similar to what would <unk> calendar. We're able to do is take 2 extremely efficient motivated and intelligent operations teams and companies as a whole.
You you take best practices and ideas and creativity and when we're looking at.
The individual development programs, we worked things on a pad by pad basis. Obviously, there are some regional similarities that come into play.
But taking a look at spacing and stacking trying to take into account existing wells geology Petro physics.
How you propagate fracs water infrastructure and takeaway capacity you have.
We've been extremely successful.
And lowering the amount of water and having these wonderful hybrid fracs that even within an individual well we can modify the design within an individual well. So we anticipate learning a lot from what's already been done and combining that with the things that we've been successful with so I'm very confident that this is a good good net.
I appreciate the color guys. Thanks.
Excellent.
Thank you. The next question is for them they'll digman. The truest. Please go ahead.
I think the 3 and a half rigs in the 2.
I guess are you hear me.
Yes, I mean, no doubt if you could start at the beginning it cut out when you first started your question.
Oh, sorry, I was just wondering Joe you'd mentioned 3 to 5 rigs on the prior and then 2 rigs on the new I'm. Just wondering when you kind of look at the plan going forward in order to you had obviously prior to the deal and I think EBITDA will probably included in the deal pretty nice free cash flow plan will that include that in 5.5 for it.
Rigs in.
Let me just stop there I mean can you give us for the idea of kind of once that's combine what youre kind of thinking of it as far as rig and frac activity.
Yeah, we were gonna run independent calendar independent would run about 3 and a half rigs so for the back half of it.
Right now prime mix as 2 existing rigs that are taken care of some obligations and some delineation within the acreage for the short term plan is to continue that combination of that.
We feel very strongly about the back end of the year from a free cash flow and overall capital performance.
That kind of remains unchanged again across the board, it's a really good fit.
So our initial program will be relatively straightforward of a just a linear combination of both companies.
Okay, and then just 1 last 1 just kind of double if I could on the deal and the assumptions. It certainly appears that given the cash flow or the production that you pick it up.
On your free cash flow I guess sort of forecast, but I'm wondering based on kind of the way you guys can leave and everybody was running the numbers does that assume you do something with the $4.40, that's put on the revolver and then I'm just wondering on that and the Cambridge deal is there any sort of lockups. Thank you.
Yes. This is Kevin thanks, Neil so on the $4.40, the assumption right now is that we will put that on the revolver and Opportunistically look for.
For potential capital markets opportunities to maybe term some of that out, but we do feel very comfortable putting that on the <unk> and be able to pay down that through a combination of.
Free cash flow over the coming quarters as well as other potential divestitures in our program.
And in terms of.
Cambridge that they do not have a lock up similar to where they stand today, but the prime mix.
Selling shareholders that they will receive stock Cowen do have a lockup.
Very good thanks, guys congrats on the deal.
Thanks Neil.
Thank you next question from Derrick Whitfield with Stifel. Please go ahead.
Oh.
Thanks, Good morning, all and congrats on your update in an accretive transaction.
Thanks.
Per perhaps for for Joe, but at a high level could you comment on how this acquisition opportunity came together.
Yeah.
Yeah.
Yes, I'll go back.
In time this is actually an opportunity that.
I discussed with prime mix going back 3 or 4 years ago.
Sort of a similar type of a concept in terms of.
You know an equity type of driven transaction.
We're both growing companies at that point and saw some some benefits as we were.
<unk> our position in the Delaware things didn't work out at that point, but certainly.
Kept an eye on how they are progressing as Jeff said 8 a lot of progress so I think as a matter of.
Staying in touch over the years.
Is obviously helpful in building those types of relationships.
But we.
We have been looking for opportunities and we've been very clear about this can we find opportunities to bring in great assets that will continue to drive the value proposition for Cowen.
As well as align them with great financial outcomes and we've looked at several things that didn't.
Match that Venn diagram. This is 1 that they did an overlay that that relationship in that dialogue and.
Sellers that saw a great opportunity to take back stock in the <unk>.
Combined entity and things come together these arent easy to put together.
So there's been many months of work to do this but hopefully that gives you a flavor how this all came.
Came to fruition.
That's great and then as my follow up I wanted to focus on the midstream side of the acquisition.
So with regard to Sara go so could you speak to the value assigned to this in your acquisition price and comment on the opportunity you see to increase third party volumes.
Yeah can't specific specifically address the value assigned that certainly there was a value sign out maybe talk about what.
This this is there's a good footprint of gas gathering and gas lift services that this provides to.
The wells, both us and our working interest partners are theirs.
Theres a field gas supply component that delivers field gas the drilling rigs frac crews. So there's some really good savings there versus a diesel and also reduce our emissions.
Freshwater supply necessary goes own water wells frac ponds water distribution pipelines.
100000 barrels of water a day for capacity.
That's where there's certainly some third bar third party.
Revenues, there, there's pretty decent and we're going to look to.
Potentially build on that.
As you know we've been way ahead of the game on water and managing that the right way over the last few years, we've built on our water recycling business in the Delaware. This is going to more than double that so we're going to look for opportunities now but.
There's no specific number that I can give you that there is a value proposition here not only today, but potential to build on that going forward.
Okay very helpful and great update acquisition.
Thank you.
Thank you and the next question comes from Phillips Johnston of capital 1. Please go ahead.
Hey, guys, Thanks, and congrats from me as well.
But it sounds like you're assuming a 2 rig program on the <unk> asset throughout all of next year for about $150 million or so of Capex.
Just just wanted to ask on the gross and net wells that assumes for next year and is that a maintenance type of program or is there a little bit of sort of growth exit to exit.
It felt that there's a.
A little bit of growth I mean, it's fairly modest so we talked about over the 21 to 'twenty 3 type of timeframe looking at you know.
4 ish, 5% type of growth over that timeframe on a compounded annual growth basis.
But there'll be a little bit of growth in 'twenty..2 obviously when you get these integrated further optimize the plan from here.
In terms of gross and net I don't think we're positioned to provide that until we really pin down that the formal budget, we feel great about what we've put out there I'm hopeful we can do even a little bit better.
Out there, but that might mean.
Moving some some wells around that might change the gross and net so I don't want to put a marker out there that might change.
Okay and then.
Once you guys Digest. This deal do you think youll be actively seeking additional deals like this that can also.
Moving the needle and provide some accretion on free cash flow leverage ratio and some of the other metrics.
Yeah.
I don't think that active.
It isn't necessarily the word.
In a world that is going to be characterized by continued consolidation in my opinion, it's just part of the business and day to day, we will continue to look at opportunities that we can find similar situations, where we can add great assets overlay, our expertise and knowledge base deliver synergies make them better.
Good day.
Deliver those types of operational results plus.
Financial outcomes that are going to further our deleveraging plans get us further down the path to being squarely below 2 times get us in a position to be thinking about how a potentially return.
Capital to shareholders.
I wouldn't say, that's active or passive I think it's just part of what we do every day as an operator and what everyone should be doing and in a world that's going to continue to consolidate.
Yeah, Okay sounds good makes sense. Thank you.
Thank you and again if you have a question. Please press Star then 1.
Next question comes from Gabe Daoud Cowen. Please go ahead.
Hey, good morning, guys and congrats on the on the 2 transactions here.
Was hoping.
Joe maybe we could just touch on.
How the pro forma asset base stands from a divestiture.
Standpoint, or divestment standpoint, moving forward whether it's.
Continued sales of non core upstream or.
You're obviously much bigger.
On the midstream side does that open up more opportunities for for midstream.
Potential, Michigan, JV, and just just any thoughts around divestitures moving forward would be helpful.
Sure.
As you know we're active.
On that front as we speak.
With a few processes going on that we hope to bring some closure to in the not too distant future. The A&D market has certainly got better pretty low bar I guess to judge against but it is getting better things take a little bit more time than what we've experienced historically, so we're making sure that we canvass the entire group.
In my mind, we're gonna take this.
The results from those processes and digest right.
What's the right asset for for this type of a market go back through the combined footprint and see if there's additional opportunities we're focused on getting to our goals that we've put out there for for this year first.
But we will continue to assess other pruning.
Opportunities and I think with a transaction like this it's a natural catalyst to take a step back and say what else can we do beyond what we had on our radar screen before with the new combined footprint with capital priorities and allocation maybe theres. Some additional assets from a working interest standpoint that.
Good.
We put in the mix later this year or next year on the midstream side, Yeah, no. It's a it's a pretty big boost to our midstream presence and asset base.
We're evaluating some of those.
Alternatives that may be enhanced.
In terms of divestitures or JV or some of the things that we've talked about.
We just got to get this to.
To the finish line and start thinking about maybe there's a path forward on a broader midstream.
Monetization or structure, but it's a little too early for that.
Got it. Thanks, that's helpful and then just as a follow up.
In the press release, you had mentioned.
The acquisition could accelerate capital return to shareholders. Just curious how you think about that against where the balance sheet is today and is there a net debt target that you want to get to or an absolute debt target that you need to hit just curious how those 2 play.
Moving forward as well.
Okay.
I'll start with this I'll turn it over to Kevin to talk about maybe some of the financial parameters.
Right now I think we have a clear value proposition.
Phenomenal enterprise value proposition for for.
Shareholders in the near term, it's taking some of that value from debt holders, putting the equity holders.
Pockets from paying down debt.
So I think it's very clear and this only accelerates that debt.
Mandate that we've had.
Of how we're delivering shareholder value in the near term.
But we are thinking about okay, where this type of free cash flow generation on this new platform is.
Is substantial and I think our leverage starts moving down.
Dramatically and maybe Kevin you want to talk a little bit how we think about decisions.
I think the key part of that press release is.
The rest of that sense, which is before reaching a less than 2 times net debt.
There's probably not a discussion about this at this point for point is this transaction helps bring forward the timetable by which we reached at less than 2 times net debt.
Patrick I would say overall, our goals are still focus on that balance sheet, reducing overall debt levels, increasing maturity runway given ourselves more liquidity, reducing overall interest burden, we're still very much targeted on those elements. We do like the fact that out of the gate.
Pro forma Q2, this takes us down almost a half a turn or more of leverage by the end of 2022 on planning price as this takes us down about <unk> for turns on so this.
Dramatically improves our leverage profile and accelerates the timetable by which we can actually talk about those shareholder returns.
Understood. Thanks, guys.
Thanks, Greg.
Thank you and the next questions for David Eichmann, Pickering Energy partners. Please go ahead.
David like any mergers done it definitely takes a lot of time I appreciate that.
Sorry day that we missed the first part of your question cut out.
Oh, no worries just congratulating you on getting mergers done at I'm sure. There's a lot of work when we were looking at your parent wells on the assets. It looks like there came a little better than what you all have had historically and more full field development can you talk about as you take these assets into full development should we expect kind of it.
10, or 20 per cent less Kim then what are the initial wells.
Have been as we pulled public data.
I think that is.
Yeah, I'm not going to get tied down to a percentage because of course, there will be a distribution anytime you come out to more of a greenfield area.
And you have a handful of parent wells or youre not competing for hydrocarbons generally speaking you're going to see a.
Higher initial EUR from some of those early wells and we would expect some some modest degradation over that over time.
So I think that Thats, a very fair statement.
The nice thing about it is sometimes geologic complexity can work in your favor for incentive.
There's some areas within <unk> existing acreage where.
There may be a possibility of some lower zones, where you don't necessarily have to get them right away and you can come back later, because theyre not geologically connected to the wells above them.
I'm not saying that's the case here with the prime mix acreage.
But but you will see very very strong returns and very very strong capital efficiency throughout the whole robust development program that we're going day again springboard off of what's already in the ground.
So so I would anticipate.
Strong results across the board.
And then we're pulling in getting like a mid thirties base decline on a BOE basis is that is that reasonable if we just take them in and let them, let the existing PDP decline.
Yeah.
That's right yeah.
Yes, I think that is.
Especially if you take a well that's kind of revealed itself in and.
Is dropped into pseudo steady state flow. It it is going to be what it's going to be if you go in and you neighborhood up improperly you'll change that quite a bit going the wrong way, but I think we've proven that.
Our programs that we put in place around surrounding wells are again very profitable.
Yep.
That's helpful. Thank you.
Thanks, Dave.
Thank you next question is a follow up from Scott Hanold of RBC capital markets. Please go ahead.
Thanks for bearing with me for 1 more here just just a quick question. Obviously you guys have your sustainability report out I think a week ago that showed some pretty I'm pretty stark dramatic improvements.
As you kind of pull together count Kellen and Carrizo and obviously take your breath for best practices now when you step back and look at these assets you're getting with premix.
How does this fit into you know the.
The ESG story is there is there.
Do you have an idea of like where they are.
Relative to your current asset base.
Yeah.
But we do and of course, the proof is in the putting in the discovery when we physically have an opportunity to integrate the day assets and get out there, but I think more importantly, the philosophy that primary says is very complementary to where Calvin is existing relative to I mean, you look at a relatively small.
Operation that is 80000 barrels of water recycling capacity that's outstanding.
If you look at some of the opportunities in growth that the industry has and that frankly, calling in prime mix will have relative to a reduction in flaring recordable incident rate.
<unk>.
An acknowledgment that.
The combined practices of both companies and it can improve ESG or in particular safety and emissions across the board.
Again, I think from a cultural fit its exemplary and I would anticipate that to continue and Scott I think you said.
<unk> said it.
And another way sort of in line with what we've put out there in terms of.
Our goals on flaring volumes in <unk> emissions. This asset base is completely aligned with that.
We evaluate not only prime expert.
Net other acquisitions.
As a key criteria right when we're going through our diligence. This is a big part of how we look at asset basis. So.
There's always work to do to get improvements as Jeff talked about with non prime mix for our own asset base, but overall.
<unk> isn't going to.
Microsoft for any of our goals and hopefully even get us in a position to do better.
Got it got it okay. So so you know at least as good and hopefully overtime continued dump path of getting better.
That's fair statement, yes.
Thank you.
Thank you and again if you have a question. Please press Star then 1.
This.
Our question and answer session I would like to turn the conference back over to Mr. Joe Gatto, President and CEO for closing remarks.
Thank you for that and thanks, everyone for joining.
Exciting day here.
Some good discussion good questions, obviously reach out for anymore, we've put a lot of information out there.
Later than we had hoped [laughter] last night, but we're around to answer questions.
And we'll look forward to updating you in a few months on the progress.
On the acquisition and just our operations with Cowen. Thanks again.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.