Q4 2021 Highpeak Energy Inc Earnings Call
Thank you for standing by and welcome to high Peak Energy's fourth quarter 2021 earnings Conference call. At this time, all participants Arnie are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please.
Be advised that today's call is being recorded should you require any further assistance. Please press star zero I would now like to hand, the call over to Stephen Nolan Chief Financial Officer. Please go ahead.
Thank you.
Good morning, everyone and welcome to high peak Energy's fourth quarter 2021 conference call representing high peak today, our chairman and CEO , Jack Hightower, President, Mike Hollis, Vice President of business development, Ryan High Tower and IMC.
<unk> <unk> Chief Financial Officer.
During today's call, we will make reference to our March investor presentation, Our fourth quarter 2021 earnings release, and our 2021 Form 10-K , all of which can be found on high peaks website.
Today's call participants may make certain forward looking statements relating to the company's financial condition.
Results of operations expectations plans goals.
<unk> and future performance. So please refer to the cautionary information regarding forward looking statements and related risks and the company's SEC filings, including the fact that actual results may differ materially from our expectations due to.
A variety of reasons many.
Many of which are beyond our control.
We will also refer to certain non-GAAP financial measures on today's call. So please see the reconciliations in the earnings release, which was issued yesterday afternoon.
Our prepared remarks will begin on slide four of our March investor presentation.
I'll now turn the call over to our Chairman and Chief Executive Officer, Jack Hi, Tyler.
Thank you Steven and good morning, everyone and welcome to today's call.
As you probably realize every CEO is always excited to talk about their company and the performance of the company.
I'm more of a macro person in terms of annualized performance, but this is a great exciting time with high peak in with oil and gas prices in the world. Unfortunately, some of which are contributing to the Ukraine crisis.
But we had a great fourth quarter, our average production averaged over 14900 barrels a day, which was an 81% increase compared with our third quarter average.
We successfully executed on our drilling program and average almost three rigs throughout the quarter we.
We had a large number of wells that are in the process of being completed and most of these wells will come online and be completed and contributing to our production towards the end of this year.
Majority of the wells are anticipated.
To.
Ramp up and be reaching peak rates.
Towards the end of the year again, we added our fourth rig in January and are now very active with four rigs running in the market.
We continue to.
We will consider.
Adding to our rig count if commodity prices.
<unk> strong and so we are contemplating adding to our drilling activity and with our cash flow as we go through the numbers you can see we can do so without increasing our outspend.
<unk> is a growth story and we're going to take advantage of current market strength in oil and gas prices to create additional value for our shareholders.
So I'd like everyone to point to slide four over our March investor presentation.
And this gives you an overview and key statistics for the company.
I previously mentioned that our average production was 14900 barrels a day consisting of 95% liquids. This contributes tremendously to our economic success.
We continue to realize pure leading prices and cash operating margins and on a <unk> basis, our fourth quarter and unhedged cash margin was $60.26 per barrel of oil equivalent.
Approximately 84% of our fourth quarter realized pricing.
Also in the in the first quarter of 'twenty, two we entered into a series of acquisitions, which in the aggregate include 9500 acres and almost 2500 barrels a day of production and an additional 40 locations with a saltwater disposal system, including three disposal.
The wells and rights to local non potable water sourcing of approximately 35000 barrels a day.
These acquisitions also contribute to about about $3 million per year in savings on water.
The acquisitions just in closing in the first quarter and 15% increase to our flat top acreage.
Two our acreage total acreage position and 29% to our flat top acreage position.
If you think about it and looking back a year ago. In 2021, we had about 51000 acres and today with the closing of that transaction, we will have almost 72000 acres and a little over a year, a 40% increase for high peak.
Increasing our scale and giving additional locations to our inventory.
The acquisition checks all the boxes that are immediately available for development and related gathering infrastructure is already in place we paid less than a three times multiple on cash flow.
And we are projected to increase our EBITDAX in 2000, and EBITDAX in 2020 to over $50 million more than that with present pricing, but $50 million assuming commodity prices stay in the range of 70 to $90 a barrel.
The assets are contiguous to our flat top operating area. They provide many synergies, including adding to our robust infrastructure system. The acreage is 100% operated and will be easy to integrate into our development plan. The 40 locations with $15 million to $20 million of net.
Present value.
And of course, it's hard to pick pricing right now because prices are so high compared to the numbers that we've been utilizing but they add potential upside value to high peak. In addition to the current PDP value in other words, we will be actively developing that area and each.
Well and approximately $20 million net present value with 40 locations can add significantly to our value.
You'll turn to page five or slide five I'm only going to pick out a few things in this particular slide we still have the highest oil cut amongst our peers in the basin. Our income stream was 88% oil 95% liquids our realized price.
Was $72 seven on a BOE basis, which was 93% of the weighted average of Nymex oil price during the quarter.
And this is because we have such a high percentage of oil are hedged price was 67 50 still a great price compared to a lot of our peers that are having significant write downs because of their hedges, we lowered our LOE by 60, a barrel in the third quarter compared to the third quarter.
But I look at the what's happening in the future and Mike's going to talk about operationally, what's happening with our lease operating expenses, but theyre going to continue decreasing once the substation and other things become honorable manner.
<unk> things in progress, our EBITDAX was $72 $4 million, which was 117% increase.
That was at a very low oil price of $72. Thanks.
Think about what it would be today.
On an unhedged basis that gives you a sense of what's happening in the future and how excited we are about.
Our future plans in our future drilling in our future EBITDAX.
If youll turn to two.
Slide six.
Our track record of delivering.
Capital efficient oil weighted growth will continue into the future.
Look at 2020 per month.
19, 800 barrels a day all the way up to this fit almost 15000 barrels and then take our guidance for this year of average in on the low end 27000 barrels to 32500 barrels with the four rigs drilling and going all in.
Lay up to around 45000 barrels that's tremendous growth. If you look at our EBITDAX as a function of increasing production.
And we'll talk about drilling performance in terms of single well performance payout and reserves, but if you think about this was based on roughly 70 to $90 oil at $6 million to $800 million.
Average for 2022 and exiting the year at between $8 50, and $1 billion $100 million.
At a higher oil price of around $110.
Barrel that takes us up to 1 billion $4 billion to $1 billion six and 2022.
So that you can see what oil and gas prices are doing for high peak in terms of cash flow.
And now if you turn to slide seven.
Hi peak is continuing to provide rapid proved developed reserves growth.
Mentioned, many times and I want to mentioned many times in today's presentation, we are a growth company.
If you look at our growth from 2020.
Going up from $51 million at 400 million to $744 million to exiting this year at over $815 million and proved developed.
<unk> developed reserves and another added that.
$1 billion and $498 million counting our proved reserves.
And that's at a low price deck, it's much higher than that at todays prices just a month or so after the end of the year and then look at and this is very important to look at our rapid growth and what that's going to do to us going into the end of 2022.
We did some numbers at a price deck of $110 a barrel.
Basically $14 a barrel below actually oil prices are higher than that right. This minute.
Almost $19 a barrel cheaper I mean more expensive today than what we projected and it takes us up to $3 $8 billion of proved reserves and just this 12 month period, not counting what will be in process of being completed at year end. So we were on a rapid growth we're very excited.
What's taking place we're going to drill over 100 wells this year.
<unk>.
As you can see and use your own imagination as to what prospects you want to use we are having tremendous success and with that I'll turn the presentation over to Mike who is going to talk about the next few slides.
And give you an update on operations.
Okay. Thanks, Jack I'd like to start by saying that our hearts minds and prayers are with each and every Ukrainian.
Their perseverance strength ensure determination are all inspiring high peak, we'll absolutely do our part to provide the world with clean cheap and reliable energy.
We do not and should not have to be asked to do the right thing.
That's just embedded in our DNA.
We're blessed here to have the acreage position.
The rock quality and a.
Fortress balance sheet that will allow us to lean in during this time.
With a heavy heart.
You can't do more.
Very proud the high peak and our employees are doing what we can to reduce our nation's need for foreign energy.
Now turning to slide eight.
Midland Basin bench market.
L results slide eight illustrates how consistent our well performance has been to date.
The Red curve shows our Midland Basin peer average.
The yellow dotted curve shows how our flat top average wells compare.
Our wells shallower decline leads to outperformance in later months.
Our low cost structure strong well performance.
Absolutely drive peer leading economics inefficiencies.
The Blue dotted line shows our signal peak average.
The results in signal peak.
Although very early and include many vintage wells strongly compete for capital not just in ours, but in anyone's portfolio.
Turning now to slide nine.
Flat top single well economics.
Slide nine details our single well economics based on the blended average type curves from our year end 2021 Reserve report.
12500 foot laterals into lower Sprayberry and Wolfcamp a formation.
Since we are focusing on co developing these zones and flat top we feel this is a great way to display our average single well economics.
This provides a representative view of our investment opportunity.
Our wells achieve payout quickly and provide very high net present values as shown on the chart.
They deliver tremendous rates of return in today's commodity price environment of course, but are still extremely economic and low prices.
At $80 oil they have a recycle ratio of five 7% again phenomenon.
The average well in flat top as a breakeven of only $28 a barrel again blended breakeven we get asked a lot about inflationary pressures.
They are real and we have accounted for them.
We were carrying roughly 10% more capex in our budget for 2022 from what we achieved in the fourth quarter of 2021.
The graph also shows payouts sensitivities compared with capital cost at.
At any reasonable oil price, our wells have a fantastic greater return and recover our investment in a short period of time.
We show the effect of what a half a million dollars per well will do the payout period from first production.
And our strong well economics are resilient to inflationary cost in payout timing is not affected significantly at any oil price zone.
If youll turn now to slide 10.
Yes.
2021 margins.
Again displayed on slide 10, our margins for the full year of 2021, which were driven by our low cost <unk>.
High oil cuts and great realized pricing, where pure leading on both hedged and unhedged basis.
Our margins were approximately 27% higher than our closest peer on an unhedged basis in.
And 45% higher than our closest peer on a hedged basis.
But remember we've positioned ourselves for continued margin growth with our LOE reduction initiatives, which will further distinguish us from our peers.
For example increased recycling our horizontal ellenberger SW DS.
Full field electrification.
And energizing our solar farm.
I should also note we are extremely leaf and a very lean shopping will continue to be that way and as our production grows so too will our G&A per barrel.
Again further magnifying our margins.
If youll turn now to slide 11.
Operational update at flat to up again, we are in full manufacturing mode co developing the wolfcamp, a and lower sprayberry.
In signal peak.
We have two new 15000 foot Wolfcamp D wells they are about to come online in the eastern one third of our block.
That's a 30000 lateral foot test.
We also have a 10000 foot wolfcamp D will on the far east of our acreage.
We are encouraged by the early flow back of our recent Wolfcamp, a and lower Sprayberry wells again, very early time, but look <unk>.
Extremely encouraging and following our type curve.
We are also drilling are in the process of drilling two additional 15000 foot Wolfcamp b wells in the southern portion of our block.
And complimentary to our operated wells. We've recently participated in three gross non operated Wolfcamp DS on the western side of our acreage position.
As well as we are currently participating in the drilling of four additional gross non op Wolfcamp D wells as well.
With that said, we will have full insight into the delineation of our Wolfcamp D zone across our entire block in the coming quarters, If youll turn now to slide 12.
ESG and sustainability highlights in the fourth quarter, we recycled 58% of our stimulation fluid companywide.
As Jack mentioned earlier, we have access now through the recent acquisitions to 35000 barrels a day of non potable water.
So in addition to reducing our need for freshwater makeup we stand to save roughly $3 million a year in capital cost.
And we can now supply 100% of the stimulation fluid needs for one frac crew and flat top.
With recycle and non potable fluid.
The high peak substation is fully constructed and set for a second quarter commissioning date.
Eliminating the need for multiple local generators and the cost and emissions associated with them.
Our solar farm is on schedule to be completed this summer.
The oil the oil pipeline construction commenced in our gas infrastructure upgrade is in process.
Phase one is operational today or has been.
These will result in trucking and emissions reductions.
Deliveries from our local sand mine will commence in the third quarter.
Assuring sand availability and efficient completions operations and reduced trucking missions.
We are also proud of the fact that we have had zero employee safety incidences to date.
And with my comments now complete I will turn the call back over to Jack.
Thanks, Mike.
If you look on slide 13.
And that gives you an overview of our budget.
<unk> increased to $800 million.
We show our production range in terms of guidance for this year.
This has been a year of growth, we revised our capital guidance as I mentioned to you the.
The graph on the right, which is very interesting shows that our 2022 .
Average production at the midpoint is 220% higher compared to our 2021 average.
Our 2020 to exit production rate at the midpoint is 350% higher than what we did in 2021.
So that basically signifies unparallel unparalleled organic growth into 2023.
Keeping in mind that we are not going to get out over our skis and I'll reemphasize that we have a pristine balance sheet or overspend has almost been completely absorbed with where oil and gas prices are today and this growth profile will continue.
Sean as we go forward into the year.
Turning to slide to the next page on liquidity and financial overview.
It shows our financial position at year end.
It shows that subsequent to year end, we closed our $225 million senior unsecured notes.
We took those dollars and we paid off our RVO in full.
And we still have $225 million of liquidity between our cash position and our Undrawn <unk>.
We expect at <unk>.
In April we have a redetermination period, we already know that we can increase our BL significantly we haven't specifically outlined exactly what we're going to apply for that but we're not going to have any problems relative to liquidity or having access to necessary capital.
We maintained our low leverage position at two times net debt to annualized fourth quarter EBITDAX.
And it just shows how little leverage we currently have compared to the value of our PDP and our proved reserves and if you look at the box on the lower right hand corner that just simply for you financial experts gives you an overview of what our coverage is relative to <unk>.
Our debt.
As you can see we just have tremendous coverage relative to total debt and net debt.
And.
And with that I'll reemphasize that we're always going to maintain a debt to EBITDAX of less than a one time.
Leverage.
So we've been able to do this very effectively very responsibly as we go forward and if Youll turn to slide 15 that continues our responsible growth story.
We're going to continue our efficient production growth, while maintaining a very low responsible debt level. We've increased our liquidity position as mentioned, our focus will continue being capital and operational efficiency, especially in light of current industry wide inflationary pressures.
And as Mike mentioned earlier, we've done many many things to eliminate these inflationary pressures by going out into the forward market and buying materials and planning for all of our.
LOE savings as we go forward.
We have one of the most attractive product mixes in the industry and that leads to higher oil and liquids production strength, great realized prices for our products and our low cost structure that will continue to drive our peer leading margins for high peak.
I'm going to emphasize in closing.
Net.
Prior to the Ukrainian crisis, we recognize the massive underinvestment in energy over the past several years many of the banks were coming out with forward projections and many were saying prices are going to go down and.
And contrary to industry sentiment, we forged ahead and positioned ourselves for responsible growth.
Hi peak is uniquely poised to take advantage of current market conditions excellent well economics and performance operational expertise and a strong balance sheet, we contemplate accelerating our drilling activity this year, which at today's.
Prices, we could accomplish without increasing our near term outspend.
In fact, we have no one else bandwidth prices, where they are today, if they maintain close to this range.
I want to reemphasize, we are a growth company, we're going to take advantage of all available opportunities and we're going to with our quick payouts on our wells are high rates of return we will continue leaning into as Mike mentioned.
Increasing our drilling activity and making sure that our shareholders have the returns that they expect to have going forward.
So now we will turn the call and open up the call for questions.
As a reminder to ask a question you will need to press star one on your telephone again Thats Star one on your Touchtone telephone to ask a question to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of John White of Roth Capital Partners. Your line is open.
Good morning.
And congratulations on a very impressive quarter.
Thank you thanks John .
If you could.
I'd like to get the breakout on fourth quarter completed wells.
In flat top and signal.
If you have that handy or you have some ballpark number.
Yes.
John This is Mike Hollis, a basically we've had six wells that were completed that came online in the fourth quarter.
Again kind of the third quarter going into fourth is when we really began our ramp up.
Went from the one virtually up to three rigs and pick up the fourth in January .
So again, we brought these rigs and drilled large multi well pads.
So as we mentioned in our press release, we've got 27 wells in the first quarter that will be turned online most of which will be in the latter portion of the first quarter. So what you saw in the fourth quarter were the six turn in lines that we had as well as the large bag.
Hurry of wells in the center part of flat to up that came on earlier kind of late <unk> into Q2, they've really started to perform into the fourth quarter and what drove that performance.
Again, we've kind of mentioned a little bit of Lumpiness from the second quarter into third you saw that again youll see a little bit more of that going into the early part of 2022 as we bring on these 27 wells.
But again the blended.
Data that we showed in the presentation of our average flat top wells.
<unk>.
Drive net present value dramatically as well as rate of return. So again, we're very excited about what's coming we feel very confident in our guidance for 2022, but again you did not see all of the wells that were drilled and completed.
Fourth quarter Youre going to see all of those coming on towards the latter half of 'twenty. The first quarter of 2022.
So hopefully that'll give you a little bit of clarity, but you had six wells.
Yes.
Of the six wells coming on versus the 27, and then from a go forward standpoint think about a ratable eight wells per month coming online that are being drilled and completed and again it will smooth more out as we go forward into 2022, and 2003 that it will be closer to that again as we do pass.
You may obtain one months.
<unk> the next month, but in general each month.
Signal peak, we have completed two of the 15000 foot wells we've just.
If you look back in fourth quarter we.
Barely finished fracking the two wolfcamp, a and the lower Sprayberry wells, we've now had them on for roughly a week and a half and again as we said we're very encouraged with those results.
The 215000 foot wells, we've now Frac those and we will begin to drill out of operations and continue to complete wells in signal peak on a ratable basis.
Again at about that split of $25 75 of our Capex spend for 2022, four signal peak versus flat top.
Little little long winded, but hopefully that gives you a good sense.
Yeah. Thanks for all the detail 27 wells Thats a lot of wells to be completed so for 2022 about the drilling plans are about 75%.
At 25% signal peak is that right.
That is correct yes.
Okay.
I'll pass it along.
Alright, thank you.
Thank you. Our next question comes from Nicholas Pope of Seaport Research. Your line is open.
Good morning, guys.
Good morning.
I was hoping you could talk a little bit more.
On the signal peak area as you kind of delineate that acreage.
You laid out the map here, what wells were going to be looking at in the near term and over 22, but I'm curious what.
I guess what data that you are are going to get from this first set of wells.
And I guess, maybe what's the missing with the data at this point, we can fairly early stage.
What what the focus is going to be as you start to see these wells come on.
And what we should how we should think about that that set of wells and what it means for kind of inventory.
Yes, Nick.
Overall from a from a big picture perspective, we're looking at a lot of development from the western part of our acreage was offset operators.
We have drilled four wells and now we're participating with them in four more wells and we're moving from west to east from a depositional perspective coming off the shelf edge to the east and so from a geological perspective, we have enough well control to know that the zoo.
<unk> is there we know the thickness of the zone, we're trying to make sure before we start we want to delineate the area to make sure that from the eastern part all the way to the western part and we're going to have the performance that we feel like we should have with the thickness of the.
Reservoir with the Prostie with the permeability and making sure we're completing the wells properly in the various areas because of increasing.
Clay's the stabilizers friction reducers, we're using we apply a lot of technology that a lot of smaller companies don't do.
We come from building major oil companies. So we're very very deliberate in making sure everything's good.
<unk> now can speak more specifically about what we learn in each area in terms of drilling the performance, but we're waiting to see and while we are.
The slowly to do this in the proper manner go ahead, Mike you bet Nick.
Nick in signal peak.
Matt that we've shown on page 11 that gives you an idea of what is in progress today. So.
A lot more activity is going to take place at the signal peak throughout the year, but this will this is the initial phase of the delineation as Jack mentioned moving kind of from east to West.
The eastern third of the block, we're doing a 30000 foot lateral test.
Almost done fracking today so.
So what we're looking for there as Jack mentioned is.
The economic.
<unk>, we know the rock is there we know it produces oil and gas and every indication is that it will meet our expectations again being a very pragmatic engineer I like to see oil in the stock.
So we had oil in the stock take a mile and a half to the west that absolutely met our expectations. The rock here is thicker looks to be better. We expect the same so we shouldn't be able to be forthcoming with that information very quickly as Jack mentioned, we want to do it systematically and delineate.
So over the next couple of months, we'll have all the way from the west to the east and the north to the south delineate into the Wolfcamp D.
The lower sprayberry.
Offset a well that was drilled by an offset operator.
So everything there is.
Again progressing as we had expected.
Mentioned, a wolfcamp, a well is a step out and test that.
Well, we have drilled it's flowing back and again meeting type curve early time right now so everything is.
Producing and reacting as we had expected as Jack mentioned, there's a lot of science going on out here, we talked about just the completion side of things.
Again on the drilling side, we love, putting a rock in the ground or a bid in the ground the rock talks to US a lot and we're able to optimize so we would.
Be very surprised if we're not able to see extreme optimization on the drilling front much like we saw it up and flat to up two very much differentiate ourselves from our peer group in the area for our drilling costs completion costs and well results again driving the economic.
It could be differentials as well.
That is very thorough.
I appreciate it.
Yes.
And then kind of changing topics here a little bit.
I'm curious with the outstanding warrants that are still out there is there anything.
Is there any timeline on the warrants are they just indefinite is there anything that could happen with converting those to shares or should I. Just think it should be all continue to treat those just as.
They are fully in the money in.
And kind of potential dilution out there.
Good question Nick.
Warrants are it's amazing how many continue to be exercise where people are looking for long term capital gain and realizing that our stock should be continuing to go up in value.
<unk>.
We had another 40000 shares exercised this last week.
But gradually the warrants will be exercised.
They were originally for five years. So they are still well over three years in order for them to be able to exercise the warrants and so that'll be taking place.
And they should be well into the money and continue.
Increasing in value over the course of the next year and a half to two years.
Got it.
I assume on the on the CVR is I mean at this price.
Stock price they shouldnt, even come into the conversation is that is that right.
It's been a while.
Yes, eventually they come due in August and in August as long as the original investors have a 20% gain.
At <unk> as long as our stock stays at $12. They have no effect and they will expire and be gone.
And that should happen in August .
Got it that's all I had I appreciate the time guys. Thank you.
Uh huh.
Thank you. Our next question comes from Jeff Robertson of water to our research your line is open.
Thanks, Good morning.
Jack you talked about potentially adding a fifth rig in I'm curious, one where you would take that rig and would you would you accelerate some of what you had talked about previously doing at signal peak and then secondly.
If you add a rig does it change anything you will you will need to do on your saltwater disposal or other infrastructure.
Assets and flat to up.
Good question, John and Jeff and adding a fifth rig when.
When we say, we're contemplating that lots of things go into that decision process.
And part of the process is deciding where we're going to go with it and where we're going to keep it because we want to be very efficient with pad drilling in terms of.
The economics and cost.
And we have multiple places we could go with it right now.
We could go on some of our new acreage acquisitions, it's basically development drilling on these 40 locations. We could go with it depending on the outcome of what's happening down in signal peak, we could go down there with it.
And keep roughly four rigs running up north and.
And maybe having a half a rig down at signal peak plus the other rig down at signal peak.
We could even we haven't enough locations and enough opportunity already identified that we could actually go to six rigs instead of five rigs, but we're going to we're going to study. This over the course of the next three to four weeks and make a decision probably around mid <unk>.
March is two expanding our operational and our drilling activity, but with prices where they are in four to five months payouts, we feel like it's in the best interest of our shareholders to really be proactive in where we would go and that can happen almost anywhere we.
So many locations and so many areas, we're not going to go out and do speculation or what I would call more exploratory anything we do will be close in drilling development drilling, increasing our puds and increasing our cash flow.
Hey, Jeff on the Swg question, absolutely not look we built the pipeline system again being a 20 inch pipeline that basically in circles in the center part of.
Flat top allows us to move.
Very very large volumes of water anywhere in the field such that we're able to either dispose of it very efficiently and our high volume.
Horizontal ellenberger wells and.
So again to increase activity and increase the water production from the field slightly no. It will have zero effect.
Now would that mean, we might have to drill a future SWT instead of.
A year out maybe nine months out yes, but again, it's because we are receiving unparallel kind of returns drilling those wells from the oil side. So the system was built to be expandable.
Again, we talk the last conference call about the split in one of the future of our earlier questions about the 75% and 25% split on Capex for the <unk> side. However on the infrastructure side, it's about split the other direction between flat top.
In signal peak, so as soon as we get our delineation information from our wells, we've already have designs and everything ready to go to implement a.
SWT system and recycle system down in signal peak, that's what you see the vast majority of the infrastructure dollars that we have in the budget for 'twenty. Two again, we just wanted to get confirmation that we know the sizing that we have is right. The modelings easy we can change the sizing based on.
Well performance in water cuts.
Again, we will have signal peak very quickly built out like we did in flat to up.
Again, we're all about doing this efficiently and making sure we get the highest return for our shareholders.
Yes.
Thanks.
Similar to Nick's question on signal peak can you talk <unk>.
Micro Jack about any offset activity on this off the southern end of your flat top acreage or the eastern.
Like a flat top.
Helping you delineate through what others are doing that.
Sorry to your acreage position.
Yes.
Mike Glenn operational you bet Jeff.
It's pretty obvious who the operator is to the south of US look we're all we're all really tight where friends out here, we share all of our data drilling completion production with all of our offset operators.
The operator in particular, you're mentioning to the south of directly south of us.
They're fairly active they are running two rigs or frac crew full time.
They've got wells.
<unk> south of our acreage block all the way to the east that again are extremely encouraging.
Many of these wells IP, well above 1000 barrels of just oil a day. So again, they're similar rock similar debt cost will be very very similar if we were operating that they're very good operators as well. So we're learning a lot from each other and it does encourage us there also.
So.
A little bit farther along where more co developing our known zones, the wolfcamp, a and lower sprayberry.
<unk> done a little bit more delineation.
Right South of our flat top area, they've got several Wolfcamp BS envoy wells.
Again, there roughly 600000 barrel of oil wells with associated gas highly economic at these prices, but even all the way down into the $35 $40 range, they're economic.
Another more exciting thing.
Some of the operators nears, our doing flat to up our Wolfcamp D as in dog test.
There is a well right south of US that's been completed and flowing back that again has got us very encouraged and I think it would be reasonable to expect that in 'twenty two you'll see us.
Test the Wolfcamp D on our southern acreage block again, we like to do close all of <unk> and the geology looks good well north of where they're well is but youll, probably probably see us test the wolfcamp D close to where they're well is so again, we really appreciate those guys getting down the forefront for us.
Thank you.
You bet. Thank you.
Thank you. Our next question comes from John White of Roth Capital Partners. Your line is open.
Just wanted to follow up.
On your.
Acquisition in the fourth quarter.
9500 net acres. The press release describes that is contiguous to flat top.
I'm looking at slide four.
Your acreage map and you've got verbally.
Walk us through where that acquisition.
Acquired acreage is.
John we intentionally didn't put that on the map at this stage.
We are acquiring additional acreage in the area has become very competitive.
From the northern side as you mentioned, we said Gordon and Howard.
From the northern side, all the way to the eastern side, and then also to the south eastern side of.
Flat top and so until we are.
Our successful or not successful in.
Possibly additional acquisitions and additional acreage add on.
We're not going to specifically say, where it is but when I say contiguous it is contiguous either north south east and west.
I like it and disclose.
Both locations.
I can appreciate that and I don't blame you for title and.
Yes, it's a very it's a <unk>.
Competitive area.
One of our peers has gone out all the way now six miles to the east and the Mitchell County.
We have a lot of control a lot of information out there and.
It's really the whole area is locked we started when we first bought our first 7500 acres.
And if you remember the SM presentations of moving from the Western part of Howard County to the East.
Kept delineating moving further and further east.
And when we went to the far east is the Viper well in that area to the west of US and we bought our acreage thinking this isn't going to change, it's just going to continue moving to the east.
That's happening and that's exactly what's happening and even the wells to the south and the B and then the D and in these lower sprayberry and the Wolf.
They are coming in really well and to the north.
And the we'll face specifically those wells are coming in really well the 15000 foot laterals are all over 1 million barrels so.
Our whole area is really looking good and we're very excited about what's taking place.
Well, great, we'll look forward to seeing some some more leases get signed up.
Good luck with that I'll pass it on.
Thanks, John Thanks.
Thank you at this time I'd like to turn the call back over to CEO , Jack Tai Tower for closing remarks, Sir.
Well in closing I, just want to thank everybody for attending the call.
<unk>.
I don't really have anything else to say I think we've said at all other than we are I just I'm extremely excited about our performance our operational guys are doing a super job.
I hate that we had to have award to increase oil prices because we felt like that oil prices are going to go up anyway. The industry as a whole on a worldwide basis is just not reinvesting enough capital, we're going to have shortages, whether we had the ukraine situation or not and those are all.
On the horizon and if you look at all the major company five year plans every single company from sovereign wealth to the big majors are way behind and reserve replacement I think.
Almost less than 20% of what the five year averages historically have been on the last part of this year.
Of last year of 2021, so we got some serious problems in terms of being able to supply the world and maintain our quality and quantity of lifestyle and fossil fuels are going to be a very important part of that and we plan on making sure that we provide as much as we possibly can.
Can.
Thank you very much for your time.
This.
Close today's conference call. Thank you for participating you may now disconnect.
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Yes.
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