Q2 2022 Highpeak Energy Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the Hype Peak Energy 2022 second quarter earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need a press star one one on your telephone please be advised that today's conference is being recorded.
Now like to hand, the conference over to your Speaker today, Stephen told him Chief Financial Officer. Please go ahead.
Good morning, everyone and welcome to <unk> Energy second quarter, 2022 conference call representing high peak today, our chairman and CEO , Jack High Tower, President Michael Hollis.
Vice president of business.
Business development, Ryan high power and <unk>.
Steven.
Financial Officer.
During today's call, we will make reference to our August investor presentation in our second quarter 2022 earnings release, which can be found in 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 assumptions and future performance. So please refer to the cautionary information regarding <unk>.
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 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 August investor presentation.
I will now turn the call over to our chairman and CEO , Jack Hi, Tyler.
Thank you very much for the introduction.
And I am extremely excited about this quarter's performance.
Our growth continued growth strategy being able to execute that.
Like everybody to think about the press release and earnings release that we just had and then looking at that and studying that.
Just been a phenomenal quarter.
You could say it's business as usual in terms of executing everything we set out to accomplish in the quarter.
We of course increased our legacy <unk> production volumes.
Essentially.
If you think about going from 12000, something now Oklahoma.
Pro forma basis so.
Almost doubling that.
He ended up integrating properties and infrastructure into our operations. We ended the quarter with six rigs running and three frac crews running which was an increase when you think about last year's business.
Almost three times.
The number of <unk>, we had one rig running most of last year and now we have six rigs running.
We commissioned our client top electrical substation project and we're in the process of converting our flat top field operations to electrical power our sand mine partnership became operational in June .
And we're integrating that into our completion operations, we increased our revolving credit facility up to $400 million and we added multiple banks to our group's syndication.
I want to definitely congratulate our team and then with what we were able to accomplish increasing our drilling activity filled operations integrating the acquisitions will have without having to add significantly to our personnel and our employee base and.
To lower our lease operating expenses and on a per Boe basis.
Lower our G&A per barrel.
We are evolving on a quarterly basis as evidenced by our track record of consistent responsible growth.
Talk about that many times.
And I'm, assuming that prices hold in this range, we will start generating free cash flow next year, while simultaneously continuing to materially increase our production.
If you really look at the quarter and think about our differentiated growth.
Project.
Our growth story, we are continuing to execute on our business plan and in my hope 52 years in business other than making substantial acquisitions I've never had this kind of growth profile of doubling production in one quarter.
So please turn to page four.
Our investor presentation, and I'm, just going to pick out a few things on this page.
Give you insight as to where we're going and what's happening.
Our production averaged legacy production averaged over 22000 barrels a day and of course from year from the beginning of the year in terms of our effective date on hand upon.
Our total pro forma production averaged over 25000 barrels a day.
Actually almost a 100 plus percent increase in production quarter over quarter.
So this continues our growth story, but more importantly, we have 46 wells in progress right now.
Horizontal wells in various stages of drilling and completion.
Dan.
That is tremendous growth profile in terms of increasing our production as we go forward.
And we're doing all of this on the basis.
Great operating margins.
In addition to that when you look at our acreage position.
Year, when we went public we had 51000 acres.
Today, we've closed on over 97000 acres, which is a 50% increase in.
In the last year alone and we have line of sight on acreage that were still in process of purchasing that's going to take us well over 100000 acres. So the company is growing we're getting more and more inventory and we now have a split of contiguous nature.
Acreage one of the largest two contiguous blocks in the Midland Basin, and it's roughly a 50 50 split between flat top in signal peak.
At the end of the quarter, we still have six rigs running.
We actually have the highest unhedged operating cash margin in the industry way above any other companies. So I want to thank our bank group for their continued support and for the three new banks that joined our facility. We look forward to maintaining this relationship as we.
Grow the company in the future.
Now turn to slide five.
That gives you different perspectives. It shows you our daily production growth, which is tremendous growth in terms of this particular quarter and we're going to continue that as we go forward and looking forward to.
The rest of this year.
And then the next year and throughout next year, we're going to continue this growth profile, which is unprecedented in the industry.
We've increased the number of wells that we're drilling our EBITDA as we mentioned.
Is almost equal to all of last year's EBITDA in one quarter.
On a fully unhedged basis is approaching $800 million.
And our operational Ducks.
I'm going to spend a little time on that in the sense of.
People have asked how many wells are you turning in line.
When you have six rigs running we now are going to have approximately 30 to 35 wells that we'll be turning.
Per quarter, and we have about the same number of docs with six rigs, we're getting 10 to 12 ducts also which is another 30 to 35.
So that would give you a sense of how our growth product profile is going to go and give you a sense of timing relative to our legacy production.
And how the new drilling rigs will start adding to this continued increase in growth production.
Keeping in mind that production from our six rig that <unk> had been operating will not start contributing until the fourth quarter of income. So it takes time for these rigs to start contributing to production and start contributing to our EBITDA.
Our successful program is going to continue growing and we're going to continue with the highest operating margins in the industry.
Great production growth and a tight supply in the oil market.
Our next slide on page six.
Is.
Just looking at the numbers on this I'm not going to spend a lot of time other than we're continuing to maintain 95% liquids.
Our total Boe, including derivatives in terms of our realized pricing is the highest in the industry. Our alloy is continuing to go down and we'll continue going down over the course of the next 60 to 90 days as we bring on all the benefits that we have been out.
I'm going to use going forward.
And therefore, we also have the.
Excluding hedges, our highest operating margin in the yen.
Industry.
And we're turning on about 30 wells a month plus.
And so we're very excited the other thing that I think is important relative to L. A is that we now have about 70% of our generators online in our pipeline system is starting to come in place and we're adding that and that reduces our generators.
As we go forward, so our Illinois is coming down appropriately as a result of that.
Mentioning again.
Peak is an absolute differentiated growth story.
And we're going to continue taking advantage of current market conditions and pricing in order to create maximum value for our shareholders with that I am going to turn it over to my colleague who's going to talk about operating margins and operations and bring everybody up to speed on the successful quarter that we've had.
Thanks, Jack and now turning to slide seven high peaks differentiated margins.
Again, not all <unk> are created equal.
<unk> seven highlights high peaks continued unhedged pure leading margins our second quarter 2022 margins are 20% above our closest peer.
And 38% above our peer average.
I think is positioned to continue our margin expansion with our LOE reduction initiatives. For example, our removal generators electrify your operations and the expanded use of our recycling and company owned SWT system.
<unk> will also benefit from the dilution of fixed cost as our production continues to increase.
The main takeaway from slide seven is production mix matters.
It would take an average peer production of 35000 BOE a day with their average margins to equate to the EBITDA that high peak generated in the second quarter with our margin per Boe.
Over our 25000 Boe per day on a pro forma basis.
Combining our high margin oil weighted mix with high peaks differentiated growth model.
Besides the potential for shareholder value creation through levered exposure to oil price and production growth.
And now turning to slide eight.
I'll provide a brief operational update on both flat top in signal peak.
And flat top we've added over 14000 net acres contiguous with our block since the beginning of the year.
We've already begun drilling a portion of the new acreage and are in the process of integrating the associated infrastructure with our legacy operations in the area.
We commissioned our local high peak electrical substation in late May enter in the process of converting our field operations from rental generators over to more cost efficient high line electrical power.
To date, we've removed 70% of those generators and flat top and should start to see the financial benefits show up in our LOE in the third and fourth quarters.
We have also plugged in one of our drilling rigs and flat top to electrical power.
At today's diesel cost the anticipated cost savings are approximately $90000 per well.
We are on track to convert a second rig to grid power by the fourth quarter.
We initiated deliveries from our local sand mine partnership in late second quarter and are currently supplying one frac crew with local wet sand.
We will continue to increase our utilization of local sand and expect to start servicing a second frac crew in late third quarter early.
Fourth quarter.
When fully utilized.
Equaled recognize roughly 3000 or $300000 per well and Capex savings.
Our crude gather is continuing to build out our infield gathering system and flat top and currently is gathering roughly 40% of our oil volumes via lack sales and pipelines.
Our goal is to have the system fully operational before winter.
We are also continuing to increase our use of recycled and non potable water and our flat top completion operations and are currently servicing 100% of stimulation fluids for two frac crews.
Now moving to signal peak as Jack mentioned, we closed on Hana Thorn acquisition late in the second quarter and we are currently in the process of integrating the properties and infrastructure in our field operations.
We are also in the process of negotiating long term gas and oil takeaway opportunities on the legacy signal peak area with a recent positive well results, we do expect to receive very favorable pricing terms.
The well results from our recent Wolfcamp, a b and lower Sprayberry wells continue to be positive and confirm the inventory in these two zones across the acquired acreage.
It's reasonable to expect that we'll be drilling additional wells in these zones on the acquired acreage this year.
We are active in signal peak with two rigs running and plan to turn in line 18 additional wells before the end of the year.
We continue to be excited about this area and look forward to demonstrating additional success through the drill bit this year as we transitioned from the delineation phase to full manufacturing mode.
Now turning to slide nine.
ESG continues to be at the heart of every field level decision we make.
As I mentioned earlier, we increased the use of recycled fluids that account for over 82% of flat Todd stimulation fluids last quarter.
We continue to reap major benefits from our water system, both on the Capex and Opex side of the equation, while drastically reducing our need for fresh water in our operations.
We have removed again to 70% of our.
Generators at flat to up to date or in the process of converting the remainder of the field to highlight electrical power <unk>.
Reducing our emissions and costs associated with rental and fuel for the generators.
We also converted one of our flat to up rigs to run off electrical power and we expect to convert our second rig to highlight power in the fourth quarter.
Our local sand mine partnership is now operational and is reducing our total truck miles to get say into our completion locations.
By utilizing web sand, we also eliminate the combustion of natural gas needed to drive the typical frac sand further reducing our emissions associated with our operations.
We're gathering 40% of flat top oil production.
And this will greatly reduce the total number of truck miles and emissions associated with that trucking once the system is fully built out.
We continue to have a flawless safety record, the health and well being of employee base and our community is our absolute number one priority.
And I'll leave you with this the vast majority of our ESG initiatives are both environmentally and fiscally rewarding to all of our stakeholders.
If you turn now to slide 10.
Mitigating capital cost escalation.
I discussed this slide in detail on our Q1 call and the main takeaway here is that management is constantly looking ahead to combat rising inflationary and supply chain pressures.
As we've talked about all of these initiatives in the past we're pleased to announce that we have implemented implemented all of these items and are beginning to reap benefits associated with each.
Again, we saw these pressures coming in advance and took serious preemptive steps to protect against these cost increases.
One additional thing I'd like to point out here is that our local sand mine project is not only reducing costs and emissions, but is also increasing our operational efficiency.
We are recognizing a reduced downtime with sand deliveries now that we are supplying local wet sand due to the close proximity of mind to our field operations, we expect to increase our utilization of this wet sand in our completion operation as the mine continues to scale up into full scale operations.
And with that I'll turn the call back over to Jack.
Thanks, Mike.
If you turn to slide 11.
We've talked about these things before response will grow great operating margins operational foresight and maintaining flexibility.
I've also I'll add a lot of questions in terms of inventory had questions regarding.
Increasing with six rigs where are we going to where are we going to turn out everything we do is geared towards maintaining lease for <unk>.
Principles of <unk>.
Having great operational foresight in operating margins and making sure we have a pristine balance sheet not going over one time.
<unk> debt to EBITDA.
Our production and cash flows are increasing significantly.
We are very quickly approaching cash flow neutrality.
And in terms of thinking about the value of the company whatever level of production, we decide to grow the company in the next 12 months.
Somewhere between 65, and 80 plus thousand barrels a day.
At that point in time, we can literally go down almost 50% of budget and 50% less rigs running and still maintain in excess of $1 billion a year, possibly as high as a $1 billion $5 a year.
Operational free cash flow.
We have two of the largest contiguous acreage positions in the Midland Basin.
With full spectrum operational synergies, we have one of the very best experienced teams to be able to execute and provide operational excellence. We will continue with our peer leading margins and actually you can see from what Mike was telling me, we're improving on those margins.
We are going to continue to innovative lay adapt to market conditions as we plan for our future, we're going to focus on our capital and operational excellence and lead our peers and cost structure.
We're going to monitor the market and we truly as a controlled company have luxury that our competitors don't have we are an operational differentiated growth story in that if oil prices go down we can eliminate some of our drilling rigs and reduce our cash.
<unk> expenditures, but as long as.
<unk>.
Oil prices remain where they are today it would be crazy with payouts happening as quickly as they are for us not to keep six rigs operating.
One thing that people are thinking about is inventory we have.
Literally differentiated now.
<unk> 50 year rig life years.
And that's almost eight three at six rigs running at eight three years of.
Drilling activity.
No.
It doesn't matter what price you want to use it doesn't matter what projections you want to use internally for production growth.
If you take the range is.
You can literally look at one.
1 billion, 6% to two plus billion dollars next year.
Providing.
No excess spending providing tremendous free cash flow and providing great growth profile going forward. So.
So we have the inventory we have the team we have the financial capability to grow the business and then you need to think about what's happening in the market.
Where our price is going to go what's going to happen to oil prices.
Banks and lenders are always concerned about utilizing lower pricing.
Utilizing strip pricing on a reduced basis, all the way down now to almost $80 a barrel on the new three year strip pricing.
And if you think about that the main precedent that I learned years ago working with.
The founder of OPEC and the minister of oil from Saudi Arabia for 24 years that everything needs to be looked at on a macro scale.
We have tremendous.
You bet.
Clients.
Production throughout the world on the basis of our decline curve.
I'm almost a 50% decline curve in the U S. If we just stopped drilling we'd lose 57% of our production in the year.
And we are only reinvesting as an industry about 30% of what's necessary just to maintain the deliverability.
So it's not a matter of if we're going to have research recession. If we're going to continue growing production. It's a matter of it's not going to happen with the industry and with the world.
Private wealth as well as.
<unk>.
Nations in effect reinvesting only 30% of what's necessary to maintain production.
We are going to have a shortage of oil and gas and its just a function of when that's going to take place. So we're looking at high peak with the growth story, we have with financial and with the operation and with the team. We have it's going to be a very good place to be in terms of ownership in terms of growth.
In terms of 19 money for our shareholders, so with that I'll turn it over to questions.
Thank you if you have a question at this time. Please press Star then one on your telephone.
Okay.
And our first question comes from the line of Nicholas Pope with Seaport. Your line is open. Please go ahead.
Good morning, everyone.
Good morning morning.
I was I was hoping you guys could update.
On signal peak, a little bit more I know you talked about on the prepared remarks, but.
I guess in <unk> I think we brought on four or five five or six wells I guess was there any were any brought on in the second quarter and also what's kind of the longer term profile relative to kind of your expectations on those on that kind of basket of signal peak wells that came on earlier in the year.
<unk> next question is more geared to operations I'll, let you answer that absolutely.
Thank you for the question absolutely we've had the two rigs running constantly Val in signal peak.
As with the rest of the company as a whole we don't have any operational anything other than operational docs.
So to that point as we've been drilling wells in signal peak, we've been bringing them on we're pleased to announce that we've now got wells in the Wolfcamp D delineated all the way across both Hana onto the west and IP legacy to the east fully delineated across signal.
We've been bringing on wells as we drill and complete them.
We've had a couple of wells come on this quarter in signal peak and they come on looking very similar to the other wells that we had the quarter. Prior so again very pleased with our Wolfcamp D performance.
As well as we brought on a well from the very southern portion of our signal peak area that is performing the same actually a little better than some of the wells to the north. So again extremely pleased with the Wolfcamp D. We have mentioned the lower sprayberry Wolfcamp a wells.
We drilled kind of in the center of our signal peak pro forma block.
<unk> wells, we're extremely excited about they are very similar in production profile to our lower sprayberry and Wolfcamp a up at flat top and as you know the economics are fantastic. So I think it would be reasonable to expect we're going to drill several wells out of the 18. The rest of this year that will be turned online.
Some of the wells, we drilled this well this year, where we turned online in 'twenty three.
Between now and the end of the year, we will drill some additional lower sprayberry.
Down in signal peak.
Got it.
I'll add a little bit to what Mike said from a geological perspective, almost half of our acreage to the west.
Has the Wolfcamp, a and the lower sprayberry in terms of locations and if you refer to the appendix you can see how many locations we have in terms of developing that area not only in the world.
The lower sprayberry, but also considerable number of locations and the Wolf B and will be delineating that further.
Throughout the next 12 months. So it's turning out great. We're very excited about it and of course very pleased about increasing our acreage position in that area.
Excellent.
And.
Kind of looking at it a little bit at the big Okay.
From production.
Thank you.
Previous guidance given after the hand upon announcement I think was.
Kind of mid thirties for.
Barrels of oil production.
For the year.
Seems like a pretty big.
Uptick for the second half of the year is that I mean, we all still comfortable with with the targets.
With the exit rate that I think you have given.
For the 2022 and that full year production guidance kind of width.
Where production is and kind of where you all expect to be with these large number of wells coming on in the second half of the year.
Yeah.
We both Mike and I will visit on this particular question, a little bit and respond to it.
We of course have not changed our guidance and we're very excited it all depends on how much interference we have across our entire block as were fracking additional wells, but we definitely are going to have a growth in <unk>.
Used mid Thirty's.
And the.
By the end of the year.
We think that it will be a much better number than that.
We are excited about.
Keep maintaining our production growth profile going forward.
We will continue with six rigs drilling to continue that growth profile and if anything relative to looking at per pass is also going to happen in the future.
<unk> production in a quarter I don't think we're going to have that kind of growth that will be very good.
Very much on par with what we are projecting Mike go ahead, you bet, Nick Yes. Your number of the kind of mid <unk>. There. That's an average for the year and that is pro forma Hannah <unk> with an effective date of January one so just keep that in mind when you're looking at.
<unk> average number now exit numbers and again, we closed that so the.
Production volumes, you will start seeing basically in third and fourth quarter. So that is part of that step up jump that youre talking about.
And then also on slide.
Five youll see a large number of wells that are kind of in progress to be turned in line.
As you go forward in time kind of an average run rate for high peak running the six rigs will be roughly 30 to 33 wells a quarter.
And you can see a big number of those 10 were turned in line kind of mid July .
To answer that question, yes, as we picked up activity over the last couple of quarters going from two to four to now six rigs. Yes, we will have a large number of wells coming online towards the end of the year and a large production response associated with that so.
Year in kind of exit rates are going to be very similar to what.
What we put out as guidance.
But again your numbers are pretty close there none of run rate Jack had mentioned kind of interference from offsets.
Simulations.
Again as you pick up activity, obviously, you affect more wells as you pick up frac.
<unk> frac crews and start fracking additional pads.
The good news is as we've been running our three frac crews for quite some time now so that that effect is immediate when you pick the frac crew up and start fracking it affects roughly within about a week starting that so.
Our run rate going forward has that offsets kind of baked into it going forward in those projected numbers.
Thank you and our next question comes from the line of Jeff Robertson with water Tower Research. Your line is open. Please go ahead.
Good morning, Jack and Mike can you Jack.
<unk>, Mike just a question on the six rig pace and how does the decision around the around pad sizes.
And how you look at production and also the effect of interference when you when you bring wells on.
<unk>.
From a macro perspective, and I'll, let Mike go into more detail.
Once too Jeff if that doesn't answer your question, but from a macro perspective, we do not try to run the business on.
On the basis of worrying about shutting in production we.
We do what's necessary relative to the reservoir and relative to properly grow proper maintenance and proper care of the reservoir. So on any given day is Mike, saying, we might have as much as 6000 barrels a day with numerous offset well shut in.
As we drill but undoubtedly drilling pads and multiple wells on a pad is much more commercial much more.
Much cheaper from an operational perspective, so as you can tell we really focus on our profit margin and most of our decisions are made to protect the reservoir and not necessarily worry about production growth we.
<unk> going to have some lumpiness at times, some quarters are not going to grow as fast and if you look at our pathway literally headquarters that went down on production and then all of a sudden we get wells back online and all of a sudden our production is much higher than what we projected so it's not really a conscious.
Decision other than proper maintenance of the reservoir and protecting and getting the best crack the breath best process in place.
Anything.
You bet Jacky covered it very well hey, Jeff to your to your question about the six rigs and the Frac crews, we feel very confident that six is the right number for IP today.
And the capital split that we have for four rigs running up and flat top two data signal peak.
Seems to be again based on 100 different variables, but probably the biggest one for signal peak as we want to make sure that we have the infrastructure in place to be very efficient.
Moving into a development plan and mowed down and signals. So running the two rigs down there is the most efficient today now open top to your question about the number of wells per pad, obviously theirs.
There is competing things on either side, we'd love to be able to do as many wells per pad as possible.
To your point earlier timing is important it does take time to drill and complete each additional well.
Do bigger and bigger pads. So we have to be mindful of how much capital we deploy into an investment before we start receiving return. So again there are some competing factors, but we do feel like we've got the most optimal for where we sit today.
As Jack mentioned, yes, we do have some.
Every company does lumpiness in production growth.
Now in the past when Youre based volume was smaller and Youre, adding frac crews you saw a much larger percentage changes in that kind of lumpiness now from a forward looking basis. Our base production has grown significantly and as I mentioned before we have the three frac crews running.
Now as you move from one pad to another there will be small lumpiness, but going forward production will continue to increase each quarter. It may not increase by 100%, it's going to be quarters words, a couple thousand a day in other quarters, It's 10, plus thousand a day in a quarter.
So it's going to be up into the right and the Lumpiness going forward World will hopefully not be any lumpiness down because again the base is so large and we already have kind of an equilibrium amount of frac impact that we'll just live with those three frac crews as we go through time.
So again think up into the right and that Lumpiness will just be a little bit of flattening of that that kind of up into the right Kurt hopefully that helps yes.
That does and a question.
Moving to margins.
Obviously, you have some of the strongest margins.
The industry.
But Mike can you talk more specifically about the impact that the high line moving moving to generators off and blacktop could have on third quarter and fourth quarter now that they are the substation is fully operational.
You bet Jeff.
Today, we've got again, the 70% of the generators removed and on high line power.
Going through third quarter into fourth quarter, we will continue to remove the rest of them again. It takes a little time to run the highlight power lines out to the locations. So we kind of look for that full blown effect in the fourth quarter third quarter again, <unk> got about 70% of it generators locally in the field are an extremely expensive.
Ziv operation one you have to rent the units.
They don't run at a very high efficiency and then you have to supply fuel and as everyone knows depending on the fuel that you use whether its liquefied petroleum gas or it's CMG or even diesel at the worst.
All extremely expensive so.
Order of magnitude cheaper to go off of Highline power. So if we look into third quarter into fourth quarter.
You would see roughly and again, our volumes are increasing as well as we grow into third and fourth quarter, but our individuals Boe basis, Youre looking somewhere in the $1 25 in the third quarter and something a little north of that closer to the 150 ish range in fourth quarter for total.
Bowie difference.
But again remember as our production grows so too decreases our fixed cost.
G&A is continuing to level out at it at $1 BOE year less again, we've added these acquisitions grown production and not added a lot of staff. We've got a very competent staff that's able to scale. So again, we do see this margin expanding.
I appreciate you, saying in pointing out that it is an industry leading margin per Boe.
Very proud of that and blessed to be in the right spot that provides very very oily mix.
Thanks, Mike turning to Capex or you all outlined in our press release highlighted power on the one rig will save you about $90000 per well and I think stand with the wet sand will save about 300000 per well, but you also talked about servicing one.
Crew with recycled water can you talk about what that will save maybe on a per well basis.
You bet Jeff.
And we can do two frac crews now fairly close with just recycle fluid and we supplement that recycled fluid with non potable water from the Santa Rosa field.
And both of those have very similar cost structures. So when you look at whether we use one or the other we kind of look at those is virtually the same they do offset bringing in fresh water from local farmers and folks that need that fresh water to take care of crops and our livestock Howie.
You mentioned a very good point there is a huge difference in cost between supply.
Youre stimulation needs with freshwater are what we're doing here at IP with recycle and non potable water. There is roughly a $200000 a well difference in capex cost just for the stimulation fluid side and again as you mentioned the sand.
Being able to recycle on the low side as well seeing those savings. So a lot of we look at that equation Holistically, we wanted to attack all sides of it.
Great realized price, which we've gotten again from location being close to the refinery and close to gas plants, putting the infrastructure in place such that we can acquire that great realized price and again with that infrastructure and looking forward and making sure. We have all of these initiatives in place reduce our capex and opex.
Giving us a very high recycle ratio for this high peak machine Thats been built.
Thanks, I'll go back in the queue and see if somebody else has a question.
Alright, Thanks, Jeff.
Thank you and I'm showing no further questions at this time I would like to hand, the conference back over to CEO , Jack Hi, Taylor for any further remarks.
Well I just would like to say that everything is going along the way we've planned at our production is increasing our cost are going down and we will continue with the efficiencies that Mike just outlined with Jeff.
We are very very pleased with market conditions.
Nobody likes to have a decline in production.
Oil prices like we've had over the course.
Over the last two months.
But that can't stay very long, we will have times when oil prices go down we will continue to always have volatility in the market.
On the whole oil prices are going to continue going up into the right over the course of the next year to year and a half and.
And our production is going to continue going up into the right and our operational efficiency is going to continue to become better and better and lower cost lower G&A lower lifting cost with low.
So we're extremely pleased with what's taking place and we just we appreciate the support of the shareholders.
Honestly I think we're trading at a market price below what our peers are trading for hand, when you have production growth of doubling.
In effect in one quarter.
The market ought to start recognizing that this growth is going to continue and our stock price should start reflecting that growth.
Thank you very much.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Yes.