Q3 2022 Talos Energy Inc Earnings Call

Good morning.

And welcome to the Talos Energy third quarter 2022 earnings Conference call.

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I would now like to turn the conference over to Sergio <unk> Investor Relations. Please go ahead. Thank.

Thank you operator, good morning, everyone and welcome to our third quarter 2022 earnings Conference call.

Joining me today to discuss our results are Tim Duncan President and Chief Executive Officer, Shane Young Executive Vice President and Chief Financial Officer, and Robin fielder Executive Vice President low carbon strategy and Chief Sustainability Officer.

Before we get started I'd like to take this opportunity to remind you that our remarks. Today will include forward looking statements actual results may differ materially from those contemplated by these forward looking statements.

Factors that could cause these results to differ materially are set forth in yesterday's press release and in our Form 10-Q for the quarter ending September 32022 filed with the FCC yesterday.

Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

During this call we may present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures was included in yesterday's earnings press release, which was filed with the SEC and which is also available on our website at <unk> Dot com and.

And now I'd like to turn the call over to Tim.

Thank you Sergio and good morning, everyone and thank you for joining our call today as.

As we discussed in our second quarter earnings call. We knew we were going to have substantial planned downtime in the third quarter with the HP one dry dock in the shell Odyssey pipeline maintenance.

But despite these planned production outages, we surpassed our internal expectations for the quarter by controlling our operating costs, allowing us to generate substantial free cash flow in the quarter and to continue to rapidly delever our balance sheet.

Over the last six quarters, Telus has repaid approximately $450 million of debt, which equates to approximately $5 40 per share outstanding in debt repaid over the period.

In the third quarter alone tells payback of 140 million in our credit facility.

This is another record breaking quarter on the balance sheet for tell us our leverage metric is now 0.8 times the lowest level in the company's history and Telus is liquidity is now more than 800 million the highest in the company's history.

We continue to generate and cultivate several catalysts to make our business unique which include a robust organic drilling inventory growth in our carbon capture and sequestration business and the pursuit of accretive M&A opportunities.

On the drilling side, we kicked off our deepwater drilling campaign in the third quarter, which is expected to continue into 2023, and which exposes talis to significant additional organic resource upside if successful these opportunities could represent tens if not hundreds of billions of barrels of oil equivalent of additional resources on a gross basis.

Because most of these projects are not currently in our reserve report they could add significant growth to our proved reserves and had multiple years of reserve replacement, which makes it very exciting times in the months ahead.

It should be noted that most of the prospects, we expect to drill in the coming months regenerated in house by our very talented team of Geoscientists. These leases are typically acquired in M&A transactions are through federal lease sales and our initial ownership levels are usually very high Austin, a 100% working interest after applying our seismic reprocessing techniques to better define the project.

Potential. We then look to farm them down to a talus ownership level that fits our capital allocation strategy I think the fact that we were able to attract such sophisticated partners for these projects who include BP Chevron and Oxy ACA patrol and Walter oil and gas among others speaks to the quality of these opportunities.

Another major catalyst and we continue to be excited about is our tell us low carbon solutions business focused on carbon capture and sequestration. In this business. We are primarily focused on four parallel priorities working with our industrial partners to secure long term contracts for the transportation and sequestration of their C O to securing additional storage capacity straight.

<unk> existing partnerships and forging new ones and finally, advancing the engineering and feed work in our existing portfolio of projects.

Since the inflation reduction act was passed into law, we have seen a renewed enthusiasm by industrial emitters and a heightened commitment to moving forward with their decarbonization goals. We believe several of these work streams will lead to positive milestones by year end and I'm extremely confident that our Ccs business will be a significant contributor to Dallas as earnings and cash flow and they come.

In years.

Lastly, we believe that acquisition opportunities are also a key catalyst for us as a logical acquirer in late September we announced the strategic acquisition of <unk> energy, a private Gulf of Mexico, operator for $1 1 billion through a combination of stock and cash consideration. We are very excited about the industrial logic of owning these assets, which can.

Just a deepwater oil weighted production through operated infrastructure across the basin.

We expect the transaction will bring significant additional scale, including approximately 24000 barrels equivalent a day to 2022 estimated production and approximately 78 million barrels equivalent of proved plus probable reserves as well as increased asset diversity, reducing field level concentration and doubling our operated deepwater facility footprint.

The transaction is financially attractive to talis shareholders as well and is expected to be accretive to 2023 free cash flow per share and to be immediately deleveraging to our already strong balance sheet. Lastly, the acquisition improves our G. H G intensity metric and will be a catalyst to declassify, our board of directors and enhance its independents to better and.

Line with shareholder interest going forward.

We are convinced that this transaction checks all the boxes that investors expect from M&A deals. The overwhelmingly positive feedback we received from shareholders in our stock performance since the announcement reinforces that belief.

As an update on the regulatory process to close the transaction, we received overwhelming support from tell us noteholders and attained in obtaining consent to bring inventor assets in bonds into the Telus credit profile at the closing of the transaction.

Having all assets on one balance sheet allows us to speed up and maximize the capture of the synergies we expect to achieve.

After the expiration of the Hart Scott Rodino review window last week, we filed our form S. Four registration statement with the SEC, depending on the potential FCC review timelines, we expect to close the transaction in either December or January .

I'll briefly address the third quarter and provide key operational updates before turning the call over to Shane to walk through the quarter in detail.

The production for the quarter was 53000 barrels of oil equivalent per day, which is 67% oil and 75% liquids. This is inclusive of the planned dry dock and maintenance for our H B, one floating production unit and the planned maintenance of the shelves Odyssey pipeline system in Mississippi Canyon. The combination of these two plants planned downtime activities resulted in production deferrals.

<unk> of approximately 8000 barrels of oil equivalent per day for the quarter.

In the third quarter, we experienced very strong loop current in our production operations and drilling operations, specifically in the Green Canyon area of the deepwater Gulf of Mexico.

These loop currents only affect dynamically positioned vessels since those vessels rely on their own thrusters to maintain their position, while moored and fixed platforms are not impacted by these current because floating production units like the H P. One and deepwater drilling rigs are dynamically positioned they are impacted by loop currents stress created.

By constant loop currents cause staebell extended shut ins on the HP one in the third quarter. This production Intermittency and the Phoenix field related to the loop currents resulted in an additional 1000 barrels of oil equivalent per day for the quarter up unplanned deferred production the.

The loop currents continue to impact production from the HP one in the first few weeks of the fourth quarter as well, although conditions have recently improved and currently running as expected.

On the drilling operations front, we took possession of our deepwater rig the sea drill Savannah, Louisiana in August the first operation was an uphold re completion and our bullet project.

After very encouraging completion results of the targeted zone, we encountered operational difficulties associated with similar loop currents in the area, we decided to temporarily suspend operations on that project and move the rig from the Green Canyon area to the Mississippi Canyon area. We plan to return to re completion project in the first quarter of 2023 to finalize the work and bring the well online.

Our drilling campaign in the Mississippi Canyon area, starting with our lime rock prospect near our operated ramp out facility lime rock will be followed by our biggest project also by our Ram Powell facility.

We will then wrap up the bullet re completion before starting a rig lease prospect, which if successful could be tied back to our pompano facility and each of these new drill exploitation projects, we have secured joint venture partners.

We'll participate at a 60% working interest in each and each of these projects could deliver five to 15000 barrels of oil equivalent per day gross within 12 months to 18 months of achieving a successful result.

We have additional options with the rig and we're finalizing the planning for our 2023 capital program. We are confident this exciting program of lay a solid foundation of production growth and additional organic reserves growth in 2023 and 2024.

Beyond our operated rig program. We're also participating in a number of interesting non operated exploration projects, we spud the appraisal well for our Puma West project in Green Canyon in October and anticipate those results in early 2023. Additionally, we completed a multi block cross assignment trade with oxy covering over 46000 acres in the green.

Kinion and Walker ridge areas and expect to drill a high impact sub salt Miocene prospect called Penn Sharon on that acreage in early 'twenty 'twenty three we highlighted some attributes of that project in our analyst day presentation back in May and that a project named Camelia, but we hope to share more details on that project as part of our 2023 guidance, which we intend to rollout into Clos.

<unk> of our infant transaction.

In summary, it was a busy quarter and the team has managed through the downtime challenges by focusing on operational execution, while continuing to use our excess free cash flow to put our balance sheet and the healthiest position it has ever been now.

Now we are well positioned to focus on key catalysts as we closed out the year and exciting deepwater drilling program and closing and integrating and at very attractive M&A transaction and the continued development of our carbon capture and sequestration portfolio with that I'll turn the call over to Shane to address some additional details for the quarter.

Thank you Tim and thank you everyone for joining us on our call. This morning.

I'm also very pleased with our performance during the third quarter and this morning I'll focus on three topics.

First I'll provide further details on our financial results for the quarter.

Next I will focus on the strength of our balance sheet.

Finally, I will provide some guidance on the balance of the year.

During the third quarter, we produced 50 653000 barrels of oil equivalent per day inclusive of approximately 9000 barrels of oil equivalent per day of mostly planned deferred production from the HP, one dry dock and third party midstream downtime as well as other operational developments, which Tim referred to earlier in the call.

We receive strong pricing for our production in the quarter with realizations of over $90 per barrel of oil Ngls at 36% of our realized oil price and over $9 35 per Mcf on natural gas production.

This resulted in total revenue of $377 million.

Net income for the quarter was approximately $251 million or roughly $3 per diluted share and adjusted net income was approximately $63 million or <unk> 75 per diluted share.

In the third quarter, we generated adjusted EBITDA of $197 $6 million or $278 7 million before the cash impact of hedge settlements.

On a per barrel of oil equivalent basis. This translated to adjusted EBITDA margins of approximately $41 per Boe.

And adjusted EBITDA margins, excluding realized hedge losses of approximately $57 per Boe.

Those represent 67% and 74% margins respectively.

After capital expenditures of $129 million and interest expense, we continued to generate strong free cash flow before changes in working capital.

Generating $39 $4 million during the quarter.

This brings total free cash flow generation for the first nine months of the year to $265 million.

Turning to the strength of our balance sheet during the third quarter, we repaid another $140 million of borrowings under our revolving credit facility.

Or approximately $1 70 per share.

<unk> the balance of the Army L to just $60 million outstanding at quarter's end.

This is down from $375 million at the beginning of the year and leaves our army L. Approximately 93% undrawn relative to our commitments.

As of September 30th total debt stood at approximately $665 million.

Since the first quarter of 2021, when we refinanced our bonds, we've reduced debt outstanding by approximately $450 million were approximately $5 40 per share.

At quarter's end liquidity stood at over $800 million, while leverage stands at 0.8 times net debt to adjusted EBITDA, the lowest level in the company's history.

We're very pleased with our rapid deleveraging and repayment of outstanding debt in recent quarters.

I expect deleveraging to continue through the remainder of 2022, albeit at a slower pace as our capital program has ramped up with the addition of our open water drilling program.

I expect further deleveraging into 2023 is our legacy hedges roll off.

Moreover, the closing of our transaction with inland is expected to further strengthen our credit profile going forward.

Currently we are launching our fall borrowing base redetermination process and we'll update the market. After we have concluded it later in the month.

Finally, turning to our financial guidance for the remainder of the year as outlined in our earnings press release from last night, we expect production for the fourth quarter of between 56, and 57000 barrels of oil equivalent per day.

This is inclusive of three and a half to 4000 barrels of oil equivalent per day of anticipated deferrals from ongoing loop currents and downtime at non operated Delta House.

Putting us slightly below our full year production guidance provided at the beginning of this year.

Fourth quarter production is also impacted by the timing shift on the re completion that Tim mentioned from the fourth quarter to the first quarter of 2023.

As well as by lower royalty relief for gas volumes, given the higher price realizations, we've experienced in 2022.

We continue to expect cash operating costs and general and administrative expenses to be within our original guidance range with inflation pushing them towards the upper half of that range.

Lastly, as previously discussed during our second quarter earnings call, we expect capital expenditures towards the high end of our guidance range due to continued inflationary pressures and non operated capital project timing.

We currently expect fourth quarter capital expenditures to be between 170 and $180 million inclusive of P&A expenditures.

We will have more to say about the 'twenty 'twenty three outlook around the time of the closing of the invent transaction.

With that I'll now turn the call back over to Tim.

Shane when we built tell us we made a decision to stay in the Gulf of Mexico, because we believe that over time, it would generate more significant investment opportunities in other basins as I reflect on where we are in the lifecycle of Dallas, we celebrated our 10th anniversary in over four years as a public company I'm extremely excited about the opportunities ahead of US our team continues to deliver in <unk>.

Tactful drilling opportunities, we believe we have positioned ourselves as a counterparty of choice an assortment of business development opportunities and.

And we've used our in house skill sets to build out a low carbon business that we think will differentiate ourselves from other small and mid cap public e&ps.

In market terms I believe we have one of the largest alpha generation opportunities out there to continue to build long term shareholder value now and in the future.

With that operator, we'll open up the line for Q&A.

We will now begin the question and answer session.

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Okay.

Yeah.

And our first question here will come from <unk> Chandra with the benchmark company. Please go ahead.

Hey, good morning, Tim So and chain address the loop current issue quantified it. Thank you for that.

But we'd ask you would you speculate what exit rate could look like in the fourth quarter.

Now with some of those loop current issues I guess subsiding and maybe even further into first quarter. When you add the re completion.

Well you know so there's two bus how are you yeah. It's interesting on the loop current yeah I would tell you just as a general matter they haven't really impacted us over the last couple of years. Those are things that are seasonal they they hit different parts of the Gulf of Mexico, I think last year. They were lingering around the Mississippi Canyon area. This year, they're lingering around the Green Canyon area. So frustrating.

Hard to operate and again it doesn't impact everybody. It impacts those vessels that are dynamically positioned and obviously, we have one of those and the HP. One so we knew the quarter would have the HB. One volumes are you know a lot removed for most of the quarter and then we thought hey, we will get the ship hooked back up and get a lot of those volumes back and then the loop current challenge that thesis.

Things have returned to normal I would say to think about how to build that right back up. So we have some non operated facilities that are doing some repairs and maintenance that we generally knew about the loop currents.

Where something that's a bit of a surprise those have subsided. So we should get those volumes back as we exit the year and then we had that bullet re completion, which is several thousand barrels a day of volume that we would think to get back.

In the first quarter now keep in mind, we've got a platform.

One rig running its doing a project called mountain Hunter, we think that could come back in the first quarter. So.

We've got I think as you think about building back production you've got some of the planned.

These are compressor change out projects that are in this fourth quarter guidance, we knew about a lot of that that's fine that builds back up there's some contingency on any potential weather, maybe we don't need that contingency that builds back up and then the bullet re completion getting back on that which is also a kind of a victim of the loop currents, you'll see that build back up in the first quarter and then Mt.

Hunter, which I just talked about and then if you kind of go forward from that Sue Bostrom, just start thinking about where this all goes over the next kind of 12 to 18 months.

As we work on our drilling program began we have a platform rig program on the Pompano area. We have an open water rig program, we talked about Mt. Hunter, we talked about the bullet re completion, then it goes and execute three straight actually maybe even four straight of these really simple tie backs and these are right off the ramp how facility I've talked about one off the pompano facility.

If these are successful they can add five to 15000 barrels a day equivalent gross we own 60% of those and so you can start to see how these things could stack up in the second half of 'twenty three and into 24, that's what we get pretty excited about what we're doing on the non op side in open water Puma west the pinch arrow prospect with Oxy those don't have immediate impact on <unk>.

Reduction, but they are really big impact on potential reserve. So theres a lot of moving pieces, but if you really start to stack. The catalyst together I think it's pretty exciting and then when you look to where we're trying to go with the invent assets. They have their own platform rig program they've done great work in the lobster field and then they have an open water program, that's going to be delivered in the first quarter to go.

A couple of interesting tie backs similar to what we're doing with our tie back so when I look at the combined businesses you know a little choppy fourth quarter I get it you know nobody loves it but you got to be pretty excited on where this is going as you get into the first quarter and you look out the next 12 to 18 months.

It's Tim.

Comfortable putting any numbers around sort of the first quarter expectations.

No I think hopefully I gave you enough anchors to start to build some of that out I mean, we're we're trying to do is get this transaction closed as fast as we can and we're working through kind of the S. Four filing hoping that goes effective and then when we get this closed I think we're gonna roll out you know a lot of things with our closing our vision to the pro forma business, how we think about guidance for next year.

How do we think about capital allocation all of those things will kind of come through closing, which look at the end of the day could be by the end of the year or just sneaks into January but you.

You know I would say the active programs that we've put together is going to build everything back up to a point that we're gonna be pretty satisfied with.

Okay.

Look forward to that.

Follow up perhaps for you and Robin So now we're seeing.

So with the U S sort of dominating.

Cts projects globally whole bunch of different announcements et cetera.

Broadly can you sort of put <unk> in context of that sort of where your competitive advantages are in there as well.

We know the projects you have et cetera, but as you go forward you know I'm, assuming you're seeing a lot more competition out there sort of what's your brand provides that others don't.

Yeah, Let me, let me start with that Sebastian I'm going to hand, it over to Robyn will maybe piggyback that and I think you know look congrats on some of these announcements we've seen from some of our peers and friends and competitors.

I think they would tell you they don't whatever you might have read in the last two weeks, probably took months and months and months to negotiate these things aren't aren't quick and so that's why I think in the call I talked about I'm pretty excited that we still have some milestones that we intend to try to achieve by the end of the year and so I think there's a lot still coming from us on what we've been putting together.

Generally our advantages and we took it very early as we really understand the Gulf coast geology and into geology and extends into the state waters were nimble we move fast.

And I think that was reflected in and why Chevron chose to partner with US just for example, Robin in southeast, Texas, and so what I've talked about in the call was these parallel paths Robbins teams working on between enhancing the storage space, which is really geology based getting are things permitted talking two emitters, even enhancing partnerships and I think you're going to see more.

More milestones around that and Robin you know provide some your views as well.

Yeah, I'll Echo that I think are our advantages being a first mover here getting some very strategic leasehold.

We're approaching 1 billion metric tons of C O two storage across the U S Gulf Coast and when you look at what we've got in for announced project areas.

And so that's it.

That is allowing us to have those discussions with the partners, whether they be customer attracting additional equity partners and as you know we brought in chevron into our buy even projected ourselves in carbon parts last quarter.

And so it's very exciting right now we are seeing and others start to build their positions I feel like there are a few quarters behind and so for US. It's just continuing to progress on some of the other milestones as we collect the data we need for a permit and advancing pre feed and feed activities.

I think we've mentioned.

Just the enormity of the level of emissions from if you just would call that more of an addressable market, even though obviously youre not going to remove all of them, but the enormity of that market relative to the amount of different places where you can have a good storage kind of unit kind of good carbon storage infrastructure I think the point that you're going to say if you look out five years from now.

The announcements you've been reading this week theres going to be a large just a large amount of those types of announcements theres, absolutely plenty of room for our peer companies to achieve their goals on Ccs for us to achieve our goals on Ccs and still needing to do more to address the broader emission story. So it's.

It's a big market and I think we're well positioned and again well positioned with a partner like Chevron and one of those and you know I think we're gonna enhances partnerships and some of the other areas as well.

Okay and not to Overstay My welcome here in the Q&A just one final one.

So you talked about a sort of year end side, you know announcement on Ccs could you specify sort of in what category that might be thank you.

Hopefully multiples but.

I mean look I I can't you know when you're working in for kind of parallel things you've got things youre doing with respective projects you already have such as good strat well done get that classics permit filed you've got more again carbon storage or trying to go get around your project areas, you've got different partnerships discussions you're having in an ultimate.

Amira discussions it can come from any one of those four places and I certainly am not going to preview any one of those in particular, but our job and look they they move at different speeds and I think that's part of the point to Somebody's then can come together pretty quickly in somebody's just the conversations drag out because we're thinking of these negotiations on something for the first time, so there's a lot of that.

Turning out there in this space. They are really our first time type contracts and I think we'll all admit they go a little slower than we anticipated, but not for the lack of effort. So I don't know which of those four gets you. The next milestone, but I'm I'm I'm pretty confident it'll be one or two of those.

Thank you.

Our next question will come from Jeff Robertson with water Tower Research. Please go ahead.

Thank you good morning.

Tim.

Well the tornado will have any impact on overall operating cost of early early water breakthrough.

You know maybe a slight one it's not I don't think it's too bad.

A lot of what we're doing Jeff is we're just we're still managing a total liquid numbers. So.

These two wells were producing gross somewhere between 16 and 18000 barrels a day you still have 16 to 18000 barrels of liquids a day, but part of that liquid is substituted by the water. There are some fees. We collect this tied to oil and so you might have some of those fees go down and.

But at the same token that that's facility when it's running right has tremendous up uptime and.

And again I do think youre going to have we're going to have synergies when we put the nbn assets together that I think offset some of that so I think it will be negligible. When we think about margins broadly in and you know again, it's important that we are transparent about these things, but this is a this is a project just to kind of put it in perspective.

I think it was producing a it produced about 30 million barrels across those wells are when when we decided to go ahead and do the water injection project, which is a pretty novel first of its kind all intra water inside the same wellbore and has produced 15 million barrels already since then and you can imagine the prices in which we produced those barrels. So this is.

A heck of a project that's got a lot of years left again, a little more water volume early that's really only have one of the wells. The other wells is is in good shape and it's asking like it's supposed to act, but probably broke through a couple of months earlier than our model and so you know speaks to some volumes, we felt like flushing through but you know I think again great <unk>.

Jake that's something we'll manage.

Jim can you comment on the Nbn.

Platform rig program they have taken their lobster area and also.

In terms of.

Are those projects that would add production throughout 2023 or like some of the things you spoke of with respect to Carlos.

Would it be more back half weighted or for 2024.

Well I would tell you. So that's an asset in that lobster field that like many of the assets that <unk>, we looked at it and tried to bid on it and good on them and they kind of between the bid and that's what makes it so interesting to kind of come back to these assets and so we've admired the work they've done over the last four to five years in that asset they've had a platform rig.

And it's one of those fields that when it's got the right team focusing on it. They can just continue to churn up opportunities.

When you have a constructive oil environment, you can turn up new opportunities and so.

They've had an active program for the last four years, they've really done a fantastic job. We don't see any reason to change that at least for the next nine to 12 months and so.

That is absolutely the type of program that where if you have success then you turnaround and you have production. So that's a great way to get consistent production from your assets is is when you have those type of redevelopment opportunities and so if you look at the combined businesses you would have two platform rig programs going at the same time, you would have to open water rig.

Graham's going at the same time and you know starting in the first quarter of next year with their open water rig those are going to be that 12 to 18 month payback top up type of opportunity and then we'll have a non operated program going which is for the high impact stuff like Puma West. So you've got the full complement of opportunity. Some near term volume somewhat I would call mid term volume 12 to 18 months.

And then the bigger chunkier stuff that if it works it may be several years out, but it'll be very impactful when it gets there so.

Pretty bullish on how we're putting the program together and how it adds both rate and reserves kind of over the next 12 months to 18 months.

Thanks, Doug.

Shane a question on the mechanics of the S. Four will.

How long can you go with the SEC before they would require you to drop.

Our September 30 financials in.

Oh, yeah. So when we look to say we would we would have to do that today, we will re filed today. The September 30 numbers now that we've filed our September 30 numbers, we're gonna have to roll those and as well for and then into <unk>.

Subsequent filing.

Probably.

Yes.

So at some point there'll be an amended filing with September 30.

That's correct.

Okay.

Yep, Thanks, Jeff perfect.

Our next question will come from Nate Pendleton with Stifel. Please go ahead.

Good morning, Thanks for taking my questions you.

You bet My for my first question, maybe for Robin going back to earlier on Ccs based on the favorable geology, along the Gulf Coast for Ccs do you have any indication about the potential India activity per well that youre projects could achieve and how would that compare crusher projects, especially onshore versus offshore.

Hi, yes. Thanks for the question and we've been planning kind of in a range of about one to one and a half million tons per annum of injection per while it's really going to be about how you size. The wow. The wellbore itself been a wellbore construction design and so we see that it can be fairly similar whether it's onshore or offshore.

There will be stand.

A few things that are that are designed a little bit differently, but that's part of the BD of having a portfolio is we really want this approach of design one construct many where we can build in efficiencies across our project portfolio.

Yeah. It doesn't change it's funny when you go from producing a well to injecting NOL you know the theory is really around rock properties and thickness or what we call cage and so that you know that productivity index did you create when you produce a well isn't different when you go and check the well so some areas might have better rock properties, but a thicker section in some areas might have at the intersection of a better <unk>.

Properties and so it just depends and that can change, but generally when you go 10 miles into the coast or five miles off the coast of geology isn't dramatically different yeah. So these should take a few wells that we will we'll go drill in many of these areas well will help us getting confirmatory data.

Better understand the rock properties will collect some additional data there and not just for the permitting but I'll say, that's where we're planning for and inject injection.

Great. Thanks for the detail and as my follow up is you talked about earlier there had been several large greenfield Ccs project announcements along the Gulf Coast.

Given the significant brownfield opportunity surrounding your projects can you speak to your appetite for developing additional sequestration sites and any challenges to adding those sites and also maybe could you comment on if your team is interested in taking you expect heat expertise beyond the Gulf Coast region.

Yeah, No I really appreciate the question, it's a great one.

So yes, there is a lot of current industrial emissions and many of these regional corridor, which we've already got an established leasehold.

But in some of these areas that there will be greenfield investment as well you know one of our projects the coastal <unk> project and around the port of Corpus Christi, and it's been a very large energy export hub, when we think about hydrocarbons, but they've been very vocal about wanting to attract new investments and participate and what we're calling a balloon.

Economy that he can decarbonize wednesday's youll can products on the front end.

And the thought is over time, they will they will get a premium or at least be a preferred supplier as as those types of products are getting exported globally. So yeah. We're we're certainly having conversations with I'd say letters in both categories, sometimes it those who have existing facilities today, but are looking for new investment and part of that is.

At part of getting to their final investment decision will require a de carbonization solution in place. So that's where we've got a strategic foothold in a storage site in the region and it really gives us a leg up to have some of those conversations and then to your second point about other areas I'll say I'll say, yes, we certainly have some of that.

The world's best geologic rock properties, along the Gulf Coast.

Which is great for for hub scale, but as we think about some of these point solutions, where we're developing and designing a very bespoke solution for a particular customer that when you've got the emitter upfront.

We are exploring some of those opportunities as well and that's where we think as.

And that's at an independent we can kind of play in both worlds and have that diversification and our low carbon portfolio. Yeah, yeah. The only thing I'd reiterate there as in Robin's exactly right.

Hubs, along the Gulf Coast are Super interesting partner with folks like us.

Chevron in southeast, Texas, absolutely interesting and excited about that but because we're a smaller company. We can kind of work on things that are what our point store small nimble maybe in an area wouldn't immediately think of just because someone's thinking about new construction and wants a solution and that may not be big enough for some of the majors that are playing in the space. So I think we're just trying to.

Flexible and use the expertise we're building every day to figure out how to monetize that and more value you know kind of in this low carbon space. So I'm I'm actually excited about how we can build a portfolio of not only participating in hub registration.

But also a point source and in different parts of the Gulf Coast, and then outside the Gulf Coast.

Awesome, Thanks for taking the questions.

You bet.

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Okay.

Okay.

Okay.

And with no remaining questions. We will conclude our question and answer session I would like to turn the conference back over to Tim Duncan for any closing remarks.

Oh, great. Thanks for joining us today on the call and I would tell you what we're most excited about and hopefully came through is where the catheter programs moving with respected catalyst. We think we are in the business not only on the drilling and the organic side, what we're trying to do and get wrapped up and announced on the Ccs side and then we just have a big transaction that we can't wait to get across the finish line and so.

The next time, we speak with our Investor community I think we're going to be a bigger company and we're going to really roll out the vision of what that bigger company wants to do and what it's going to look like and what it's capable of and I think it's going to be absolutely extremely exciting. So we really look forward to the next time, we get together and talk about that.

The vision of the pro forma company and until then thanks Participative supporting this call and those who have interest certainly know how to get a hold of us and we look forward to speaking with you. Thanks.

Okay.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Okay.