Denbury Inc. Q1 2023 Earnings Call

May 4, 2023

Are in listen only mode. Later, we will conduct a question and answer session.

I would now like to turn the call conference call over to your host for today's call Brad Whitmarsh head of Investor Relations. Please proceed sir.

Hey, good morning, everyone and thank you for joining us today.

I hope you've had a chance to review the earnings release and the supporting materials that were issued yesterday afternoon.

These items are available on our website at <unk> Dot com.

Want to remind everyone that today's call will include forward looking statements that are based on our best and most reasonable information.

There are numerous factors that could cause actual results to differ materially from what is discussed on today's call.

You can read our full disclosures on forward looking statements and the risk factors associated with our business in the slides accompanying today's presentation.

Our most recent SEC filing in yesterday's news release.

Also please note that during the course of today's event, we may reference certain non-GAAP measures.

Conciliation and disclosure relative to these measures is provided in today's earnings release as well.

This morning, our prepared comments, which are estimated at approximately 10 minutes will come from Chris Kendall, our president and CEO .

Mark Allen CFO , David Shepherd C O O.

Nick Wood SVP of carbon solutions, and they hand SP SVP of business development and technology are all here to participate in the Q&A.

With that I'll turn the call over to Chris.

Thanks, Brad and good morning to all of you who are joining us today.

Make a few opening comments and then we'll open the call for your questions.

Looking back it's now been three years since the enhanced 45 Q six U S tax credit was published in the Federal Register.

Our vision at the time was a Denver, a deep C O two expertise and our extensive strategically positioned <unk> infrastructure would propel us into a leadership and a new high growth <unk> industry.

Three years later, we are well along that path.

Denver is unique and important role in the industry is more clear today than ever and our view of the possibilities and value of this business has only grown greater.

This is all on top of an already strong.

Our business.

It is an incredibly exciting time to be a den Berg.

This morning, I will focus on three primary areas highlights from our first quarter results.

On good progress on our CCA enhanced oil recovery development.

And new accomplishments toward advancing our Ccs strategy.

We've had a great start to the year Denver delivered strong first quarter operating and financial results across the board.

Our safety performance continued near record levels and production pricing and all of our cost items were in line with our annual guidance.

Operating cash flow before working capital changes totaled a $140 million for the quarter exceeding our development capital expenditures by $20 million.

We also spent nearly $9 million and our asset retirement program for our most mature fields and invested $7 million through equity investments and two carbon capture technologies ion and Aqua.

We ended the first quarter with $672 million in liquidity and $68 million of debt with a modest increase in debt from year end, primarily due to annual working capital outflows for bonus and AD valorem tax payments.

Nick Wood SVP of carbon solutions, and Matt They hand, SP SVP of business development and technology are all here to participate in the Q&A.

With that I'll turn the call over to Chris.

Okay.

Thanks, Rob and good morning to all of you who are joining us today.

Sales volumes in the first quarter average around 47700 Boe per day.

A few opening comments and then we'll open the call for your questions.

More than 1000 Boe per day sequentially with the various ins and outs described in more detail in our earnings release bottom line. We are on track with our plan and we see production relatively flat in the second quarter.

Looking back it's now been three years since the enhanced 45 Q six U S tax credit was published in the Federal Register.

Our vision at the time was a Denver, a deep <unk> expertise and our extensive strategically positioned <unk> infrastructure would propel us into a leadership and a new high growth industry.

On the capital front.

$510 million remains our midpoint for the year and we expect capital to be modestly higher in the second quarter with <unk> being the primary driver, including anticipated storage site acquisitions, such as the one we just announced and other pre development spend.

Industry.

Three years later, we are well along that path.

Denver is unique and important role in the industry is more clear today than ever and our view of the possibilities and value of this business has only grown greater.

In early April we took advantage of strong oil prices to round out our hedge portfolio in the second half of 2023 and to layer in additional hedges in 2024.

This is all on top of an already strong.

Our business.

It is an incredibly exciting time to be a den Berg.

This morning, I will focus on three primary areas highlights from our first quarter results and update on good progress on our CCA enhanced oil recovery development.

Turning to the Cedar Creek Anticline, we are very pleased with what we've seen so far on the CCA <unk> project.

With our first recycled facility online at Cedar Hills South.

New accomplishments toward advancing our Ccs strategy.

We are monitoring production performance associated with this facility and now expect to see first EUR production. This quarter from this game changer asset.

We've had a great start to the year Denver delivered strong first quarter operating and financial results across the board.

Our team is now commissioning the second <unk> facility and two more are scheduled to be brought online late in the third quarter.

Our safety performance continued near record levels and production pricing and all of our cost items were in line with our annual guidance.

We still anticipate incremental EUR production to ramp to around 2000 barrels per day by the end of this year and to peak in a range of 7500 to 12500 barrels per day in the latter part of 2024.

Operating cash flow before working capital changes totaled $140 million for the quarter exceeding our development capital expenditures by $20 million.

We also spent nearly $9 million and our asset retirement program for our most mature fields and invested 7 million through equity investments and two carbon capture technologies ion and Aqua.

I'm extremely proud of the work our team is doing at CCA.

As a reminder, CCA is the largest DLR project, we've ever worked on with 400 million barrels and potential recovery.

We ended the first quarter with $672 million in liquidity and $68 million in debt.

It will drive 2024, and 2025 production growth for our company and as it ramps. It will also improve our cash margins.

With a modest increase in debt from year end, primarily due to annual working capital outflows for bonus and AD valorem tax payments.

In addition, the Cotwo injecting is 100% industrial source. So all of the new volumes are expanding the scope of our carbon negative blue oil operations.

Sales volumes in the first quarter average around 47700 Boe per day.

CCA will be a significant contributor to our overall goal of being scope III net zero by the end of this decade.

As the CCA project highlights the EUR side of our business is fundamental to the execution of our Ccs business.

On the capital front.

<unk> Barry has the near term ability to take upwards of 10 million tonnes of captured industrial cotwo per year into EUR.

Our <unk> business provides strong cash flow that can be deployed in <unk> investments and it supports the development of the technical and operating capabilities as well as the pipeline infrastructure necessary for <unk>.

In early April we took advantage of strong oil prices to round out our hedge portfolio in the second half of 2023 and to layer in additional hedges in 2024.

The unique combination of these competencies capabilities and assets sets them very apart in the industry.

Turning to the Cedar Creek Anticline, we are very pleased with what we've seen so far on the CCA <unk> project.

Our 2023 Ccs activities are highly focused on both expanding our dedicated CODI storage network and continuing to build the scale and diversity of our Cotwo transportation and storage agreement portfolio.

With our first recycled facility online at Cedar Hills, South we're monitoring production performance associated with this facility and now expect to see first EUR production. This quarter from this game changer asset.

During the first quarter, we drilled our first stratigraphic test wells at the Orion site in Alabama in support of our classics process. We were pleased to see reservoir characteristics very consistent with our expectations.

Our team is now commissioning the second Cotr recycled facility and two more are scheduled to be brought online late in the third quarter.

We still anticipate incremental EUR production to ramp to around 2000 barrels per day by the end of this year and to peak in a range of 7500 to 12500 barrels per day in the latter part of 2024.

We should receive detailed core analysis later this year, which will further confirm our understanding of the subsurface as we progressive storage site with the EPA.

We expect to continue to drill stratigraphic test wells on our lease storage sites to support the classics process with at least two additional wells planned this year.

I am extremely proud of the work our team is doing at CCA as.

As a reminder, CCA is the largest EMR project, we've ever worked on with 400 million barrels and potential recovery.

Since quarter end, we finalized an agreement for a 30000 acre 150 million metric ton dedicated Sidoti storage site Matagorda County, Texas.

It will drive 2024, and 2025 production growth for our company and as it ramps. It will also improve our cash margins.

Adding this site to our network provides additional flexibility and redundancy and removing <unk> from the high emissions Houston area.

In addition, the Cotwo injecting is 100% industrial source. So all of the new volumes are expanding the scope of our carbon negative blue oil operations.

In addition, it facilitates access to multiple emission sources <unk> customer plant sites and EUR development opportunities, while serving as a stepping stone to additional opportunities further along the Texas Gulf Coast.

CCA will be a significant contributor to our overall goal of being scope III net zero by the end of this decade.

As the CCA project highlights the EUR side of our business is fundamental to the execution of our Ccs business.

Last week, we submitted six well permit applications to the EPA for classic Cotwo injection at our <unk> site in Mississippi.

Denver has the near term ability to take upwards of 10 million tonnes of captured industrial cotwo per year into EUR.

Leo is directly underneath or any JV pipeline. An example of the great advantages afforded by our over 900 mile Gulf Coast Sidoti <unk> <unk> network.

The Leo site leased from Weyerhaeuser provides tremendous competitive advantage and flexibility for our <unk> network, leveraging our infrastructure footprint in Mississippi.

We expect to submit classics permits for additional sites at a cadence of about one site per quarter over the next several quarters.

The unique combination of these competencies capabilities and assets set to them very apart in the industry.

Our 2023 Ccs activities are highly focused on both expanding our dedicated Sidoti storage network and continuing to build the scale and diversity of our Cotwo transportation and storage agreement portfolio.

Nick and his team are in extensive discussions and negotiations to provide <unk> services for multiple customers with both brownfield and greenfield projects and my confidence level and reaching our cumulative 30 million metric ton per year target by the end of the year is high.

During the first quarter, we drilled our first stratigraphic test well that the Orion site in Alabama in support of our classics process. We were pleased to see reservoir characteristics very consistent with our expectations.

As a reminder, these agreements can be for our combined transportation and storage transportation only or even the complete chain of capture food storage.

We should receive detailed core analysis later this year, which will further confirm our understanding of the subsurface as we progressive storage site with the EPA.

With the industry's only dedicated Cotwo pipeline network in the Gulf Coast, we remain ideally positioned to service the growing market for <unk> solutions.

We expect to continue to drill stratigraphic test wells on our lease storage sites to support the classics process.

We believe that <unk> bass <unk> pipeline network combined with multiple strategically located dedicated storage sites.

At least two additional wells planned this year.

Since quarter end, we finalized an agreement for a 30000 acre 150 million metric ton dedicated Cotr storage site Matagorda County, Texas.

And reinforced by over a dozen <unk> injection sites will provide customers. The most efficient the most diverse and most reliable Sidoti transportation storage services in the Gulf Coast.

Adding this site to our network provides additional flexibility and redundancy and removing <unk> from the high emissions Houston area.

As I mentioned at the outset, it's a very exciting time here at then Gary.

Our <unk> business is generating strong cash flow and we expect to see incremental production from our CCA EUR project this quarter.

At the same time, we're making rapid progress on building the industry's meeting Sidoti transportation and storage network.

I can't think of a company better positioned to deliver the energy, we all need to date will decarbonize in the future.

Last week, we submitted six well permit applications to the EPA for classic <unk> injection at our <unk> site in Mississippi.

Thanks, again for joining us today, and we will now open the call for your questions.

Leo is directly underneath or any JV pipeline. An example of the great advantages afforded by our over 900 mile Gulf Coast Sidoti <unk> <unk> network.

We will now begin with the Q&A session. Please note that this call is being recorded questions will be answered in the order they are received.

The Leo site leased from Weyerhaeuser provides tremendous competitive advantage and flexibility for our <unk> network.

We will now pause a moment to assemble the queue.

Leveraging our infrastructure footprint in Mississippi.

Our first question will come from Scott Gruber from Citi.

We expect to submit classics permits for additional sites at a cadence of about one site per quarter over the next several quarters.

Yes, good morning good.

Morning, Scott.

So let me start on the recent news here is that the EPA has signaled its intent to give promisee, Louisiana with regard to classic well Permian.

I think there's a couple of extra steps here it has become common.

In theory, but give us a sense for when the state officials in Louisiana Pittsburgh processing permits in.

Any sense for what a reasonable timeframe can look forward to executing the processing of the permit.

As a reminder, these agreements can be for our combined transportation and storage.

<unk> only or even the complete chain of capture of food storage.

Rate level versus your expectation with EPA.

With the industry's only dedicated Cotwo pipeline network in the Gulf Coast, we remain ideally positioned to service the growing market for <unk> solutions.

Yeah, Scott this is Matt <unk>.

And we're really pleased to see the EPA post.

Louisiana is application on the Federal Register, which actually happened on the 28th subject to public comment.

We believe that Denver as Vas <unk> pipeline network combined with multiple strategically located dedicated storage sites.

And then Louisiana following up with announcing a June 15th public hearing in Baton Rouge.

And reinforced by over a dozen <unk> injection sites will provide customers. The most efficient the most diverse and most reliable Sidoti transportation and storage services in the Gulf Coast.

The comments stays open until the 26th of June and then they start the final processing codification of of the rulemaking process.

Our expectation is we may be towards year end or early 2024.

As I mentioned at the outset, it's a very exciting time here at <unk>.

Our <unk> business is generating strong cash flow and we expect to see incremental production from our CCA EUR project this quarter.

MSC is officially granted.

I think from a processing standpoint, I would imagine that as Louisiana gets up to speed that'll be running about the same timeframe. Initially is what the EPA would but as time goes on I think those processes speed up significantly.

At the same time, we're making rapid progress on building the industry's meetings Sidoti transportation and storage network.

I can't think of a company better positioned to deliver the energy, we all need to date will decarbonize in the future.

And Scott I'd, just add to <unk> comment there I mean, we're thrilled to see yet another step that opens the pathway for Ccs to broadly accelerate so as it needs to just with the opportunity set that we see out there.

Thanks, again for joining us today, and we will now open the call for your questions.

We will now begin with the Q&A session. Please note that this call is being recorded questions will be answered in the order they are received.

More stuff like this is a very positive thing in our view.

We will now pause a moment to assemble the queue.

Gotcha.

And then just a question on the permitting process with the EPA.

Our first question will come from Scott Gruber from Citi.

Now six months or so out from initial submission last fall.

Yes, good morning good.

Morning, Scott.

So let me start on the recent news here that the EPA has signaled its intent to give promisee, Louisiana with regard to classic well Permian.

The feedback from the EPA at this juncture and any updated color as to whether that.

Two year timeframe is still reasonable and there can be.

The updated thoughts there would be great.

I think there's a couple of extra steps you'd have to jump through.

Hi, This is Vic yeah. So the EPA has been processing the permits and the same cadence that we expected them to.

In theory, but you have a sense for when the state officials in Louisiana Pittsburgh processing permits in.

Any sense for what a reasonable timeframe can look to execute on the processing of a permit.

They show that they go through the verification of completion at about the same time frame. We expected we see that they are going through the details at about the speed we expected.

Rate level versus your expectation with EPA.

Yes, Scott this is Matt <unk>.

So we're still we're still looking at about two year timeframe there.

And we're really pleased to see the EPA post.

Louisiana is application on the Federal Register, which actually happened on the 28th subject to public comment.

Yeah, and I guess the bottom line there Scott is just the engagement from the EPA has been solid.

We feel good about where we are with the EPA and to me that's.

And then Louisiana following up with announcing a June 15th public hearing in Baton Rouge.

Good start with primacy for Louisiana, It looks like it's come in that's just that much better.

Comment stays open till the 26th of June and then they start the final processing codification of of the rulemaking process.

I appreciate the color.

Thanks.

Our next question comes from Nate Pendleton from Stifel.

Our expectation is we may be towards year end or early 2024.

Good morning, and congrats on the new site in classics permit submission. Thanks.

MSC is officially granted.

Thanks, Matt good morning.

Regarding your poor space leasing success can you provide some color on the level of competition for sequestration sites in the market and specifically how are prices trending from core space and should we think about how should we think about the availability of high quality pore space along the Gulf Coast.

And Scott I'd, just add to <unk> comment there I mean, we're thrilled to see yet another step that opens the pathway for Ccs to broadly accelerate so as it needs to just with the.

Yes.

This is this is Mick I'll take that question so in.

In terms of competition for poor space. There is there is high competition for floor space.

<unk> said that we see out there.

<unk> brings us the advantage of being able to talk about the volumes, we can bring to that core space. So when we're in negotiations there is a series of different variables that that the poor space owners are looking for I would say the main one is the amount of volume we can actually take to the to the storage side, because thats a big driver of their economics.

More stuff like this is a very positive thing in our view.

Gotcha.

And then just a question on the permitting process with the EPA.

Now six months or so out from initial submission last fall.

The feedback from the EPA at this juncture and any updated color as to whether that.

Viability for that that core space owner, and so Jim Barry brings a big big advantage there.

Two year timeframe is still reasonable and there can be different.

So that's that's that drives our success, we expect to continue to be successful there youll see us continue to add to our portfolio of storage sites. When it comes to the variance of course base charges, it's been pretty pretty steady.

Updated thoughts there would be great.

Hi, This is Vic yeah. So the EPA has been processing the permits and the same cadence that we expected them to.

They show that they go through the verification of completion at about the same time frame. We expected we see that they are going through the details at about the speed we expected.

Thanks, I appreciate the color and in your release, you mentioned that capital is being deployed to expand current sites can you elaborate on the opportunity to expand those sites and knowing that storage calculations are often conservative using the methodology as you learn more about our reservoir do you expect the storage capacity and.

So we're still we're still looking at about two year timeframe there.

Yeah, and I guess the bottom line there Scott is just the engagement from the EPA has been solid.

And your activity estimates increase.

So we feel good about where we are with the EPA and to me that's.

Yeah, that's a great point. This is Nick again, yes. So we are continuing to expand our sites, we do that through additional acquisitions of offset acreage to site. So if you think about the steps. The first step is to identify the large poor space owner in.

A good start with primacy for Louisiana, It looks like it's come in that's just that much better.

I appreciate the color.

Thanks.

Our next question comes from Nate Pendleton from Stifel.

The contract with them and then from there we continue to add to the.

Good morning, and congrats on the new site in classics permit submission. Thanks.

Contiguous acreage that that initial owner.

Thanks, Matt good morning.

Connected to to increase the total course base amount.

Regards to your second question around the conservative nature of the evaluation of the storage side I would say youre accurate in that the upfront science, usually puts what I'll call kind of the lower range of the initial poor space that's available along with the availability of injection. So as time goes on you.

Yes.

This is Nick I'll take that question so in.

In terms of competition for core space. There is there is high competition for floor space.

We'll probably see increase in both core space injection rates.

Alright, thanks for taking my questions.

Thanks, Nick.

Our next question comes from Ken <unk> from Keybanc.

Hi, good morning.

Good morning, Jim.

Great.

I just had a question on sort of the state of the brownfield market.

I know in my discussions with you all in the past folks have been a little bit frustrated or haven't been more contracts that have gotten over the finish line.

Liability for that that poor space owner, and so Jim Barry brings big Big advantage there.

A lot of people believe this would be a quicker path to first revenue. So can you just kind of give an update on what youre seeing and maybe why theres a logjam in and how we can think about contracts getting over the finish line this year.

Sure this is new.

Hi, Tim This is Nick I'll take that question.

We're currently engaged in having engaged with many brownfield projects I'd say, it's about half of the portfolio or pipeline of projects, we have going through the system right now.

We've explained it before as it's it's like remodeling your house versus <unk>.

And your activity estimates increase.

Versus building out where a lot of the brownfield developers have to go in and rearrange their process, which takes a bit of extra time to.

Yeah, that's a great point. This is Nick again, yes. So we are continuing to expand our sites, we do that through additional acquisitions of offset acreage through the site. So if you think about the steps. The first step is to identify the large poor space owner in.

To evaluate and to make sure that their economics match up to what they expected as we started the scoping exercises of the project initially.

I would say that right now we've seen a lot of great progress with a lot of brownfield projects that we've actually been engaged with for multiple years now. So in some cases, we've been engaged for over two years and so we see a lot of those projects.

The contract with them and then from there we continue to add to the <unk>.

Contiguous acreage that that initial owner is connected to to increase the total course base amount.

In regards to your second question around the conservative nature of the evaluation of the storage side I would say youre accurate in that.

Coming to completion hopefully.

Maybe this year, but there's chances that some of these projects take over three years to actually get to the finish line and we're happy to be with our partners that whole time.

The upfront science, usually puts what I'll call kind of a lower range of the initial poor space that's available along with the availability of injection. So as time goes on.

Okay. So I guess I'll stay tuned.

You will probably see increase in both core space injection rates.

That's fair and then I appreciate the comments on CCA that was originally going to be my first question for my second question, but.

Alright, thanks for taking my questions.

I wanted to ask about the Dorado sequestration site.

Thanks.

Our next question comes from Ken <unk> from Keybanc.

Obviously, it's not going to be connected to an existing pipeline.

Hi, good morning.

Good morning, Jim.

I just had a question on <unk>.

<unk>.

If that were to develop can you talk about kind of the cost and the time it would take to sort of build that potential extension to that area.

The state of the brownfield market.

I know in my discussions with you all in the past folks have been a little bit frustrated or hadn't been more contracts that have gotten over the finish line.

Okay.

Hi, David speak again, yes. So the <unk> is one of one of the big sites that we wanted to add to our portfolio for many reasons and some of the things that might not be quite as clear as the positioning of that site is great for our portfolio. The reason is it does a few things for us one.

A lot of people believe this could be a quicker path to first revenue. So can you just kind of give an update on what youre seeing and maybe why theres a logjam in and how we can think about contracts getting over the finish line this year.

Sure. This is Nick itunes, Nick I'll take that question.

That extension brings us into new markets. Both in capturing emissions also additional storage sites that can be acquired and you buy it.

We're currently engaged in having engaged with many brownfield projects I'd say, it's about half of the portfolio or pipeline of projects, we have going through the system right now.

<unk> also brings us closer to EUR fields that we could we can develop.

I think we've explained it before as it's it's like remodeling your house versus.

And finally, it adds to kind of the path that we might go on to continuing down in corpus.

Versus building out where a lot of the brownfield developers have to go in and rearrange their process, which takes a bit of extra time to.

With any storage site the benefits come with adding the total storage that's in our portfolio. In this particular case the position of the store site allows us the opportunity to go by Directionally at a point that has a lot of expected emissions coming in what that does is it allows us to have a high.

To evaluate and to make sure that their economics match up to what they expected as we started the scoping exercises of the project initially.

The increase to our total total network.

So that's kind of the reasoning behind the drive sites position in life. So valuable I'll say from a cost standpoint, it's about 60 miles away and we will stick with the $2 million to $4 million a mile.

Coming to completion hopefully.

Maybe this year, but there's chances that some of these projects take over three years to actually get to the finish line and we're happy to be with our partners that whole time.

Expectation and cost I would say for this site, it's probably on the lower side of costs.

So that's the range, we're thinking and then Tim This is Chris I'll, just add to that just strategically when we look at where we are and where we want to be.

Okay. So I guess, we'll stay tuned.

That's fair and then I appreciate the comments on CCA that was originally going to be my first question for my second question, but.

We love the footprint that we have.

I wanted to ask about the Dorado sequestration site.

But we also think that that backbone really sets us up to extend into some key emissions areas. So moving down towards the Corpus Christi area as a part of that and this helps us get there.

Obviously it is.

It's going to be connected to an existing pipeline.

Sure.

If that were to develop can you talk about kind of the cost and the time it would take to sort of build that potential extension to that area.

Okay I appreciate the color and then just the timeline it would take us theoretically big picture to get in and get some wind at built and permanent.

Okay.

Yes. So this is Nick again, and so I.

I am sorry, Tim was that another question okay.

Any big Colin.

Yes. So the thought is it would probably take US a couple of years to get the pipeline permitted and installed.

The reality of what will happen is because we can probably move faster than the I'll call. It the need from an emission standpoint, we would lineup that investment for with the need for the emissions moving down that pipe. So because we can we can kind of be at a quicker pace, it's going to be really dependent upon when we.

Extension brings us into new markets. Both in capturing emissions also additional storage sites that can be acquired nearby.

<unk> also brings us closer to EUR fields that we could we can develop.

And finally, it adds to kind of the path that we might go on to continuing down in corpus.

Have emissions coming alive, when we actually start construction and finish it out.

With any store side, the benefits come with adding the total storage that's in our portfolio. In this particular case the position of the storage site allows us the opportunity to go by Directionally at a point that has a lot of expected emissions coming in what that does is it allows us to have a high.

Okay that makes sense. Thank you for the comments.

Alright, Thanks, Tim.

As a reminder, if you have a question you may raise your hand by using the raise hand feature at the bottom of intrusion window or by dialing star nine if you have joined us today by phone.

And our next question will come from Sam Burwell from Jefferies.

The increase to our total total network.

Hey, guys. Good morning, it's actually steal Tim's line of questioning but apply it to perhaps like a larger scale pipeline. I know you guys have been asked about replacement value for the pipeline system in green in the past, but curious if that.

Three to four per mile.

Expectation and cost I would say for this site, it's probably on the lower side of costs.

Full of thumb would apply for a larger scale long haul line.

So that's the range, we're thinking and then Tim This is Chris I'll, just add to that just strategically when we look at where we are and where we want to be.

And then any sort of commentary you can give about the permitting process time to plan any anything on from a timing perspective, I really like how would that process differ from the process that you guys undertook in the late two thousands when you Bill Greene.

We love the footprint that we have.

But we also think that that backbone really sets us up to extend into some key emissions area. So moving down towards the Corpus Christi area as a part of that and this helps us get there.

Hi, Jim This is Nick again, so in terms of replicating our network.

We believe it would be challenging to do in general.

Okay I appreciate the color and then just the timeline it would take us theoretically big picture and get some wind at built and permanent.

There'll be a lot of permits that are very tough to get through that we were able to accomplish a 10 years ago plus in.

In general when you think about the replication of that line the $2 million to $4 million a mile. We believe would be potentially a little bit light.

So this is Nick again, and so I.

I am sorry, Tim was that another question okay.

Any big problems.

In the sense that there are a lot of cross savings that we're able to not have in our shorter extensions that you would have to go through when traversing the territories that we'd go across and replicating that line. So we would expect it to be a bit higher than the $2 million to $4 million a mile in terms of permitting.

Yes. So the thought is it would probably take US a couple of years to get the pipeline permitted and installed.

The reality of what will happen is because we're we can probably move faster than the I'll call. It the need from an emission standpoint, we would lineup that investment for with the need for the emissions moving down that pipe. So because we can we can kind of be on a quicker pace, it's going to be really dependent upon when we.

There's a lot of different agencies that come into play depending upon where you're at when youre permitting a pipeline I would say that you can think about the short pipelines that we're dealing with.

Have emissions coming alive, when we actually start construction and finish it out.

When we're connecting either emitters or storage sites as being in the two year timeframe.

Okay that makes sense. Thank you for the comments.

Alright, Thanks, Tim.

So being able to permit and construct when you're going down a larger.

As a reminder, if you have a question you may raise your hand by using the raise hand feature at the bottom of his resume window or by dialing star nine if you have joined us today by phone.

Multi state connection there will be a lot longer timeline in accomplishing that.

Yes, Sam I, just think that along the lines of what Nick said, when we stay in the local and regional level.

And our next question will come from Sam Burwell from Jefferies.

It's one thing, but as we expand into something that is.

It is broader than that.

Honestly, we see how thats working across the country even here today.

Part of what makes us feel so good about that framework that we have in place right now.

Three to four per mile.

Full of thumb would apply for a larger scale long haul line.

Okay, that's really helpful.

Followed would be sort of on an dorado, what can you comment as to the the subsurface there is it similar to <unk> and then maybe zooming out a little bit like would you comment on how the storage space Thats available in Texas might differ from what's available in Louisiana and Mississippi.

Hi, Sam this is Nick again, so in terms of replicating our network.

In Alabama.

We believe it would be challenging to do in general.

Hi, there, yes. This is Nick again, and so the subsurface for draw to US is very much like the poor space that we've acquired on most all of our other sites. It's what we think of as a floor.

There'll be a lot of permits that are very tough to get through that we were able to accomplish a 10 years ago plus in.

In general when you think about the replication of that line the $2 million to $4 million a mile. We believe would be potentially a little bit light.

Flat reservoir it doesn't have a lot of gip to it.

In the sense that there are a lot of crossings that we're able to not have in our shorter extensions that you would have to go through when traversing the territories that we go across and replicating that line. So we would expect it to be a bit higher than the $2 million to $4 million a mile in terms of permitting.

The core space is attached to a ceiling on first so there hasnt been a lot of well penetrations, which is a very big deal. When you are evaluating a store site.

Because there wasn't oil and gas necessarily development through through that particular area. So very promising there just in general the actual storage intervals in the sandstones that we're dealing with.

There's a lot of different agencies that come into play depending upon where you are at when you are permitting a pipeline I would say that you can think about the short pipelines that we're dealing with.

In Texas look very much like the Louise Louisiana pore space the difference between the Louisiana pore space and the Texas for space and availability is around the rules of actually owning the floor space and so Louisiana, there's a bit more firmness around.

When we're connecting either emitters or storage sites as being in the two year timeframe.

So being able to permit and construct when you're going down a larger.

Surface owners owning the floor space.

In Texas that hasn't necessarily been completed yet and so in which way that goes where theres minerals in the surface as it fully.

Multistate connection there will be a lot longer timeline in accomplishing that.

Yes, Sam I, just think that along the lines of what Nick said, when we stay in the local and regional level.

It's quite yet so the way we accommodate that.

At issue is we look for poor space that has both the surface and the mineral owners and we acquire those sites, which is the case in Toronto.

It's one thing, but as we expand into something that is.

It is broader than that.

Honestly, we see how thats working across the country even here today.

Okay Super quick follow up on that would be like.

Blake.

Part of what makes us feel so good about that framework that we have in place right now.

Surface and mineral rights being more aligned in Louisiana that make it easier to lease in Louisiana.

Okay, that's really helpful.

In general.

Followed would be sort of on an dorado, what can you comment as to the the subsurface there is it similar to <unk>.

I would say that it makes it easier to target large areas to lease because you have a surface owners that doesn't necessarily have to have the mineral owner.

And then maybe zooming out a little bit like would you comment on how the storage space Thats available in Texas might differ from what's available in Louisiana, and Mississippi and Alabama.

B the same crews to acquire that particular store site.

I will point out that in general when when we been very is looking to acquire storage sites, we still want those incentives to be aligned we want we want everyone to win in this circumstance. So generally we look for places where the surface and mineral owner or the same group. So that we can acquire and feel good about the source.

Yes. This is Nick again, and so the subsurface.

<unk> is very much like the poor space that we've acquired on most all of our other sites. It's what we think of as a.

Flat reservoir it doesn't have a lot of dip to it.

Titan and where we're going.

The poor space is.

Okay Awesome and thanks for indulging My third question.

<unk> two a ceiling first so there hasnt been a lot of well penetrations, which is a very big deal. When you are evaluating a store site.

Thanks Al.

Our next question comes from Charles Meade from Johnson Rice.

Because there wasn't oil and gas necessarily development through that particular area.

Good morning, Chris and Nick and the rest of the Denver I came there.

So very promising there just in general.

Yeah.

Chris I want to apologize ahead of time for what may seem like a.

The actual storage intervals in the sandstones that we're dealing with and in Texas look very much like the Louise Louisiana pore space. The difference between the Louisiana pore space and the Texas for space and availability is around the rules of actually owning the floor space and so Louisiana, there's a bit more firmness.

Elementary question about the whole class six permit process, but I think this would be helpful to me and probably to a lot of.

A lot of other people listen to this call.

Can you give us a little bit more.

Detailing context about.

About.

How many stratigraphic wells to drill.

Around surface owners owning the floor space in Texas that hasn't necessarily been completed yet and so in which way that goes where theres minerals in the surface as it fully.

To support.

Plastics permit and then and then going back to your prepared comments.

It sounds like you said.

Quite yet so the way we accommodate that issue as we look for poor space that has both the surface and the mineral owners and we acquire those sites, which is the case in Toronto.

I think you said, maybe six class six promise at you're accurate.

Leo location did I hear that correctly.

What drives the number of class six permits you need.

Okay Super quick follow up on that would be like.

Yes, you bet.

Nick Nick to take that on as well.

Surface and mineral rights being more aligned in Louisiana that make it easier to lease in Louisiana.

Charles It's Nick.

Thanks for the questions and so when it comes to stratigraphic well test generally each store site that we developed will will most likely take one I will say that they arent absolutely necessary for the class six process.

In general.

I would say that it makes it easier to target large areas to lease because you have a surface owners that doesn't necessarily have to have the mineral owner be the same crews to acquire that particular store site.

What generally happens during classics process is that you submit your permit.

You get the completion verified you didn't go to a point, where you have this back and forth with the EPA or whatever regulatory agency youre dealing with that has questions on the technical evaluation. You. Then you didn't get to the point, where you have a permit to construct once you have permits to construct you didn't you didn't actually take a drilling rig in and go.

I will point out that in general win win.

When we've been very is looking to acquire storage sites, we still want those incentives to be aligned we want we want everyone to win in this circumstance. So generally we look for places where the surface and mineral owner or the same group. So that we can acquire and feel good about the store site and where we're going.

Drilled the well that it will be the class six well at that point in time. Most groups are taking the core and then sending it off for analysis, which usually takes around six months and so they have usually have that full analysis done at that point in time that then kind of puts an additional ill call. It tasking. The Gantt chart in terms of timing.

Okay awesome. Thanks for indulging My third question.

Thanks Al.

Our next question comes from Charles Meade from Johnson Rice.

Good morning.

And kind of leads to a little bit of a longer term process.

What's been very is doing but generally thats, where it will be taken at that point in time, you get the information back from the core and then you then you have some injection test and you have to do.

From that point as long as everything comes in as you expected you didn't get the permit to inject and begin injection in our case, what we're doing is we're speeding up the classic permit process by drilling stratigraphic wells early because we can get that permit early we can get the stratigraphic permit to go drill well gather that core and center.

To have it analyzed in parallel to those other steps that are taking place at the EPA and that in that bypasses the need to potentially have to core and analyze that class six well after you have that.

Permit to construct and I'll pause there to see if there's any questions on that piece before I move to your second question.

Right no that's an excellent excellent explanation. Please continue.

Alright, great. So when it comes to the <unk> site and the six the six classics permits that Chris mentioned, what happens during the evaluation of a storage site is you have an area of review where you do have a very detailed geologic study of.

The poor space and then you reservoir stimulation across that poor space to watch how this Q2 will move throughout the system as Youre doing that you optimally placed wells within that poor space to make sure that the pressure and the skew to traveling through the pore space stays contained within the area.

One and so of course, what you want out of any given store side is a lot of potential rate and a lot of storage availability. So when you see us put in multiple wells in the storage side that means that we're increasing the total rate that storage site can accommodate at this point in time, given the position we have and so at this.

Point in time, we have six wells here that you can you can think of are going to generate somewhere between 500000 tons per year to 2 million tons per year of injection rate and so that's that's just for the current position as you can imagine we're continuing to add to that position, which will add to the availability of additional injection as we continue.

And I guess just fundamentally Charles.

We're going to have a permit for wealth and so next talking about six wells and so we have six apartments.

Got it got it and then thank you for all that there was a really helpful elaboration, Chris perhaps just a follow up might be for you or Matt.

You cited.

The eventual rate for CCA.

It would be I think chip between seven and a half of 12 and a half.

Thousands barrels a day and.

I'm wondering if you can.

If you can.

Give us some indication what are going to be the factors that determine where you wind up on that spectrum and perhaps given that you I guess last quarterly call you talked about <unk> early and now we're hearing that youre actually going to get EUR volumes early.

Does that bias you to one end of that of that spectrum or the other.

You bet, Charles and I'm going to hand, it over to David in a moment here to talk.

More detail about that but.

Bottom line, we're excited about what we see it's also early days and so much to be determined that you know how.

Business works with some of these floods and you really need to work the data as it comes in so so with that I'll turn it over to David.

Yeah. Good question Charles.

Thanks for asking that so yeah, we're really excited about getting this first recycle facility commissioned.

Got that to online have introduced a few wells.

That facility I would say that this facility is in the heart of where we've seen some of that early <unk> arrival and correspondingly we're seeing some indicators that's going to help us to get to that point in the second quarter, where we're going to declare.

Your response within that particular recycle facility.

We are currently commissioning our second recycle facility.

Near proximity same field CHS you.

What we will bring those wells into that system and get to watch that and make further assessments.

Continuing on that path, we have two more recycled facilities coming in to CHS you. This year towards the back end of the third quarter. So it's going to be later in the year.

Once we bring those all bring wells into those two independent systems will get to ourselves and see if our model our expectation is.

As on track everything that we've seen so far tells US too. It is it's a solid plan right now and every data point, we're acquiring confirms that so real happy about that.

Those recycle facilities throughout time, we'll be expand that will bring additional compression.

As we move more <unk> through the system that will expand our production capabilities throughout this area ultimately targeting that 7500 to 12000, Bob hundred barrel a day window, there's going to be some ebbs and flows in that.

Throughout Tom as our development pace.

Spans and goes a little faster or moderates throughout time. So that's a general range to think about the long term trajectory of how we're going to produce this particular asset.

Yes, Charles I think just as we go forward every every quarter, you'll you'll see us.

Update with new data points, as David mentioned and hopefully.

Be able to tighten with admittedly is a fairly wide range as you pointed out there.

Well I'm sure you guys are good.

More eager for the data than I am So I will look forward to hearing more about that future color all were all eager further down and Thats right.

Alright, Thanks, guys. Thanks Charles.

Okay.

Operator, Leila I think we've got maybe one more question in the queue.

Yes, we can take a question from Brian Velie from capital one.

All of my questions have been have been answered. Thank you very much.

Thanks, Brian Alright, Thank you Brian .

And then no further questions on the line at this time thank you.

Yeah. This is Brad again, just want to thank everyone for joining us today should you have any follow up over the coming days. Please don't hesitate to reach out to best or myself.

And we look forward to connecting with you all thanks again.

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