Q4 2023 Evolution Petroleum Corp Earnings Call

Good afternoon, and welcome to the evolution Petroleum fiscal fourth quarter 2023 earnings release Conference call.

At this time, all participants have been placed in a listen only mode and the floor will be opened for questions and comments.

After the presentation.

I will now turn the call over to your host Bradley Hudson Investor Relations manager.

Please go ahead.

Thank you welcome to evolution petroleum fiscal full year 2023 earnings call I'm joined by Kevin White, President and Chief Executive Officer, Brian Cash Senior Vice President Chief Financial Officer, and Treasurer, Mike Bumps Chief Operating Officer, We released our fiscal 2023 full year.

And fourth quarter financial results after the market close yesterday, please refer to our earnings press release for additional information concerning these yourself.

You can access our earnings release, and the industrial stuff on our website.

Please note that any statements and information provided in today's call speak only as of today September .

2023, and any time sensitive information may not be accurate.

Our discussion today will contain forward looking statements of management's beliefs and assumptions based on currently available information. These forward looking statements are subject to the risks assumptions and uncertainties as described in.

Our LTC farm.

Actual results may differ materially from those expected we undertake no obligation to update any forward looking statement.

On today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA and I'm talking about.

Reconciliations of these measures to comparable GAAP measures can be found in our earnings release.

Kelly will begin today's call with a few opening comments followed by our operational results from CLO, Mark Munch, and then Ryan fashion CFO will review, our fiscal year financials before turning back over to Kelly for closing comment.

After our prepared remarks, the management team will be available to answer any questions.

As a reminder, this conference call is being recorded if you wish to listen to a webcast replay of today's call. It will be available on the investors section of our website with that I will turn the call over to Kelly.

Thanks, Brandy good afternoon, everyone and thanks for joining us for today's call.

We appreciate everyone's interest in our reporting of our successful fiscal 2023 operational and financial results.

However, before we begin to discuss our recent results I would first like to make some general comments related to the announcement, we put out this morning with Bradesco concerning our definitive participation agreement to jointly develop the chaparral oil field in the northwest shelf Southern New Mexico, It's a conventional oil.

The Bering Sea and Andros play in the Permian Basin located in Chavez County.

We're proud to partner with <unk>.

Company that shares our values and goals of providing superior total returns to shareholders I will let mark go into the details of the strategic partnership later, but I want to point out the biggest highlight of this arrangement first the deal adds a new and exciting arrow in our quiver of capital allocation opportunities.

In the past in order to grow our production and reserves, we have relied heavily on the A&D market, while we've been quite successful and plan to continue that strategy. The 80, plus high quality locations covered by this agreement will allow evolution to grow or maintain its production and reserves, even in times where asset level.

Transactions are priced at what we consider to be unattractive levels.

In turn we believe this will be highly supportive to our dividend program for years to come the wells here are 90, plus percent oil and located in the Permian Basin, which is an important market to which we want to be exposed.

Now on to our fiscal 2023 results.

Our results for the period were solid and continued to demonstrate our assets' ability to generate strong free cash flow, we used our cash flow to once again fund operations capital spending and shareholder dividends. In addition, I'm pleased to report that we repaid $21.5 million of debt again.

All from cash flow and exited the year with a debt free balance sheet and increased liquidity, we continue generating meaningful free cash flow from the acquisitions completed over the previous years and we will use these to continue to fund our strategic objectives.

Of course.

Our ongoing success is a direct reflection of the hard work and accomplishments of our team I want to thank each and every member of the evolution team for their contributions and continued dedication to driving near and long term value for our shareholders.

During the fiscal year, we paid cash dividends totaling 48 cents per common share.

This was 37% higher than for fiscal 2022.

Which we view as a clear indicator of the growth and strength of our business.

Our board recently declared a cash dividend of 12 <unk> per share for fiscal Q1 2024 payable on September 29th.

Marking the payment of our 14th consecutive quarterly dividend since the company began paying dividends in December of 2013, we've returned approximately $102 4 million or $3.09 per share of capital to investors.

As we have discussed in the past there are very few small cap E&P companies that can say they've consistently paid a dividend for that length of time throughout several tumultuous commodity price cycles. We believe this reinforces the strategic view our board takes as we prudently grow the business through the targeted acquisition of Saab.

<unk> long life and low decline assets that will continue to support our sustainable quarterly dividend for the immediate and long term.

In short maintaining and ultimately growing the payment of a quarterly cash dividend remains front and center for our board and management team.

I will now turn the call over to Mark to discuss operations.

Thanks, Kelly total production for the fourth quarter of fiscal 2023 was 6484 net barrels of oil equivalent per day, consisting of 1736 barrels per day of crude oil 22000, 462000 cubic feet per day of natural gas and one.

<unk> thousand barrels per day of natural gas liquids.

Looking at our fourth quarter results in more detail oil decreased 6% from 1856 barrels of oil per day in the prior quarter, primarily due to downtime at the Delhi field.

Where production was shut in for approximately one week to upgrade the facilities install a heat exchanger to increased plant efficiencies.

Natural gas production decreased 8% from 24480 9000 cubic feet per day, or 4077 barrels of oil equivalent per day in the prior quarter, primarily due to downtime in the Barnett shale properties associated with extreme summer weather conditions allow.

With gathering line maintenance a compressor issues.

NGL production decreased 13% from 1156 barrels of Ngls per day in the prior quarter.

Primarily attributed to downtime at Delhi field properties to install the heat exchanger form NGL plant maintenance at our Barnett shale properties. Our NGL volumes were affected by the same factors that have impacted our natural gas production.

Looking at our full year results in more detail total production for the full year fiscal 2023 with 7104 net barrels of oil equivalent per day.

Assisting of 1806 barrels per day of crude oil 24950, 6000 cubic feet per day of natural gas and 1140 barrels per day of Ngls oil increased 6% from 1696 barrels of oil per day in the prior year.

Primarily due to our acquisitions of non operated working interest in the Jonah field in the Williston basin in the second half of fiscal 2022.

This increase was offset by the downtime at fiscal 2023 at the Delhi Field has mentioned previously.

Natural gas production increased 28% from 19000 564000 cubic feet per day in the prior year, primarily due to acquisitions. If non operated working interest in the Jonah field in the Williston basin in the second half of fiscal 2022.

The increase is partially offset by downtime in our Barnett shale properties as mentioned previously.

NGL production increased 14% from 997 barrels of Ngls per day in the prior year, primarily attributable to the two acquisitions in fiscal 2022 offset by decreases attributed to downtime at our Delhi field and the same factors that impacted our natural gas production in our Barnett shale properties.

As mentioned previously.

Based on discussion with our operators, we expect capital Workover projects to continue to all the fields overall for fiscal year 'twenty 'twenty four we expect budgeted capital would be in the range of $4 million to $5 million, which excludes any potential acquisitions.

Our expected capital expenditures for the next 12 months include knit two new drill wells at Delhi field drill borrow operator did Barry.

As Kelly already said, we're really excited about our strategic partnership with <unk> in the Permian. The agreement covers approximately 25000 gross acres in and around the shopper is yield in northeast in Mexico.

The shopper refilled was originally developed targeting the San Andres formation with vertical wells on 40 acre spacing.

We need a horizontal development at the St Andrews in the chabrier fill to be very compelling based on extensive vertical well control the data and results from previous Fidelco horizontal wells and analog developments of other 40 acre non water flooded vertical so they interest fields. We expect this project will significantly.

They contribute to the success of evolution for years to come we expect our capex to increase over the $4 million to $5 million budgeted for our existing assets due to drilling and completing expected three wells in this fiscal year. The ultimate amount of capital spent during fiscal year 'twenty 'twenty four for drilling in the Permian will depend.

On the schedule agreed to with our partner with that I will turn the call back over to Ryan to discuss our financial highlights.

Thanks, Mark as mentioned earlier, please refer to yesterday's earnings release for additional information concerning our results. My comments today will primarily focus on financial highlights and comparative results between fiscal 2023 and 2022.

During the fourth quarter, we experienced extended downtime and maintenance across multiple assets and were negatively impacted by much lower realized natural gas and NGL prices. However, our fiscal year 2023 results still represented record revenue production and net income during.

During the past fiscal year, we had solid generation of cash flow, including adjusted EBITDA, which was $61 million for the current year compared to $52.8 million in the prior year, a 14% increase.

During this fiscal year, we funded our operations development capital expenditures dividends and share repurchases all out of operating cash flow, while also paying down debt drawn for acquisitions.

Supported by our continued strong operational and cash flow outlook, we paid a dividend of 12 cents per share in the fourth quarter and declared a dividend of <unk> 12 per share for fiscal Q1 of 2024 payable on September 29.

Our cash dividend program has been and will continue to be a top priority as we clearly recognize the strategic importance of returning value to our shareholders.

We ended the fiscal year debt free and our borrowing base remained at $50 million on June 32023, cash and cash equivalents totaled $11 million and working capital was $8 9 million as a result total liquidity on June 30th 2023 was $61 million, including cash and cash equivalents.

This represents an increase in liquidity of 65% since June 30 of 2022.

This is a direct result of our targeted and immediately accretive acquisitions over the past couple of years. We are ideally positioned for the continued execution of targeted future growth opportunities that meet our strategic vision.

Lease operating costs increased to $59 5 million from $48 7 million in fiscal 2022, primarily driving the overall increase was the acquisitions of the Jonah field and Williston basin, which occurred in the latter half of fiscal year 2022.

Cash G&A expenses increased 18% to $7 9 million from $6 7 million in fiscal year 2022. The increase in expenses is due to approximately 600000 in salary and employee benefits from the addition of personnel added since the prior year and 300000 and professional fees associated with our search for a CEO .

Also contributing to the increase or additional fees for accounting audit related services and public reporting expenses due to the increased size of our company.

Net income for the fiscal year was $35 2 million or $1.04 per diluted share compared to $32 6 million or <unk> 96 per diluted share in fiscal year 2022.

Now I'll turn the call back over to Kelly for his closing remarks.

Thanks Ryan.

We continued to benefit from the targeted acquisitions, we have completed over the past few years and as a result, we enjoy a larger and more geographically diverse asset base and commodity mix. This provides us with a solid platform for significant cash flow generation that we will continue to use to support.

And enhance our well established shareholder capital return program.

Our shareholders expect a consistent and meaningful cash return on their investment and we remain committed to maintaining and as appropriate increasing our dividend payout over time.

As in the past, we will maintain a conservative balance sheet and remain disciplined in our management of capital as we fully recognize the cyclicality of our business.

Our ongoing commitment to remaining fiscally prudent was evidenced by our prompt pay down of our debt position. Following the closing of our most recent acquisitions.

As a result, we are well positioned to execute on targeted high rate of return.

Immediately accretive growth opportunities as appropriate.

We will continue to execute our strategic plan focused on maximizing total shareholder returns and optimizing every dollar that we invest.

With today's announcement, we have added an opportunity to have a meaningful organic growth component as well all of our capital allocation decisions any drilling here must compete with dollars to be used elsewhere in the nature of this arrangement will allow for that.

We're not required to pay upfront for anything other than the acreage cost for the immediate development block, which we will be developing next this is unlike other situations where companies must pay in advance for entry into a field and prepay for well locations.

This is a true strategic partnership where development will occur sequentially with the decision moved forward based on success.

We <unk> expect that this partnership will produce positive results for many years to come.

With that I'll turn the call over to the operator for questions. Thank you.

We will now begin the question and answer session.

Good question, you May press Star.

Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing.

Thank you.

To withdraw your question. Please press Star then two.

Once again sorry.

Wanted to ask a question.

This time, we will pause momentarily to assemble the roster.

Okay.

Okay.

And our first question comes from John White of Roth capital.

Go ahead.

Good afternoon, and congratulations on the Bradesco deal.

Agree with you I think it looks very good.

Jackie.

Thank you John Hey, John Kim.

Before we get to your question can I just make one additional comment.

Yes of course, okay. So.

I just want to reiterate.

As I've said before that we when we and the board. We said dividends are we do so with the multi year horizon, our expectation based on our production and resulting cash flow that is generated.

<unk> from our forecast did pricing and production levels.

With this in mind, we fully expect that our cash flow combined with our pristine balance sheet and our cash and cash equivalents.

We'll be able to more than fully cover our dividend, which by the way, we just reset at 12 cents per share.

Not only do we believe it will fully cover our dividend it should cover all of our capital needs up to and including any planned drilling activity.

We're confident.

As as you mentioned John that this this strategic partnership will be highly supportive of our dividend for quite some time.

Okay, Yeah, I appreciate that that add on.

So regarding the Bradesco deal with respect to capital expenditures are Mr.

Offered some commentary.

However, our commentary was was I would say highly conditioned or highly qualified.

And can you offer any more detail about the potential capex. After bradesco deal may be quoted in terms of a minimum or maximum more or a six month timeframe or a 12 month time frame.

Well.

Whatever you're comfortable.

I can.

Absolutely look these are these are fluid in their plans that we're going to come up with and finalized with our partner <unk> go initially.

Initially I will tell you what we're both the thinking on this we have a we have an initial three well pad, which we're working on.

It's it's been permitted the expectation is that.

We want to get to that three well pad sooner rather than later again, we need to finalize all the details are in general the way we thought about this is.

Basically again fluid can change depending on conditions environments. All this.

But essentially about eight wells gross per year is in general how we started thinking about the budget on this together.

So again three wells are at.

At roughly $3 million per copy.

Our half of that is four and a half.

We have acreage famous so four $5 million to $5 million would be our expectation for the initial three well pad.

And then as I mentioned.

The initial goal again, which is highly dynamic and fluid and we'll adjust as we go but at least our initial sort of game plan is roughly around eight wells per year, together, which we'd be 50% up.

Yeah, that's a that's a lot a lot of extra detail and I really appreciate that Kelly.

So on the.

Uh huh.

The maintenance or or some of the infrastructure work.

Let's just.

Make sure we understand it.

Is the work of Delhi is that all completed is the heat exchanger installed and working.

John This is mark bench and the heat exchanger is up and running the plant turnaround was completed and so we expect that you know the Delhi is back running at a you know a rated loads, so where we see that our Delhi.

Performing as we would be expected to.

Okay. Thank you and same question on the Barnett shale with the gathering line maintenance and compressor compressor issues.

The Barnett shale.

That that was all obviously related to compressor and gathering Steph.

We see that that is we believe that that is kind of.

Generally on on demand, but as of right now we don't know whether that is.

Whether it is <unk>.

Believe me back up and running as it's supposed to be.

Okay, you know John when it's 112 degrees in Fort worth.

Compressors don't always act properly in and they're going to run into issues, which clearly they did for much of the summer, but I think we're starting to see that get better.

Okay, I appreciate that and Oh.

I'll turn the call back to the operator, thank you.

Thank you.

The next question comes from Jonathan Shaffer of Northland Capital markets. Please go ahead.

Hey, guys. Thanks for taking the questions.

Sure you know this but.

Donovan Schafer.

So I wanted to start picking up are John left off.

The.

Operator: At this time, all participants have been placed in a listen only mode and the floor will be open for questions and comments after the presentation.

So we've covered the Delhi and the Barnett, but I'm in the Williston.

Could I actually honestly be a data entry error.

Brandi Hudson: I will now tell the call over to your host, Brady Hudson, investor relations manager. Please go ahead. Thank you.

I haven't been able to double check this but it looks like the Williston was down quite a bit too not just wrong on that I have the dwarf them down.

I'm thinking like.

Kelly Loyd: Welcome to Evolution Petrolym fiscal full year 2023 earnings call. I'm joined by Kelly Loyd, President and Chief Executive Officer, Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer, and Mark Bunch Chief Operating Officer. We released our fiscal 2023 full year and 4th quarter financial results after the market closed yesterday. Please refer to our earnings press release for additional information concerning these results. You can access our earnings release in the investor section of our website.

North of 10% quarter.

Quarter over quarter, but was there a decline there or is that just on <unk>.

Ara in my model.

And Jonathan.

Yeah. Don this is mark bunch than there was during one month, we had a.

The downtime on the compression side, there and so it affected Ngls and it also affected gas production and that's the main cod well I'm talking about are you, saying this is true for the business.

Bakken Williston, yes, yes, yes for the Williston, Oh really okay.

Unknown Executive: Please note that any statements and information provided in today's calls be only as of today's date September 13, 2023 and any time sensitive information may not be accurate at a later date. Our discussion today will contain forward looking statements of management beliefs and assumptions based on currently available information. These forward looking statements are subject to the risks, assumptions, and uncertainties as described in our SEC filing. Actual results may differ materially from those expected.

The compression issues and boat.

So the compressor down in the Barnett, Okay got it.

Yeah.

Okay, Okay, and then I wanted to turn to so for the year over year production maybe Ryan.

But for the full year the.

The year over year production numbers were good.

But of course part of that comes from the Jonah and the Wilson acquisition.

Unknown Executive: We undertake no obligation to update any forward looking statement. During today's call, we may discuss certain non-gap financial measures, including adjusted EBITDA and adjusted debt income. Reconciliation of these measures to the closest comparable gap measures can be found in our earnings release. Kelly will begin today's call with a few opening comments followed by our operational results from COO Mark Bunch, and then Ryan Stash CFO will review our fiscal year financials before turning back over to Kelly for closing comments. After our prepared remarks, the management team will be available to answer any questions. As a reminder, this conference call is being recorded.

Having a partial contribution last year and having a full year contribution this year.

So is there anything you can give us in terms of have you always kind of compare apples to apples either.

Last year versus this year.

Kind of including those pro forma for the full year last year or or stripping them out.

What's the apples to apples change in production, presumably some amount of decline.

All of that information.

Yeah, David we haven't done a full pro forma we tend to look at it sequentially right quarter to quarter and so we can try to come back with you on that for trying to pro forma out those acquisitions or as if we owned in the full year, but I mean, ultimately I think the you know at the end of the day right. We have seen declines in the assets for natural reasons, but this.

Unknown Executive: If you wish to listen to a webcast replay of today's call, it will be available on the investor's section of our website.

Kelly Loyd: With that, I will turn the call over to Kelly. Thanks, Brandy. Good afternoon, everyone, and thanks for joining us for today's call. We appreciate everyone's interest in our reporting of our successful fiscal 2023 operational and financial results. However, before we begin to discuss our recent results, I would first like to make some general comments related to the announcement we put out this morning with Padevco concerning our definitive participation agreement to jointly develop the Shaveru oil field in the northwest shelf of Southern New Mexico.

Last fourth quarter. Unfortunately, we got hit with maintenance and three of our three of our fields, which are a major asset fields extended downtime combined with pretty much the lowest prices we've seen realized in two years. So you know.

Unfortunately, it hasn't it hasn't it wasn't there wasn't great timing for all of us, but we can certainly get back to you on what we think if youre trying to get to what the actual field decline is field by field.

So we're just getting into kind of your blended decline.

Kelly Loyd: It's a conventional oil bearing San Andres play in the Permian Basin located in Shavez County. We're proud to partner with Padevco, a company that shares our values and goals of providing superior total returns to shareholders. I will let Mark go into the details of the strategic partnership later, but I want to point out the biggest highlight of this arrangement first. The deal adds a new and exciting arrow in our quiver of capital allocation opportunities.

Factoring out those step function increases from transactions. So I guess if that is something you feel like you know the answer to are we still sitting at a.

I don't know if 5% annual decline rate for in a business as usual situation without incremental acquisitions or where do you think is the decline the endpoint.

I think we've got it before they like.

High single digit to 10% sort of annual decline yes.

Kelly Loyd: In the past, in order to grow our production and reserves, we have relied heavily on the AMD market. While we've been quite successful and plan to continue that strategy, the 80 plus high quality locations covered by this agreement will allow evolution to grow or maintain its production and reserves, even in times where asset level transactions are priced at what we consider to be unattractive levels. In turn, we believe this will be highly supportive to our dividend program for years to come. The wells here are 90 plus percent oil and located in the Permian Basin, which is an important market to which we want to be exposed.

Okay.

I don't think that thats necessarily change, but the fourth quarter, obviously is going to throw some things off when youre looking at decline rates sure.

Okay.

Sure.

And then I also wanted to yeah. It.

Just a quick deal like yet and I want to make sure you understand like the Williston that that compression issue was resolved also during the during the quarter. It was really just a one month downtime its backup.

Okay.

And so then.

From a kind of.

I mean, I know you don't give guidance, but maybe.

Does it is it.

It reasonable for us to think there will be kind of like a reversal of things, where there's kind of a.

Kelly Loyd: Now, onto our fiscal 2023 results. Our results for the period were solid and continued to demonstrate our assets ability to generate strong free cash flow. We used our cash flow to once again fund operations, capital spending and shareholder dividends. In addition, I'm pleased to report that we repaid 21.5 million of debt, again, all from cash flow and exited the year with a debt free balance sheet and increased liquidity. We continue generating meaningful free cash flow from the acquisitions completed over the previous years and we'll use these to continue to fund our strategic objectives.

Yeah, I don't know what part might be too strong of a word but a movement back up in terms of total production numbers.

Going from this quarter to the next quarter, just because a lot of that stuff can fix them.

A little bit of an upward movement just to get back onto a normalized decline.

That expectation.

Yeah, Dan I mean in order to avoid guidance, we won't say a whole lot on that but.

I think you understand that there were some.

Some unique events that happened so.

Okay.

Kelly Loyd: Of course, our ongoing success is a direct reflection of the hard work and accomplishments of our team. I want to thank each and every member of the evolution team for their contributions and continued dedication to driving near and long-term value for our shareholders. During the fiscal year, we paid cash dividends, totaling 48 cents per common share. This was 37 percent higher than for fiscal 2022, which we view as a clear indicator of the growth and strength of our business.

And then.

Hey, John did ask about.

At the <unk> costs associated with that.

You may have asked this maybe I missed it but just kind of the timeline of when that would start to contribute some amount of incremental production.

So again that's something.

We are working with them on.

I think both parties are incentivized and excited to get those initial three well pad anyway.

Going is as soon as is practical and we're both comfortable doing that.

Kelly Loyd: Our board recently declared a cash dividend of 12 cents per share for fiscal Q1 2024, payable on September 29th, marking the payment of our 40th consecutive quarterly dividend. Since the company began paying dividends in December of 2013, we've returned approximately $102.4 million or $3.9 per share of capital to investors. As we have discussed in the past, there are very few small-cap EMP companies that can say they have consistently paid a dividend for that length of time throughout several tumultuous commodity price cycles.

So I'm not going to give you any specific timing, but I I look.

I'm hopeful it will be sooner rather than later and expect that so.

And this is similar conceptually to what you guys did in the Williston right I mean, there might be some differences to the terms with the same idea of having a way.

And Avenue through which you can drive growth when it's not an attractive market for M&A.

Are they is it.

Appropriate to kind of put the two in the same bucket.

It is and in.

In our mind.

Kelly Loyd: We believe this reinforces the strategic view our board takes as we prudently grow the business through the targeted acquisition of solid, long-life and low-to-cline assets that will continue to support a sustainable quarterly dividend for the immediate and long-term. In short, maintaining and ultimately growing the payment of a quarterly cash dividend remains front and center for our board and management team.

Yeah.

Those are the they will compete for capital just like everything else, we do with our next marginal dollar.

We at this at this time look we think the economics are very attractive.

And in the <unk> field.

With Bradesco so.

Absolutely yes.

These are just.

Mark Bunch: I will now turn the call over to Mark to discuss operations. Thanks, Kelly. Total production for the fourth quarter of fiscal 2023 was 6,484 net barrels of oil equivalent per day. Consisting of 1,736 barrels per day of crude oil, 22,462,000 feet per day of natural gas and 1,000 barrels per day of natural gas liquids. Looking at our fourth quarter results in more detail, oil decreased 6% from 1,856 barrels of oil per day in the prior quarter, primarily due to downtime at the Dell Highfield.

It's gone to a point, where they've moved to the front of the line, we think theyre very good economics.

Okay, Okay and.

And can you just talk about how you sourced the deal.

Sometimes there could be some interesting nuggets there.

Did this come in Germany.

It's typical channel or the relationships you already have they came to you and you you'd be interested in conventional stuff.

Yeah, I know this isn't tightens, the ALR, but you've got to understand you're familiar with this type of taking a second pathway. So yeah. How did this kind of come about.

Well.

You know it it mostly came about I got a call from Doug Schick at <unk>.

Mark Bunch: Where production was shed in for approximately one week to upgrade the facilities and install a heat exchanger to increase plant efficiencies. Natural gas production decreased 8% from 24,489,000 cubic feet per day or 4,077 barrels of oil equivalent per day. In the prior quarter, primarily due to downtime in the Barnett shale properties associated with extreme summer weather conditions, along with gathering line maintenance and compressor issues. NGL Productions decreased 13% from 1,156 barrels of NGLs per day in the prior quarter.

<unk>, whom I've known for several years.

We actually used to coach Peewee football.

Against each other and I've known Doug and we've spoken over the years about various.

Business deals and.

I believe Doug had an adviser.

Looking in to do something I think it was the Roth guys.

Mark Bunch: Primarily attributed to downtime at Del High Field properties to install the heat exchanger, perform NGL plant maintenance, and our Barnett shale properties and NGL volumes were affected by the same factors that impacted on natural gas production.

Who had been very good for them.

It made it made natural sense.

It's nice to do business with someone you can trust.

Okay. That's helpful. All right I'll take the rest of my questions offline. Thanks, guys. Thanks.

Thanks Donna.

The next question comes from Jeff Robertson of water Tower Research. Please go ahead.

Thanks, Mark one question on the downtime are you aware of any.

Mark Bunch: Looking at our full-year results in more detail, total production for the full-year fiscal 2023 was 7,104 net barrels of oil equivalent per day, consisting of 1,806 barrels per day of crude oil, 24,956,000 cubic feet per day of natural gas, and 1,140 barrels per day of NGLs. Oil increased 6% from 1,696 barrels of oil per day in the prior year, primarily due to our acquisitions of non-operative working interests in the Jonah field and the Wilson Basin in the second half of fiscal 2022.

Service interruptions that you expect over the next next couple of quarters from your midstream providers in the Barnett shale.

No not really no wish they'd lettuce.

Going to do that but yeah.

Yeah.

Unfortunately down I mean, I think we talked about this before right. So enlink took over for Crestwood right Crestwood sold the system and they've had extended growing pains of trying to optimize the way they run the area.

Our operator and partner diversified is certainly.

Talk to them.

And so we certainly hope and are expecting them to do a better job going forward, but unfortunately, we're not going to give us any insight as to when theyre going to have downtime or issues. Unfortunately.

Mark Bunch: This increase was all set by the downtime at fiscal 2023 at the Del High Field as mentioned previously. Natural gas production increased 28% from 19,564,000 cubic feet per day in the prior year, primarily due to acquisitions of non-operative working interests in the Jonah field and the Wilson Basin in the second half of fiscal 2022. The increase is partially offset by downtime in our Barnett shale properties is mentioned previously. NGL production increased 14% from 997 barrels of NGLs per day in the prior year, primarily attributable to the two acquisitions in fiscal 2022, offset by decreases attributed to downtime at our Del High Field and the same factors that impacted our natural gas production in our Barnett shale properties as mentioned previously.

Thanks, Ive, partially read through the operating agreement that I think it was filed in an 8-K.

This morning.

Kelly with respect to the initial three wells I think you said the goal would be to spud. The first one by the end of this year would your expectation be to drill all three of those back to back in and complete them back to back or would it be one well drilled one well completed can you.

Can you talk about how you think about that initial pad developments.

I'll, let mark talk a little bit more to that but look just from an economic standpoint drilling them on a pad is a package is a better deal. So that's certainly our expectation, but yes there'll be drilled.

There'll be drilled back to back and then completed.

Back to back that's the expectation right now.

That's the most that's the most it makes the most economically viable way to do it and then there'll be brought online at the same time.

Mark Bunch: Based on discussion with our operators, we expect capital work over projects to continue in all the fields. Overall, for fiscal year 2024, we expect budgeted capital would be in the range of 4 to 5 million dollars, which excludes any potential acquisitions. Our expected capital expenditures for the next 12 months include two new drill wells at Del High Field, drill by our operator, did vary.

And in terms of infrastructure market I know you all would share I believe in the interest.

Restructure costs.

Related to the production facilities can you just talk about what's in the area that you could move oil into I know it was developed initially with vertical wells.

Yeah.

The plan right now is really not to use any of the vertical well facilities.

Because the wells the horizontal wells are so much more prolific in the vertical wells.

Mark Bunch: As Kelly already said, we're really excited about our strategic partnership with the DevCo and the Permian. The agreement covers approximately 25,000 growth sacers in and around the Shauberu field in northeast New Mexico. The Shauberu field was originally developed targeting the St. Andrews formation with vertical wells on 40 acres spacing. We view the horizontal development of the St. Andrews in the Shauberu field to be very compelling based on extensive vertical well control, the data and results from previous Padevco horse on the wells, and analog developments of other 40 acre non water flooded vertical St. Andrews fields.

So yes, the cost that were with the capital cost. We're looking at are actually involved putting in new infrastructure, putting in new tank batteries Alpha.

And we will optimize that for the.

The being horizontal wells.

Mark from what I've read about horizontal San Andres wells there.

It's not a unconventional.

Formation in most areas. So the initial decline rate is not as steep as.

More.

As a shale formation is that true in this area as well.

Yeah, I would say that you know typically in a and a wolfcamp C. Like in the in the Delaware part of the Permian, where you have the wolfcamp those decline rates are probably above 95% here, it's going to be less than that.

Mark Bunch: We expect this project will significantly contribute to this excessive evolution for years to come. We expect our capex increase over the 4 to 5 million dollar budgeted for our existing assets due to drilling and completing expected three wells in this fiscal year. The ultimate amount of capital spent during fiscal year 2024 for drilling in the Permian will depend on the schedule agreed to with our part.

Okay.

And then just lastly on funding Kelly you mentioned in your remarks.

Maybe Ryan.

Funding the capital program funding that drilling program with available liquidity in it.

Ryan Stash: with that I will turn the call back over to Ryan to discuss our financial highlights. Thanks, Mark. As mentioned earlier, please refer to yesterday's earnings release for additional information concerning our results.

You still have we'll have the flexibility.

We'd have the flexibility to.

Continue to fund the dividend and so that really shouldnt be at.

At risk at this point.

Yeah look dividend as his first so.

Ryan Stash: My comments today will primarily focus on financial highlights and comparative results between fiscal 2023 and 2022. During the fourth quarter we experienced extended downtime and maintenance across multiple assets and were negatively impacted by much lower realized natural gas and NGO prices. However, our fiscal year 2022 results still represented record revenue production and then income. During the past fiscal year we had solid generation of cash flow, including adjusted EBITDA which was $60.1 million for the current year compared to $52.8 million in the prior year, a 14% increase.

I don't want to put that in the opposite order so yes for sure.

Okay I just wanted to make sure that was out there. Thank you.

Yeah.

The next question comes from David Welcome.

Ladies and gentlemen, please go ahead.

Hey, calling on how are you guys doing today.

Then better.

Hey, So I think you kind of answered these questions, but I just want to.

And sorry, I just wanted to ask them again for clarity.

So as it related to the downtime, particularly at Delhi, but also in the Barnett.

Ryan Stash: During this fiscal year we funded our operations, development capital expenditure, dividend and share repurchases all out of operating cash flow, while also paying down debt drawn for our acquisitions. Supported by our continued strong operational and cash flow outlook, we paid a dividend of 12 cents per share in the fourth quarter and declared a dividend of 12 cents per share for fiscal Q1 of 2024. Payable on September 29, our cash dividend program has been and will continue to be a top priority as we clearly recognize the strategic importance of returning value to our shareholders.

Would you expect that there was compression issues being fixed would get production in those particular areas back to where they were in <unk>.

March as we go.

Go forward.

So listen it's we do expect as those compression issues get better you will see better results. So I'll say that.

Okay.

And then.

For some clarity on the on the Permian assets.

Ryan Stash: We ended the fiscal year debt-free and our borrowing base remained at $50 million. On June 30, 2023, cash and cash equivalent told us $11 million and working capital was $8.9 million. As a result, total liquidity on June 30, 2023 was $61 million including cash and cash equivalents. This represents an increase in liquidity at 65% since June 30, 2022. This is a direct result of our targeted and immediately creative acquisitions over the past couple of years.

I'm just trying to triangulate a few things that you said so.

Four gross wells a year is the expectation.

And you think you can net.

Alright.

<unk> gross for net.

I'm, sorry did I say for my apologies.

To you.

Yes.

So.

You expect that you can fund that.

Ryan Stash: We are ideally positioned for the continued execution of targeted future growth opportunities that meet our strategic vision. Lease operating costs increased to $59.5 million from $48.7 million in fiscal 2022. Primarily driving the overall increase was the acquisitions of the Jonah Field and Williston Basin which occurred in the latter half of fiscal year 2022. Cash DNA expenses increased 18% to $7.9 million from $6.7 million in fiscal year 2022. The increase in expenses is due to approximately 600,000 salary employee benefits from the addition of personnel added since the prior year and 300,000 in professional fees associated with our search for a CEO.

And the dividend.

Out of free cash flow under.

Sure.

If we look at the forward curve for.

For oil and gas today.

That's right Yeah, no that's right David I mean, we when we look at when we look at where pricing is like you said and the forward curve.

Assuming oil is already increase from what we saw in the fourth quarter so of Ngls.

Kevin Aside right Ngls in the fourth quarter or by the law.

Long time, and so that certainly impacts us too, but when you take prices in a consideration free cash flow that our other assets generate plus cash that we're going to get from drilling the cadets co right. There is some delay there, but we do we do think this asset become self funding pretty quickly.

Ryan Stash: Also contributing to the increase are additional fees for accounting audit-related services and public reporting expenses due to the increased size of our company. Net income for the fiscal year was $35.2 million or $1.04 cents per diluted share compared to $32.6 million or 96 cents per diluted share in fiscal year 2022.

We don't see any issue covering that dividend plus funding our proportionate share of eight wells per year.

Yes.

That's just to reiterate metro one of the things that you know.

We're excited about with this deal is the money were spending.

Kelly Loyd: I will now turn the call back over to Kelly for his closing remarks. Thanks, Ryan. We continue to benefit from the targeted acquisitions we have completed over the past few years. And as a result, we enjoy a larger and more geographically diverse asset base and commodity mix. This provides us with a solid platform for significant cash flow generation that we will continue to use to support and enhance our well-established shareholder capital return program.

Those into the ground and drills wells.

Yeah.

We're paying for acreage.

To get in on a block by block basis, but that's a relatively small number the rest of the money goes into the ground it starts producing oil.

Again, probably within about 60 days.

Yeah, well longer than that but similar very reasonable timeframe, maybe three meg frame for when the money gets spent to when you start getting revenue from the oil from the wells you drilled.

Kelly Loyd: Our shareholders expect a consistent and meaningful cash return on their investment and we remain committed to maintaining and, as appropriate, increasing our dividend payout over time. As in the past, we will maintain a conservative balance sheet and remain disciplined in our management of capital as we fully recognize the cyclicality of our business. Our ongoing commitment to remaining fiscally prudent was evidenced by our prompt paydown of our debt position, following the closing of our most recent acquisitions.

It's not a you know.

Huge multi year payback.

Got to pay upfront and then you get payback. We in particular are excited about the fact that the money going into this goes into the ground.

Megan oil for both of us.

No.

Under the understanding that.

There is a delay between when you spend the money and when the oil starts coming.

Would you expect.

The expenditure of capital on a pro forma basis would at a minimum offset the declines in the.

Kelly Loyd: As a result, we are well positioned to execute on targeted, high rate of return and immediately accretive growth opportunities as appropriate. We will continue to execute our strategic plan focused on maximizing total shareholder returns and optimizing every dollar that we invest.

Sure.

And the other assets in the portfolio.

Okay.

So.

I'm not sure I'm prepared to go into that level of detail, but look we certainly not on the wrong track.

Kelly Loyd: With today's announcement, we have added an opportunity to have a meaningful, organic growth component, as with all of our capital allocation decisions. Any drilling here must compete with dollars to be used elsewhere, and the nature of this arrangement will allow for that. We are not required to pay up front for anything other than the acreage cost for the immediate development block, which we will be developing next. This is unlike other situations where companies must pay in advance for entry into a field and prepay for well locations. This is a true strategic partnership where development will occur sequentially with the decision moved forward based on success. We in Padevco expect that this partnership will produce positive results for many years to come.

Okay and then.

If I could sort of cycled back to is the the Williston assets, which I guess you guys have owned for the better part of 18 months now.

Or maybe that.

Date of announcements at the date of closing.

Pretty but that's pretty good.

Yes.

Several times on previous conference calls about.

Maybe putting development capital into those assets.

Yeah.

Well again, we're sitting here 18 months later and that really Hasnt happened.

No.

Why has development capital not gone there whats holding it up what makes needs Permian assets look.

Operator: With that, I'll turn the call over to the operator for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, just pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Once again, that was star, then one, to ask a question.

Superior to you because if I didnt misunderstand.

Said, a few minutes ago.

It kind of jumped the blood.

Okay. So yeah I mean.

Win win again this was.

Primarily like first and foremost the Williston acquisition was evaluated and primarily in a large large way purchase because it was a great PDP purchase.

We really like the existing assets and how they were producing it also had drilling locations, which at the time.

Operator: At this time, we will pause momentarily to resemble the roster.

<unk>.

When we evaluate them there was a you know the drilling.

Drilling and completing cost was.

I don't remember what it is for let's just say it was a certain number very shortly after the that number moved up 20%, 30%, which again it makes the returns pretty good.

John White: Our first question comes from John White of Roth Capital. Please go ahead. Good afternoon and congratulations on the Padevco deal. I agree with you. I think it looks very attractive. Thank you, John.

But the risk associated with drilling them and in the return you got it's still something that we think is attractive.

Kelly Loyd: John, before we get to your question, can I just make one additional comment? Yes, of course. Okay. So, I just want to reiterate, as I've said before, that when we in the board, we set dividends, we do so with a multi-year horizon expectation based on our production and resulting cashflow that is generated from our forecasted pricing and production levels. With this in mind, we fully expect that our cashflow combined with our pristine balance sheet and our cash and cash equivalents will be able to more than fully cover our dividend, which, by the way, we just reset it 12 cents per share.

It just it didn't jump out at us that we need to go do now if you see some theres been plenty of inflation across the service sector. So if we could see those prices abate. Some then that project becomes certainly more attractive.

But at this point in time with the current drilling.

Drilling costs that are out there in the world today in a very modern AFP, which we reviewed.

The returns here are just like I said superior to the wells there.

Okay.

Would you consider that those wells.

The Williston development opportunity to still be in sort of like a theoretical backlog subject to some combination of oil price and service costs.

Kelly Loyd: Not only do we believe it will fully cover our dividend, it should cover all of our capital needs, up to and including any planned drilling activity, and we're confident, as you mentioned, John, that this strategic partnership will be highly supportive of our dividend for quite some time. Okay. I appreciate that add-on.

Absolutely yes.

Okay.

And then.

So again, it's been the better part of 18 months now since you guys have.

John any acquisitions.

You kind of implied.

So I guess I'll try to get you to.

David outright.

The debt piece.

Kelly Loyd: So, regarding the Padevco deal with respect to capital expenditures, Mr. offered some commentary. However, this commentary was, I would say, highly conditioned or highly qualified. Can you offer any more detail about potential cap-ex at the Padevco deal, maybe put it in terms of a minimum or a maximum or a six-month time frame or a 12-month time frame. Whatever you're comfortable. I can absolutely look, these are fluid in their plans that we're going to come up with and finalize with our partner, Padevco.

Key acquisitions feel a little bit too expensive to you still and that's why you are looking at some more organic stuff.

Well, okay. So so let's be clear it was it was never either or right. It was we were always going to look to have.

The potential for us to be able to put some money into the ground.

And when there are years like this past year when the criteria that we require to make sure that acquisitions are really high highly accretive to us.

Just start there I mean, just so you know.

We used the same proven screening and processing and evaluation sort of process, we have for years and we screen valuate it and even offered on many candidates, but like I said, the seller's expectations just weren't in line with what we require to make it a good acquisition for us.

Kelly Loyd: Initially, I'll tell you what we're both thinking on this. We have an initial three-well PAD, which we're working on. It's been permitted. The expectation is that we want to get to that three-well PAD sooner or rather than later. Again, we need to finalize all the details. In general, the way we thought about this is basically, again, fluid can change depending on conditions, environments, all this, but essentially about eight-wells gross per year is in general how we've started thinking about the budget on this together.

Kelly Loyd: So, again, three-wells at roughly three million per copy are half of that is four and a half. We have acreage payments. So, we have four and a half to five million would be our expectation for the initial three-well PAD. And then, as I mentioned, the initial goal, again, which is highly dynamic and fluid and will adjust as we go, but at least our initial sort of game plan is roughly around eight-wells per year together, which we'd be 50 percent of. Well, that's a lot of extra detail and I really appreciate that, Kelly.

That that strategy is has never gone away, we're still doing it as we speak we're at.

Evaluating several deals so that's something we very much still want to do and we think this complement those very well and.

Anyway, So I don't want to make sure I'm not leaving with your impression. This is all we're going to do.

We are our goal is to go find highly accretive PDP acquisitions as well.

Okay.

Go ahead, Ryan I think yes, I think it's I think it's fair to say that.

The acquisition market has been choppy, maybe as a way to describe it.

We look at we try to source deals through connections through negotiated and also through marketed processes in.

There is probably there is probably a lull towards the beginning of this year of really quality deals that we saw come out we have seen that pick up to be honest, we have seen a lot more deals that might fit as pick up here in the near term, but you know there was a portion of we didn't see as much deal flows.

We would have liked to and I'd like to follow up with what Ryan just kind of on top of that we look at this as a way to flatten out R. R.

Our ads I mean, it's it's a low risk area, we know theres oil there and the problem with acquisitions, if you're just 100% rely on those it tends to be kind of lumpy because they come kind of in groups.

Mark Bunch: So, on the maintenance or some of the infrastructure work, let's just make sure we understand the work at Dell High is that all completed? Is the heat exchanger installed and working? John, this is Mark Bunch and the heat exchanger is up and running. The plant turnaround was completed and so, we expect that Dell High is back running at rated loads. So, we see that Dell High is performing as we would be expected to.

And this way it kind of helps flatten out or our production profile as we go just because we are developing organically we're not.

We're not having to go out and bid for it every year, yes, I mean, when you're especially for the oil assets right. If you're if you're in a backward dated commodity to curve and oil you'd much rather drill now takes all your cash flow then have to pay.

By on a car.

Curve this declining makes a little bit easier and we'd rather accelerate that right now when we see those quite yet and with current prices, we would really love to drill these wells as soon as possible because obviously the prices it picked up lately.

Mark Bunch: Okay, thank you. And same question on the Barnett Shale with the gathering line maintenance and The Barnett shale that that was all obviously related to compressor and gathering stuff, we see that that is we believe that that is kind of you know generally on on the man but as of right now we don't know whether that is whether it is completely back up and running as it's supposed to be. Okay, you know John when it's you know 112 degrees and Fort Worth compressors don't always act properly and they're going to run into issues which clearly they did for much of the summer but I think we're starting to see that get better.

Yes.

<unk> happening in the A&D market and you guys as I don't think I'd be insulting you by calling you value buyers just sort of aren't there.

Is there still like a big differentiation between bid and ask and deals just aren't happening.

Okay.

Well.

It's a little early to say so.

I said, we are we haven't stopped that process. So.

I don't want to say too much because I don't know who's listened.

I would just say we are excited about opportunities that are out there. We think the market has become a little more realistic from the seller's perspective, how about that.

And we have active fleet.

John White: Okay I appreciate that and I'll turn the call back to the operator. Thank you.

We have actively gone after acquisitions, we had even while we were developing this.

Permian Basin opportunity, we were actively looking at other acquisitions and making offers on them and I don't feel like we were like wildly out of the market. So I'd expect us to still be able to do those type of things too. We're just trying to like make it. So we're not totally dependent upon acquisition work.

Donovan Schafer: The next question comes from Jonathan Schafer of Northland Capitol Markets. Please go ahead.

Donovan Schafer: Hey guys, thanks for taking the questions and I'm sure you know this but it's Donovan Schafer. So I want to start picking up what John left off the so we covered the bell high and the Barnett but in the Wilson and this could I actually honestly be a data entry error on my part. You know the double checklist but it looks like the Wilson was down quite a bit too much is wrong on that I have the Wilson down something like you know North and 10% quarter of a quarter.

Okay, and then we've talked on a couple.

Your conference calls about just like the general notion that.

Growth Capex could come from internal cash flow and acquisition probably gets funded.

Through the credit facility to then be paid down over the course of the next couple of the couple of following years.

Does that is that still sort of like an accurate high level.

Donovan Schafer: So was there a decline there or is that just an error in my model and Donovan. Donovan this is Mark Bunch and there was during one month we had a down time on the compression side there and so it affected NGLs and also affected gas production and that's the main cause. Well I'm talking about you saying this is true for the but this is the bottom the Wilson. Yeah yeah yeah for the Wilson.

Description of the strategy.

Yes that is that's our base plan for sure you are dead on.

Yeah.

Alright, gentlemen, I'm, sorry for monopolizing time, and I'll turn it over thank you.

No I appreciate the color. Thank you.

The next question comes from Bruce Brown of Brown capital. Please go ahead.

Donovan Schafer: Oh really also there's the compression issues and both and also compressor down in the Barnett. Okay got it. Yeah okay okay and then I want to turn to so for the year of a year production and maybe Ryan has information. But for the full year you know the year of a year production numbers were good and but of course part of that comes from the Jonah and the Wilson acquisition being you know having a partial contribution last year and having a full year contribution this year.

Hi, Fellows appreciate all the color you've given us on the <unk> deal.

How long have they been active in that field and how many wells have been drilled and was there a success rate been.

And the timing of that.

They had they started in.

I think 2019.

Maybe 2018 to 18.

But so what.

And like I said, it's a better question for <unk> than for me, but the way we sort of characterize it.

Donovan Schafer: So is there anything you can give us in terms of to be able to kind of compare apples to apples either you know last year versus this year kind of including those pro forma for the full year last year or or stripping them out just like what's the apples apples change in production presumably some amount of decline. Do you have that information. Yeah Donna we haven't done a full pro forma we tend to look at it sequentially right quarter to quarter and so we can try to come back with you on that for trying to pro forma out those acquisitions or as if we own them the full year but I mean ultimately I think the you know at the end of the day right we have seen declines in the assets for natural reasons but this last fourth quarter unfortunately we got hit with maintenance and three of our three of our fields which are a major asset fields.

They had sort of had their generation one.

More science, the kind of wells, where they were trying different landing zones.

Different frac sort of.

I don't know resins and different kind of sands in different ways and how the size of the clusters of spacing between the clusters.

And trying different things.

And then they went on to what I would call their generation two sort of style of Frac, which they tried and experimented with some of the things that worked and tried some more stuff to see if they could expand or is this going to work better or worse and through that science.

That they did a they've come up with.

A plan.

In a style and a way to produce these.

Donovan Schafer: Extended down time combined with pretty much the lowest prices we've seen realized in two years so you know unfortunately it hasn't it hasn't it wasn't it wasn't great timing for all of us but we can certainly get back to you on see what we think and if you're trying to get to what the actual field decline is field by field cutting. Well, we're just getting into kind of your blended decline, you know, factoring out those step function increases in transactions.

That certainly they and we also think can be improved upon but as a as a base case and we don't do any better than what we would call sort of the gen two sort of <unk>.

<unk> design, and where to land and all those sort of learnings that have been gained I think we still have a very attractive return, but both they and we expect there to be plenty of room for upside, which again this isn't something we just.

Donovan Schafer: So I guess you could, if that is something you feel like, you know, the answer to are we still sitting at a, I don't know, 5% annual decline rate for, you know, in a business as usual situation without incremental acquisitions or where do you think the system is declined at 10 points? I think, I think we've got it before to like, you know, high single digit to 10% sort of annual decline.

Walked into this has been four months of <unk>.

Detailed.

Technical analysis and looking at all of the science, where we can.

Yeah.

Again, all of our staff in house is.

Has experience in this and is excellent at this and we did a lot in.

Donovan Schafer: Oh, yeah, yeah. We don't, I don't think that that's necessarily changed, but the fourth quarter obviously is going to throw some things off, you know, when you're looking into decline, right? Sure. Yeah, okay. And then I also want to, yeah, just quick, you know, like, and I want to make sure you understand like the will of the, that, that compression issue was resolved also during the, during the quarter. It was, it was just a one month down time and it's back up.

As I think you even had an industry expert we consulted with.

And so.

Where we've become comparable with what we know can be done and we're also very.

I have very strong expectations that we will beat that.

For anyway.

Well they are there.

Well up on the learning curve.

Donovan Schafer: Okay. Um, and so then from a kind of, I mean, I know you don't give guidance, but maybe does it, is it reasonable for us to think there will be kind of like a reversal of things where there's kind of a, you know, I don't know, pop might be too strong of a word, but a movement back up in terms of total production numbers, um, going at like, in this quarter to the next quarter, just because a lot of that stuff has been fixed and, you know, there's a little bit of an upward movement just to get back on to a normalized decline path.

As you probably would would put it.

So they're at a point it sounds like they're at a point, where perhaps they can maximize.

The knowledge they've accumulated.

And our target there they're drilling targets would be.

More more carefully.

You know plan and selected.

I think that one of the biggest learnings is.

Really what zone, you want to land the wells in and.

You look at like anywhere else, you're going to try hey, maybe if we put it here we might get two of the different St. Andrew's pay zones. If we put it here, we'll get it in and so they did all the right stuff you should do when Youre trying to learn as much as you can.

Donovan Schafer: Is that a clarification? Uh, yeah, it's done. I mean, in order to avoid guidance, we won't say a whole lot on that, but, you know, um, I think you, you understand that there were some, some unique events that happened. So, um, and then John did ask about the, uh, the debco cost associated with that. Um, you may have asked us to, or maybe I missed it, but just kind of the timeline of when that would start to contribute some amount of incremental production.

Walkaway again, we've learned a lot from that as a obviously they have and they have expectations and ideas and ways to move from that sort of Gen. Two is call. It just to sort of the gen. Three.

There's been a whole lot of science and learnings.

Yes.

We're excited.

They've drilled 10 horizontal wells out there.

Okay, well so they yeah. So yes exactly so that's that's good alright well.

Donovan Schafer: So again, that's something we, we are working with them on. Uh, I think both parties are incentivized and excited to get those, uh, initial three well pad anyway, uh, going as, as soon as, uh, is practical and, and we're both comfortable doing that. Um, so I'm not going to give you any specific timing, but I look, I'm hopeful it will be sooner rather than later and expect that. So, and this is similar conceptually to what you guys did in the Williston, right?

Good luck with that whole process it sounds very promising.

The other question I had is is since we're almost done with the first fiscal quarter.

Of fiscal 'twenty four.

Oil prices have risen substantially.

During this period of time from where they ended the last quarter.

Natural gas prices have you appear to have improved some but can you quantify what percentage impact what kind of range percentage impact that might have on <unk>.

Donovan Schafer: I mean, there might be some differences to the terms of the same idea of having a way, um, an avenue through which you can drive growth when it's not an attractive market for M&A. Is that, are they, is it appropriate to kind of put the tune in the same bucket? It is. And, um, in our mind, you know, those are, they will compete for capital just like everything else we do with our next marginal dollar.

On your cash flow in the first quarter I mean, just in a very broad sense.

Yeah. So I mean, obviously the challenge of being non op is we're still delayed on getting actual prices in the field, which can sometimes differ than what we estimated but if you're just looking at and I'll talk on more on the gas side right. The gas side was really.

Donovan Schafer: Um, we, at this, at this time, look, we, we think the economics are very attractive, uh, in, in the Shabaru field, uh, with Absolutely, yes. These are just, it's gone to a point where they've moved to the front of the line. We think they're very good, you can know. Okay, okay, let's go. And can you talk about how you source the deal? I know that sometimes they can be some interesting nuggets there.

Some of the lowest prices that we've seen right quarter over quarter or sequentially rights on the gas side Q4 was.

A trough right and so if you look at what what we've seen pricing for Houston ship channel is one of the pricing hubs that we that we sell our gastro Barnett and then ill pile up in up in the Rockies and so both of those both of those indices are.

On average call it maybe 40% to 50% higher.

This quarter to date than they were last quarter. So.

Donovan Schafer: Did this come in? Is there any typical channels? The relationships you already have? They came to you and knew you'd be interested in conventional stuff. And, you know, I know this isn't technically EOR, but you kind of understand you're familiar with this type of taking a second pass at times. So, yeah, how did this kind of come about? Well, you know, it mostly came about, I got a call from Doug Schick at Padepko, whom I've known for several years.

I don't have the exact percentage right, but you can but it's not a small percentage right. It's a pretty material move if we're talking about.

Two to $3 gas on the Barnett lesson $2 gas.

Last quarter, if you're if you're adding here.

Adding 40 onto that so certainly we expect to see some improvement this quarter on the gas realizations also Ngls right I talked about that earlier, but Ngls were.

Donovan Schafer: We actually used to coach P.W. Football against each other. And I've known Doug. And we've spoken over the years about various business deals. And I believe Doug had an advisor. Looking in to do something, I think it was the rough guys who have been very good for them. It's made it made natural sense. It's nice to do business with someone you can trust. Okay, that's helpful. All right, I'll take the rest of my questions off line. Thanks, guys. Thanks.

And a follow up falling off a cliff if you look at it from April down to June June being kind of the low month. They you know they traded down quite a bit ethane itself is up.

50%, 60% since last quarter.

Barnett has quite a bit of ethane some of the heavier components are up as much as <unk>.

Anywhere from 5% to 10%, 30%, 40%. So overall NGL prices I think those are the two pieces, you mentioned oil, but I think ngls and natural gas or two where it might be more noticeable in realizations.

Oh sure Yeah.

Yeah, obviously.

The bulk of your production is in those two areas.

So yes the company yeah, Yeah, Yeah, I understand so that's great. Okay I appreciate the color.

Jeff Robertson: The next question comes from Jeff Robertson of Water Tower Research. Please go ahead. Thanks. Mark, one question on the downtime. Are you aware of any service interruptions that you expected the next couple of quarters from your midstream providers at the Barnett shale? No, not really. No. We're saying let us know they're going to do that. But yeah, unfortunately, don't. I mean, I think we talked about this before, right? So in length took over for Crestwood, right?

I think that I think that does it for me. Thank you so much.

Thank you I appreciate your interest.

Our next question comes from Joseph Prestige, a private Investor. Please go ahead.

Hello, Yes. Good afternoon gentlemen, my question is about the future development potential of the Delhi field, assuming the acquisition of Danbury by Exxonmobil closes.

Do you anticipate any positive operational changes in the development cycle of the field or changes in asset structure. As a result of this transaction due to the size and scale of Exxon flowing through to the per barrel cost structure or is it too soon to begin thinking about this.

Jeff Robertson: Crestwood sold the system. And, you know, they've had extended growing pains of trying to optimize, you know, the way they run the area. Yeah, you know, our operator and partner diversified is certainly, you know, talked to them a lot. And so we certainly hope in expecting them to do a better job going forward.

And that's it thank you.

I appreciate that so.

Yeah, and that's a question we've had to think about and I would just say.

Mark Bunch: But unfortunately, they're not going to give us any insight as to when they're going to have downtime or issues, unfortunately. Thanks.

Well one thing you need to know about Exxon is that that theyre not them, they're going to do the smart thing and they're going to do the right thing.

Mark Bunch: I've partially read through the operating agreement that I think was filed on an AK by Padevco this morning. Kelly, with respect to the initial three wells, I think it said the goal would be to spread the first one by the end of this year. Would your expectation be to drill all three of those back-to-back and then complete them back-to-back? Or would it be one well drilled, one well completed? Can you talk about how you think about that initial PAD development?

So look I would anticipate.

Operations will.

It would be as good or better I think <unk> done a terrific job I think Exxon.

As the scale and capability to do just as well and perhaps get.

Prices.

Even cheaper.

One of the things we've been asked about in the past is the carbon capture.

Mark Bunch: I'll let Mark talk a little bit more to that, but look just from an economic standpoint, drilling them on a pad as a package is a better deal. So that's certainly our expectation. Yeah, no, they'll be drilled, you know, they'll be drilled back-to-back and then completed, you know, back-to-back. That's the expectation right now. Because that makes the most economically viable way to do it and then they'll be brought online at the same time, in terms of infrastructure mark, I know there's you all would share I believe in any infrastructure costs related to the production facilities.

Permitting and all that and.

We honestly, we I still don't have an.

Any way to tell you whether Delhi, we'll get that permit so there could be some kind of benefit for that.

But look Danbury was planning on working on that and pushing towards it.

And I would just suggest.

Did very can do it I don't see why excellent couldnt do it just as well so.

Yes, I mean, the only thing I would appreciate it yes, the only thing I would add is just the.

Mark Bunch: Can you just talk about what's in the area that you can move oil into? I know it was developed initially with vertical wells. Yeah, the plan right now is really not to use any of the vertical well facilities because the wells, the horizontal wells are so much more prolific than the vertical wells. So, the costs that we're with the capital costs that we're looking at are actually involved, you know, putting in new infrastructure, putting in new tank batteries also.

One thing we've had in the past with Danbury is capital constraints at Delhi, and so while we don't know what Exxon to plans are specifically for the field. The one thing Exxon is not as capital constrained and Triton, So, whereas Danbury went through bankruptcy. They went through a period of not spending much money at all.

That shouldn't be an issue here.

From a capital perspective.

Oh very good thank you.

Very happy shareholder gentlemen, thanks for being such prudent stewards of capital.

Mark Bunch: And we'll optimize that for the being horizontal wells. Mark, from what I've read about the horizontal and horizontal wells, it's not a unconventional formation in most areas. So, the initial decline rate is not as deep as more as a shale formation. Is that true in this area as well? Yeah, I would say that, you know, typically in a wolf camp, say like in the Delaware part of the Permian where you have the wolf camp, those decline rates are, you know, probably above 95%. Here, it's going to be less than that. Okay.

Thank you I appreciate that thank you very.

Very important to us.

Yes.

The next question is a follow up from Jeff Robertson of water Tower Research. Please go ahead.

Thank you Mark.

Kelly Orion as you model the <unk>.

Permian Wells can you talk about what kind of impact do you think those that asset could have on <unk>.

Evolutions realized oil price and also low.

I mean Permian pricing this receives WCS sour right.

Kelly Loyd: And then just lastly on funding, Kelly, you mentioned in your remarks, or maybe Ryan, from the funding the capital program, funding the drilling program with available liquidity. And it appears you still have, we'll have the flexibility, we could have the flexibility to continue to fund the dividend. And so that really shouldn't be at risk at this point. Yeah, look, dividend is first. So I don't want to put that in the opposite order. So yeah, for sure. Okay, I just wanted to make sure that was out there. Thank you.

$3 deduct TWD, yeah, it's about a $3 deducted Debbie Ti, maybe maybe a little bit more than that at $3 to $4.

And.

I don't expect this will be particularly expensive to operate so yes, you would expect I would expect that overall the margin for the company would be better just because.

There are a lot of the other step we have is either water flooded or sia two flooded which typically is low margin is at lower margin type of operations. So yes, I would think the margins would improve.

David Locke: The next question comes from David Locke of Old Mammoth Investments. Please go ahead. Hey, Kelly, nine. How are you guys doing with that? Been better. Hey, so I think you've kind of answered these questions, but I just want to answer them. I just want to ask them again for clarity.

Yes.

I definitely think it.

The work we've done it certainly stacks up to be a fairly high margin low cost.

Operating wise.

Oil play.

And yes, it's like whenever you have new wells Youre drilling new wells, they're going be higher rate wells and thats that typically translates into higher margins.

Kelly Loyd: So as it related to the downtime, particularly at Del Hive, but also in the Barnett, would you expect that those compression issues being fixed would get production in those particular areas back to where they were in March as we go forward? So listen, we do expect as those compression issues get better, you will see better results. So I'll say that. Okay. And then for some clarity on the, on the Permian assets, I'm just trying to triangulate a few things that you said.

Thank you.

Thanks, Jeff.

The next question comes from John Bair Ascend wealth advisors. Please go ahead.

Thank you and good afternoon gentlemen.

Thanks, John .

Just to be clear a real simple question I guess as you move forward too.

Develop.

Drilled a three well pad.

And your other operations all of that should be paid for through cash flow is that is that correct. In other words, you you've ended the quarter.

And the year debt free with cash on the books and so forth. So I'm just kind of curious if if I'm reading this right or are hearing this correctly.

Kelly Loyd: So for gross wells a year is the expectation. And you think you can. Sorry. Eight Grosswells, Forenet. Oh, I'm sorry, did I say four? My apologies, so four to you. So you expect that you can fund that and the dividend out of free cash flow under sort of the, if we look at the forward curve for oil and gas today. That's right. Yeah, no, that's right. I mean, we, you know, when we look at, when we look at where pricing is, like you said in the forward curve, you know, obviously assuming oil is already increased from what we saw in the fourth quarter.

John That's a plan obviously.

Pricing aside but at more prices are right now in the foreign market and what we expect yes, we would plan and as always our goal to drill those out of cash flow right. We wouldn't it wouldn't do.

Additional funding to drill those right so other.

Your other operations or other fields, and so forth. So I'm just I'm, a little I guess I'm, a little stunned at the reaction today.

Obviously, a lot of questions about and I think inferring that the dividend payment might be in jeopardy, and yet you know you've confirmed the 12 cents and have long made that a very.

Our priority.

And so I'm, just I'm a little baffled at the at.

Kelly Loyd: So of NGLs and, you know, just kind of an aside, right? NGLs in the fourth quarter were by the low end of a long time. And so that certainly impacts us too. But when you take prices in a consideration, free cash flow that our other assets generate plus cash that we're going to get, you know, from drilling with the death code, right? There is some delay there. But we do, you know, we do think this asset becomes self-funding pretty quickly.

At the extent of the reaction that that's gone on here today and I don't know if you would care to comment on that at all or or.

Well.

Okay. So here's our goal we're going to make sure.

We do everything we can to make everyone, who sold regret it and buyback how about that right.

Kelly Loyd: You know, we don't see any issue covering that have been plus funding our proportionate share of eight walls per year. Yeah, honestly, that's just to reiterate. That's one of the things that you know, we're excited about with this deal is the money we're spending goes into the ground and drills wells. You know, we were paying for acreage to get in on a block by block basis. But that's a relatively small number.

Understood.

Did you do any stock buyback in the last in the last quarter at all.

Kelly Loyd: The rest of the money goes into the ground and starts producing oil. Again, probably within about more 60 days. Yeah, yeah, longer than that. But you know, somewhere very reasonable top frame, maybe three next frame. For when the money gets spent to when you start getting revenue from the oil from the wells you've drilled, it's not a, you know, huge multi-year payback. You've got to pay up front and then you get payback. We impede up to our excited about the fact that the money going into this goes into the ground and starts making oil for both of us.

So whilst they come out with our 10-K 10-K later to to confirm that but okay stock buybacks, where you know honestly really limited for the prior we did a lot more of let's just say that in the March quarter that were already there.

Published we will publish our 10-K after the close today alright, okay.

Well very good well I I would echo the previous.

One of the previous commentators that.

And pleased with how you've moved forward and.

I hope that you do prove everybody that have been dumping their thing.

And are so.

Keep doing what youre doing.

Thanks for the sentiment and.

Yeah look as you know.

Kelly Loyd: So under the understanding that there's a delay between when you spend the money and when the oil starts coming, would you expect that the expenditure of this capital on a pro-forma basis would at a minimum offset the declines in the other assets of the portfolio? So I'm not sure I'm prepared to go into that level of detail, but look, you're certainly not on the wrong track. Okay. And then if I could sort of cycle back to the Williston assets which I guess you guys have owned for the better part of 18 months now, or maybe that's the date of announcement or not the date of clothing. Pretty good. That's pretty good. You know, we had fought several times on previous conference calls about maybe putting development capital into those assets. Well, again, we're sitting here 18 months later and that really hasn't happened.

And I think it's pretty obvious we run this company for the long run and we think about things with multi year horizons, so while nobody likes to see what's going on in the stock market today.

With our stock.

We're not going to let that led that.

US make any rash decisions, we're always going to do what's what's in the best interest for our shareholders in the long room. So yes.

Right.

Fully convinced of that thanks very much.

Thank you.

Our next question is a follow up from David lock off at all.

Ma'am.

Please go ahead.

David are you there.

Maybe he is on mute.

Okay.

Sorry about that.

Yeah.

Is there a way you sort of like a quick recap for civilians.

What went haywire in California last year at least as it regarded.

Kelly Loyd: So why has development capital not gone there, what's holding it off, what makes these Permian assets look superior to you because if I didn't misunderstand, you set a few minutes ago, but they've kind of jumped the line. Okay, so yeah, I mean, when, when, again, this was primarily, like first and foremost, the Williston acquisition was evaluated in primarily in a large, large way purchase because it was a great PDP purchase. We, we really like the existing assets and how they're producing.

The prices that you got in Jonah.

And what you're sort of thinking the situation looks like over the course of the next.

Nine months.

I wish I had that crystal ball going forward, but and going past if you recall.

So last winter was unusually I won't say unusually but probably more colder than normal right. If you look at sort of the weather maps on the west coast in California, a lot due to linear.

So the issue you have in California is very very little natural gas storage and so they have to buy everything on the spot market and when cold weather strikes people will pay what they need to get the gas to heat their homes right and they can't pull it out of storage and so you tend to get these.

Kelly Loyd: It also had drilling locations, which at the time when we evaluate them, there was a, you know, the, the drilling and completing cost was, I don't remember what it is, but let's just say it was a certain number. Very shortly after the, that number moved up 20, 30%, which again, it makes the returns pretty good, but the risk associated with drilling them and in the return you got, it's still something that we think is attractive.

Really high prices and spikes out there not unlike we've seen right in the power market in Texas, when you've had heat waves you get that in California. During the wintertime now interestingly, we saw that in the summer a little bit to where we saw prices in July and August spike a little bit with the heat out there too so any time theres a power demand, whether it's to cool year Homer heat your home.

Youre going to see probably spikes if you look out in the forward curve.

Depends on the day, but this winter when last time I looked you could hedge prices for probably around $3 premium to Henry hub. It may have gone down a little bit here in the last couple of days with call. It $2 $53, maybe even as much as $4 premium hedging in the forward market right now for winter out in California.

Kelly Loyd: It just, it didn't jump out at us that we need to go do now. If you see some, there's been plenty of inflation across the, the service sector. So if we could see those prices abate some, then that project becomes certainly more attractive. But at this point in time with the current, you know, drilling costs that are out there in the world today in a very modern AFB, which we, we did.

I think the market is still sort of expecting to potentially be short barrels out there if.

Kelly Loyd: The returns here are just, like I said, superior to the wells there. Okay, so would you consider that those wells, the Williston development opportunity is still be in sort of like a theoretical backlog subject to some combination of oil price and service costs? Absolutely. Yes. Okay.

If we saw an unusually warm winter in California, then we might not quite see the demand that we've seen in the past winners, but historically, we have seen at least some pop over the winter months and I'll also say you know I think I've talked about this before we sell gas since we take our gas in kind and John and we market it ourselves.

We sell it on kind of seasonal contracts of winter and summer contracts in winter contracts. So we get a pretty healthy premium even to what you can sell at northwest pipeline or a pal. So we would also expect that premium coming out this winter.

Kelly Loyd: And then again, it's been the better part of 18 months now since you guys have done any acquisitions. You kind of implied, so I guess I'll try to get you to state it outright. The, the PDP acquisitions feel a little bit too expensive to you still, and that's why you're looking at some more organic stuff. Well, okay, so, so let's be clear. It was, it was never either or, right? It was, we were always going to look to have the potential for us to be able to put some money into the ground.

Okay, So you're sort of.

We're kind of hedging but not.

But not like in the futures market per se just just given the nature of the way you're contracting works that's right. So the yes, so we basically sell.

As much gas as were comfortable selling firm if you will in the wintertime at a fixed price northwest pipeline at first of month northwest pipeline, plus a spread rate, which and I'll tell you in the wintertime is a fairly healthy spread and so we do have a physical contract like you said, it's not really hedge were subject to the movements in northwest.

Pipeline, but we get a premium to whatever that that prices during the winter.

Kelly Loyd: And when there are years like this past year, when the criteria that we require to make sure that acquisitions are really highly creative to us just aren't there. I mean, just so you know, we, we use the same proven screening and processing and evaluation, sort of process we have for years. We screened, evaluated, and even offered on, on many candidates. But like I said, the seller's expectations just worn in line with what we require to make it a good acquisition for us.

Be clear we locked in the premium we're going to get yes, not the base price correct, yes.

I understand.

And then sort of.

<unk> back to capital allocation, a little bit and acknowledging.

What's going on with the stock price this afternoon.

It is low sixes looks an awful lot different than high nines.

Kelly Loyd: That, that strategy is, has never gone away. We, we're still doing it as we speak. We're, we're evaluating several deals. So that's something we, we very much still want to do. And we think this complements those very well. And anyway, so I want to make sure, I'm not leaving with the impression this is all we're going to do. We, our goal is to go find highly creative PDP acquisitions as well. Yeah, I think it's fair to say that the acquisition market has been choppy as a way to describe it.

How do you guys think about.

Stock buybacks, where would the capital come from for a stock buyback to the extent that you now have functionally committed a fair amount of cash flow.

To the Permian assets.

Yes.

Well, it's again it would compete for dollars so.

Again, everything's on the table at all times and again.

We are.

Very.

Excited to be in this but.

And this drilling partnership.

Kelly Loyd: We try to source deals through connections, through negotiated, and also through market processes. There's probably a lot towards the beginning of this year of really quality deals that we saw come out. But we have seen that pick up, to be honest. We have seen a lot more deals that might fit us pick up here in the near term, but you know there was a portion of we didn't just see as much deal flows we would have liked to.

We want to go forward with it.

Sure.

But our priorities are going to be the best use of every dollar.

That everything is fair there. So yeah I think the way we might think about it and obviously be up to the board has authorized.

They're all share buyback plan, but we do authorized generally we enter into two <unk> one is right on kind.

Kelly Loyd: And I'd like to follow up with what Ryan just kind of on top that we look at this as a way to flatten out our, you know, our ads. I mean, it's a low risk area. We know there's oil there. And you know, the problem with acquisitions, if you just 100% rely on those, it tends to be kind of lumpy because they come kind of in groups. You know, and this way it kind of helps flatten out our production profiles as we go just because we're developing organically, we're not, you know, we're not having to go out and bid forward every year.

Quarterly basis, but I think as we think about capital allocation.

I think if you saw obviously the dividend we've now set is.

And very important which we've always said and we've said at 12 and so the dividend obviously is a base dividend, we're certainly going to pay above that and above any capital from the from the <unk> Permian asset or any other asset if we saw more outperformance in commodity prices with excess cash flow, especially if our stock stayed as you mentioned blue.

Kelly Loyd: Yeah, I mean, when you're, especially for the oil assets, right, if you're in a backwardated commodity curve in oil, you much rather drill now to sell your cash flow than have to pay, you know, then sort of buy on a curve that's declining. It makes it a little bit easier to rather accelerate that right now when we see those prices. Yeah. And with current prices, we would really love to drill these wells as soon as possible because, you know, obviously the prices have picked up lately.

<unk> six is purses high nines, there might be a reason for us to take another hard look at possibly buying some shares back with sort of outperforms, our excess cash flow.

That makes sense.

Okay. Thanks, a lot guys.

Thank you.

This concludes our question and answer session I would like to turn the conference back over to Kelly for any closing remarks.

Kelly Loyd: So is, is stuff happening in the AMD market and you guys, as, I don't think I'd be insulting you by calling you value buyers, just sort of aren't there, is there still like a big differentiation between bid and ask and deals just aren't happening? Well, it's a little early to say. So like I said, we, we haven't stopped that process. So I don't want to say too much because I don't know who's listening on the phone.

Just quickly I want to thank everyone for taking the time.

As you know we are always here to answer questions. So anyway I appreciate your interest and your time. Thank you.

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

[music].

Yes.

[music].

Kelly Loyd: I would just say we're excited about opportunities that are out there. We think the market has become a little more realistic from the sellers perspective. How about that? And we've actively, we've actively gone after acquisitions. We had, even while we were developing this permeant basin opportunity, we were actively looking at other acquisitions and making offers on them. And I don't feel like we were like wildly out of the market. So I'd expect this to still be able to do those type of things too. We're just trying to like make it so we're not totally dependent upon acquisition work. Okay.

Kelly Loyd: And then we've, we've talked on a couple prior conference calls about just like the general notion that Rose Capet would come from internal cash flow and acquisition probably gets funded through the credit facilities to then be paid down over the course of the next couple of the couple following years, is that, is that still sort of like an accurate high level description of the strategy? Yes, that is, that's our base plan for sure. You are dead on.

Kelly Loyd: All right, gentlemen. I'm sorry for monopolizing time and I'll turn it over. Thank you. No, I appreciate the call. Thank you.

Bruce Brown: The next question comes from Bruce Brown of Brown Capital. Please go ahead. Oh, hi, fellas. Appreciate all the color you've given us on the Padezco deal. How long have they been active in that field and how many wells have they drilled and was their success rate been? And the timing of that, they started in I think 2019 or maybe 2018, but so what and like it's a better question for Padevco than for me, but the way we sort of characterized it, they had sort of, they had their generation one.

Bruce Brown: More sciencey kind of wells where they were trying different landing zones, different frack sort of, I don't know, resins and different kind of sands and different ways and how the size of the clusters are spacing between the clusters and trying different things. Then they went on to what I would call their generation two sort of style of frack, which they tried and experimented with some of the things that worked and tried some more stuff to see if they could expand or is this going to work better or worse.

Bruce Brown: Through that science that they did, they've come up with a plan and a style and a way to produce these that certainly they and we also think can be improved upon, but as a base case, we don't do any better than what we would call sort of the gen two sort of completion design and where to land and all those sort of learnings that have been gained. I think we still have a very attractive return, but both they and we expect there to be plenty of room for upside, which again, this isn't something we just walked into.

Bruce Brown: This has been four months of detailed technical analysis and looking at all the science we can. Again, our staff in-house has experienced in this and is excellent at this. We did a lot and I think you even had an industry expert we consulted with. Where we've become comfortable is what we know can be done and we're also very strong expectations that will beat that for, yeah, anyway. Well, so they're well up on the learning curve as you probably would put it.

Bruce Brown: So they're at a point, it sounds like they're at a point where perhaps they can maximize the knowledge they've accumulated and their drilling targets would be more carefully planned and selected. I think that one of the biggest learnings is He's really what zone you want to land the wells in. Like anywhere else you're going to try, hey, maybe if we put it here, we might get two of the difference in interest, pay zones if we put it here.

Bruce Brown: And so they did all the right stuff you should do when you're trying to learn as much as you can. We'll walk away. Again, we've learned a lot from that as have obviously they have and they have expectations and ideas and ways to move from that sort of gin to as we call it just to sort of the gin three. There's been a whole lot of science and learnings. Yeah. So it's not, we're excited.

Bruce Brown: Just so you know, they've drilled that 10 horizontal wells out there. Okay. Well, so they, yeah, so they, yeah, exactly. So that's, that's good. All right. Well, a good luck with that, that whole process it sounds very promising.

Kelly Loyd: The other question I had is since we're almost done with the first fiscal quarter of fiscal 24, oil prices have risen substantially during this period of time from where they ended the last quarter. And natural gas prices have appeared to have improved some, but can you quantify what percentage impact we kind of range percentage impact that might have on on your cash flow in the first quarter? I mean, just in a very broad sense.

Kelly Loyd: Yeah. So I mean, obviously the challenge of being non-op is we're still delayed on getting actual prices in the field, which can sometimes differ than what we estimate. But if you're just looking and I'll talk on more on the gas side, right? The gas side was really, you know, some of the lowest prices that we've seen, right? Quarter over quarter sequentially, right? So on the gas side, you know, Q4 was a, you know, a trough, right?

Kelly Loyd: And so if you look at what we've seen pricing for, you know, a huge ship channel is one of the pricing hubs that we, that we sell our gas to a Barnett, and then it'll pile up in the, up in the Rockies. And so both of those, both of those indices are, you know, on average, call it, you know, maybe 40 to 50 cents higher, this quarter to date than they were last quarter.

Kelly Loyd: So, you know, I don't have the exact percentage, right? But you can, but it's not a small percentage, right? That's a pretty material move if we're talking about, you know, two to $3 gas, you know, the Barnett less than $2 gas last quarter if you're, if you're adding, you know, if you're adding 40 cents on to that. So certainly we expect to see some improvement this quarter on the gas realizations also in GLs, right?

Kelly Loyd: I talked about that earlier, but, you know, NGLs were, you know, kind of falling off a cliff, if you look at it from April down to June, they, you know, June being kind of the low month, they, you know, they traded down quite a bit. Ethane itself is up, you know, 50%, 60% since last quarter. You know, the Barnett has quite a bit of ethane, you know, some of the heavier components are up, you know, as much as, you know, anywhere from 5%, 10% to 30%, 40%.

Kelly Loyd: So, you know, overall NGL prices, I think those are the two pieces, you mentioned oil, but I think NGLs and natural gas are two where it might be more noticeable on realizations. Oh sure, that's, yeah, obviously the bulk of your production is in those two areas. He is. So, as a company, yeah, yeah, yeah, I understand. So that's great. Okay, I appreciate the color.

Unknown Executive: I think that does it for me. Thank you so much. No, thank you. Appreciate your interest.

David Locke: Next question comes from Joseph Cresty, a private investor. Please go ahead. Hello, yes. Good afternoon, gentlemen. My question is about the future development potential of the Dell High Field, assuming the acquisition of denberry by axon mobile closes. Do you anticipate any positive operational changes in the development cycle of the field or changes in asset structure as a result of this transaction due to the size and scale of axon flowing through to the per barrel cost structure or is it too soon to begin thinking about this. And that's it. Thank you. We appreciate that.

Kelly Loyd: So, yeah, and that's a question we've had to think about. And I would just say one thing you need to know about axon is that that they're not dumb. They're going to do the smart thing. They're going to do the right thing. So I look, I would anticipate operations will be as good or better. I think denberry has done a terrific job. I think axon has the scale and capability to do just as well.

Kelly Loyd: And perhaps get, you know, prices even cheaper. One of the things we've been asked about in the past is the carbon capture permitting and all that. And honestly, we I still don't have any way to tell you whether Dell High will get that permit so there could be some kind of benefit for that. But look, denberry was planning on working on that and pushing towards it. And I would just suggest if denberry can do it, I don't see why axon couldn't do it just as well.

Kelly Loyd: Yeah, I mean, the only thing I would add is, you know, the one thing we've had in the past with denberry is capital constraints that Dell High. And so while we don't know what axons plans are specifically for the field, the one thing axon is not is capital constraint. You try it. And so, you know, whereas denberry went through bankruptcy, they went through a period of not, you know, spending much money at all. That shouldn't be an issue here from a capital perspective.

Unknown Executive: Well, very good. Thank you. I'm a very happy shareholder, gentlemen. Thanks for being such green stewards of capital. Thank you. Appreciate that. Thank you. Very important to us.

Jeff Robertson: The next question is a follow up from Jess Robertson of Water Tower Research. Please go ahead. Thank you, Mark.

Kelly Loyd: If you are Kelly or Ryan, as you model the Permian wells, can you talk about what kind of impact you think those that asset could have on evolution's realized oil price and also L.O.E.? I mean, Permian pricing this for GD is WCS sour, right? Yeah, it's about $3.00 to WTI. Yeah, it's about a $3.00 to WTI. Maybe a little bit more than that. It kind of $3.00 to $4.00. And... You know, I don't suspect these will be particularly expensive to operate.

Kelly Loyd: So yeah, you know, you would expect I would expect that you know, overall the margin for the company would be better just because, you know, the lot of the other stuff we have is either water flooded or CO2 flooded, which typically is, you know, low margin is a lower margin top operation. So yeah, I would think the margins would improve. Yeah, I definitely think it is. I mean, the work we've done it certainly stacks up to be a fairly high margin low cost operating wise oil play. Well, and yeah, it's like whenever you have new wells, you're drilling new wells are going to be higher rate wells, and that's that typically translates into higher margins.

Unknown Executive: Thank you. Thanks, yeah.

John Bair: The next question comes from John Bair of Send Well Advisors. Please go ahead. Thank you and good afternoon, John. Thanks, John. Just to be clear, a real simple question, I guess as you move forward to develop the drill, the three well pad, and your other operations, all that should be paid for through cash flow. Is that correct? In other words, you've invented the quarter and the year debt-free with cash on the books and so forth.

John Bair: So I'm just kind of curious if I'm reading this right or here in this correctly. Yeah, John, that's a plan obviously, you know, pricing aside, but at work prices are right now in the forward market and what we expect. Yes, we would plan, and it's always our goal to drill those out of cash flow, right? We wouldn't additional funding to drill those. Right. So other, your other operations, you know, other fields and so forth.

John Bair: So I'm just, I'm a little, I guess I'm a little stunned at the reaction today, and obviously a lot of questions about. And I think inferring that the dividend payment might be in jeopardy, and yet, you know, you've confirmed the 12 cents and have long made that a very priority. And so I'm just, I'm, I'm a little baffled at the, at the extent of, of, you know, the reaction that that's gone on here today. And I don't know if you would care to comment on that at all or.

Kelly Loyd: Well, okay, so here's our goal. We're going to make sure we do everything we can to make everyone who sold regret it and buy it back. How about that? Right. Understood.

Kelly Loyd: Did you do any stock buy back in the last, in the last quarter at all? We love to come out with our 10 K, 10 K later to, to confirm that. Okay. But my backs were, you know, honestly really limited for, you know, the prior, we did a lot more, let's just say that in, in the March quarter that we already published. We'll publish out our 10 K after. Right. Okay. Well, very good.

Kelly Loyd: Well, I, I would echo the previous one of the previous commentators that been pleased with how you moved forward. And I hope that you do prove everybody that have been dumping this thing in error. So keep on doing what you're doing. Thank you. Thank you for the sentiment. And, you know, look, as, as you know, and I think it's pretty obvious, we run this company for, for the long run. And we think about things with multi-year horizons.

Kelly Loyd: So while nobody likes to see what's going on in the stock market today, with our stock, we, we're not going to let that, let that make us make any rash decisions. We're always going to do what's, what's in the best interest for our shareholders in the long run. So, yeah, I'm fully convinced for that. Thanks very much. Thank you.

David Locke: The next question is a follow-up from David Locke of Old Realment Investment. Please go ahead. David, are you there? Maybe he's on mute. Sorry about that. There you go.

Kelly Loyd: Is there a way to do sort of like a quick recap for civilians of what went haywire in California last year, at least as it regarded the prices that you got in Jonah and what you're sort of thinking the situation looks like over the course of the next nine months. I wish I had that crystal ball going forward. And going past, if you recall, so last winter was unusually, I wouldn't say unusually, but probably more colder than the normal, right?

Kelly Loyd: If you look at sort of the weather maps on the west coast and California, a lot due to Leninia. So the issue you have in California is very, very little natural gas storage. And so they have to buy everything on the spot market. And when cold weather strikes, people will pay what they need to get the gas to eat their homes, right? And they can't pull it out of storage. And so you tend to get these really high prices and spikes out there.

Kelly Loyd: Not unlike we've seen right in the power market in Texas, when you've had heat waves, you get that in California during the winter time. Now interestingly, we saw that in the summer a little bit too, where we saw prices in July and August spike a little bit with the heat out there too. So anytime there's a power demand, whether it's to cool your home or heat your home, you're going to see probably spikes.

Kelly Loyd: If you look out in the forward curve, you know, depends on the day, but you know, this winter last time I looked, you know, you could hedge prices for probably around $3 premium to Henry Hub. It may have gone down a little bit here in the last couple of days, but call it, you know, $253, maybe even as much as $4 premium hedging in the forward market right now for winter out in California.

Kelly Loyd: So I think the market is still sort of expecting to potentially be short barrels out there. You know, if we saw an unusually warm winter in California, then we might not quite see the demand that we've seen in the past winners, but historically we have seen at least some pop over the winter months. And I'll also say, you know, I think I've talked about this before, you know, we sell gas, since we take our gas and kind of gel and we market it ourselves, we sell it on kind of seasonal contracts, a winter and summer contracts, and you know, winter contracts, we get a pretty healthy premium even to, you know, what you can sell at, you know, Northwest Python or a PAL.

Kelly Loyd: So we would also expect that premium of this where. Okay, so you're sort of, you're kind of hedging, but not, but not like in the futures market, per se, just given the nature of the way your contract it works. That's right. So, yeah, so we basically sell as much gas as we're comfortable selling firm, if you will, in the winter time at a fixed price, Northwest Pipeline, it's, you know, first of a month, Northwest Pipeline plus, you know, a spread, right, which I'll tell you in the winter time is a fairly healthy spread.

Kelly Loyd: And so we, we do have a physical contract, like you said, it's not really hedge, we're subject to the movements of Northwest Pipeline, but we get a premium to whatever that, that price is during the winter. David, to be clear, we locked in the premium we're going to get. Yes, not the base price. Correct. Yeah.

Kelly Loyd: Okay, I understand.

Kelly Loyd: And then sort of cycling back to capital allocation, a little bit, and acknowledging what's going on with the stock price this afternoon, because low sixes looks an awful lot different than high nons. How do you guys think about stock buybacks? Where would the capital come from for a stock buyback to the extent that you now have functionally committed a fair amount of cash flow to the Permian assets? Well, it would, again, it would compete for dollars.

Kelly Loyd: So, again, everything's on the table at all times. And again, we are very excited to be in this, but in this drilling partnership, and we want to go forward with it. But our priorities are going to be the best use of every dollar. So, that everything is fair there. Yeah, I think the way we might think about it, and obviously we have to, you know, the board is authorized, sort of the overall share of our back plan, but you know, we do authorize, generally we enter into 10B51s, right on kind of quarterly basis, but I think as we think about capital allocation, you know, I think if you saw, you know, obviously the dividend we've now said is, you know, is very important, which we've always said, and we've said it at 12 cents, and so the dividend obviously is a base dividend we're certainly going to pay.

Kelly Loyd: Above that, you know, and above any capital from the Padevko Permian asset or any other asset, if we saw more out performance in commodity prices with excess cash flow, especially if our stock state, as you mentioned, low sixes versus high nons, you know, there might be a reason for us to take another hard look at it, possibly buying some shares back with sort of, you know, our performance or excess cash flow. That makes sense. Okay, thanks for that, guys. Thank you.

Kelly Loyd: This concludes our question and answer session. I would like to turn the conference back over to Kelly Lloyd for any closing remarks. Just quick, I want to thank everyone for taking the time. As you know, we are always here to answer questions, so anyway, appreciate your interest in your time. Thank you. The conference is now concluded.

Operator: Thank you for attending today's presentation and you may now disconnect.