Q4 2023 SM Energy Company Earnings Call
Operator: Greetings. Welcome to SM Energy's fourth quarter 2023 financial and operating results Q&A. At this time, all participants are in a listen-only mode.
Greetings and welcome to SM Energy's fourth quarter, 2023 financial and operating results Q&A at this time all participants are in a listen only mode.
Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jennifer Samuels, Vice President, Investor Relations and ESG Stewardship. Thank you. In today's call, we may reference the earnings release, the IR presentation, or the prepared marks, all of which are posted on our website. Thank you for joining us this morning.
<unk> and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Jennifer Samuels, Vice President Investor Relations and ESG stewardship.
You may begin.
Yep.
Today's call we may reference the earnings release, IR presentation or prepared marks all of which are posted to our website. Thank you for joining us. This morning to answer your questions. Today, we have our president and CEO Herb Vogel and CFO weight per cell before we get started I need to remind you that our discussion today may include forward looking.
Jennifer Martin Samuels: To answer your questions today, we have our President and CEO, Herb Vogel, and CFO, Wade Purcell. Before we get started, I need to remind you that our discussion today may include forward-looking statements and discussion of non-GAAP measures. I direct you to slide 2 of the accompanying slide deck, page 7 of the accompanying earnings release, and the risk factors section of our most recently filed 10-K, which describe risks associated with forward-looking statements that could cause actual results to differ. We may also refer to non-GAAP measures.
Statements and discussion of non-GAAP measures I direct you to slide two of the accompanying slide deck page seven of the accompanying earnings release and the risk factors section of our most recently filed 10-K, which describe risks associated with forward looking statements that could cause actual results to differ we may also refer to non-GAAP measures. Please see the <unk>.
Jennifer Martin Samuels: Please see the slide deck appendix and earnings release for definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measures and discussion of forward-looking non-GAAP measures. Also, look for our 2023 10-K, which was filed this morning. And with that, I will turn it over to Herb for a brief opening commentary.
Slide deck appendix and earnings release for definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measures and discussion of forward looking non-GAAP measures.
So look for 2023, 10-K, which was filed this morning and with that I will turn it over to her for brief opening commentary her. Thank you Debbie good morning, and thank you for joining us while we're waiting for people to join the call. Let me start by reiterating a few key messages.
Herbert S. Vogel: Thank you, Jennifer. Good morning, and thank you for joining us. While we're waiting for people to join the call, let me start by reiterating a few key messages. Our excellent 2023 operating financial results were driven by our very high quality asset base. Best-in-class operational performance that is supported by differential technological expertise and a track record of success, as well as our strong balance sheet and low leverage that enabled significant growth and a return of capital to stockholders. As we look through 2024, we are excited about our capital program, which we expect to deliver more on each of these strategic objectives as we lean activity toward the Midland Basin, where we will generate higher oil volumes and delineate and develop our new In short, the operational focus in 2024 is more oil growth, less gas growth, and significant capital efficiency improvement with a 10% increase in capital against a nearly 30% increase in turn in lines weighted to oil. So, let me say that again.
Our excellent 2023 operating and financial results were driven by our very high quality asset base best in class operational performance that is supported by differential technological expertise and a track record of success and our strong balance sheet and low leverage that enabled significant growth and return of capital to stock stockholders as we lift.
Through 2024, we are excited about our capital program, which we expect to deliver more on each of these strategic objectives as we lean activity towards the Midland Basin, where we will generate higher oil volumes and delineate and develop our new acreage positions to organically grow inventory and create value.
In short the operational focus in 'twenty 'twenty four is more oil growth.
Less gas growth.
Significant capital efficiency improvement with a 10% increase in capital against a nearly 30% increase in turn in lines weighted to oil. So let me say that again, it's a 10% increase in capital against a nearly 30% increase in turn in lines weighted to oil, but that I will turn it back to.
Operator: It's a 10% increase in capital against a nearly 30% increase in turn in lines weighted to oil. But that I will turn it back to the operator to start taking your questions. Thank you.
Thank you operator to start taking your questions.
Yeah.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
Timothy A. Rezvan: You may press star 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for your... Our first questions come from the line of Tim Rezvan with KeyBank Capital Markets. Please proceed with your question. Good morning, folks, and thank you for taking my questions.
One moment, please while we poll for your questions.
Our first questions come from the line of Tim restaurant with Keybanc capital markets. Please proceed with your questions.
Hey, good morning folks and thank you for taking my questions.
Herbert S. Vogel: I'd like to start with the acreage map you put out with the stealth play location. I was wondering if you could comment on what initial zones you're targeting in that western Sweetie Peck area. And as you look at the map, it seems to be filling opportunities. Is that position built out? Are you still sort of looking to add?
I'd like to start on them you know.
The acreage map you've put out with the you know the stealth play location I was wondering if you could comment on what initial zones, you're targeting and that that western Sweetie Peck area.
And you know as you look at the math it seems to be filling opportunities doesn't is that position built out are you still sort of looking to add you can understand how to think about that over the next couple of years.
Herbert S. Vogel: You try to understand how to think about that over the next couple of years. Yeah, Tim, great question. We are really pleased we added those 9,100 acres there, and we have this track record of our geoscience team being able to identify intervals that kind of are overlooked a little bit by others. In that area, we have some confidence from some data we have from some offset wells. So we're not disclosing specifically which intervals we're chasing there. But we are planning to put a rig out there this year, and we'll hopefully be showing some results there later in the year. But you're right, it's easy for us from an efficiency standpoint because it's pretty contiguous with our Sweetie Pack position.
Yeah Timm Great question, we I'm really pleased we added those 9100 acres there and we have this track record of our geoscience team I being able identify intervals that are kind of are overlooked a little bit by others.
In that area, we have some confidence from some data we have from some offset wells. So we're not disclosing specifically, which intervals we're chasing there.
But we are planning to put a rig out there this year and will be hopefully showing some results. There are later in the year.
But you're right, it's easy for us from an efficiency standpoint, because it was pretty contiguous with our sweetie Peck position. So we really like like what we got there if we could add more we would add more it's a it's obviously are going to get the price here in the future than it was when we picked up the acreage.
Herbert S. Vogel: So we really like what we got there. If we could add more, we would add more. It's obviously going to be more expensive in the future than it was when we picked up the acreage. Okay, that's fair.
Okay. Okay, that's fair.
Herbert S. Vogel: And then I guess I'll pivot with my follow-up to the other emerging area, that northern part of Dawson. Can you just talk about, you know, in your early stages of development, I believe, Herb, this was, you know, the dean was sort of the primary target here. Does that sort of remain the case? Is that what this was underwritten on?
And then I guess I'll pivot, but my follow up to you know the other convergent area at northern.
Part in Dawson.
Can you just talk about.
As you sort of your early stages of development you know I believe Herb. This was you know the dean was sort of the primary target here.
Is that sort of remain the case is that what this was underwritten on and can you talk about other areas that you may be targeting but what sort of initial development.
Herbert S. Vogel: And can you talk about other areas that you may be targeting with some sort of initial development? Uh, Kim, that's right. When we announced the acquisition in June last year, we talked about two intervals. Uh, one was the, uh, Dean, and then the other was the Middle Sprayberry Sand. Uh, you're probably aware there's another operator just to the northwest playing the Middle Sprayberry Sand pretty heavily. Uh, so we'll be looking at both those intervals. We're starting with the Dean.
Tim that's right when we announced the acquisition in June last year, we talked about two intervals. One was the the Dean and then the other was the middle Sprayberry sand.
You're probably aware there's another operator just to the northwest playing the middle Sprayberry sand pretty heavily.
So we'll be looking at both those intervals, we're starting with the Dean are I think we talked about eight to nine wells on three pads and you'll start seeing some results.
Herbert S. Vogel: Uh, I think we talked about eight to nine wells, uh, on three pads. And you'll start seeing some results, uh, probably three cubes because we'll wait till we get past the 30 day IPs. Uh, but yeah, we're excited about it. Uh, and you know our best wells and some of the best wells in the Permian overall are in the Dean. And, uh, so we're really looking forward to the results there. Thank you for the call.
Three Q, because we'll wait until we get past 30 day Ips.
But yeah, we're excited about it and Youre aware, our best wells and some of the best wells in the Permian overall are in the Dean and so what we're really looking forward to the results there.
Okay. Thank you for the color.
Yeah.
Leo Mariani: Thank you. Our next questions come from the line of Leo Mariani with Roth MKM. Please proceed with your questions. I wanted to maybe just stay a little bit with some of the new acreage here. I'm just curious as to kind of why you decided to disclose the 91,900 acres in terms of where that is today. And also, I was hoping you could provide a little bit more color on how you guys managed to add the 65 chop locations. Was this just an appraisal, you know, of additional acreage from the 23 drilling program? Any color on those things would be great.
Thank you. Our next question is come from the line of Leo Mariani with Roth Capital. Please proceed with your questions.
I wanted to maybe just stay a little bit with some of the the new acreage here.
I'm just curious as to why you decided to disclose at 91 900 acres in terms of where that is here today and also I was hoping you could provide a little bit more color on how you guys managed to add 65 chalk locations was this just a appraisal of additional acreage off on the 23 drilling program any color on those things would be great.
Herbert S. Vogel: Yeah, hey, thanks, Leo. Yeah, it's pretty straightforward on the 9100 acres, it becomes public when we file in the leases, it was already coming out there for people who were looking at the courthouses. So that that became public was not exactly what we're targeting drilling for. So we did want to disclose it. So it was everybody on the playing field that it's really in Upton and Crane counties there. On the Austin shock, it's great you picked that up.
Yeah, Hey, Thanks, Neal Yeah, the pretty straightforward on the 9100 acres it becomes public when we file and the leases it was already coming out there for people who were looking at the court houses. So that that became public was not public is exactly what we're targeting drilling. So we did want to disclose someone's everybody around 11.
Playing field that it's really in Upton and Crane counties there on on the Austin chalk. The grave you picked that up it's a we've had such great success with delineating and then developing and now really staggering between two landing zones, that's where we've really optimized and so.
Herbert S. Vogel: It's, we've had such great success with delineating and then developing and now really staggering between two landing zones. That's where we've really optimized. And so we've got confidence to increase the inventory; we kind of always held that back, knowing there was potential there. And so we feel good about those additional 65 locations. So it's just turned out to be a great value add that was purely organic and without any additional lease acquisition costs. Okay, that's helpful.
We've got confidence to increase the inventory kind of always held that back knowing it was the potential there.
And so we feel good about those additional 65 locations. So its just turned out to be a great value add that was purely organic and no additional lease acquisition cost.
Okay. That's helpful.
Herbert S. Vogel: And then I was hoping you could maybe address, you know, first quarter production. Obviously, it's down a little bit, you know, per your guidance. You guys did mention, you know, weather in your press release, which has certainly plagued the industry. I was hoping you could kind of maybe quantify that. Is there like a BOE per day impact on the weather side?
And then I was hoping you could maybe address them you know first quarter production, obviously, it's down a little bit you don't put your guidance you guys did mention whether in your press release, which is certainly plagued the industry I was hoping you could kind of maybe quantify that or is there like a boe per day impact on the weather side and then I'm also assuming that perhaps maybe theres fewer tills.
Herbert S. Vogel: And then I'm also assuming that perhaps maybe there are fewer tills this quarter and the program is maybe a little bit weighted to subsequent quarters on tills. So any kind of color around, you've got the slightly weaker first quarter production would be helpful. Yeah, yeah, Leo, if you guys were really tracking 2023, you know, we had 92 net tills, and there were only 11 net in the fourth quarter. So that's obviously going to have an impact on the first quarter. So if you were really watching what, and we turned the wells in line in the fourth quarter, you'd see why that impact was in the first quarter. Then there was a little bit of not, not a major impact, but there was a weather impact.
This quarter and the program is maybe a little bit weighted to subsequent quarters until so any kind of color around you've got the slightly weaker first quarter production would be helpful.
Yeah, Yeah, Leo if you guys were really tracking in 2023, you know we had 92 net tills and there are only 11 net in the fourth quarter. So that's obviously going to have an impact on the first quarter. So if you were really watching what and we turned the wells in line in the fourth quarter, you would see why that impact was in the first quarter and there was a little bit.
Not not a major impact, but there was a weather impact.
Herbert S. Vogel: That was partly the weather itself, but then also some gas plant weather impact from the third party downstream for us. But that's really what drives it. And if you see what we project for 2024, you see it starts from a low, and then we gradually work our way up through the year. And I hope people are taking that strategic perspective of how much we produced in 2020, 2021, 22, 22 to 23, which was a 5% BOE growth. And then now we're looking at, you know, 3.5% BOE growth and 6% oil growth into 24. So I think really more focus on what we are doing overall annually and why that is beneficial for stockholders is really more important than the quarterly cadence. I understand. Thanks, guys. Thank you.
That was partly weather itself, but then also some gas and weather impacts on the third party downstream for us, but that's really what drives it and if you see what we project for 2024, you see it starts from a low and then we gradually work our way up through the year and I hope people are taking that strategic.
<unk> how much we produced in 2020 2021 'twenty two 'twenty two to 'twenty three with a 5% Oh <unk> growth and then now we're looking at three.
Three 5% growth in 6% oil growth into 'twenty four so I think really more focused on what are we doing overall annually and why that is beneficial to stockholders is really.
More important than the quarterly cadence.
Understood. Thanks, guys.
Thank you our next questions come from the line of Zach part with J P. Morgan. Please proceed with your question.
Zach Parham: Our next questions come from the line of Zach Parham with J.P. Morgan. Please proceed with your questions. Good morning.
Good morning, My first question, just on the buyback, which slowed a little bit this quarter. Despite some pretty robust free cash flow generation can you just give us any detail on why you slowed down with the buyback pace this quarter and maybe just detail how you're thinking about utilizing the buyback in 2024.
Wade Purcell: My first question is just on the buyback, which slowed a little bit this quarter despite some pretty robust free cash flow generation. Can you give us any detail on why you slowed down with the buyback pace this quarter and maybe just detail how you're thinking about utilizing the buyback in 2024? Yeah, good morning, Zach. It's Wade.
Yeah.
Yeah. Good morning, Zach it's weighed the question Yeah, no nothing nothing really tangible to report there you know is as we were as we were moving into looking at two.
Wade Purcell: Good question. Nothing really tangible to report there, you know, as we were moving into, you know, looking at 2024 and putting our plan together, and a lot of uncertainty about the economy and commodity prices. It just felt really good to end the year with a really strong balance sheet, which we did. Good cash position, you know, lower leverage below a billion dollars in net debt. As we move into this year, we're still very committed, obviously, to the stock buyback program, completing the commitment of over 200 million. And, you know, I should just say that I don't think it'll surprise you that we still believe that the current stock price is undervalued.
2024, and putting our plan together and you know a lot of uncertainty economics and commodity prices. He just felt really good to end the year with a with a really strong balance sheet, which we did good cash position.
Yeah, well, we're leverage below $1 billion net debt.
You know as we move into this year, we're still very committed obviously to the to the stock buyback program completing the commitment of over $200 million.
And I should just say I don't think it will surprise you that we still believe that the current stock price is undervalued.
Herbert S. Vogel: And the buybacks are very attractive. And we will continue that as we move into 2024. Thanks, Wade. And then my follow-up question on the M&A that we've seen in the industry over the last several months. I think there's a broad agreement that a larger scale attracts a larger investor base for E&Ps. You know, how do you see SM fitting in going forward?
The buybacks are very attractive and we will we will continue that as.
As we move into 2024.
Yeah.
Thanks Wade.
Then my follow up just on on the M&A that we've seen in the industry over the last several months I think theres, a broad agreement that that larger scale attracts a larger investor base for E&ps, how do you see S M fitting and going forward do you see yourself as more likely to get larger through acquisitions.
Herbert S. Vogel: Do you see yourself as more likely to get larger through acquisitions or potentially being combined with a larger operator? Or do you think you have the needed scale to attract more investors? Thanks, Wade. Yeah, Jack, you know, it's obviously a topical question given the recent consolidation in the industry. And, you know, we've been there saying for a long time that we truly believe in consolidation, we see the merits of consolidation, and we're agnostic about which side of a transaction we wind up on. But we do focus on kind of our area where we're really strong. So it's got to be a comparable sort of inventory to ours in terms of quality that we don't want to combine where we have delayed development. We want don't want to, we basically want to have a good balance sheet coming out of any sort of transaction. It's got to have industrial logic to that, you know; if it's just two disparate companies getting together at scale, that's probably not going to move the needle for us.
Or potentially combine with a larger operator or do you think you have the needed scale two to attract more investors.
Yeah, that's you know.
Obviously, a topical question given the recent consolidation in the industry.
And they're saying for a long time that we truly believe in consolidation and we see the merits of consolidation and where we're agnostic of which side of a transaction, where you wind up on but we do focus on kind of our our our area where were really strong. So it's gotta be comparable sort of inventory to ours in terms of quality.
We don't want to combine where we've gotten.
We have delayed development, we want don't want to we basically want to have a good balance sheet coming out of any sort of transaction. It's got to have industrial logic to that are you know if it's just two disparate companies getting together for scale, that's probably not going to move the needle for us.
Herbert S. Vogel: So that's how we look at it from a consolidation standpoint. There are clear benefits, and we'll see what comes along. In terms of growing the company, we've been really persistent and patient about it. We have a lot of confidence in our technical team.
So that's how we looked at it from a consolidation standpoint Ah there's clear benefits and we'll we'll see what comes along in terms of growing the company, we've been really persistent and patient about it are we have a lot of competence our technical team they continue to identify organic opportunities and.
Herbert S. Vogel: They continue to identify organic opportunities, and we wind up delivering on them. And then we have that track record, and we have a lot of discipline in what we've done with our capital. And we sit on 10-plus years of inventory, so we don't have to really overpay to get something to just move along. So that's kind of our perspective on it. But if the right deal comes along, we'd be there.
We wind up delivering on them and then we have that track record got lot had a lot of discipline in what we've done with our capital and we sit on 10 plus years of inventory. So we don't have to really overpay to get something to just move along so that that's kind of our perspective on it but if the right deal comes along.
We'd be there.
Oliver Huang: Thanks, everyone. Thanks, everyone. You bet. Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone. Our next question comes from the line of Oliver Huang with TPH. Please proceed with your question.
Thanks, Ed.
You bet.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line of Oliver Huang with T. P. H. Please proceed with your questions.
Good morning, all and thanks for taking my questions.
Herbert S. Vogel: I think just kind of to start out, in the Midland. I know last year you all had a few Leonard and Woodford Welles that you all were testing. It doesn't sound like those, or not Woodford, Wolf Camp D Wells that you all were, It doesn't sound like those will be part of the plan for 2024, but is there any way that you could kind of speak to how that capital might shift around from an interval targeting basis for 2024? Yeah, Oliver. This is Herb.
I think just kind of start out at in the Midland I know last year, you all had a few Leonard and Woodford wells that you all are testing it doesn't sound like those are not Woodford a wolfcamp D. Wells that you all were testing it doesn't sound like those will be part of the plan for 2024, but is there any way that you all could kind of speak to how that.
Capital might shift around from an interval targeting basis for 2024.
Yeah, Oliver the Serbia the the Leonard.
<unk> had a total of six well somewhat offset operators also had some wells in there and when we looked at the results. We recognize that it was more capital efficient to put a little a few were a few more wells into the middle Sprayberry, which underlies.
Herbert S. Vogel: Yeah, the Leonard, you know; we had a total of six wells; some offset operators also had some wells in there. And when we looked at the results, we recognized that it was more capital efficient to put a little fewer, a few more wells into the middle spray break, which underlies that interval. So that seems to be the right way to go about this. Thus, the fracs will grow into the overlying interval.
That interval.
So that's that seems to be the right way to go about this so the fracs will grow into the overlying interval and that's that's how we would see that some of the Leonard oil being produced as a more capital efficient way.
Herbert S. Vogel: And that's, that's how we would see some of the Leonard oil being produced in a more capital efficient way. And that's just, you know, what you do in the normal course of development optimization. In the case of Wolf Camp D, you know, it's a completely isolated interval.
And that's just you know what what you do in the normal course of development optimization in the case of Wolfcamp D. You know, it's a completely isolated interval. So what we've really done is delineated the wolfcamp D. We have a good sense of how much inventory is available there is a deeper interval, it's slightly gassy here and so the our perspective.
Herbert S. Vogel: So what we've really done is delineated Wolf Camp D so we have a good sense of how much inventory is available there. It is a deeper interval, and it's slightly gassier. So our perspective is to co-develop the shallower horizons, come back to Wolf Camp D at a later date, put it into the facilities that would have already been put in, put on, so the capex that was spent on the facilities for the co-development, and then come back in once there's latent capacity and flow the Wolf Camp D into there. So that's another just a capital efficiency move rather than trying to co-develop all of Okay, that's helpful, Culler. And maybe just to kind of follow up to the comments earlier on the often-chopped...
Is to co develop the shallower horizons come back to the Wolfcamp D. At a later date put it into the facilities that would have already been put a put on so the capex that was spent in the facilities for the co development and then come back in once there's latent capacity and slow the Wolfcamp D into there.
So that's another just a capital efficiency.
Move rather than trying to co develop all of the intervals when theres no need with the Wolfcamp D. I think so much separation from the Wolfcamp b above.
Okay. That's helpful color and maybe just to kind of follow up to the comments earlier on the Austin Chalk just wondering how does the stagger the two landing zone compared to the development that you all have carried out in the area. The last couple of years in South, Texas and or the incremental <unk>.
65, or so locations, primarily coming from that liquids rich window or is it.
Herbert S. Vogel: I'm just wondering, how does the stagger, the two landing zones, compare to the development that you all have carried out in the... Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q So, you know, from our first Austin Chalk dedicated well, five years ago, we were really working on interval selection, and we've really improved on what the best interval is. And then last year and part of the year before, we were really figuring out where that secondary Austin Chalk zone is that optimizes capital efficiency and the value of each DSU. And so we worked between two different intervals, besides the best interval that we had already identified. So what you're seeing now is we've locked in on which is the best way to do that on the stagger. And then, in some cases, there's also Eagleford.
Pretty ratably spread out across the entire footprint.
Okay, Oliver I'll, let me get into that a little bit on the on the Austin chalk. So what you know from our first Austin chalk dedicated well five years ago. We were really working on interval selection, we've really improved on what the best interval was and then last year end.
The year before we were really figuring out where is that secondary Austin chalk zone that optimizes, the capital efficiency and the basically the value of each D. S. U and so we worked between two different intervals beside the best interval that we had already identified so what.
You are seeing now is we've locked in which is the best way to do that on the stagger and then in some cases, there's also Eagle Ford. So you can have as many as three landing zones, depending on the thickness are we have a bias towards more the liquids rich oily area. So you'll see a great returns you'll see.
Herbert S. Vogel: So you can have as many as three landing zones, depending on the thickness. We have a bias towards the liquids-rich oily area. So you'll see great returns; you'll see maybe a few slightly lower BOEs in some cases because we'll be in the higher liquids area. But in terms of returns, they're going to be stronger in the commodity price environment we're looking forward to in 2024. I think that gets to the questions you had there, Oliver. Thanks; I appreciate the colors.
Maybe a few a little bit lower in some cases, because we'll be in the higher liquids area, but in terms of the returns they're going to be stronger with the commodity price environment. We're looking forward to in 2024, I think that gets to the question you had there al.
Thanks appreciate the color.
Nicholas Pope: You bet. Thank you. Our next questions come from the line of Nicholas Pope with Seaboard Research. Please proceed with your question. Good morning, everyone.
You bet.
Thank you. Our next question is come from the line of Nicholas Pope with Seaport Research. Please proceed with your questions.
Good morning, everyone.
Okay.
Herbert S. Vogel: Um, I was curious, uh, about the Klondike area... You mentioned, you know, drill the science well, https://www.youtube.com.uk, I guess what information at this point is... Net Science, and how to, I think you mentioned you added, Inventorian in Klondike. Transcript. And I was curious how that might shift. Okay, yeah, Nick, a couple things there. So first of all, you're aware that we have quite a few tools that really help us optimize and get the returns that you're seeing in our wells. So the purpose of the core is really to assess what intervals we can land in and which is the optimal landing zone even within there. There are just differences of 10 to 20 feet in where you land that make a difference in the value of the well.
Hum.
I was curious on the Klondike area, you mentioned, you know drilled a science well.
Three D seismic.
I guess, what what information at this point or.
Are you expecting to get from that.
From that.
From that science, and and how that I think you mentioned you added inventory and Con Dyke.
In the in the presentation transcript and I was curious how that might shift with some of the data you get from from the science and from the wells that you expected to drill through the year.
Okay, Yeah, Nick a couple of things there. So first of all you're aware that we have quite a few tools that really help us optimize and get the returns that you're seeing in our wells. So the purpose of the core is really to assess what all intervals, we can land in.
And which is the optimal landing zone, even within there. There's there's just differences of 10 to 20 feet in where you land can make a difference in the value of the well. So the core is one part then blogs. So then we have the ability to correlate the core to the logs and apply it to a broader area. When we look at the logs and understand what we're.
Herbert S. Vogel: So the core is one part, then the logs, so then we have the ability to correlate the core to the logs and apply it to a broader area when we look at the logs and understand where the best landing zones are and which intervals we can go for, because there can be more than the two that I mentioned up in that area.
Sure.
Best landing zones are and which intervals. We can go for it because it can be more than the two that I mentioned up in that area I'm not going to get into what other intervals might be there, but they're there there's always the possibility of more intervals and you wanted to be aware of what those are when you're laying out your development plans.
Herbert S. Vogel: I'm not going to get into what other intervals might be there, but there's always the possibility of more intervals, and you want to be aware of what those are when you're laying out your development plan. In terms of the 3D seismic, you're aware, and I've talked about this before, that as you go to the north there, this is more of a sand play, so this is migrated oil that's there, so you want to have a really good handle on the thickness of the sand intervals that you're targeting, and that determines what the economics will be. So that's another development optimization effort on our part. And it's relatively low-cost data when you look at it, especially compared to some other data. And how much well control do you have in that area on your acreage right now? What production? There's actually quite a bit. When we acquired the acreage, there were quite a few vertical wells, and there were several horizontal wells also. I think if you looked at Enver's data, those wells were around 58 barrels of oil per foot, so that's quite good.
In terms of the three D seismic you're aware and Ive talked about this before that as you go to the north there. This is more of a it's the fan play. So this is migrated oil. That's there. So you want to have a real good handle on the thickness of the sand intervals that you're targeting and that determines what the economics will be so that's another.
Other development optimization effort on our part and it's a relatively low cost data when you look at it especially compared to some other locations.
Yeah.
And how much well control do you have in that area on your acreage right now is there any what would production.
There is actually quite quite a bit when we acquired the acreage where there were quite a few vertical wells and there were several horizontal wells also.
I think if you looked at Empress data those wells were a round 58 barrels of oil per foot. So that's quite good and then theres more offset wells in the Dean I think we're gonna be able to optimize from there just based on what we know from all the dol's, we'd have over in north Martin, which or 10 miles away.
Herbert S. Vogel: And then there are more offset wells in the Dean. I think we're going to be able to optimize from there, just based on what we know from all the Dean wells we have over in North Martin, which is 10 miles away. Got it. That's very helpful. Shift into the balance sheet. Curious about, with the notes in 25 and 26. 5, current at some point in the next, Any thoughts about... What the plans are for those two nodes, you might accelerate calling them at some point, how do y'all think about that? Yeah, great, great question. I mean, the 25s, as you say, are coming closest; they'll mature in the middle, mid-2025.
Got it that's very helpful shifting to the balance sheet curious with.
With with the notes and 25 and 26, obviously, the 25 is going to come due at some become current at some point in the next year.
Any any thoughts about.
What the plans are for those those two notes if if you might accelerate calling them at some point Howard Howdy, I'll think about that relative to kind of the opportunity.
Yeah, Great Great question I mean, the the 20 fives as you say or are coming are the closest they will mature in the middle mid mid 2025.
Wade Purcell: You know, it's a rare time where the cash that we have on the balance sheet, you know, that you could assume that we would pay these off with cash is earning interest pretty darn close to the coupon. So we're obviously just being flexible with the balance sheet and hanging on to our liquidity. We'll pay those off, obviously, before they mature. I can't tell you when that'll be, but it'll certainly be before then at some point.
It's a rare it's a rare time, where where the where the cash that we have on the balance sheet.
You can assume that we would pay these off with with cash is earning interest pretty darn close to the coupon. So we're obviously are just being being flexible with the balance sheet and end and hanging on to our liquidity, we will pay those off obviously before they mature.
I can't tell you when that'll be but it'll be certainly be before then at some point and when you know the 26 as.
Wade Purcell: And you know, the 26s, you know, they're kind of coming on the radar screen as well. All of our bonds have nice flexibility within them for calling early, and they're already callable at some premium, but they'll be callable at par, I think, beginning in the back half of this year. Bond markets certainly strengthened. I mean, you know, our bonds are certainly trading better than they were at the beginning of the year.
Yeah, they're they're kind of coming on the radar screen as well you know all of our bonds have nice flexibility within then for calling early and they're already callable with some premium but there'll be callable at par I think beginning in the back half of this year bond market certainly strengthened.
Our R R.
Our our bonds are are certainly trading better than they were so yeah. There's a I will watch that closely as we always do and try to be opportunistic and you know you could see us thinking of a scenario, where we might do.
Wade Purcell: So, you know, we'll watch that closely as we always do and try to be opportunistic. And, you know, you could see us thinking of a scenario where we might, you know, do a new bond that takes out the 26s early, but, you know, we'll just be watching all of that as we move through the year. That's all I had. I appreciate the time. You bet. Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Herb Vogel for any closing remarks. Hey, thanks, Daryl. So we are well-positioned to continue this trajectory to build value and deliver returns going forward.
Do the new bonds. It takes out the twenty-six it's early but you know, we'll just be watching all of that as we move through the year.
Got it that's all I had I appreciate the time.
You bet.
Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Herb Vogel for any closing remarks.
Okay. Thanks Darryl.
So we are well positioned to continue this trajectory to build value and deliver returns going forward. Thank you for your interest and we look forward to seeing a number of you at upcoming events.
Herbert S. Vogel: Thank you for your interest, and we look forward to seeing a number of you at upcoming events. Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Thank you that does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
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