Q1 2024 California Resources Corp Earnings Call

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Operator: Good day, and welcome to the California Resources Corporation First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would like now to turn the conference over to Joanna Park, Vice President of Investor Relations and Treasurer. Please go ahead.

Good day and welcome to the California Resources Corporation first quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing to Starkey followed by zero. After today's presentation there will be.

Operator: An opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would like now to turn the conference over to Joanna Park, Vice President of Investor Relations and Treasurer. Please go ahead.

Joanna Park: Welcome to California Resources Corporation's first quarter 2024 conference call. Prepared remarks today will come from our President and CEO, Francisco Leon, and our CFO, Nelly Molina. Following our prepared remarks, we will be available to take your questions. Please limit your questions to one primary and one follow-up.

Joanna Park: Welcome to California Resources Corporation first quarter 2024.

Joanna Park: Prepared remarks today will come from our President and CEO Francisco, Leon and our CFO Nelly Molina.

Joanna Park: Following our prepared remarks, we won't be available to take your questions. Please limit your questions to one party.

Joanna Park: One follow up.

Joanna Park: Our remarks today include forward-looking statements based on current expectations. However, actual results may differ materially due to factors described in our earnings release and in our SEC filings. We undertake no obligation to update these statements as a result of new information or future events.

Joanna Park: Remarks today include forward looking statements based on current expectations actual results may differ materially due to factors described in our earnings release and in our SEC filings. We undertake no obligation to update these statements as a result of new information or future events.

Joanna Park: We will also discuss our pending merger with ERA. We encourage you to read our definitive merger proxy statement issued on May 7th, 2024, as it contains important information.

Joanna Park: We will also discuss our pending merger with era, we encourage you to read our definitive merger proxy statement issued on May seven.

Joanna Park: 'twenty 'twenty four as it contains important information copies of this and other relevant documents will be available on our website and the Sec's website.

Joanna Park: Copies of this and other relevant documents will be available on our website and the SEC's website. Additional information about the individuals participating in our proxy solicitation, such as our directors and officers and their interests, will be provided in our merger proxy statement. Last night, we also provided information reconciling non-GAAP financial measures discussed today to the most directly comparable GAAP financial measures on our website. We also issued our earnings release in a new quarterly presentation. I'll now turn the call over to Francisco.

Francisco: Information about the individuals participating in our proxy solicitation, such as our directors and officers and their interests will be provided in our merger proxy statement.

Francisco: Last night, we also provided information reconciling non-GAAP financial measures discussed today to the most directly comparable GAAP financial measures on our website. We also issued our earnings release and a new quarterly presentation.

Joanna Park: I'll now turn the call over to Francisco.

Joanna Park: Yeah.

Francisco: Thank you Joanne and welcome everyone and thanks for joining us.

Francisco Leon: Thank you, Joanna. Welcome, everyone, and thanks for joining us. During our first quarter in 2024, we continued our strong operational execution from 2023 and made good progress on our long-term goals. We hit the ground running with the announcement of our pending era merger. We remain focused on closing this transaction and have passed key milestones such as the HSR waiting period and the filing of the definitive proxy statement with the SEC, and we are tracking toward a mid-year 2024 close.

Francisco Leon: During our first quarter in 'twenty 'twenty four we continued our strong operational execution from 'twenty to 'twenty, three and made good progress on our long term goals.

Francisco Leon: We hit the ground running with the announcement of our pending era merger.

Francisco Leon: We remain focused on closing this transaction and have passed key milestones such as the HSR waiting period and the filing of the definitive proxy statement with the SEC and are tracking toward a mid year 'twenty 'twenty four close.

Francisco Leon: This highly accretive transaction builds scale, strengthens the durability of our conventional business, and significantly expands our carbon management opportunities to solidify CRC's differentiated strategy and advantage position. We remain confident in our ability to execute our strategy and deliver sustainable free cash flow to our shareholders and low carbon intensity energy to California. For today's discussion, I'll be highlighting a few key topics. One is the strength and quality of our assets and the operational excellence of our team. 2.

Francisco Leon: This highly accretive transaction build scale.

Francisco Leon: Its trend things the durability of our conventional business and significantly expands our carbon management opportunities to solidify crc's differentiated strategy and advantaged position.

Francisco Leon: We remain confident in our ability to execute our strategy.

Francisco Leon: And deliver sustainable free cash flow to our shareholders and low carbon intensity energy to Californians.

Francisco Leon: An update on the ERA merger and how it will unlock incremental shareholder returns. And three, our advantageous position to provide the energy and decarbonization solutions California needs. So let's begin.

Francisco Leon: For today's discussion I'll be highlighting a few key topics.

Francisco Leon: One the strength and quality of our assets and operational excellence of our team.

Francisco Leon: Two an.

Francisco Leon: An update on the euro merger and how it will unlock incremental shareholder returns.

Francisco Leon: And three our advantage position to provide the energy and de Carbonization solutions, California needs.

Francisco Leon: So let's begin.

Francisco Leon: During the quarter, production remained flat, entry to exit, while operating a one-rig program demonstrating the strength of our acid. Our portfolio consists of conventional reservoirs with stable and low decline production profiles associated with water floods and steam floods, in contrast to unconventional reservoirs with high initial production followed by steep decline. Conventional reservoirs also lend themselves to significant workover potential, which provides an efficient means to bring on production at a fraction of the cost of the new well.

Francisco Leon: During the quarter gross production remained flat entry to exit.

Francisco Leon: While operating a one rig program demonstrating the strength of our asset base.

Francisco Leon: Our portfolio consists of conventional reservoirs with stable and low decline production profiles associated with water floods and steam floods in contrast to unconventional reservoirs with high initial production followed by steep declines.

Francisco Leon: Conventional reservoirs also lend themselves to significant workover potential, which provides an efficient means to bring on production at a fraction of the cost of the new well.

Francisco Leon: In addition to workovers, our operations team performed well maintenance and artificial lift optimizations that helped offset the production decline even further. As such, CRC was able to invest just $22 million in the first quarter in drilling and workover capital to achieve this result. Our large base of PDP production also provides predictability in cash flow and financial stability. Our business generated $149 million in adjusted EBITDAX and delivered $33 million in free cash.

Francisco Leon: In addition to Workovers, our operations team performed well maintenance and artificial lift optimisations that helped offset the production decline even further.

Francisco Leon: As such he or she was able to invest just 22 million in the first quarter in drilling and Workover capital to achieve this result.

Francisco Leon: Our large base of PDP production also provides predictability and cash flow and financial stability.

Francisco Leon: Our business generated 149 million and adjusted EBITDAX and delivered $33 million in free cash flow.

Francisco Leon: These strong financial results set the foundation for our strong first quarter cash returns, in which we distributed $79 million to shareholders via dividends and buybacks, and nearly $95 million through April. The total cash payout from this initiative implies an annualized yield of approximately 8%. We currently have $675 million remaining on our share repurchase program.

Francisco Leon: These strong financial results set the foundation for our strong first quarter cash returns in which we distributed 79 million to shareholders via dividends and buybacks and nearly 95 million through April.

Francisco Leon: The total cash payout from this initiative in place an annualized yield of approximately 8%.

Francisco Leon: We currently have $675 million remaining on our share repurchase program.

Francisco Leon: And our board intends to evaluate further increases to our dividend following the closing of the era merger. As we look forward, we remain focused on providing much needed local energy for today, as well as lower carbon intensity energy and carbon solutions for the future. Total capital investments for 2024 are expected to range between $200 million and $240 million, running a one-rig program for the remainder of the year. Similar to 2023, this year's program is expected to deliver an entry to exit net production decline of 5 to 7 percent.

Francisco Leon: And our board intends to evaluate further increases to our dividend following closing of the Arab merger.

Francisco Leon: As we look forward, we remain focused on providing much needed local energy for today.

Francisco Leon: As well as lower carbon intensity energy and carbon solutions for the future.

Francisco Leon: Total capital investments for 'twenty 'twenty four are expected to range between 200, and 240 million running a one rig program for the remainder of the year.

Francisco Leon: Similar to 2023. This year's program is expected to deliver entry to exit in that production decline of 5% to 7%.

Francisco Leon: At this point in the year, we have not seen sufficient improvement in the permitting process to support the multi-rig drilling program, and expect to maintain lower activity throughout the balance of the year. As an update on the current county EIR, In March, the court ordered the county to prepare a revised C.I.R. that should address three key items: Mitigation of Agricultural Impacts, Health Assessments, and Water Supply Analysis.

Francisco Leon: At this point of the year, we have not seen sufficient improvement in the permitting process to support the multi rig drilling program and expect to maintain lower activity throughout the balance of the year.

Francisco Leon: As an update on the Kern County E R.

Francisco Leon: In March the court ordered the county to prepare a revised C. A R. S should address three key items.

Francisco Leon: Mitigation of agricultural impacts.

Francisco Leon: Health assessments and water supply analysis.

Francisco Leon: We currently expect the county to certify a revised EIR and adopt a revised zoning ordinance around year-end 2024 and estimate that the stay on drilling could be lifted by the trial court sometime in the second half of 2025. Separate from the current county's efforts, our team continues to work diligently toward progressing alternative paths to navigate these delays. Slide 18 of our deck. Details eastbound.

Francisco Leon: We currently expect the county to certify it revised E. R M.

Francisco Leon: And adopt a revised zoning ordinance around year end 'twenty 'twenty four.

Francisco Leon: And estimate that the stay on drilling could be lifted by the trial court sometime in the second half of 'twenty 'twenty five.

Francisco Leon: Separate from current counties efforts, our team continues to work diligently toward progressing alternative paths to navigate these delays.

Francisco Leon: Slide 18 of our deck <unk>.

Francisco Leon: Details these pathways.

Francisco Leon: First, our current approvals allow us to support a one-rig program through 2025. Second, the county can meet CEQA requirements by approving a conditional use permit and conducting a field-level CEQA review, which would form the basis for a new drill permit to be issued. Third, our broad footprint in and outside of Kern County allows for multi-basin development. We are targeting a potential return to an increased level of activity in the second half of 2025. Moving to ERA

Francisco Leon: First our current approvals allow us to support our one rig program through 2020 five.

Francisco Leon: Second the county can meet CCAR requirements by approving a conditional use permit and conducting a field level sequel review.

Francisco Leon: Which would form the basis for our new drill permits to be issued.

Francisco Leon: Third our broad footprint in and outside of Kern County allows for multi basin development.

Francisco Leon: We are targeting a potential return to an increased level of activity in the second half of 'twenty 'twenty five.

Francisco Leon: We remain focused on closing the merger. We expect this transformational transaction to create significant scale and asset durability to meet California's growing energy needs. ARS conventional assets are similar to CRCs with a low royalty burden and multi-stack producing zones with 10-13% corporate production declines before capital.

Francisco Leon: Moving to era, we remained focus on closing the merger.

Francisco Leon: We expect this transformational transaction to create significant scale and asset durability to meet California's growing energy needs.

Francisco Leon: Erez conventional assets are similar to crc's with lower royalty burden and multi stack producing zones with 10% to 13% corporate production declines before capital.

Francisco Leon: The transaction also expands our leading carbon management platform, adding premium pore space and co-located CO2 capture opportunities that further strengthen our ability to help the Golden State meet its ambitious climate goals. We remain confident in our ability to deliver $150 million in annual synergies from the combined businesses and create meaningful long-term value for our shareholders. To date, the CRT and NARA teams have worked together to identify meaningful synergies around GNA, supply chain, and infrastructure optimization. This great work gives us a path to deliver $50 million of these run-rich synergies within six months of closing. We are targeting to close the transaction in mid-2024 and will provide more detailed guidance post-close.

Francisco Leon: The transaction also expands our leading carbon management platform.

Francisco Leon: Adding premium pore space and co located sealed to capture opportunities that further strengthen our ability to help the golden state meet its ambitious climate goals.

Francisco Leon: We remain confident in our ability to deliver 150 million in annual synergies from the combined businesses and create meaningful long term value for our shareholders.

Francisco Leon: To date, the CRT and <unk> teams have worked together to identify meaningful synergies around G&A supply chain and infrastructure Optimisations.

Francisco Leon: This great work gives us a path to deliver $50 million of these run rate synergies within six months of closing.

Francisco Leon: We are targeting to close the transaction in mid 'twenty 'twenty, four and we'll provide more detailed guidance post close.

Francisco Leon: Regarding the sustainability of our business, we recently received a Grade A certification through MIQ's Methane Emissions Performance Standard for our operating assets in Los Angeles and Orange County. This rating highlights CRC's dedication to high sustainability standards, continuous monitoring, and methane reduction in our operations. As a reminder, we set an initial goal to lower methane emissions by 50% from our 2013 baseline by 2030. We surpassed this goal in 2018, twelve years ahead of schedule.

Francisco Leon: Regarding the sustainability of our business we.

Francisco Leon: We recently received a great a certification through I might use methane emissions performance standard.

Francisco Leon: From our operating assets in Los Angeles, and Orange counties.

Francisco Leon: This rating highlights crc's dedication to high sustainability standards continuous monitoring and methane reduction in our operations.

Francisco Leon: As a reminder, we set an initial goal to lower methane emissions by 50% from our 2013 baseline by 2030.

Francisco Leon: We surpassed this goal in 2018.

Francisco Leon: 12 years ahead of schedule.

Francisco Leon: We then set a new goal in 2022 to further reduce methane emissions by 30 percent from our 2020 baseline, also by 2030. DRC's methane reduction goals and execution exceed the 2030 goals that California has set for the state. Turning to carbon terawatts.

Francisco Leon: We then set a new goal in 2022 to further reduce methane emissions by 30%.

Francisco Leon: From our Twenty-twenty baseline also by 2030.

Francisco Leon: Crc's methane reduction goals and execution exceed the 2030 goals that California has set for the state.

Francisco Leon: Turning to carbon Taro volt.

Francisco Leon: On March 28th, Kern County announced that based on the comments received during the public comment period, our CTV-1 permit would require further environmental review, and the county recommended continuation of the process to the August 22nd Planning Commission Hearing this year. As a reminder, the EPA and Kern County have worked hand-in-hand on advancing this first-of-a-kind permit in California, which complies with California's environmental standards, which are undoubtedly the highest in the U.S.

Francisco Leon: For March 20th Kern County announced that based on the comments received during the public common period. Our C. T V. One permit will require further environmental review.

Francisco Leon: And the county recommended continuation of the process through the August Twenty-second planning Commission hearing this year.

Francisco Leon: As a reminder, the E P. A in Kern County have worked hand in hand on advancing this first of a kind permit in California.

Francisco Leon: No matter that complies with California's environmental standards, which are undoubtedly the highest in the U S.

Francisco Leon: The comments received were a result of our four joint EPA Current County Public Workshops that were voluntarily held to maximize the opportunity for public comment. These workshops, along with the EPA's voluntary extension of the public period from 45 to 90 days, facilitated the desired engagement with the public in the permitting process. The natural outcome of this is, not surprisingly, the need for more time to consider those comments. TTV supports this approach, as it sets the gold standard for CCS permitting.

Francisco Leon: The comments received were a result of our Ford joined E. P. A Kern county public workshops that were voluntarily held to maximize the opportunity for public comment.

Francisco Leon: These workshops, along with the Epa's voluntary extension of the public period from 45 to 90 days facilitated the desired engagement with the public and the permitting process.

Francisco Leon: The natural outcome of which is not unsurprisingly the need for more time to consider those comments.

Speaker Change: CTV supports this approach.

Francisco Leon: As it sets the gold standard for C. C S permitting.

Francisco Leon: And as previously communicated last quarter, we continue to expect the final EPA and current county permits in the second half of 2024, enabling us to meet our target FID on CTV-1 in the same window and begin CO2 sequestration by the end of 2025. Now, let me turn the call over to Nelly to cover our first quarter performance and second quarter 2024 guidance in more detail. Nelly. Thanks, Francisco.

Francisco Leon: And as previously communicated last quarter, we continued to expect the final EPA in Kern County permits in the second half of 'twenty 'twenty four.

Nelly: Enabling us to meet our target F. I D. On C. D V. One in the same window and begin sealed to sequestration by the end of 2020 five.

Nelly: And now let me turn the call over to Natalie to cover our first quarter performance and second quarter 'twenty 'twenty four guidance in more detail daily.

Nelly: Thanks Francisco.

Manuela Molina: In the first quarter of 2024, we generated $54 million of Adjusted Net Income, or $0.75 per diluted share. We produced 76,000 barrels of oil equivalent per day and 48,000 barrels of oil per day, all within our guidance range. Results reflected the strong execution of our operations team amidst the scheduled major maintenance at our Hell Hills Power Plant. The scope of the turnaround was expanded, and the longer downtime impacted gas sales volumes beyond initial guidance, but allowed for the maintenance to increase reliability at nominal impacts to cash flow. The power plant resumed operations back in early April.

Nelly: In the first quarter of 'twenty 'twenty, four we generated $54 million of adjusted net income or <unk> 75 cents per diluted share.

Manuela Molina: We produced 76000 barrels of oil equivalent per day, and 48000 barrels of oil per day, all within our guidance range we.

Manuela Molina: Results reflected the strong execution of our operations team and meet the scheduled major maintenance at all Hell Hills power plant.

Manuela Molina: The scope of the turnaround was expanded and the longer downtime impact of gas sales volumes beyond initial guidance, but allowed for the maintenance to increase reliability at nominal impact to cash flow.

Manuela Molina: The power plant resumed operations back in early April.

Manuela Molina: Production volumes also reflected the divestiture of our share of a non-operated field around Mountain, as well as natural decline. Moving to cash flows, first quarter net cash from operating activities was $87 million. Our total capital invested during the quarter was $54 million, with workcover capital expenditures of $22 million. We generated $33 million in free cash flow during the quarter. We maintain our strong balance sheet with $880 million of liquidity, which includes $403 million of cash and $477 million of available borrowing capacity under our Revolver Credit Facility.

Manuela Molina: Production volumes also reflect that the divestiture of our share of our non operated field at round mountain as well as natural decline.

Manuela Molina: Moving to cash flows first quarter net cash from operating activities less 87.

Manuela Molina: Our total capital invested during the quarter was $54 million with what kind of capital expenditures of $22 million we.

Manuela Molina: We generated 33 million in free cash flow during the quarter.

Manuela Molina: We maintain our strong balance sheet with 880 million of liquidity, which includes 403 million of cash and 477 million of available borrowing capacity under our revolving credit facility.

Manuela Molina: We ended the first quarter with a leverage ratio of 0.2 times. In March, and in connection with the ERA merger, we secured a commitment to increase our borrowing base from $1.2 billion to $1.5 billion and increase our revolver electric commitment from $630 million to $1.1 billion. Those increases will become effective upon the merger closing and will improve our liquidity by $470 million. We are committed to preserving a solid balance sheet and believe we have financial flexibility to deliver on our strategic objectives.

Manuela Molina: We ended the first quarter with a leverage ratio of point to time.

Manuela Molina: In March and in connection with the air them. After we secure a commitment to increase our borrowing base from 1.2 billion to $1 5 billion and increase our revolver electric commitment from 630 million to one 1 billion.

Manuela Molina: Those increases will become effective upon the merger closing and will improve our liquidity by $470 million.

Manuela Molina: We are committed to preserving our solid balance sheet and believe we have financial flexibility to deliver on our strategic objectives.

Francisco Leon: Turning to the second quarter, gross production is expected to average around 93,000 barrels of oil equivalent per day, reflecting modest natural decline. Net production is expected to range between 74,000 and 78,000 barrels of oil equivalent per day and 61% oil. We anticipate sequential quarterly net production to remain relatively flat due to the softer natural gas pricing environment and the growing seasonal supply of solar power. This will result in less natural gas sold and consumed at our Elk Hills Power Plant.

Manuela Molina: Turning to second quarter grasp.

Manuela Molina: Gross production is expected to average around 93000 barrels of oil equivalent per day, reflecting modest natural declines.

Francisco Leon: Net production is expected to range between 74, and 78000 barrels of oil equivalent per day and 61% oil.

Francisco Leon: We anticipate sequential quarterly net production to remain relatively flat due to the softer natural gas pricing environment and growing seasonal supply of solar power.

Francisco Leon: This will result in less natural gas salt and consume at our Elk Hills power plant.

Francisco Leon: Let me remind you that our net production volumes represent our sales volumes and can fluctuate based on market conditions, whereas gross production reflects the actual reservoir capability and performance. We expect to deploy $50 to $57 million in capital in the second quarter, and we'll continue to focus on operating efficiency. With that, I'll pass it on to Francisco for his final remarks.

Francisco Leon: Let me remind you that our net production volumes represent our sales volumes and can fluctuate based on market conditions, whereas gross production reflect the actual reservoir capability and performance.

Francisco Leon: We expect to deploy $50 million to $57 million in capital in the second quarter and will continue to focus on operating efficiencies with that I'll pass it on to Francisco for his final remarks.

Francisco Leon: Thank you Natalie.

Francisco Leon: In conclusion, I'm proud of the accomplishments of the entire organization. Over the next 18 months, our efforts will focus on the closing and integration of the era merger while unlocking our targeted synergy. The CRC team is excited to work closely with the AERA team to build a stronger California-focused organization, combining the best that both teams have to offer. AERA is a great company, and their execution over 25 years is a testament to the great people that work there.

Francisco Leon: In conclusion I'm proud of the accomplishments of the entire organization.

Francisco Leon: Over the next 18 months, our efforts will focus on the closing and integration of the air merger.

Francisco Leon: While on locking our targeted synergies.

Francisco Leon: The CRC team is excited to work closely with the <unk> team to build a stronger, California focused organization combining the best of both teams have to offer.

Francisco Leon: <unk> is a great company and their execution over 25 years is a testament to the great people that work there.

Francisco Leon: I am optimistic about our EMP business and our ability to return to an increased level of drilling activity in the second half of 2025. I am also encouraged by the progress made by the CTV team in meeting key milestones toward California's first-ever CO2 injection program. TRC is well-positioned to generate competitive returns, decarbonize California's hard-to-evade sectors, and deliver sustainable cash flow for years to come. Thanks for your time today. Operator, please open the lines for questions.

Francisco Leon: I am optimistic about our E&P business and our ability to return to an increased level of drilling activity in the second half of 2020 five.

Francisco Leon: I am also encouraged by the progress made by the CTV team clearing key milestones towards California first ever see a tier two injection permit.

Francisco Leon: Trc is well positioned to generate competitive returns decarbonize californias hard to abate sectors and deliver sustainable cash flow for years to come.

Francisco Leon: Thanks for your time today.

Francisco Leon: Operator, please open the lines for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Scott Hanold of RBC Capital Markets. Please go ahead. Yeah.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys.

Operator: If at any time. Your question has been addressed and you would like to withdraw it. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Operator: The first question comes from Scott Hanold of RBC capital markets. Please go ahead.

Scott Hanold: Yeah, thanks, thanks all. Hey, I was wondering if we could give a little bit more color on, I guess, what you're hearing with the classics permit. You have indicated that the current county.

Scott Hanold: Yeah. Thanks, Thanks al.

Scott Hanold: Hey, I was wondering if we could give a little bit more color on I guess, what you're hearing with the classics permit you you obviously indicated that our current economy.

Scott Hanold: The EIR is, you know, set for an August timeframe. So, so is it your understanding that the EPA and Kern County will issue their respective EIRs and draft your final permit at the same time in August, and just generally, what do you understand are the discussion points coming out of those hearings that give you pretty good confidence to maintain your FID timeline as well as first injection?

Scott Hanold: Erez you just set for an August timeframe. So so.

Scott Hanold: Is it your understanding that the EPA in Kern County will issue you know their respective E. R and draft per your final permits at the same time in August and just generally what do you understand is is the discussion points coming out of those those hearings that give you you know pretty good confidence to maintain your F.

Scott Hanold: The timeline as well as first injection.

Francisco Leon: Hey Scott, yeah, confidence is absolutely there. You know, the lack of that, you know, we don't know exactly the EPA and current county, the timeline, and if they're going to be ultimately synced up. We know we, if you think about the EPA permit, which is a subsurface permit, we look at to be on track for the summer. As we talked about today, with the county, which is really more of an above-ground permit for conditional use, that's now targeted for August, which is a couple months behind the EPA. So the confidence is really there to get to the finish line on that final permit and then get to FID right away on our first project. So that hasn't changed.

Speaker Change: Hey, Scott Yeah confidence this absolutely there is no lack of did you know we don't know exactly the E. P. A in Kern County, a the timeline and if theyre going to be ultimately synced up we know we if you think about the EPA permit with Juicy subsurface Perm.

Francisco Leon: Right.

Francisco Leon: We look at to be on track for the summer.

Francisco Leon: And as we talked about today with the county, which is really more of an above the ground permit for conditional use that's now targeted for August in which as you know it's no couple months behind the E. P. A tso.

Francisco Leon: The confidence is really there to to get to the finish line on that final permit and then getting to F. I D. Right away on her first project. So that hasn't changed if you remember last earnings call, we talked about our receipt of the Permian in the second half of the year. So we're very much still targeting that it you know it's.

Francisco Leon: If you remember on the last earnings call, we talked about receipt of the permit in the second half of the year. So we're very much still targeting that. When we look at creating kind of the gold standard permitting for CCS in the U.S., it's important that we take time because there's a lot at stake. We have a billion metric tons of pore space. We have 20 million tons of injection.

Francisco Leon: When we look at creating kind of the goal standard permitting for Ccs in the U S. A it's important that we take our time because there's a lot of a lot at stake we have 1 billion metric tons of poor space. We have 20 million tons of injection. So that first permit will set.

Francisco Leon: So that first permit will set the stage for everything else that comes. So, where it's hard to meet quarter over quarter timelines, and given that we have to announce this publicly, confidence continues to grow in the permitting process and in the engagement with the communities. And I would say the excitement is there. Also, on emitter opportunities, I would say more emitter opportunities are emerging as time passes so that pore space is becoming more valuable.

Francisco Leon: The stage for everything else that that comes.

Francisco Leon: So we're it's hard to meet quarter over quarter timelines and are given a given that we have to announce this publicly the confidence continues to grow on the permitting process on the engagement with the communities.

Francisco Leon: And I would say the excitement is there also on emitter opportunities Ah I would see more emitter opportunities unfold as time passes so that poor spaces become a more valuable so the confidence levels high it's just a matter of getting to the finish line on this first permit in each cell to.

Francisco Leon: So, the confidence level is high. It's just a matter of getting to the finish line on this first permit that needs to check a lot of boxes, but our team is working on it, and we're excited to get to FID this year.

Francisco Leon: To check a lot of boxes, but.

Francisco Leon: Our team is working it and we're excited to get to a Friday this year.

Francisco Leon: And just to clarify something, you said there are more emitter opportunities unfolding; is that referring to more brownfield opportunities?

Speaker Change: Yeah, and just to clarify something you said there are more emitter opportunities unfolding is that referring to more brownfield opportunities.

Francisco Leon: I would say it's all of the above, in meters, in green feet. When you have the scarcity of a brand new business model, where you're years ahead of anybody else in terms of getting to the first injection permit, as you start getting closer to that finish line, more and more industries of different types, again, brownfield and greenfield, are coming to us and saying, "Okay, this is really, really special, really interesting." I'd like to take a reservation for pore space.

Speaker Change: I would say, it's all of the above our emitter green feet.

Speaker Change: Okay. It's al.

Francisco Leon: Or when you have.

Francisco Leon: The scar city are any in the brand new business model are where your years ahead of anybody else in terms of getting to a first injection permit a S. As she started getting closer to that finish line more and more industries are of different types again brownfield in green.

Francisco Leon: Feels are coming to us and saying Okay. This is really really special really interesting I'd like to take a reservation for poor space. The focus right now is to get to that permit rates or announcement of more emitter deals on a premature basis without the permit Ah think you know the market discounts that we wanted to get to that first perm.

Francisco Leon: The focus right now is to get to that permit, right? So announcement of more emitter deals on a premature basis without the permit, I think, you know, the market discounts that. We want to get to that first permit and then announce all the conversations we're having.

Francisco Leon: <unk>.

Francisco Leon: And then announce all the conversations we're having.

Scott Hanold: Okay, thanks for that clarification. My follow-up question is on AERA, you know, with the closing, you know, you know, fairly imminent, I guess, in the next couple of months, can you remind us what are some of the low-hanging fruit that we could see on the near-term kind of benefit to the combined company? And I think Nellie had mentioned specifically, you know, obviously, you know, some, you know, maybe softness in natural gas demand due to solar, you know, pickup in the summer, but like, and when we were talking before, I think you talked about some synergistic opportunities between, you know, CRC's legacy assets and AERA there as well, but can you give us a sense of what are the low-hanging fruit where we could see kind of some near-term benefits?

Speaker Change: Okay. Thanks for that clarification. My follow up question is on Ara you know with the closing you know you know fairly imminent I guess in the next couple of months.

Scott Hanold: Can you remind us what what are some of the low hanging fruit that we could see on the near term kind of benefit to the combined company and I think now they had mentioned specifically you know obviously you know some.

Scott Hanold: You know maybe softness in natural gas demand due to solar.

Scott Hanold: Pick up in the summer, but like in and when we were talking before that you talked about some synergistic opportunities between <unk> legacy assets and error there as well, but can you can you give us a sense of what are the low hanging fruit, where we could see kind of some near term benefits.

Francisco Leon: Yeah, there's a lot of low-hanging fruit. If you look at $150 million of annual synergies, 10 years of run rate, that's a billion dollars that would be added value to the combined entity. And as we talked about before, there's an upside to that number. These are two great companies coming together that have been run independently from each other. A lot of facilities are already in place, and a lot of capacity, whether it's power, water treatment, or gas flows.

Speaker Change: Yeah, there theres a lot of low hanging fruit, if you look at $150 million of annual synergies.

Francisco Leon: 10 years of run rate, that's $1 billion that are would be added value to the combined entity and and S. We talked about before there's upside to that number. These these are two great companies coming together that had been run independently from each other a lot of facilities are already in place.

Francisco Leon: Now we have an opportunity to reimagine how the western side of Kern County should look. So there's a lot there. I'm excited to share the specifics in a few months. But I'll turn it to Omar Hayat to maybe provide a couple of more detailed examples of what we're seeing.

Francisco Leon: A lot of capacity, whether it's power a water treatment or gas flows are have now we have an opportunity to re imagine.

Omar Hayat: How are the western side of Kern County should look so there's there's a lot there are excited to share the.

Omar Hayat: Fix in a few months, but I'll turn it to Omar Hi, Ed to maybe provide a couple of more detailed examples of what we're seeing.

Omar Hayat: Yeah, thanks Francisco. Scott, like Francisco mentioned in his earlier comments, the synergies are really going to be focused around three areas: infrastructure, supply chain, and G&A. So to give you more specific examples of infrastructure... What we are looking at is, what we are trying to leverage here is the close proximity of ERA's operations to ours. There is already some legacy connectivity between the fields, but we plan to invest in and build that connectivity even more.

Omar Hayat: Yeah. Thanks, Francisco, a scarred like for Cisco mentioned in his earlier comments the synergies are really going to be focused on.

Omar Hayat: Around three areas infrastructure supply chain and G&A.

Omar Hayat: So to give you more specific examples on infrastructure.

Omar Hayat: What we are looking at is what we're trying to leverage here is a close proximity of arrow's operations to ours and.

Omar Hayat: There is already some legacy connectivity between the fields, but we plan to invest and build that connectivity even even more.

Omar Hayat: And what we want to get to is the ability to move power, gas, oil, and water across these fields. And we see either an improvement in margin for our products through doing that or a reduction in the cost of our operations. So, for example, there are areas that are in close proximity to our power plant where there could be a potential to move them away from PG&E power and provide our own power there and lower the cost. Similarly, ERA is a net consumer of gas because of its steam plant operations.

Omar Hayat: And what.

Omar Hayat: But what we want to get to is an ability to move power gas oil and water across these skills.

Omar Hayat: And we see either an improvement in margin for our products through doing that or lowering the cost of our operations. So for example, there are Arab fields.

Omar Hayat: That are in close proximity to our Elk Hills power plant, where there could be a potential to move them away from P. J D power and provide our own powered there and lower the cost.

Omar Hayat: Similarly, Ara is a net consumer of gas because of their steam flood operations. We are a net producer. So we see some some opportunities to explore there as well.

Omar Hayat: We are a net producer, so we see some opportunities to explore there as well. And then moving on, there is the possibility to look at various oil blends to improve our margins and even water treatment for beneficial use, given that we operate in an agricultural county here in Kern County with a lot of demand for water. So that's that's the infrastructure and, similarly, the supply chain. What's going to happen is that our scale will essentially double in size.

Omar Hayat: And then moving on Theres, a possibility to look at.

Omar Hayat: Various oil blends to improve our margins are and even water treatment for beneficial use given that we operate in a agricultural county here in Kern County, with a lot of demand for water. So that's that's infrastructure and similarly on supply chain.

Omar Hayat: Happiness that our scale will essentially double in size. So that then lends itself to looking at the operating model differently. We can look at some in sourcing opportunities for some of the services.

Omar Hayat: So that then lends itself to looking at the operating model differently. We can look at some insourcing opportunities for some of the services. We will also look at outsourcing some, and we will learn from the two companies and bring the best practices to the combined company. And GNA is an obvious one; obviously, with an overlapping footprint, we see material opportunities there as well. Yeah, so the plan is to, uh...

Omar Hayat: We will also look at outsourcing some and learn from the two companies and and and bring them. The best practices of the combined company and G&A is an obvious one obviously with overlapping footprint, we see material opportunities there as well.

Omar Hayat: Yes, so the plan is to migrate the best of the combined teams from a GNA perspective. So we're working on it, and the commitment is we're going to get to 50 million in synergies within the first six months. So there is low-hanging fruit. There is a lot of opportunity, and we're excited about it.

Omar Hayat: Yeah. So the plan is to yeah.

Omar Hayat: I agree the best to combine teams from in the G&A perspective in.

Omar Hayat: So we're working at and Ah. The commitment is we're going to get to 50 million of synergies within the first six months. So there is there low hanging fruit there is a lot of opportunity and we're excited about it.

Speaker Change: Thank you.

Omar Hayat: Yeah.

Operator: Our next question comes from Kali Akamine from Bank of America. Please go ahead.

Speaker Change: Our next question comes from comes from Kelly ACA Muni from Bank of America.

Kaleinoheaokealaula Scott Akamine: Please go ahead.

Kaleinoheaokealaula Scott Akamine: Hey, good morning, guys, Francisco and Ellie. My first question is about the use of cash. So the buyback this quarter has some support from the balance sheet, and I think that makes sense given the performance lag. The context there, I think, is the EIR result. So we like seeing you lean in. But with ERA now closing, I feel like there are now competing priorities for that cash with respect to leverage. So, with those motivations as the backdrop, I'm wondering about the rough contours of your cash program post-ERA.

Kaleinoheaokealaula Scott Akamine: Hey, good morning, guys Francisco Nelly Mike.

Kaleinoheaokealaula Scott Akamine: My first question is on the use of cash so the buyback this quarter had some support from the balance sheet and I think that makes sense given the performance lagged the comp.

Kaleinoheaokealaula Scott Akamine: There I think it's in the I O resolved. So we like seeing you lean in but with Erin now clothing I feel like there are now competing priorities for that cash with respect to leverage so I guess with those motivations as the backdrop wondering about the rough contours that youre cash flow ramp post era.

Francisco Leon: Yeah, you know, I think they're definitely getting to the finish line, Kalei. We need to improve the balance sheet. We're going to look opportunistically to refinance that debt. And our commitment is to get to a less than 0.5 leverage ratio on the debt. But we think we can get there pretty, fairly quickly.

Kaleinoheaokealaula Scott Akamine: Yeah, you know I think did yes, nearly getting to the finish line Kelly, we need to improves the air our balance sheet, we're going to look opportunistically to refinance that debt and our commitment is to get to a less than a 0.5 leverage.

Francisco Leon: Ratio and the debt, but we think we can get there pretty fairly quickly in the amount of cash generation from this business is absolutely tremendous and so we're going to look to increase the dividend subject to board approval. After closing and then you have the fantastic tool, which is the share repurchase program.

Francisco Leon: And the amount of cash generation from this business is absolutely tremendous, and so we're going to look to increase the dividend, subject to board approval after closing. And then you have the fantastic tool, which is the share repurchase program. I see an opportunity as we get to final permits for both oil and gas and CCS. And in looking at the lag in the stock performance, I continue to buy aggressively our shares. So I wouldn't say overarchingly that there's a change. I would say there is probably more to come.

Francisco Leon: I see an opportunity, yes, as we get to our final permits on both oil and gas and C. C. S. A and in looking at the the lag in the stock performance, our continued to buy aggressively or our share. So so I wouldn't say our overarching leaders.

Francisco Leon: <unk> I would say, it's probably more more to come we have a good track record of returning cash to shareholders. We will continue doing that in anything related to the Ara merger will will address quickly get the debt levels down and then our focus on distributed more cash to shareholders.

Francisco Leon: We have a good track record of returning cash to shareholders. We'll continue doing that in anything related to the air merger. We'll address it quickly, get the debt levels down, and then focus on distributing more cash to shareholders.

Kaleinoheaokealaula Scott Akamine: But my suspicion is that the quarterly cash sweep will probably be split between the buyback and debt reduction. But as you think about the cash balance that you currently have, which is still very strong, how do you think that trends as we head towards that target leverage metric that you have in 25?

Francisco Leon: But my suspicion is that the quarterly cash sweep will probably be split between the buyback and debt reduction, but as you think about the cash balance that you. Currently have that's still very strong how do you think that trends as we head towards that that target leverage metric that you have in 'twenty five.

Francisco Leon: Yeah, I guess one clarification is to remember the effective date on the transaction is 1-1-24. So there's already cash in the system with ERA's balance sheet that's being used to de-lever already as we go. So we do have a few things to take care of after closing or before closing. But I think the prime objective post-closing and once we get on track to get the leverage to 0.5 will be to distribute cash to shareholders. So that's what we did in 23 when we had no permits for oil and gas. That's what we'll do in 24 and into 25.

Speaker Change: Yeah, I guess, one one clarification is remember the effective date on the transaction.

Francisco Leon: Is one 124, so there's already cash in the system with Eros balance sheet, that's being used to delever already S. We go. So we do have a few things to take care of after closing or before closing, but I think the prime objective a post closing and once.

Francisco Leon: We get on.

Francisco Leon: On track to get the leverage 2.5 will be to distribute cash to shareholders. So.

Francisco Leon: That's what we did in 23, when we have no permits for oil and gas that's what we'll do in 'twenty four and into 'twenty five.

Kaleinoheaokealaula Scott Akamine: Got it. I appreciate that.

Kaleinoheaokealaula Scott Akamine: Got it. All right. I appreciate it.

Speaker Change: Got it I appreciate that my second question goes to your pro forma guidance cap.

Kaleinoheaokealaula Scott Akamine: Capex Opex and included.

Kaleinoheaokealaula Scott Akamine: Closing is coming up for error and you suggested that program is basically a mirror of yours, but had to close within a month or so wondering about any updated thoughts you have on 20.

Kaleinoheaokealaula Scott Akamine: 24 guidance.

Speaker Change: And I'll leave it there.

Kaleinoheaokealaula Scott Akamine: Yeah.

Kaleinoheaokealaula Scott Akamine: My second question goes to pro forma guidance, CAPEX, OPEX, and ARO included. Closing is coming up for ERA, and you suggested that the program is basically a mirror of yours, but it had to close within a month or so. Wondering about any updated thoughts you have on 24 guidance.

Speaker Change: Yeah, 24 guidance, we haven't communicated for the combined company you have the view for CRC mid.

Francisco Leon: Yeah, 24 guidance, we haven't communicated for the combined company, but you have the view for CRC, midpoint of production 70,000 VOE per day. So basically, a continuation of what we delivered in the first quarter and our capital of 200 to 240 for CRC. So we'll update 2024 guidance; we are not expecting to run any rigs on onerous fields in the second half of the year. So I would say a light capital program on a relative basis for 24.

Francisco Leon: Midpoint of production 70000, Boe's per day, so basically a continuation of what we have delivered in the first quarter.

Francisco Leon: And our capital 200 to 244 CRC.

Francisco Leon: So we'll update 2022 for guidance.

Francisco Leon: We are not expecting to run any rigs on erez fields in the second half of the year. So I would see a light capital program on a relative basis for 24.

Francisco Leon: What we do see once we're able to get back to increased production, and in we have the ability to invest to keep production flat, we see investment of about five to $600 million as maintenance for the combined company that would be drilling completions and workovers, plus facilities, and that's different every year. That would be the objective once we get back to full permits. But in the meantime, a low capital, one rig program on a combined basis. And you can see some of the numbers for the slides, but it's a low capital program until we can get permits back on track.

Francisco Leon: Well, we do see once we're able to get back to increase production and and we have the ability to invest to keep production flat.

Francisco Leon: We see investment of about $5 million to $600 million of maintenance for the combined company are that would be drilling completions and workover.

Francisco Leon: Facilities and that's various every year and that would be the objective once we get back to full permits but in the meantime.

Francisco Leon: Low capital a one rig program on a combined basis and you can see some of the numbers. So the slides, but it's a low capital program until we can get permits back on track.

Kaleinoheaokealaula Scott Akamine: In the absence of a drilling program on the arrow asset for 24, what are your expectations for an oil decline rate?

Francisco Leon: In the absence of a drilling program on the air asset for 24, what are your expectations for an oil decline rate.

Francisco Leon: Yeah, so on the slides, you'll see that we showed ERAS decline and CRTs from 2023, an average of about 6% for both companies. And as I said, these assets are very similar, really good rock, low decline.

Speaker Change: Yeah. So we are on the slides you'll see that we showed a ear S decline NCR sees from 'twenty to 'twenty three.

Francisco Leon: Our average till about 6% for both companies and as I said these assets are very similar really good rock a low decline.

Francisco Leon: And you can basically get from the corporate decline rate of call. It 11.5% you can get into the mid single digits with Workovers and sidetracked and increase our workovers from capital and Opex.

Francisco Leon: And you can basically get from the corporate decline rate of call it 11.5%. You can get into the mid single digits with workovers and sidetracks and increased workovers from capital and OPEX. And that's effectively what ERA did last year. And that's what ERA is doing this year, too. So, 5% to 7% on a combined basis based on last year; I would expect something similar for this year with one rig running between the two companies.

Francisco Leon: And that's effectively.

Francisco Leon: What are they had last year, that's what areas doing this year, so 5% to 7% on a combined basis based on last year I would expect something similar for this year are with one rig running between the two companies.

Operator: Our next question comes from Nate Pendleton of Stiefel. Please go ahead. Good morning and thanks.

Francisco Leon: Our next question comes from Nate Pendleton of Stifel. Please go ahead.

Nathaniel David Pendleton: Good morning, and thanks for taking my question. Good morning, Nate. Good morning. My first question is: AI and data center power demand have been quite topical recently. Can you provide your perspective on the opportunity that you see for CRC given your dominant position in the California natural gas market?

Nathaniel David Pendleton: Good morning, and thanks for taking my questions.

Nate: Good morning, Mike.

Nathaniel David Pendleton: My first question AI and data center power demand has been quite topical recently you can provide your perspective on the opportunity that you see for CRC given your dominant position in the California natural gas market.

Francisco Leon: Definitely watching it unfold. If you look at what the data centers are looking for, it's 24-7 power, but they're also looking for carbon-free power. They need land, they need running room, and they need water. We provide it all at Elk Hills. We'll have it at Bell Ridge as well. If you look at California specifically, where you don't have an ability to develop nuclear power, we're down to one plant. The only reliable sources of carbon-free power are going to be natural gas-fired power plants with CCS.

Nathaniel David Pendleton: In a definitely watching it Oh unfolds. If you look at what the data centers are looking for is 24 seven power, but they're also looking for carbon free power the have they need land and you're running room they need water.

Francisco Leon: We provided all at El kills a will have it at bell rich as well.

Francisco Leon: If you look at California, specifically.

Francisco Leon: Where you don't have an ability to develop nuclear we're down to one plant.

Francisco Leon: The only reliable sources of carbon free power are going to be natural gas fired power plants with Ccs. So we think we have the perfect solution to keep the data centers in California are in Cal capture our which is our Elk Hills power project becomes a fascinating oh.

Francisco Leon: We think we have the perfect solution to keep the data centers in California. CalCapture, which is our Elk Hills Power Project, is becoming a fascinating opportunity to advance and look forward. Early conversations are happening. Maybe I'll turn it to Chris Gould to give a perspective of what we're seeing on the data center side. Thanks.

Chris D. Gould: <unk> two to advance and look forward so early.

Chris D. Gould: Yeah, thanks Francisco. Nate, thanks for the question.

Francisco Leon: Early conversations are happening in maybe I'll turn it to Chris Gould to give a perspective of what we're seeing on the datacenter side, yes.

Chris D. Gould: Yeah, just to unpack that a bit, obviously California is a national leader in technology, and it's got a high concentration of data centers in LA, Silicon Valley, and Sacramento. And that, you know, uniquely overlaps with our footprint for our CTV reservoirs. So you all know CTV-1 is about 120 miles or so from Los Angeles, and CTV-2 through 5 are 30 to 65 miles from Sacramento or Silicon Valley. So we're uniquely positioned to take advantage of that growth and that opportunity by co-locating either hyperscale data centers, which, as you know, are large megawatt facilities, or co-locators, which are smaller, with a range of different storage volumes and injection to do with Francisco referenced around sourcing that baseload carbon-free energy.

Chris D. Gould: Yeah. Thanks Francisco Nate Thanks for the question, Yeah, just to unpack that a bit obviously, California is a national leader in technology.

Chris D. Gould: And it's got a high concentration of data centers in L. A silicon valley in Sacramento.

Chris D. Gould: And that.

Chris D. Gould: You know uniquely overlaps with our footprint for our C. T V reservoir. So you all know C. T V. One is about 120 miles or so from L. A and C. T V. Two through five are 30 to 65 miles from our Sacramento.

Chris D. Gould: Or silicon Valley. So we're uniquely positioned to take advantage of that growth and that opportunity by co locating either hyperscale datacenters, which as you know are large large megawatt facilities and or co locators, which are smaller.

Chris D. Gould: With a range of different storage volumes in injection to do with Francisco referenced around sourcing that baseload.

Chris D. Gould: <unk> been free energy.

Chris D. Gould: So, very excited about that. As Francisco mentioned, early discussions are underway, and ultimately, the scale at which we could deliver a solution like that is in the gigawatt range as opposed to the megawatt range, and something we're advancing discussions with.

Chris D. Gould: So very excited about that as Francisco mentioned early discussions are underway.

Francisco Leon: And ultimately.

Chris D. Gould: The scale at which we could deliver a solution like that is in the gigawatt.

Chris D. Gould: Range as opposed to the megawatt range and something where we're advancing discussions with.

Nathaniel David Pendleton: Got it. I appreciate the detail. It's a great opportunity. And for my follow-up, referencing slide 18, can you please provide some detail around the potential to use those conditional use permits for Kern County, such as other limitations on the potential size of those programs that such permits could support?

Speaker Change: Got it I appreciate the detail great opportunity and for my follow up referencing slide 18 can you provide some detail around the potential to use those conditional use permits for Kern county catches up with limitations on the potential size of those programs that are such permits could support.

Francisco Leon: So, good potential. Not only is CRC having in the queue three conditional use permits, Elk Hills, Buena Vista, and Kern Front. AIRA has several CUPs in the queue as well. So, we'll have a lot of opportunity to go back to kind of field-specific programs. The packaging of the programs, you know, number of wells, injectors.

Nathaniel David Pendleton: So good potential so not only we talked about CRC, having in the Q3 conditional use permits a L kills window Vista and Kern front.

Francisco Leon: Era has and several T you piece in the Q as well so.

Francisco Leon: We'll have a lot of opportunity to go back to kind of feel specific programs are the packaging of the programs are you know a number of.

Francisco Leon: Wells injectors.

Francisco Leon: That's still to be determined in terms of how we ultimately best get the CU piece of the ground. That's what we're working through. It will still take some time. We don't see that process moving quickly. And as we said, it's going to be more of the second half of next year, but we have good confidence in the ability to permit using that format. That's effectively how the rest of the state works in other places where CalGEM is the lead agency. So we see this as working well, even though it's not ready today. It's a very good solution to permit using the CUP.

Francisco Leon: That's still to be determined in terms of how ultimately best get the the Cu piece of the ground.

Francisco Leon: And that's what we're working through are they still will take some time, we don't see that process moving quickly and we as we as we said it's going to be more of a second half of next year.

Francisco Leon: But good confidence in the ability to permit are using that format. That's effectively how the rest of the state works.

Francisco Leon: In in other places where Cal Jim is the lead agency. So we.

Francisco Leon: We see this as working well, even though she already today. It's it's a it's a very good solution to a to permit using DCU piece.

Operator: Our next question comes from Betty Zhang of Barclays. Please go ahead.

Francisco Leon: Our next question comes from Betty Jang of Barclays. Please go ahead.

Betty Zhang: Hello, thank you for taking my question. Sorry, just follow up on the permitting question a bit more. I guess on the conditional use, some of the two other options beyond the current county litigation resolution, when it comes down to the conditional use permit and, Francisco, what you just talked about, the multi-basin approach, what – is it – can you just get the – get a bit more detail into the legislatures or the organization that's involved in providing these permits and whether that could completely offset the permits that you guys need in current county that will be able to compensate the hurdles that you're currently seeing in current county?

Betty Zhang: Oh, Thank you for taking my question I wanted to.

Betty Zhang: Sorry, sorry, just follow up on the poverty question, a bit more I guess on the come.

Betty Zhang: Additionally, some of the two other options beyond the Kern County litigation resolution.

Betty Zhang: When it comes down to the conditional use permit.

Betty Zhang: And Francesco yet what you just talked about the multi basin approach what.

Betty Zhang: Is it can you just get the.

Betty Zhang: Get that more detail into that.

Betty Zhang: The legislature or at that the organization that's involved in providing these permits and weather.

Betty Zhang: That could completely offset the apartments that you guys need in Kern County that that we'll be able to compensate.

Betty Zhang: The hurdles that you currently sell in Kern County Thanks.

Betty Zhang: Yes.

Francisco Leon: Hey, Betty. Yeah, so we're in multiple basins. We're in Long Beach, we're in Sacramento, and now we will be in Ventura beyond the San Joaquin Basin, which is primarily Kern County. The attention has been given to Kern County and the process that they have as the lead agency effectively. And that's what's been challenged in the courts.

Francisco Leon: Hey, Betty Yeah, Yeah sure. We we're in multiple basins, we're in long beach, where in Sacramento, and now where there will be inventory beyond the San Joaquin Basin, which is primarily Kern County.

Francisco Leon: The attention is being given to Kern County, and in the process that they had as the lead agency effectively and that's what's been challenged in the courts, but outside of Kern County, Cal Jim is the lead agency in Cal Jim's working through.

Francisco Leon: But outside of Kern County, CalGEM is the lead agency, and CalGEM is working through a new standard operating procedure. They're working through their process in terms of making sure we're checking all the requirements from a regulatory perspective. So outside of Kern County, it's CalGEM.

Francisco Leon: A new standard operating procedure there they're working through their process are in in terms of making sure where we're checking all the requirements from a regulator regulation perspective.

Francisco Leon: And so outside of Kern County, It's Cal Jim and the discussions are ongoing we actually receiving sidetracked under this process are not enough to say that they've more than compensated the loss in Kern County, but theres progress there and that's what gives us confidence that we're going to be able to run a one rig.

Francisco Leon: And the discussions are ongoing. We are actually receiving sidetracks under this process. Not enough to say that they've more than compensated for the loss in Kern County, but there's progress there, and that's what gives us confidence that we're going to be able to run a one-ring program this year and next year. There could be some upside as more permits come through. But it is hard to know at this stage. We just know that CalGEM is working on it, and progress is starting to show up.

Francisco Leon: Program this year and next year, there could be some upside as more as more permits come through but hard to know at this stage. We just know that Cal Jim's working it in and our progress is starting to show up.

Speaker Change: Got it thank you.

Francisco Leon: And I have a follow up on the the Brookfield payments and how they think about the next catalysts when it comes to the carbon management business can you just walk through why should we should be looking for to receive the next tester installed payment for propel.

Betty Zhang: think about the next catalyst when it comes to the carbon management business. Can you just walk through what we should be looking for to receive the next, the third installed payment for Brookfield and when should we expect in terms of FID for the cryogenic plant, for the first injection plant, which I believe will be followed by the hydrogen plant?

Betty Zhang: And when should we expect in terms of F. I D for the cryo plant for the first injection plant, which I believe will be followed by the hydrogen plant.

Francisco Leon: Yeah, Betty. So, you know, as we looked two plus years ago now with Brookfield, a first of a kind joint venture, there were a lot of unknowns as to how things were going to progress. And we set up, as we dropped into reservoirs, and we dropped in the first one called 26R, we decided to have a staggered payment system that's tied to milestones. The first payment was for the draft permit, which we received in December. The second permit came in as the public comment period was finalized and completed to Brookfield satisfaction.

Speaker Change: Yeah, Barry So you know as we as we looked at our two plus years ago now with Brookfield.

Francisco Leon: He first of a kind joint venture.

Francisco Leon: There were a lot of unknowns as to how things were going to progress and we settled the S. We drop in reservoirs and we dropped in the first one called twenty-six our we decided to have a staggered payment system. That's tied to milestones first payment was for the draft permit which we received in December the second permit came in.

Francisco Leon: The public common period was finalized in and completed two Brookfield satisfaction that their payment is surround the final permit effectively and reaching F. I D. So that's I would expect that are either later this year are the beginning of next year. It just depends.

Francisco Leon: The third payment is around the final permit effectively and reaching FID. So that's, I would expect that either later this year or the beginning of next year, it just depends on how things play out in terms of getting to FID. But if you go back to my conversation earlier, we are looking for a final permit in the second half of this year. And the gas processing plant, which is our CRC-owned plant, 100,000 tons of CO2 per year that we can capture right away.

Francisco Leon: And soon and how things play out in terms of getting to F. I D. But if you go back to Mike.

Francisco Leon: In my conversation earlier, we're looking for final permit in the second half of this year and the that the gas processing plant, which is our CRC owned plant 100000 tons per.

Francisco Leon: Per year of C. O two that we can capture right away. That's a project that's within our fuel boundaries, it's already in place and something that we can execute quickly. So the conversations will brookfield will be around that F. R. E. D is the project that triggers the last payment, but it also has the condition of a final.

Francisco Leon: That's a project that's within fuel boundaries. It's already in place, and something that we can execute quickly. So the conversations with Brookfield will be around that FID as the project that triggers the last payment, but it also has the condition of final declaration of the size of the reservoir by the EPA. So we are seeing upsides to the numbers that we had planned for. So that's where we provide a range for the third payment that could be higher than the first and second and third payments, kind of a catch-up payment if the reservoir is higher.

Francisco Leon: Declaration of the size of the rest of the war by by the EPA. So we are seeing are upsides to the numbers that we had planned for so that's where we provide a range to the third P. M index could could be higher than the first and second and third payments kind of a catch up payment. If the rest of the war is higher so expect more.

Francisco Leon: So expect more news in the second half of the year. Once we get closer to the final permit, once we get to FID, we'll update on that Brookfield payment. But I think we'll be in a position in the near term to collect all three payments and look forward to adding more reservoirs into the JV.

Francisco Leon: In the second half of the year once we get closer to the final permit once we get to two F. I D. We'll update on that Brookfield payment, but I think we'll be we'll be in a position in the near term to collect called prepay on payments and looking forward to adding more rest of awash into the JV.

Operator: The next question comes from Leo Mariani of Roth MKM. Please go ahead.

Francisco Leon: The next question comes from Leo Mariani of Ralph M. Kam. Please go ahead.

Leo Mariani: I wanted to focus a little bit on production here. You guys certainly mentioned that first quarter production came in a little bit lower, and it sounded like some of that was extended maintenance at Elk Hills in terms of the power plant. I was hoping you guys could kind of quantify this, so how much did you lose in the first quarter? And presumably, that's all back in the second quarter, but it sounds like you're also losing some production here just because of kind of lower gas demand.

Leo Mariani: I wanted to focus a little bit on the production here. So you guys. Certainly mentioned that you know first quarter production came in a little bit lower and it sounded like some of that was extended maintenance.

Leo Mariani: L kills.

Leo Mariani: In terms of the power plant I was hoping you guys could kind of quantify so how much did you lose.

Leo Mariani: In the first quarter and presuming that's all back in the second quarter, but it sounds like you're also losing.

Leo Mariani: Some production here just to kind of lower gas demand.

Leo Mariani: Maybe you can help quantify that a bit and presumably those are some of the reasons why you guys lowered the production guidance a little bit and then also probably high oil prices was the PSC impact is there anything else that kind of caused you to bring the production guidance a little bit lower here in 'twenty four.

Leo Mariani: So maybe you can help quantify that a bit. And presumably those are some of the reasons why you guys lowered the production guidance a little bit and then also probably higher oil prices with some PFC impact. Is there anything else that kind of caused you to bring the production guidance a little bit lower here in 24?

Francisco Leon: In the first quarter, the delay in the power plant turnaround was about 800 barrels equivalent per day, but it's all gas. And so that was the impact there. And as we talked about, this plant is growing in value every day, and we have our team doing a fantastic job of maintaining the assets. We took the opportunity to do an expanded review to make sure everything was functioning and looking at the steam turbines and doing an inspection. So that was completed successfully.

Leo Mariani: So yeah first quarter.

Francisco Leon: The delay of the power plant turnaround, what's about 800 barrels equivalent per day, so, but it's all of it gas.

Francisco Leon: In so that was that was the impact there and as we talked about this is this plant is is growing in value every day and we have our team does a fantastic job of maintaining the assets are we took the opportunity to do an expanded.

Francisco Leon: Reveal of <unk> to make sure everything was functioning and looking at the steam turbines and doing an inspection.

Francisco Leon: The plant is running, got restarted, running at 100 percent capacity, so that's primarily the impact in the first quarter. We also had some weather, a lot of storms, and mudslides to contend with. And then finally, the PSC effect. So, yeah, that's where we're at on the lower end of the range. More gas struggled a little bit more than oil, but oil actually was above on the high end of the range, but those are kind of the first quarter impact.

Francisco Leon: So that was completed successfully the plant is running got restarted are running at 100% capacity are in those are the that's primarily the impact in the first quarter. We also had some weather a lot of storms mudslides to contend with and then final the P. S. C effect. So yeah, that's where we're at the.

Francisco Leon: Lower end of the range, a more gas struggle a little bit more of an oil oil actually was above the high end of the range, but are those sort of kind of the the first quarter impacts.

Francisco Leon: Now, the second quarter comes around with a little bit of spillover from the turnaround for LKLs. But again, we got it back up and running in full in April. So you're back to having two primary issues for the second quarter.

Francisco Leon: Now second quarter comes around a little bit of the spillover of the turnaround for Elk Hills, but again, we got it back up and running in full.

Francisco Leon: In April.

Francisco Leon: So you're you're back to having two primary issues for the first for the second quarter, a one as we're planning our the second quarter at a higher Brent price. So you do expect some impact to P. S. C. S hits against are inversely correlated P. S heat production.

Francisco Leon: One is we're planning the second quarter at a higher brand price, so you do expect some impact on PSE as it's against inversely correlated PSE to production. And what we're seeing in the second quarter is we're having to take down the power plant to a lower capacity given that we're seeing a lot of solar energy being generated in the second quarter, and that brings prices for power down. So rather than send power into the grid in this environment, we decide to ramp down the plant on a temporary basis. I would say this is a seasonal aspect of how we're seeing things unfold in California. We do have fixes in the go forward basis.

Francisco Leon: But what we're seeing in the second quarter is a we're having to take down the power plant to a lower capacity.

Francisco Leon: Given that we're seeing a lot of solar energy being generated in.

Francisco Leon: In the second quarter, AR and that allows that brings prices for power down so rather than send power into the grid.

Francisco Leon: In this environment, we decided to ramp down that the plan for on a temporary basis I would say this is a seasonal aspect of how we're seeing things unfolding californium, we do have fixes in the on a go forward basis are it's one of the again advantages of having the merger.

Francisco Leon: It's one of the advantages of having the merger with ERA. And basically, what happens is there's some permeate gas that is not up to specifications for the utilities, but we're able to run that to our power plant, plus or minus, and then you're able to put all the gas into the plant. If you bring that down in terms of capacity, then you have less consumption of that gas, and so you're not getting to that sales point.

Francisco Leon: Or were there in and basically what happens is there's some Permian gas that AR is not up to specs for the utilities, but we're able to run that through our power plant a plan goes from a full capacity of 550 megawatts.

Francisco Leon: Plus or minus then youre able to are you able to default to put all the gas into the plant. If you bring that down in terms of capacity. Then then you have less consumption of that gas into you're not getting to that sales points. We're able to after the merger closest to route that gas to air S fields and offset.

Francisco Leon: We're able to, after the merger closes, route that gas to ERAS fields and offset some of the gas that they're purchasing at Bell Ridge, as an example. The two fields are already connected by a pipeline, so it gives us effectively a relief valve to move that gas on a go-forward basis. But that's effectively what's going on, so there are independent issues with the plant. The first one was a turnaround, the second one is the market, and maybe I'll just ask Jay Bys to provide a little bit more color commentary on solar power generation in California.

Jay A. Bys: So while the gas at their purchasing at Bell rates as an example, the two are the two fields are already connected with our pipeline. So it gives us a effectively a relief valve to move that gas from a go forward basis.

Francisco Leon: But that's effectively what's going on so they're independent issues are with the plant. The first one was a turn around the sector. One is market in maybe I'll just ask jv's to provide a little bit more color on colored commentary on solar power generation in California.

Jay A. Bys: Good morning. Yes, California has actually become a net power exporter over the course of the last couple of years. In fact, power is going north to Washington State to capture GHG driven pricing up there. Even with that, we're seeing growing backdowns on both solar and wind generation in these shoulder months. It's

Jay A. Bys: Good morning, Yes, California has actually become a net power export or over the course of the last couple of years.

Jay A. Bys: In fact powers going north to Washington State to capture G. H G driven pricing up there.

Jay A. Bys: Even with that we're seeing.

Jay A. Bys: Growing back downs on both solar and wind generation in the shoulder months.

Jay A. Bys: Uh huh.

Jay A. Bys: It's interesting to watch this play out. You know, fortunately, we've got a couple different value streams related to our power plant. As Francisco points out, even when we back the unit down, we're not able to take full advantage of the off-spec gas that would otherwise be burned, but we do continue to have the benefit of the plant behind the fence to give us very attractive rates. And we've got a capacity revenue stream that goes with the power plant. So it's going to be interesting to see how the broader scenario plays out in California. But from our perspective, we're pretty well situated.

Jay A. Bys: It's interesting to watch this play out you know Fortunately, we've got a couple of different value streams related to our power plant is francisco points out.

Jay A. Bys: Even when we back to unit down we're not able to take full advantage of the off spec gas that would otherwise be burned.

Jay A. Bys: But we do continue to have the benefit of the plant behind the fence to give us very attractive rates and we've got a capacity revenue stream that goes with the power plant. So it's.

Jay A. Bys: It's going to be interesting to see how the broader circumstance plays out in California, but from our perspective, we're pretty well situated. The addition of the era of off ramp if you will to run this offset gas steamers that that's only a benefit.

Francisco Leon: The addition of the air off ramp, if you will, to run this off the gas through steamers, that's only a benefit.

Leo Mariani: Okay, I appreciate the thorough answer there. And then I just wanted to follow up on the oil and gas, you know, drilling permit process here. So, it sounds like there's been maybe somewhat of a hiatus, you know, for CalGEM, kind of outside of Kern County. Obviously, you've got the LA Basin operations, and the Sac Basin operations. You mentioned the agencies kind of, you know, reviewing procedures out there. Just for some context, have they not really issued much in the way of drilling permits to anybody this year as they're kind of reviewing those protocols?

Speaker Change: Okay I appreciate the thorough answer there and then just wanted to follow up on the oil and gas drilling.

Leo Mariani: Drilling permit process here so it.

Leo Mariani: It sounds like there's been maybe somewhat of a hiatus.

Leo Mariani: For Cal Jim kind of outside of Kern County, obviously, you've got the L. A basin.

Leo Mariani: In operations. The fact based on operations. He mentioned the agencies kind of you know.

Leo Mariani: Reviewing our you know procedures out there just for some context, they not really issued much in the way of drilling permits anybody this.

Leo Mariani: This year as their kind of reviewing those those protocols and presumably they're going to have maybe some updated protocols and perhaps a slightly modified permitting process. You know later this year just kind of how do we kind of expect that to play out I assume you get have you been in contact with Cal Jim about these things, but maybe just.

Leo Mariani: And presumably, they're going to have maybe some updated protocols and perhaps, you know, a slightly modified permitting process later this year. Just how do we kind of expect that to play out? I assume you've been in contact with CalGEM about these things. So, maybe just a little bit more color just because, obviously, you have assets outside of Kern and it'd be great to kind of drill some wells.

Leo Mariani: Little more color just because obviously you have assets outside of current and it'd be great to kind of drill some wells.

Francisco Leon: That's the thing you got it, Leo. That's exactly right.

Leo Mariani: So that's a thing you do guardedly Oh, that's a that's exactly right. Our Cal Jim is going through a fairly extensive review of their procedures in and are looking to improve how they think about permitting in California are like I said, they're sidetracked and there are there's progress being.

Francisco Leon: CalGEM is going through a fairly extensive review of their procedures and looking to improve how they think about permitting in California. Like I said, there are roadblocks, but there's progress being made in our fields, and we're seeing some approved in other fields throughout the state. We haven't seen new wells permitted this year under the new format. I think CalGEM is still working through that. I can't speak for them as to when they're going to be ready.

Francisco Leon: Made in our fields and we're seeing some approved and in other fields throughout the state. There's a we haven't seen new wells permitted this year on their on their the new format. The intelligence still working through that.

Francisco Leon: We engage with them very frequently in looking to get back to full permitting capacity and full drilling program outside of Kern County. So, it's hard to pinpoint a specific date when CalGEM will be ready, but we do see meaningful progress on sidetracks and workovers, and the anticipation is that we'll get the new wells back on track soon. So, I can't put a timeline on it, but we see a lot of progress being made, and the agencies are talking about us getting to, hopefully, the final steps in the process.

Francisco Leon: Can't speak for them as to when they're gonna be ready, we engage with them very frequently.

Francisco Leon: And looking to to get back to a full permitting capacity in full drilling program and in outside of Kern County, So hard to pinpoint a specific date, when we'll Cal Jim will be ready, but we do see progress are already a meaningful progress on on sidetracked and work.

Francisco Leon: Overs in when dissipation is that we'll get the new wells back on track soon so I can't put a timeline to it but we see we see a lot of progress being made in and the agencies are talking about us.

Francisco Leon: You know getting to hopefully the final steps in their process.

Operator: The next question comes from Noel Parks of Tuohy Brothers Investment Research. Please go ahead.

Francisco Leon: The next question comes from Noel Parks of two O E Brothers investment research. Please go ahead.

Noel Parks: Hi, I just had a couple. You mentioned earlier that there is interest from brownfield and greenfield emitters that are looking to reserve porous space. And I just wonder, in talking with parties like that, can you talk about sort of what the terms are that are being discussed? Are they mostly focused on, you know, commitments to a certain volume or pricing terms?

Noel Parks: Oh, Hi, I just had a couple of.

Noel Parks: I mentioned earlier that there is interest from a brownfield.

Noel Parks: Infield emitters.

Noel Parks: That.

Noel Parks: We're looking to reserve a poor space and I just went through in and talking with parties like that.

Noel Parks: Talk about sort of what the terms are that are being discussed are they mostly focused on.

Noel Parks: Commitments to a certain volume or or pricing terms anything above that would be interesting.

Speaker Change: Yeah. So.

Francisco Leon: Yeah, so... You have a few very interesting dynamics at play. We see California emitters winning grants from the Department of Energy to capture CO2, but that's only going to be valuable and good if they have a storage site to put the CO2 to work. We're looking for the discussions with the brownfield emitters to really circle around CO2 pipelines. We are still waiting for the legislature to issue rulings on the framework on how CO2 pipelines are going to work in the state. We anticipate some progress being made during either the budget session or later in the legislative year.

Noel Parks: You know when you have a few very interesting dynamics at play are we see California emitters.

Francisco Leon: Winning grant from the Department of energy, who are to capture shield two.

Francisco Leon: And but that that's only going to be valuable and good if they have a storage side to put this yield two to work so well.

Francisco Leon: We're looking for the discussions with the brownfield Limiters really circle around a shield to pipelines and we are still waiting for the legislature to issue a ruling surround.

Francisco Leon: The framework on how.

Francisco Leon: <unk> two pipelines are went to work in the state.

Francisco Leon: We anticipate.

Francisco Leon: Some progress being made during a.

Francisco Leon: Either the budget session or later in the legislative year. So you know that's that's something that could be a very positive catalyst, but without those pipelines and the connectivity to brownfield limiters is not going to be there in putting our risk are the doa funding and some of the big capital projects that the submitters have I would say that's in a nutshell.

Noel Parks: So, you know, that's something that could be a very positive catalyst. But without those pipelines, then the connectivity to brownfield emitters is not going to be there, putting at risk the DOE funding and some of the big capital projects that these emitters have. I would say that's, in a nutshell, what's slowing down some of the brownfield emitters. In the greenfield emitters, where we have all of them behind the fence, it's really about trying to optimize how we allocate the pore space.

Noel Parks: What's slowing down some of the some of the brownfield limiters on the Greenfield Limiters are where we have all of them behind behind defense Ah, It's really about trying to optimize how we are how we allocate the pore space you know we've talked about a 50 to $75 per ton story.

Noel Parks: You know, we've talked about $50 to $75 per ton of storage fees that the JV is going to collect from these emitters. Ultimately, they need a CCS storage site as well to make their projects clean, and a lot of these markets are emerging, whether it's hydrogen or ammonia. These projects are – there's no market for the clean version of these energy sources, so the off-take is being discussed, and so there are other elements to the green fuel projects in terms of more certainty as to how we get the CO2 on the ground once we get the permit, less certainty as to how they're going to get the product sold and what kind of premium it's going to command. So it's unfolding, it's moving, it's very dynamic, a lot of really interesting discussions are happening, and that final permit on Class 6 will ultimately unlock a lot of these exciting discussions.

Noel Parks: H.

Noel Parks: Fees that the JV is going to collect from from the submitters ultimately they need a storage ccs storage side as well to make their projects clean AR in a lot of these markets are unfolding, where whether its hydrogen or ammonia. The these projects are there's no market for <unk>.

Noel Parks: The clean version of these energy sources. So the offtake is being discussed in there. So there's other elements to the greenfield projects in terms of more certainty as to a how do we get the shield two underground once we get the permit a less certainty as to how they're going to get the product sold and what kind of premium it's going to command so.

Noel Parks: It's unfolding, it's moving very dynamic a lot of really interesting discussions happening in that final permit on classics will ultimately unlock a lot of these are exciting discussions.

Francisco Leon: Great, thanks for that, and I wanted to ask about the arrow acquisition and looking back to sort of where the strip stood at the time that you announced it early in the year. So, looking at WTI, the strip out a couple of years was kind of in that mid-60s sort of range, and then with this last rally we had in crude, it took it more like... low to mid-70s. I just wondered if that Delta, um, transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: Great. Thanks for that and I wanted to ask about the arrow acquisition and looking back to sort.

Francisco Leon: Sort of where the stripped stood at the time that you were announced it.

Francisco Leon: Early in the year.

Francisco Leon: So looking at W. T I E. The strip out a couple of years with kind of in that mid 60 sort of range and then.

Francisco Leon: With this last rally we hadn't and include it took up more like two.

Francisco Leon: Low to mid seventies, I, just wonder if that delta.

Francisco Leon: Translated to any.

Francisco Leon: Any project or any upside potential that you.

Francisco Leon: You didn't include in your valuation. So you essentially are going to be paying for that might come into play if you could.

Francisco Leon: Envision on a long term stronger oil price.

Francisco Leon: Yeah, I mean, definitely, the conditions that supported the decision around the era merger are there and are getting stronger in a lot of ways, given the confidence that we have in synergies. We have seen the beginning of the year with stronger brand pricing. You know, as a reminder, they had a different view on hedging their volumes than we did. They have historically entered into more swaps, locking in some of the pricing, which is good because it gives us more ability to plan, but it takes away some of the upside. They do have some barrels open that will provide some further upside to pricing in the near term. Difficult to quantify at this stage, but we'll be providing an update once we get to close.

Francisco Leon: Did I mean definitely the conditions are there.

Francisco Leon: That supported the decision around the euro merger.

Francisco Leon: Or are there and are getting getting stronger and a lot of ways given the confidence that we have on synergies.

Francisco Leon: Have seen the beginning of the year with stronger brand pricing.

Francisco Leon: As a reminder, our private company error had a different view on and hedge or hedging their volumes and then we did a.

Francisco Leon: They they have entered a historically into more swaps locking in some of the pricing which is good because it gives us more of an ability to plan, but it takes away some of the upside. They do have some barrels open that would provide some some further upside to pricing in the near term are difficult to quantify at this stage and but will be.

Francisco Leon: Providing an update once we get to close.

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

Francisco Leon: This concludes our question and answer session I would like to turn the conference back over to Mr. Li on for any closing remarks.

Francisco Leon: Thanks for joining us today. We will be presenting at several investor conferences during the summer. I really look forward to seeing you and engaging in more conversations. Bye.

Leon: Thanks for joining us today, we will be presenting at several investor conferences during the summer Ah really look forward to seeing you in using in more conversations. Thanks, so much bye.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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

Operator: [music].