Q1 2024 HNR Acquisition Corp Earnings Call

Good morning, everyone and welcome to the H N O acquisition Corp. First quarter ended March 31, 2024 financial results.

At this time all participants are in a listen only mode and we will open for questions. Following the presentation. If anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Michael Porter, who.

Michael Porter: As director of public relations Michal over to you.

Operator: Thank you, Jenny. Good morning, everybody, and welcome to our first quarter earnings call. Before we start the call, I'd like to introduce Dante Everetti, who is President and CEO. Mitch Trotter, who is CFO, and Jesse Allen, who is Vice President of Operations.

Dante Everetsy: Thank you Jenny good morning, everybody and welcome to our first quarter earnings call before we start the call I'd like to introduce Dante ever Etsy, who is president and CEO Mitch.

Niche Trotter.

Speaker Change: Sorry, President and CEO, Mitch Trotter, who is CFO and Jesse Allen, who is vice president of operations.

Operator: The forward-looking statements have to be read, and then we'll get to the formal part of our presentation. The information included in this conference call is forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995 that involve risk and uncertainties that could cause actual results to differ materially from what is expected. Words such as expects, believes, anticipates, intends, estimates, seeks, et cetera, and variations in similar words and expressions are intended to identify such forward-looking statements. Such statements differ related to future events and future results based on current available information and reflect the company management's current beliefs. All the information for the Qs, the Ks, and all our documentation is listed on EDGAR and at the Security Exchange Commission'

Speaker Change: The forward looking statements has to be read and then we'll get to the formal part of our presentation.

Speaker Change: The information included in this conference call are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Speaker Change: Involves risks and uncertainties that could cause actual results to differ materially from what is expected words, such as expects believes anticipates intends estimates seeks et cetera, and variations and similar words and expressions are intended to identify such forward looking statements, but the absence of these words does.

Speaker Change: Not mean that the statement is not forward looking.

Speaker Change: Such statements differ related to the future events and future results based on current available information and reflects the company management's current beliefs.

Speaker Change: All the information for the Qs the case in all of our Documentations are listed on Edgar and the security Exchange Commission's website.

Operator: Without further ado, I'd like to introduce you all to Dante, our President and CEO. Good morning, Dante. Good morning.

Speaker Change: Without further Ado I'd like to introduce you all to downtown President and CEO Good morning Dante.

Dante Everetti: Good morning, Mike. Thank you. Welcome and thank you to all our participants. Thank you for joining us this morning. I'd like to just start with a statement about the role of management on our board. We all work for the shareholders, which means we work for all those shareholders that are on the call today and those prospective investors to give you a superior rate of return on your investment here. And that includes all of us that have invested in this, which is the entire board and all of the management team.

Dante Everetsy: Good morning, Mike Thank you.

Speaker Change: Welcome and thank you to all our participants thank you for all joining us this morning.

Dante Everetsy: I'd like to just start with a statement about the role of management and our and our board. We all work for the shareholders, which means we work for for all those shareholders that are on the call today and then those perspective investors to give you a superior rate of return on your investment here and that include.

Speaker Change: <unk> all of us that have invested in this which switches all of the board and all of the management team. We're all major investors in this endeavor. So we put up our hard earned body to to make this sort of a big success.

Dante Everetti: We are all major investors in this endeavor, so we've put up our hard-earned money to make this a big success. We also work for all our employees, and we'd like to give a shout out to those in the field, especially David O'Brien, who runs our New Mexico operations. And we want to ensure that everyone returns home safely every evening.

Speaker Change: We also work for all our employees and we like to give a shout out to those in the field, especially David O'brien, who runs our new Mexico operations and we wanted to ensure that everyone returns home safely every evening. So at this point I'm proud to report that we've had no injuries.

Dante Everetti: To this point, I'm proud to report that we've had no injuries since assuming operations on November 15th of 23. So you should have in front of you our first slide, which is my comments. And I'm gonna explain first the diagram to the right, which shows our original oil in place. And myself, I'm a registered petroleum engineer, and I'll do this one time and not do it on every earnings call, but I'll do it this one time.

Speaker Change: Assuming operations on November 15th of 'twenty three.

Dante Everetti: The big oval there that looks like a pizza pie, and it represents the total volume of oil that's in place underground within our four main producing zones. And as you can see there, very little has been produced to date. So the previous recovery is dark blue.

Speaker Change: So you should have in front of you our first slide which is the the my comments and I'm going to explain first the diagram to the right, which shows our original oil in place and myself I'm a registered petroleum engineer and I'll I'll do this one time and not do this on every earned.

Dante Everetti: The other lighter shaded colors represent our proven reserves, our additional reserves from adding perforations, additional reserves from infill drilling, and so on. And I'm just going to give you a tiny story because our chairman loves this, but the largest oil field in the world is the South Gawar Field in Saudi Arabia. It has something on the order of 170 billion barrels of oil in place. It produces today something close to 4 million barrels a day, and it's been doing that for some time.

Speaker Change: <unk> solved but I'll do this this one time.

Speaker Change: The big global there that looks like a pizza pie.

Speaker Change: It represents the total volume of oil that's in place underground within are our four main producing zones and as you can see there very little has been produced to date. So the previous recovery is the dark blue the other lighter shy shaded colors represent.

Our proven reserves or additional reserves dramatic perforations additional reserves from infill drilling and so on and and I'm just going to give you a tiny story because our chairman loves this but the largest oil field in the world is the south Lamar field in Saudi Arabia.

Speaker Change: Yeah. It has something on the order of 170 billion barrels of oil in place. It produces today something close to 4 million barrels a day and it's been doing that.

Speaker Change: For some time.

Dante Everetti: So, that field has produced to date 85 billion barrels out of 170 billion barrels in place. We have just under a billion barrels in place, it's a water flood, the South Gowar Field is a water flood, we're a carbonate, the South Gowar Field is a carbonate, and our goal is to have a tremendous recovery, something on the order of 15%, 10 to 15%. The South Door Field has already exceeded 50% in a carbonate under a water flood. We're a carbonate under a water flood. The main zone of focus for us is the Seven Rivers zone. You're going to hear all about that from Jesse when he gets up.

Speaker Change: So that field has produced today to 85 billion barrels out of 170 billion barrels in place. We have just under a billion barrels in place. It's a waterflood the south Lamar field as a waterflood, where a carbonate the south Garfield there's a car.

Speaker Change: And our goal.

Speaker Change: Our goal is to is to have a tremendous recovery something on the order of 15%, 10% to 15% the south or field has already exceeded 50% in a carbonate under waterflood, where a carbonate under waterflood.

Speaker Change: The main zone, a focus for US is the seven rivers zone, you're going to hear all about that for Jesse when he got a job and we have a another perspective zone there could double triple quadruple our are recoverable reserves in the San Andreas you're going to hear about that as well.

Dante Everetti: And we have another prospective zone that could double, triple, quadruple our recoverable reserves in the San Andreas. You're going to hear about that as well. So that's it for that pie chart, now you know what it means, and you know that it tells a story of future upside potential for our company. The quarter that just finished had mixed results.

Speaker Change: So that's it for that Pie chart now you know what it means and and you know that it. It. It tells the story of a future upside potential for our company.

Speaker Change: The quarter one just finished.

Speaker Change: Had mixed results.

Dante Everetti: We made $5.2 million in cash revenues, although we had $5.9 million in mostly non-cash and one-time costs. This depressed earnings, and you'll hear about that in a little bit. Prior to the purchase, you will see our decline curve was coming down from $1,400 to $1,000. We couldn't do anything about it because it was under the previous owner's control.

Speaker Change: We we made 5.2 million in cash revenues, although we had 5.9 billion in mostly noncash and one time cause this depressed earnings you're going to hear about that in a little bit.

Speaker Change: The purchase you're going to see our decline curve was was coming down from 1400 to a thousand.

Speaker Change: And we couldn't do anything about it because it was it was under the previous owner's control now that we own it effective November 15th we've invested money in the field to arrest that decline holding at about a thousand barrels a day and now we're reversing that declined and adding up work you're going to hear.

Dante Everetti: Now that we own it, effective November 15th, we've invested money in the field to arrest that decline, holding at about 1,000 barrels a day, and now we're reversing that decline and heading upward. You're going to hear all about workovers. You're going to hear about how we finance these workovers, and that's really our story. It's the goal to increase production over the next two to three years from 1,000 to 3,000 barrels a day. We did go to New York and visit with a lot of you, and we appreciate the time you folks spent with us.

Speaker Change: We're all about Workovers youre going to hear about how we finance these workovers and <unk> and that's really our story, it's the it's the.

Speaker Change: Its the goal to increase production over the next two to three years from 1000 to 3000 barrels a day.

Speaker Change: We did go to New York and visit with a lot of you and we appreciate the time, you've you folks, but with US we came away with.

Dante Everetti: We came away with a very good feeling that we've got very interested investors that are happy to help us, that understand the oil business, and we're grateful. We had some advice given to us that we'll follow, which is to be transparent and forthright about what we see, what's coming up, speak candidly, share often. Uh, and in return, we believe we'll have a high degree of interest. So that's New

Speaker Change: With a very good feeling that we've got very interested investors.

That that are are are happy to help us that understand the oil business and and we're grateful we had some advice given to us that will follow which is to be transparent.

And forthright about what we see what's coming up speak candidly share often.

Speaker Change:

Speaker Change: And and and and in return we believe we will have a high degree of interest. So that's New York, We just added a lot of fun. There we appreciated the New York stock exchange door.

Dante Everetti: We just had a lot of fun there. We appreciated the New York Stock Exchange tour and the fun of being a public company. So, increasing production is my main topic here, and there are a lot of things we can do to improve earnings. Increasing production is one of them. Cost control, engineering, improved maintenance, improved safety, financial engineering, all those topics come into play.

Speaker Change: And the the fun of being a public company.

Speaker Change: So increasing production as is as my main topic here and there are a lot of things we can do to improve earnings increasing productions, one of them cost control engineering improved maintenance improve safety a financial engineering, all those topics come into play.

Dante Everetti: But right now, I'm focusing on increasing production. And my first bullet is stabilizing production was critical because we inherited a declining field, not because of field performance as much as due to mechanical failure of pipe and downhole pumps. So we'll talk about that. We think that we're in good shape to tackle most of that, and it's reflected in production, which is now leveled out to 1,000. And here we are.

Speaker Change: But right now I'm, focusing on increasing production and.

Speaker Change: My first bullet is stabilizing production was critical because we inherited a declining field not because of.

Speaker Change: Field performance as much as due to mechanical failure of flight and downhole pumps and so we'll talk about that we think that we're in good shape to to tackle most of that and that's reflected in the production, which has now leveled out the thousands and yep yep.

Speaker Change: Yes.

Dante Everetti: The steps that we're taking to increase production. First of all, we have to find more working capital. We're short, and we've got many options to increase our working capital. The number one choice for us of working capital is the ground, to just simply increase production, which increases revenue, which increases working capital. However, the rate of our increased free cash flow is not to our liking, so we're going to talk about that in this call.

Speaker Change: Are the steps that we're taking to increase production first of all we have to find more working capital were short and we've got many options to increase our working capital the number one choice of <unk>.

Speaker Change: For us of working capital is the is the ground just simply increase production, which increases revenue, which increases working capital. However, the the rate of our increased free cash flow is not to our liking. So we're going to talk about that.

Dante Everetti: We have mapped out and done the engineering for 70 workovers; we've identified production increases from these 70 workovers from 400 to 800 barrels a day, and we're going to that scale. The last bullet under Steps to Increase Production, what goes hand-in-hand with that, is proving reserves. The formula to prove reserves is prescribed by our third-party engineer. For the most part, it's adding perforations, stimulating new zones, and then demonstrating with production from these wells what is possible.

Speaker Change: This call we have mapped out and done the engineering for 70 Workovers. We've identified production increases from these 70 Workovers from 400 to 800 barrels a day similar to that.

The last bullet under steps doing grease production, what goes hand in hand with that is proving reserves. The formula to proved reserves is as prescribed by our third party engineer for the most part it's adding perforations stimulating new zones.

Speaker Change: And then demonstrating with production from these wells what what is what is possible.

Dante Everetti: And then after some period of proven production, we're granted an increase in our proven, developed, producing reserves, which is our measure of, I'll say, future life. Today, we have $15 million in proven reserves. Our intent is to increase that to $50 million over the next six months. So, in summary, Q1 was mixed and disappointing, but with a good explanation. Q2 will be much improved, and Q3 and Q4 will be much improved beyond that. So with that, I'm going to pass it over to Mitch Trotter, our CFO, to give you the financial details. Mitch.

Speaker Change: And then after some period of proven production, where graduate and increase in our proven developed producing reserves, which is our measure of I'll say future life. Today, we have 15 million in proven reserves, our intent is to increase that.

Mitch Trotter: Great. Thanks, Dante.

Speaker Change: The 50 million over the next six months.

Speaker Change: So in summary, Q1 <unk>.

Speaker Change: Mix disappointing.

Speaker Change: But with good explanation Q2 will be will be much improved Q3, and Q4 much improve beyond that.

Mitch Trotter: So with that I'm going to pass it over to Mitch drought or our CFO to give you the financial details Mitch.

Mitch Trotter: Again, I'm Mitch Trove, CFO, and I see many of you on the call, but we're on our last earnings call, and many I met in New York last week. Thank everybody for continued interest and support. As noted on our last call or on the 10K earnings call, the Q1 turn was tight, and we filed as expected when we expected. And now we're back to normal closing of months on a normal schedule, so we're back over the hurdles of all the complexities of the 10-K. Also, as noted on previous calls, the predecessor, prior quarters that you see in our financials of prior years, they're not comparable to Hnr So eventually, you know, two or three quarters out, we'll have much more comparables. But in the meantime, it's not really comparable to us.

Mitch Schroeder: Thanks, Dante again, amidst Schroeder CFO and I see many of you on the call that are were on our last earnings call and many of them out in New York last week. So I want to thank everybody for continued interest and support.

Mitch Schroeder: As noted on our last call or on the 10-K earnings call. The Q1 turn was tight and we filed as expected when we expected and now we're back to <unk>.

Mitch Schroeder: Normal closing of months on the normal schedule. So we're.

Mitch Schroeder: Back back over the the hurdles of all the complexities in the 10-K.

Mitch Schroeder: Also as noted in our previous calls the predecessor.

Mitch Schroeder: The.

Mitch Schroeder: Prior quarters that you've seen in our financials of prior years, they're not comparable to H&R a a good we only took over.

Speaker Change: The last six weeks of <unk>.

Speaker Change: 2023 so eventually you know two or three quarters out we will have much more comparable.

Speaker Change: Meantime, our it's not really comparable to us.

Mitch Trotter: Now, as Dante kind of alluded to, we're kind of through the discovery phase of reviewing what we got in the field and the wells and also the oil reserves, as he showed on the graph. And I'll restate the condition of the field was below expectations, but the potential for higher oil reserves is much higher than we were expecting. So we are very optimistic about the long-term growth and future of this company. We will take further questions when we get to the Q&A. And if somebody needs a lot more detailed questions, we will gladly reach out to them, and we will gladly set up a one-on-one conversation. We've done that before.

Speaker Change: Now it's gone to kind of alluded to we're kind of through the discovery phase of reviewing what we got in the field in the wells and also the oil reserves as he showed on the graphs and I'll restate the condition of the field was below expectations, but the potential for higher risk for reserves is much higher.

Speaker Change: Then we were expecting so we're very optimistic about the long term growth and future of this company.

Speaker Change: We will take further questions when we get to the Q&A and if somebody needs a lot more detailed questions. We will gladly reach out to us gladly set up a one on one conversation we've done that before.

Mitch Trotter: So on Q1 overall, as Dante noted, we've stabilized production after the declining pre-acquisition production from the pre-acquisition condition. We did spend about $1.2 million on extra repairs and maintenance, getting the field back into good working order. We do expect some of this to stay elevated over the next quarter or two, but the amount will decline as the excess repair and maintenance will shift more into CAPEX, which will go into producing parts of the field.

Speaker Change: So on the Q1 overall.

Speaker Change: It's not until you noted we've stabilized production after the decline in pre acquisition products from the pre acquisition condition. We did spend about a million two an extra repairs and maintenance of getting the field back into good working order.

Speaker Change: And we do expect some of this to stay elevated over the next quarter or two but declining in the mountain as excess repair and maintenance, we will shift more into capex, which will go into producing parts of the field. So while we do expect a continued spin.

Mitch Trotter: So, while we do expect a continued spin, we do expect that to be mitigated with the increase in production and award. Going from here, I'll give you a touch on slides with revenues, expenses, and cash flows. So advance to the cash revenue slide, please.

Speaker Change: And we do expect that to be medicated with the increased production.

Speaker Change: I will then.

Going from here I'll give you touch on slides with revenues expenses and cash flows are so advanced to the cash revenue slightly.

Mitch Trotter: And on that, we have, as we know, we had about $5.2 million of cash generated from our Revit. Now it reflects about $3,233 in our Q1, but that's because of a $2 million gap non-cash hit from the derivative. And basically, what this gap entry does is it takes our two years of hedging, which you can see down at the bottom, and it pulls it all the way back to March 31st of this year.

Speaker Change: Please.

Speaker Change: And all of that we have as we know we had about 5.2 million of cash generated from our revenues.

Speaker Change: It reflects about 3233, and our Q1, but that's because of the $2 million GAAP non cash hit from the derivatives.

Speaker Change: And basically what it does is this gap entry is it takes our two years of hedging, which you can see down at the bottom.

Speaker Change: And it pulls it all the way back to March 31st of this year and what would it take us to buy the whole thing out produces a liability. So when you see on the P&L hit.

Mitch Trotter: And what would it take us to buy the whole thing out, producing the liability? So when you see it on the P&L ahead. In reality, it's a good thing that day-to-day cash collections are going up because that means oil prices are going up. And therefore, from the last quarter, which means our unhedged oil is producing more cash because we got everything locked in for 60%, 50% over the next two years at $70 or greater, which is a great level for our company to be. So, it reflects, it does the other part.

Speaker Change: In reality, it's a good thing.

Speaker Change: Of day to day cash collections, because that means oil prices went up.

Speaker Change: And therefore from the last quarter, which means our unhedged oil is producing more cash because we got everything locked in for 60%, 50% over the next two years of $70 or greater which is a great level for our company to be.

Speaker Change: So it reflects it does the other bar now if you analyze it all while we are 60% hedged for 'twenty 'twenty four.

Mitch Trotter: Now, if you analyze it all, while we have 60% hedged for 2024, because of the collars, only 30% was impacted in Q1 and probably Q2, until oil gets up over 85 and it's running, you know, the 80 plus or minus 2 right now. So, really only 30%. So, 70% is floating with the higher rates. Okay.

Speaker Change: Because of the colors only 30% was impacted in Q1, and probably Q2 until oil gets up over 85 and it's running.

Speaker Change: Plus or minus two right now so they're really only 30% so 70% is floating with the higher rates.

Mitch Trotter: So let's go ahead and go on to the next slide. We'll talk about the costs that have hit. You know, we had a loss of $5.3 million as reflected in the 10-Q. And with that, we had $5.9 million that Dante alluded to of costs that really are in there that I need to explain when we analyze. And they all make sense in the grand scheme of things.

Speaker Change: Okay.

Speaker Change: Let's go ahead and go on to the next slide we will talk about the costs that have hit you know we had a loss of <unk>.

Speaker Change: Plot point 3 million is reflected in the K one excuse me 10 10-Q.

Speaker Change: And with that we had $5 9 million that Don alluded to of course.

Speaker Change: That really are in there that I need to explain when they analyze and they all make sense in the Grand scheme of things Theres 4.4 of noncash GAAP driven an expensive.

Mitch Trotter: There's $4.4 million of non-cash gap, And that is on the left, and in a minute I'll talk about the 1.5 of additional cash expenses above where we expect them to be, but it's producing results. Of the 4.4, the two million hedges I've already described, there's $574,000 of fees that were paid in stock that's buried in the G&A. And that's a good thing from a standpoint; instead of paying cash, we did issue stock in an agreed amount in lieu of cash for fees for instruments.

Speaker Change: And that is on the left and in a minute and I'll talk about the 1.5 of additional cash expenses above where we expect it to be but it's producing results. So.

Speaker Change: Of the full point for the 2 million of hedges I've already.

Speaker Change: Described there's 574000 of fees that were paid in stock. That's buried in the G&A and that's a good thing from our standpoint, instead of paying cash we stock.

Speaker Change: Stock in an agreed amount in lieu of cash for fees for instruments and and.

Speaker Change: Agreement.

Mitch Trotter: There's also down below the line, the warrant liability gets evaluated, and the FBA liability gets evaluated each quarter, and that's just the change in the derivative calculation for those types of Is. And there's also a little over 800,000.

Speaker Change: There's also down below the line the warrant liability are gets evaluated F. P. A liability gets evaluated each quarter and that's just the change in in the the derivative calculation for those type items.

Speaker Change: And there's also a little over 800000.

Mitch Trotter: Debt Discount Amortization, which the debt discount was booked as part of the opening balance sheet, the purchase entry, and therefore it's being amortized off. So that's the non-cash impacts, the major ones, and then on the other side to the right, we have the 1.5 million of additional cash expenses, and 1.2 I've already talked about. The repair and maintenance above and beyond our normal baseline level, and we've done a lot of analysis on it, really went to some of the items that Jesse will talk about, and it's not recurring in the grand scheme of things.

Speaker Change: That discount amortization, which the debt discount was.

Speaker Change: Book as part of the.

Speaker Change: Opening balance sheet, the purchase entry and therefore, it's being amortized off so that's the noncash impacts are the major ones.

Speaker Change: And then on the other side to the right we have the.

Speaker Change: 1.5 million of additional cash expenses.

Speaker Change: And 1.2 have already talked about the repair and maintenance above and beyond.

Speaker Change: Our normal baseline level and we've done a lot of analytics of it.

Speaker Change: Really went to some of the items of Jesse will talk about.

And it's not recurring in the Grand scheme of things it will decline and a lot of those type cost or spend levels normal, but it'll go into capex.

Mitch Trotter: It will decline, and a lot of those type costs; our spend level is normal, but it'll go into cap as it goes to producing more oil, which is what we need. And there was also, in GNA, about $350K of additional professional fees from a pretty healthy budget, but for those who are on the 10-K, the annuals. The 10-K had a lot of complexities with taxes and the FBA and warrants. I said again, taxes, and then there was S-1 and all that.

Speaker Change: Is it kind of it goes to producing more oil which is what we need.

Speaker Change: And there was also.

And G&A about 350 K of additional professional fees some of them are pretty healthy budget, but for those who were.

Speaker Change: On the 10-K the annuals.

Speaker Change: A lot of complexities with.

Speaker Change: With taxes in the S P a and warrants in <unk>.

Speaker Change: So again the taxes and.

Speaker Change: And then there is S. One and all of that so it was a very heavy quarter for being right out of the gate of being a public company and that'll start to settle down as we go forward, but so I thought I'd bring that out.

Mitch Trotter: So it was a very heavy quarter for being right out of the gate of being a public company, and that'll start to settle down as we go forward. So I thought I'd bring that up.

Mitch Trotter: All right, let's go to my last slide, which is really on a touch base on the cash flows and our sources that Dante alluded to, and I'm not going to go into the detail of the cash flow statement. It's in our queue, but we had $1.5 million from operating activities, so it was positive and out of the field. We had investing activities of about a million. There are a couple things going into that, but you know, part of it, not all the spin was repair and maintenance.

Speaker Change: Alright, let's go to my last slide which is really wanted to touch base.

Speaker Change: The cash flows and our sources.

Speaker Change: That Dante alluded to.

Speaker Change: And I'm not going to go into the details of the cash flow statement. It's in it's in our Q, but we had one 5 million from operating activities.

Speaker Change: So it was positive in the field.

Speaker Change: We had invest.

Jesse Allen: Investing activities where of about a million there were a couple of things into that but you know part of it but not all of the spin was repair and maintenance, we did capex towards producing which is part of what the stabilized the harder to stabilize the production in the field that dawn to Oh excuse me Jesse will talk.

Mitch Trotter: We did CapEx towards producing, which is part of what stabilized the production in the field that Jesse will talk about. And, of course, we serviced our debt adequately, and the financing activities were reflected. Now, as Dante alluded to, we really have three things.

About.

Jesse: And of course, we serviced our debt adequately and and the financing activities reflects that.

Speaker Change: Now as Don alluded to.

Jesse: We really have three things we are working capital with debt service and we have capex and we need sources for that.

Mitch Trotter: We have working capital, we have debt service, and we have capital expenditure, and we need sources for that. And currently, we are moving along. We have cash generated by operations and the production increases, and that'll self-fund a lot. We also, as we discussed in the past, we have instruments in place to be able to cover our needs, but those items don't start to become effective until late June or beginning of July, our expectation.

Jesse: And currently.

Jesse: We're moving along we have cash generated by operations and production increases and that'll self fund a lot of this we also and we've discussed it I discussed it in the past we have instruments in place to be able to cover our needs, but those items that doesn't start.

Jesse: Effective until late June beginning of July timeframe is our expectation.

Mitch Trotter: So we are, and we think it's responsible, always reviewing and ongoing what our capital stack is, what potential funding as a supplement of what we have in place. And today I would have to say we can take on some debt within a responsible level of debt service and amount, keeping it properly balanced with equity, and equity is probably not in favor at the moment until the stock gets back to our expectations and a lot of other expectations. What's appropriate now. So that's kind of where we are. I will probably get some Q&A, and I'll be glad to take it. And in the meantime, let's move on to Jesse on the feed.

Jesse: So we are and we think it's responsible always room reviewing an ongoing water per tenant, what's our capital stack, which would sort of potential funding as a supplement of what we have in place and today I would have to say we can take on some.

Jesse: That was in a responsible level of debt service and amount I'm, keeping it properly balanced with equity.

Jesse: In equity probably not in favor at the moment until the stock gets back to our expectations and a lot of other expectations is what's the appropriate amount so.

Jesse: That's kind of where we are I, Oh, probably give some Q&A and glad to take it and in the meantime, let's move on to Jesse on the field.

Jesse Allen: Thank you, Mitch. Again, my name is Jesse Allen.

Jesse: Thank you Mitch Oh.

Jesse Alan: Again my name is Jesse Alan I am the vice President of operations.

Jesse: And.

Jesse Allen: I am the Vice President of Operations. My first comment is that my focus is to increase production. But before I get into the details of that, I wanted to, if you'll..., look at that chart there on the right. That is our daily oil production, and it goes back to May 2022, and production at that time was just about 1,400 barrels of oil per day. And as you can see, the red line there is when we took over operations, and you can see a steady decline there. And as Dante and Mitch have mentioned, that was mainly due to the previous operator just not spending any money on maintenance and repair.

My first comment is my focus is to increase production.

Jesse: But before I get into the details of that I wanted to if you'll.

Jesse Allen: And so when we took over, we immediately put in a work, contracted a workover rig, and started returning idle wells to production, doing maintenance and repairs as needed. And so you can see after the red line and in the first quarter here, our production has lined out and stabilized at just under a thousand barrels of oil per day. So again, my focus is to increase production, so how are we going to do that?

Jesse: Look at that chart there on the right that is our daily oil production and it goes back to May 'twenty 2022 in production at that time was just about 1400 barrels of oil per day and as you can see the Red line. There is when we took over operations and you can see a steady decline there.

Speaker Change: And as a daunting and Mitch has mentioned them.

Speaker Change: That was mainly.

Speaker Change: Due to.

Speaker Change: The previous operator, just not spending any money on maintenance and repairs and so when we took over.

Speaker Change: We immediately put a a workout contracted a workover rig and started returning idle wells to production doing maintenance and repairs and as needed and so you can see after the red line and in the first quarter here. Our production is lined out and stabilized at just under a 1000 barrels of oil per day.

Speaker Change: So again my focus is to increase production. So how are we going to do that I'm sure that so a great interest of course to our investors and the way. We will do that is first by opt in optimization of our producing wells and what that means is over the course of the previous 18 months and the wells went off production.

Jesse Allen: I'm sure that's of great interest, of course, to our investors, and the way we'll do that is first through the optimization of our producing wells. And what that means is, over the course of the previous 18 months, as wells went off production, they weren't either immediately returned to production, or they were allowed to remain down. So with that workover rig we contracted, we have started returning those wells to production. And as a result, it's leveled out and stabilized our daily oil and gas rates.

Speaker Change: They weren't either immediately returned to production or they were allowed to remain down so with that workover rigs contracted we have started returning those wells to production and as a result, it's leveled out staples stabilized our daily oil and gas rates.

Jesse Allen: What we'll also do is optimize our injection wells. As has been mentioned, we are water flooding the Seven Rivers Formation, so let me direct your attention to our geologic section. That's the chart underneath the production curve, and you can see the HnrA zones that we're interested in. Of course, the blue one there is the Seven Rivers, and below that is the Queen, the Greyberg, and the St. Andrews.

Speaker Change: What we'll also do is the optimization of our injection wells has been as has been mentioned we are water flooding seven rivers formation. So let me direct your attention to our geologic section that's the.

Speaker Change: Chart underneath the production curve and you can see are the H N. R. E zones that we're interested in of course, the blue when there is the seven rivers and below that is the Queen the Gray Bergen Sanders and his eye.

Jesse Allen: As I continue with my comments, the Queen, Greyberg, and St. Andrews is the 34 million barrels of additional potential that our third-party engineering group had identified, and that's where we'll pick up those additional reserves. And so, as far as optimization of the injection wells is concerned, when we took over, there were several of our injection wells that had been shut in due to they failed their mechanical integrity test or their MIT. And so we ended up at the end of the first quarter here contracting a second workover rig to strictly return those injection wells, repair them, get them tested, and return them to injection. And that's what we're in the process of doing now.

Speaker Change: Continue.

Speaker Change: With my comments, the Queen Gray Bergen, San Andres, just the 34 million barrels of additional potential that are our third party engineering Ah <unk>.

Speaker Change: Group had identified and that's where it will pick up those additional reserves and so as far as optimization of the injection wells when we took over.

Speaker Change: They were.

Speaker Change: Several several of our injection wells that had been shut in due to they had failed their mechanical integrity test or their M I T and <unk>.

Speaker Change: So we ended up at the end of the the first quota here contracting a second workover rig to strictly return those injection wells repair them.

Speaker Change: Get them tested and returned to injection and that's what we're in the process of doing now I can't overemphasize the importance of.

Jesse Allen: I can't overemphasize the importance of getting water in the ground in seven rivers, optimizing the rates, putting water where it's needed. We've seen that as these injection wells have been down over the course of the first quarter, it has affected the water flood operation. And so, as we repair those and get them back on injection, we expect to see some uptick in production as a result of that activity. And finally, as has been mentioned, the repairs and maintenance, we also have some infrastructure upgrades that are associated with those repairs and maintenance. And I'll talk a little bit about that toward the end of my comments here.

Speaker Change: Getting water in the ground in seven rivers optimizing the rates are putting water, where it's needed we've.

Speaker Change: We've seen them.

Speaker Change: As these injection wells have been downloaded over the course of the first quarter. It has affected the waterflood operation and so as we repair those and getting them back on injection, we expect to see some uptick in production as a result of that activity and finally has been as has been mentioned.

Speaker Change: The repairs and maintenance. We also have some infrastructure upgrades, that's associated with those repairs and maintenance and I'll talk a little bit about that towards the end of my comments here. So major future activities of course, we're targeting seven rigorous workovers and that's where we'll end up re completing some of those wells.

Jesse Allen: So, major future activities. Of course, we're targeting Seven Rivers workovers, and that's where we'll end up re-completing some of those wells that are currently in the Queen, the Gray-Bergen, and St. Andrews and coming up to the Seven Rivers, perforating, stimulating, and putting on production. We have nine to ten wells that we've targeted as really good candidates, and we'll prioritize those and do the first four or five and test some of the new ideas I have about perforating and stimulating these wells.

Speaker Change: That are currently in the Queen Gray, Bergen, and San Anders and coming up to the seven rivers ports.

Speaker Change: Perforating stimulating and putting on production we have a nine to 10 wells that we've targeted as really good candidates and will initial we'll prioritize those and do the first four or five and test number than a new ideas I have about perforating and stimulating these wells.

Jesse Allen: Second is the workovers to exploit the potential reserves that are in those legacy zones that I've talked about, the Queen, the Greyberg, and the St. Andrews. And we've targeted probably 40 to 50 of those, and we're prioritizing those. And those are a little bit more complicated in that we'll be adding perforations in intervals that already have some perforations in some of the other zones. These are the bypassed and overlooked pay that our third-party engineers identified.

Speaker Change: Second is the workovers to exploit the potential reserves that are that's in those legacy zones that I've talked about the queen the great bargains and Anders and we've targeted.

Speaker Change: I believe 40 to 50 of those and we're prioritizing nose and those are a little bit more complicated in that we'll be adding purse in intervals that that already have some perforations in some of the other zones. These are the bypass and overlooked pay that are our third party engineers identified and.

Jesse Allen: And so finally, the infrastructure upgrades. When we took over, we had quite a few wells that were idle just because their flow lines, over the course of time, had developed multiple leaks or had become plugged with sand, paraffin, whatever. And so those wells were shut in. We have now purchased a three-inch polypipe, and we're in the process of replacing those lines.

Speaker Change: Finally, the infrastructure upgrades when we took over we had quite a few wells that were idle just because theyre flown lines over the course of time had developed a multiple leagues were had become plugged a sandal a paraffin whatever and so those wells were shut in we have now.

Speaker Change: Just a three inch poly pipe and we're in the process of replacing those lines and so here within the next.

Jesse Allen: And so here, within the next several weeks to months, we'll be returning 10 to 15 wells that are currently capable of producing, except we have to replace the flow lines. So that's one of the infrastructure projects. The second infrastructure project is the replacement of one of our water injection trunk lines there in our Skelly unit, which is one of our leases there that's part of our legacy water flood. And so we have purchased the pipe, we're awaiting delivery, and so we'll be able to get that water flood reactivated here in the not-too-distant future.

Speaker Change: Three weeks to months, we'll where we will be returning 10 to 15 wells.

Speaker Change: That are currently capable of producing you said, we have to replace the phone lines. So that's one of the infrastructure projects. The second infrastructure project is a the replace replacement of one of our water injection trunk lines are there in our scaling a unit, which is one of our leases there that's part of our legacy waterflood.

And so we have a purchase the pipe or waiting delivery and so we'll be able to get that waterflood reactivated here in the not too distant future.

Jesse Allen: And finally, at our Russell-Turner Water Station, which is one of our other water injection facilities that we're using to flood the seven rivers, we need to do some upgrade work there, transformers, lightning protection, and so we'll be doing that here in the not-too-distant future also. And with that, obviously, there will be some questions. I anticipate some questions. So, at this point in time, I turn it back over to our CEO, Dante.

Speaker Change: Finally on our Russell Turner, our water station, which is one of our other water injection facilities that were using to flood. The seven rivers are we need to do some upgrade work their transformers Lightning protection and so we'll be doing that here in the not too distant future also.

Speaker Change: So with that obviously, there will be some questions I anticipate some questions. So.

Speaker Change: At this point in time, I turn it back over to our CEO Dante.

Speaker Change: Books.

Operator: Did we lose Dante? Dante, are you hearing us?

Speaker Change: And we lose company don't tell you hearing us.

Speaker Change: Yeah.

Dante Everetti: Oh, okay. I'm on. I'm sorry. I was on mute.

Speaker Change: Oh, Okay I'm on I'm, sorry, I was on mute my bad.

Dante Everetti: My bad. Uh, I'm gonna, I'm gonna summarize what I hope are the takeaways from the last three presenters. Item number one: We sent everybody home safe. Since we bought the property, everybody went home safe. We continue to focus on safety. That's my top priority.

Dante: I'm going to I'm going to summarize what what I hope are are the takeaways from the last three presenters.

Dante: Item number one.

Dante: We sent everybody safe since we bought the property everybody went home safe we continue to focus on safety. That's that's that's my top priority item. Two we bought the right asset we are a per app.

Dante Everetti: Item two, we bought the right asset. We are a pure Permian water flood play. Lots of things about this particular part of the Permian and our water flood make us unique.

Dante: Pure Permian waterflood play lots of things about this particular part of the Permian and our waterflood make us unique.

Dante Everetti: For one, it's a mature field drilled up with a lot of Passover zones, meaning Greyberg was the primary area focused by our predecessor owners. We're not focused there. We're focused on the Seven Rivers and the San Andreas Formations, which have plenty of reserves and to the point where we're targeting $50 million in recoverable reserves to be proven over the next 12 months. We are meeting our debt requirements, and we have a strong hedge position locking us in at $70 a barrel. Mitch talked a bit about that; it was on his slides.

Dante: For one it.

Speaker Change: It's it's it's a mature field drilled up with a lot of Passover zoned meaning the gray bird was the primary area of focus by our predecessor owners were not focused there we're focused on the seven rivers in the San Andres formation, which have plenty of room.

Dante: Reserves.

Dante: And to the point, where we're targeting 50 million and recoverable reserves to be proven over the next 12 months.

Dante: We are meeting our debt requirements and we have a strong hedge position Lockheed I said at $70 a barrel Mitch talked a bit about that it was on his slides we feel like our hedging above 70 is a good thing and we've done it so where we're.

Dante Everetti: We feel like hedging above $70 is a good thing, and we've done it. So we're hedged this year at 60% at $70, and 50% of production in 2025 at $70. So it gives us insulation from the... Oil Price Swing. Q1 and Q2 were impacted by acquisition costs and a poorer field condition than we anticipated. However, we're about out of that phase.

Dante: Hedged this year at 60% at $70, 50% of production in 'twenty five at $70. So it it gives us installation from oil.

Dante: Oil price swings.

Speaker Change: Tier one and Q2 were impacted by acquisition costs and a.

Speaker Change: A poor field condition than we anticipated. However, we're about out of that phase. We're now working to increase production and you can see it in the curves where we're quite bullish on Q3 and Q4, we're staging a number of 1400, but I assure you the number that we're talking with.

Dante Everetti: We're now working to increase production, and you can see it in the curves. We're quite bullish on Q3 and Q4. We're stating a number of 1,400, but I assure you the number that we talk about when we're not on these calls is much higher.

Speaker Change: Not on these calls is much higher there.

Dante Everetti: The current actions, the takeaways of what we're really doing, we've got 70 workovers that have been detailed in terms of what we are doing, where are the procedures, how are we going to stimulate them, and we've got two rigs running, hoping we can go to three rigs. All that contributes to increased production while we maintain and manage down our debt. We're following the science and lessons learned. A lot of what that means is a close examination of what's worked and what hasn't worked in the past.

Speaker Change: The current actions the takeaways are of what we're really doing we've got 70 workovers that have been detailed in terms of what are we doing where the procedures. How are we going to stimulate them and we've got two rigs running hoping we can go to three rigs all of that contributes to it.

Speaker Change: Increased production, while we while we maintain and manage down our our debt.

Speaker Change: Ah we're following the science and lessons learned a lot of what that means is a close examination of what's worked what hasn't worked in the past and we do believe we've got the winning formula we have so many successes to report if we were to go through the details of the past in recent past.

Dante Everetti: And we do believe we've got the winning formula. We have so many successes to report if we were to go through the details of the past and recent past. The water flood, I guess I failed to mention that the largest water flood in the world. I was a project manager for Parsons Corporation on the second expansion of that field back in the 1990s.

Speaker Change: Yeah.

Speaker Change: The waterflood Ah I I I guess I failed to mention that that large largest waterflood in the world I was a project manager for Parsons Corporation on the second extent expansion of that field back in the Ninety's. So I feel confident to talk about waterfall.

Dante Everetti: So I feel competent to talk about water floods in carbonate, and that's what we're doing right here. So I'm on my water, I guess you could say. So we have promising results, which means that of the patterns completed, and we have something like 95 patterns completed, we see very good results. It's young, it's early, and we've got another 150 patterns to go in the seven rivers. By analogy, we have something like the same number of patterns, or 250, to go into San Andreas as we prove up reserves there.

Speaker Change: Janet carbonate and that's what we're doing right here, so I'm I'm I'm in my mind that my my water I guess you could say so we are promising results, which means of the patterns completed and we have something like 95 patterns completed we see very good results. It's young.

Speaker Change: It's early and we've got another hundred and 50 patterns to go in the seven rivers by analogy, we have something like the same number of patterns are 250 to go win the San Andreas as we prove up reserves there. So my closing.

Dante Everetti: So, my closing remark, we believe the share price will follow earnings, and earnings will follow production, and of course, we have to do everything else correctly, but that's where we are, and our focus today was to talk to you about what we're doing with production. So with that, I'm going to turn it back over to Mike, please.

Speaker Change: Bart.

Speaker Change: This week, we believe the share price will follow earnings and earnings will follow production and of course, we have to do everything else correctly, but that's where we're at and our focus today was to talk to you about what we're doing about production.

Mike Thank: With that I'm going to turn it back over to Mike. Please.

Mike Thank: Thank you Dawn take Danny I'd like to now open it up for questions. Please.

Operator: Thank you, Dante. Benny, I'd like to now open it up for questions, please. Thank you.

Operator: Thank you very much. At this time, we'll be conducting our question and answer session. If you would like to ask a question on the phone lines, you may press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the key.

Speaker Change: Thank you very much at this time, we'll be conducting a question and answer session. If you would like to ask a question on the phone lines. You May Press Star one on your phone key patent now a confirmation tone will indicate that your line is in the key you May press star two if he would like to leave you a question from the key say anyone using speaker equipment it might.

Speaker Change: Be necessary you can pick up your handset before you press the keys.

Operator: Also, if anyone wishes to ask a question on the webcast, you can do so by clicking on the bottom left of your screen, typing in your question, and hitting submit. Please wait a moment while we poll for questions. Thank you. Your first question is coming from Todd Felt of Aegis Financial. Todd, your line is live.

Speaker Change: So if anyone wishes to ask a question on the webcast you can do by clicking in the bottom left of your screen typing in your question and hitting submit Pizza amendment, whilst people for questions.

Speaker Change: Thank you. Your first question is coming from Todd felt of just financial Todd Your line is life.

Speaker Change: Uh huh.

Todd Felt: I appreciate you taking my questions. The $2 million hedging derivative charge that you had, is that hedging gain or loss going to be something that occurs every quarter based on the price of oil moving up and down, or is that just something that will happen the first quarter of each year as you hedge out production for that year?

Todd Felt: I appreciate you taking my questions. The 2 million dollar hedging derivative charge that you had is that Ghana is a hedging gain or loss going to be something that occurs every quarter based on the price. It will move up and down or is that just something that will happen. The first quarter of each year as you hedge out production.

Todd Felt: For the for that year.

Mitch Trotter: Good question. It does go up and down every quarter. You know that is one place that the predecessor is relevant to it. The oil rose dramatically in Q1. That's why the amount was such high. And if you look back at there's, you know, it fluctuates by 100,000 or two up and down each quarter. So yes, that will be ongoing.

Speaker Change: Good question. It does go up and down every quarter.

Speaker Change: One place that the predecessor is a relevant through it.

Speaker Change: The oil rose dramatically in Q1, that's worthy of mountains, such high and if you look back at their as you know it fluctuates 100000, or two up and down each quarter. So yes that will be ongoing.

Mitch Trotter: If oil drops a little bit, it'll be a positive number if oil goes up a little bit. So, a big negative is good. We don't want a big positive number because that means oil is going down. Hopefully, that answered your question, Todd. Thank you.

Speaker Change: Oil drops a little bit a it'll be a positive number for oil goes up a little bit. So I'm a big negative is good we don't want a big positive because that means oil has dropped off of it.

Todd Felt: So hopefully that answered your question Todd. Thank you yeah. So and then just just a follow up I. Appreciate your comments on not wanting to raise cash.

Todd Felt: I appreciate your comments on not wanting to raise cash via equity at these low levels. Is there a timetable on when you need to get some cash raised in order to meet all these projects and maintenance demands? Are you looking to do this in the next 30 days, you know, 60, can you go 120 days without raising cash, what's the timetable?

Speaker Change: <unk> equity.

Speaker Change: These low levels is there a timetable on when you need to get some cash raised in order to meet all these projects and and maintenance demands you're looking to do this in the next 30 days you know 60 can you go 120 days without raising cash what's what's kind of the timetable.

Mitch Trotter: Well, obviously, a very good question. We want the cash to be able to accelerate production. So, we can maintain where we are, but we definitely want it to be able to increase. And I would see the next 30 to 60 days would be a reasonable timeframe of what we're looking. Obviously, the ELOC goes into play starting in January in the 60-day range.

Obviously, a very good question, we want the cash to be able to accelerate production. So we can maintain where we are but we definitely want it to be able to increase.

Speaker Change: And I would see in the next 30 to 60 days and it would be a reasonable timeframe of what we're looking obviously the.

Iraq goes into play start in January and a 60 day range.

Mitch Trotter: This is a supplement to that, so it won't be like, oh, now we've got that, because that will help, and we'll work with that with volumes and price, but we fully expect to use a lot of that as the price justifies it, but that also, we're very sensitive to downward pressure, as you alluded to at the beginning, so it's a proper balance between debt and equity and stock price So hopefully, that answers your question, but that's our expectation. Yep, thanks.

Speaker Change: As a supplement to that so it won't be like Oh, now we've got that because that will help in and that'll we'll work with that with volumes and price, but we fully expect to use a lot of that as the price justifies, but that also we're very sensitive to downward pressure as you alluded to it in the beginning.

Speaker Change: So it's a proper balance of against our.

Speaker Change: Debt and equity in stock price and are protecting all of the investors.

Speaker Change: Which we all are at least all of the management team is.

Speaker Change: So hopefully that answered your question, but that's our expectation.

Todd Felt: Final quick question on your proven reserves. I know the research from Partner Cap, you know, they had a level of, I think, 291 million that they listed in there. And obviously, those include some of the reserves that don't yet qualify as proven, probably in the San Andreas. And you had about 94 million on the balance sheet.

Speaker Change: Yep. Thanks final quick question not sure final quick question on your proven reserves I know the your research from partner cap you know they had a level of I think 291 million that they listed in there and obviously those include some of the reserves and aren't don't yet qualify as proved and probably in the San Andres.

Mitch Trotter: Do you plan on updating those reserves every quarter as the studies come in and they meet the standards to be listed as proven? So basically, I'll say yes and no on that. The first of the 281 or 291 of the PV-10 is only the seven rivers.

Speaker Change: And you had about 94 million on the balance sheet do you plan on updating those reserves every every quarter as the studies come in and they meet the standards to be listed as proven.

Speaker Change: So basically I'll say, yes, or no on that.

Speaker Change: First off the $2 81, or 291 of the PV 10 is only the seven rivers. So any of the additional 34, which has gone to and Jesse described which is more like in the San Andres area that would be above and beyond that because that goes from additional probable to prove.

Mitch Trotter: So any of the additional 34, which is as Dante and Jesse described, which is more like in the San Andres area, that would be above and beyond that because that goes from additional probable to proven. So, normally, we would just update the cop report and the reserve report once a year. But if we've got proven reserves, if we get something flipped, and it increases the proven reserves, we will definitely have a rerun of that, and we'll publish it.

And.

Speaker Change: So normally we would just update once a year.

Speaker Change: Copper Port our reserve report.

Speaker Change: But if we've got proven reserves or we get some flip and it increases the proven reserves, we will definitely have a rerun of that and produce and of course, we will publish it.

Mitch Trotter: So that will be in the future. And as Dante described the process, there are a lot of steps that can take six to nine months to complete. So I'd like to be releasing that when we get it. But otherwise, it'll be the end of the year.

Speaker Change: So that's that'll be in the future and is done to describe the process. It's a lot of steps. They can take six to nine months to complete so.

Speaker Change: I'd like to be releasing that when we get it but otherwise will be the end of the year.

Todd Felt: Thank you very much.

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Operator: Thank you very much. Your next question is coming from Chris Rucuso of Partner Capital Group. Chris, your line is live.

Thank you very much. Your next question is coming from Christopher to save US partner capital Great. Chris Your line is life.

Chris Rucuso: Good morning, gentlemen. Can you hear me?

Speaker Change #100: Good morning, gentlemen, can you hear me make sure I'm not muted.

Operator: Good morning. I have various questions. Can you give us some guidance as to what you think production might look like, let's say, by the end of this year or the first quarter of next year? Is it safe to assume that the conservative goal is about 1,400 barrels per day, or is it something above that? That would be the first question.

Speaker Change #101: Yeah, Yeah, yeah, okay.

Speaker Change #102: Good morning.

Speaker Change #103: Various questions.

Chris: Ken can you give us some guidance as to where you think production might what do you think production might look like let's say by the end of this year first quarter next year is it safe to assume that that the conservative goal is about 1400 barrels per day or is it is it something about that that would be.

Chris Rucuso: The second question, which I think is the really dispositive one, is have you guys completed what you would consider to be an entirely thorough or complete survey of your plant and equipment, whereby you will not have any additional nasty surprises vis-a-vis the state of some of the wells and some of the pipes, so to speak? and I guess an adjunct question to that is can you give us a sense of what your cost profile will look like in the next quarter or two while you're working through these unanticipated cost overruns? Is it fair for us to just essentially assume flat cost profiles into the next quarter in terms of these repairs, or are they going to start trending down? And then, at the risk of testing your patients, one last question.

Speaker Change #104: The first question.

Speaker Change #104: Second question.

Speaker Change #106: I think it's been really dispositive. One is have you guys completed what you would consider to be a thorough.

Speaker Change #107: Entirely throw a complete survey of your plant and equipment, whereby you will not have any additional nasty surprises easily be the state of some of the wells and in some of the pipe so to speak.

Speaker Change #107: And and.

Speaker Change #108: I guess, an adjunct question to that is can you give us a sense of what your cost profile will look like in the next quarter or two while you were working through these these unanticipated cost overruns as it is it is it fair is it fair for us to just essentially assume.

Speaker Change #109: <unk> cost profiles into the next quarter.

In terms of these in terms of these repairs or are they going to start trending down.

Speaker Change #110: And then at the risk of a testing your patience one last question is.

Mitch Trotter: Do I understand correctly the mechanics of the derivatives that you have established today, and that effectively, it's an inflection point of around $85 per barrel; above or below that is where you get losses or gains. Is that net net a distilled understanding of your current derivative contract? So, Dante, let me answer the cost and the derivative thing, and then let you talk about the other one. So, obviously, on cost forecast, hard dollars.

Speaker Change #111: Do I understand correctly, the mechanics of the derivatives that you have established today and that is effectively it's in there.

Speaker Change #111: It's an inflection point of around $85 per barrel above or below that is where you get losses or gains is is is that is that net net a distilled understanding of your current derivative contracts.

Speaker Change #111: So.

Speaker Change #111: Dante, let me answer the costs and the derivative young thing and then let you talk about the other so you obviously own calls forecast are hard dollars.

Mitch Trotter: We're not making projections, but as I stated, we expect the spin level, and it may go up a little bit with the extra pullover rig. But a lot of that will correspond and go into CapEx versus the lift operating or the lease operating expenses or the lift. So that mix, I don't know, but that mix will improve over the next couple of quarters as less expense and more capex. And on the derivative.

Speaker Change #112: We're not making projections, but as I stated, we expect the spin level.

Speaker Change #113: Especially as it may go up a little bit with the extra pullover rig.

Speaker Change #113: But there's a lot of that will.

Speaker Change #113: Correspond and go into Capex versus the lift the operating or the lease operating expenses or the lift cost.

Speaker Change #113: So that mix I don't know, but that mix will improve over the next couple of quarters is less expensive more capex.

Speaker Change #113: And on the derivatives.

Mitch Trotter: The Hedging Most of our hedging is, or all of our hedging is $70 a grade for all of this year and next year. And there are collars that go to 70 to 91 for half the year and 70 to 85, or 50, I believe, for the second half of the year. The derivative calculation liability that hits the P&L is based on whatever the oil price is that day compared to the change in oil price it was, so March 31st oil price versus June 30th oil price.

Speaker Change #113: The hedging.

Speaker Change #113: Most of our hedging is that all of our hedging is $70 or greater.

Speaker Change #113: For all of this year and next year and the their colors that go to the 90 170 to 91 for half of the year and 70 to 80 550, I believe for the second half of the year.

Speaker Change #113: The derivative calculation a liability that hits the P&L.

Speaker Change #113: Is based on whatever.

Speaker Change #113: The oil prices that they compare to the changed oil price. It was so march 31st oil price versus June 30th oil price. If it's flat there'll be no impact if it goes up a little bit there'll be a little negative or if it goes down a little bit of course will be a little positive and that's based on the change and then compare it so.

Mitch Trotter: If it's flat, there'll be no impact. If it goes up a little bit, it'll be a little negative. If it goes down a little bit, of course, it'll be a little positive. And that's based on the change, and then it compares. So if it's, if it is, let's just say it goes up to 95, then the collar's going to play. But if it stays between, basically. 70 and 85, 86 range, where it is right now.

Speaker Change #113: If it if it is.

Speaker Change #113: Let's just say it goes up to 95.

Speaker Change #113: Then the colors go into play, but if it stays between basically the 70 and 80 586 range, where it is right now.

Mitch Trotter: Uh, the, the change from swaps to colors does not really impact the formula. It's really just the change in.

Speaker Change #114: It does.

Speaker Change #115: The hedge.

Speaker Change #115: The the change of from swaps to colors.

Speaker Change #116: Not really impact the formula that it's really just a change in that and I.

Mitch Trotter: I hope I answered that question so you understood it. If not, let me know, but let me go ahead and let Dante address the 14-00 level in the review of the field, and I think that we hit all your questions with those. Go ahead, Don.

Speaker Change #116: I hope I answered that question so you understood it.

Speaker Change #116: But.

Speaker Change #117: If not let me know, but let me go ahead, and let Dan to address the.

Dan: 1400 level of X and the and there will be with the field and I think that we hit all your questions with square topic. Yeah. So what we expect 50 to 75 barrels a day increase every month that that's our expectation. If you. If you work that out we should be north.

Dante Everetti: Yeah, so What we expect 50 to 75 barrels a day increase every month that that's our expectation if you if you work that out, we should be north of 1,400 at the end of the year and frankly we discussed internally do we say by year end? we're at 1,400 or do we say by q4 we're at 1,400, but It's our goal to certainly to exceed that we're going at the fastest rate we can With the working capital that we have and and and we're we're prioritizing Those activities that increase production over those activities that don't unless it's required Due to being saved or due to some other reason now in a water flood normally the response time between Injecting water and seeing the production increase that the producer takes a while But this field behaves pretty quick so we we we we have a high priority as to get all the injectors to work and the injectors cost us an average of $20,000 to work over per well We're a producer costs us close to a hundred thousand to work over which involves Perforating stimulating and and changing out the pump and and so that's that's what we look We're looking at in front of us did did I?

Dan: The 1400 at the end of the year and frankly, we discussed internally do we say by year end, we're at 1400 or do we say by Q4, we're at 1400, but it's our goal is certainly to exceed that where we're going at the fastest rate we can with the working capital that we have.

Dan: And and and where we're prioritizing those activities that increase production over those activities that don't unless its required due to being safe or due to some other reason now in a waterflood normally the response time between.

Speaker Change #119: Injecting water and seeing the production increase at the producer takes a while but this field.

Speaker Change #119: It was pretty quick so we we we we have a high priority is to get all the injectors to work and the injectors caused us an average of $20000 to work over per well, where producer cost us close to 100000 to work over which.

Speaker Change #119: Involves perforating stimulating and and change it out the pump and and so that's that's what we look we're looking at in front of US did did I answer your questions.

Dante Everetti: He wanted to know about the field condition. Oh, that's right. That's right. So here's what we see. We think the worst is behind us, but that doesn't mean quarter two isn't going to see some repairs. We kind of see Q2 having a hangover with some of the same, but not to the extent that we did in Q1. And then we see Q3 and Q4 being pretty clean. You know, it is an old field.

Speaker Change #120: He wanted to know about the field condition.

Speaker Change #120: Oh, that's right that's right so here's the reality.

Speaker Change #120: We think the worst is behind us it doesn't mean the quarter two isn't going to see some some repairs. We we kind of see Q2, having a hangover with some of the same but not to the extent that we that we did in Q1, and then we see Q3 and Q.

Speaker Change #121: For being pretty clean you know it is an old field, we are going to have some line leaks, but just to give you a little bit of.

Dante Everetti: We are going to have some line leaks, but just to give you a little bit of color here, if a line had 17 holes pop in it or 17 line breaks in the last 12 months, we're replacing the line, the whole line. We're not patching the next hole, which is just expensive. You also run the risk of a cleanup. And where you inject water, the water is treated as a contaminant. So we don't want any spills.

Speaker Change #122: Color here, if if a line had 17 holes pop in it or or 17 line breaks in the last 12 months, we're replacing the light the whole life, we're not catching the next hole, which is just the expensive you also run the risk of a cleanup and.

Speaker Change #122: Where are you inject water the water street. It is a contaminant. So we don't want any spills, we want to make sure everything's working in good. Good order. So we've done that with you know and we're doing that now it will certainly carry through Q2 to a lesser extent the Q1 and that's why in our notes.

Dante Everetti: We want to make sure everything's working in good order. So we've done that with, you know, and we're doing that now. It will certainly carry through Q2 to a lesser extent than Q1. And that's why in our notes we said we were very bullish on Q3 and Q4, but Q2 will have some of the same impacts as Q1.

Speaker Change #122: And we said, we're very bullish on Q3 and Q4, but Q2 will have some of the same impacts as Q1.

Chris Rucuso: Got it. Understandable. Thank you. Thank you.

Speaker Change #123: Got it understood. Thank you. Thank you.

Operator: Thank you very much. Just a reminder that if anyone does have any remaining questions, you can press star 1 on your phone keypad to join the queue or type your question into the left side of your screen on the webcast and hit submit. Bye-bye. Okay, I'm not seeing any further questions come in. I will now hand over to Michael for any other comments or any other questions he may have.

Speaker Change #124: Thank you very much just to remind you that if anyone does have any remaining questions. You can press star one on your phone keypad to join the key all type your question into the left side of your screen on the webcast and hits.

Speaker Change #124: Right.

Speaker Change #124: Hey.

Seeing any set of questions come into queue.

Michael Porter: I'll hand back over to Michael for any other comment so any other questions you may have.

Operator: Thank you. Thank you everybody for listening to our call. If you have any further questions, please contact me at 973-865-9357, and I will arrange for the team to give you a call back.

Michael Porter: Thank you.

Michael Porter: Thanks to everybody for listening to our call. If you have any other further questions. Please contact me at 90, 738659357, and I will arrange for the team to give you a call back I have a great day. Thank you very much Paul.

Operator: Have a great day. Thank you very much. Thank you, Paul. Thank you all.

And thank you all.

Operator: Thank you very much. This does conclude today's conference. You may now disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Speaker Change #125: Bye bye. Thank you very much. This does conclude today's conference you may now disconnect. Your phone lines at this time and have a wonderful day. Thank you feel participation.