Q2 2024 HighPeak Energy Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the HighPeak Energy 2024 second quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Steven Tholen, CFO. Please go ahead.

Operator: Good day, and thank you for standing by.

Good day and thank you for standing by welcome to the high Peak Energy 2024 second quarter earnings Conference call.

Operator: Welcome to the HighPeak Energy 2024 2nd quarter earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: All participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Stephen Tolhim: Here, an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Stephen told him CFO. Please go ahead.

Operator: Please be advised that today's conference is being reported.

Operator: I would now like to hand the conference over to your first speaker today, Steven Tholen, CFO. Please go ahead.

Steven Tholen: Good morning, everyone, and welcome to HighPeak Energy's 2nd quarter 2024 earnings call.

Steven Tholen: Good morning, everyone, and welcome to HighPeak Energy's second quarter 2024 earnings call. Representing HighPeak today are Chairman and CEO Jack Hightower, President Michael Hollis, and I'm Steven Tholen, the Chief Financial Officer.

Stephen Fowle: Good morning, everyone and welcome to Hiseq Energy's second quarter 2024 earnings call representing high peak today, our chairman and CEO, Jack High Tower, President, Michael holidays, and I'm Stephen Fowle.

Steven Tholen: Representing HighPeak today are Chairman and CEO Jack Hightower, President Michael Hollis, and I'm Steven Tholen, the Chief Financial Officer. During today's call, we will make reference to our August investor presentation and our 2nd quarter earnings release, which can be found on HighPeak's website.

Stephen Fowle: Chief Financial Officer.

During today's call, we will make reference to our August investor presentation, and our second quarter earnings release, which can be found on Hy Tech's website.

Steven Tholen: During today's call, we will make reference to our August investor presentation and our second quarter earnings release, which can be found on HighPeak's website. During today's call, the call participants may make certain forward-looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions, and future performance. Please refer to the cautionary information regarding forward-looking statements and related risks in the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control.

Steven Tholen: Today's call participants may make certain forward-looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions, and future performance. So please refer to the cautionary information regarding forward-looking statements and related risks in the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control.

Stephen Fowle: Today's call participants may make certain forward looking statements relating to the company's financial condition results of operations expectations plans goals assumptions.

Stephen Fowle: Future performance. So please refer to the cautionary information regarding forward looking statements and related risks and the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons many of which are beyond.

Steven Tholen: We will also refer to certain non-GAAP financial measures on today's call. So please see the reconciliation in the earnings release and in our August investor presentation.

Steven Tholen: We will also refer to certain non-GAAP financial measures on today's call, so please see the reconciliations in the earnings release and in our August investor presentation. I will now turn the call over to our Chairman and CEO, Jack Hightower.

Stephen Fowle: In our control.

Stephen Fowle: We will also refer to certain non-GAAP financial measures on today's call. So please see the reconciliations in the earnings release and in.

Stephen Fowle: Our August Investor presentation.

Jack Hightower: I will now turn the call over to our Chairman and CEO, Jack Hightower. Thank you, Steve, and good morning, ladies and gentlemen, and thank you for joining us today on this call. My prepared remarks will begin on slide four of our August investor presentation. I'm very proud to report that HighPeak had another solid quarter of execution across the board as we continue to stay committed to our 2024 core values, which include maintaining disciplined operations, strengthening our balance sheet, and focusing on maximizing shareholder value. Operation A our drilling program continued to generate impressive production results, and our operations team remains aggressively focused on optimizing daily operations and reducing our cost structure.

Speaker Change: I will now turn the call over to our chairman and CEO, Jack Hi, Tyler.

Jack Hightower: Thank you, Steve, and good morning, ladies and gentlemen, and thank you for joining us today on this call. My prepared remarks will begin on slide four of our August investor presentation. I'm very proud to report that HighPeak had another solid quarter of execution across the board as we continue to stay committed to our 2024 core values, which include maintaining disciplined operations, strengthening our balance sheet, and focusing on maximizing shareholder value. Operationally, our drilling program continued to generate impressive production results, and our operations team remains aggressively focused on optimizing daily operations and reducing our cost structure.

Jack Hi: Thank you, Steve and good morning, ladies and gentlemen, and thank you for joining US today on this call. My prepared remarks will begin on slide four of our August investor presentation.

Jack Hi: I'm very proud to report that <unk> had another solid quarter of execution across the board as we continue to stay committed to our 2024 core values.

Jack Hi: Which included maintaining discipline operations, strengthening our balance sheet and focusing on maximizing shareholder value.

Jack Hi: Operationally, our drilling program continued to generate impressive production results and our operations team remained aggressively focused on optimizing daily operations and reducing our cost structure.

Jack Hightower: Financially, we generated positive free cash flow for the fourth consecutive quarter, even taking into account that the second quarter will be our highest level of cap X spend this year. And we continue to use our free cash flow to prioritize debt reduction while also executing our opportunistic share buyback program as we implement our primary objective of increasing shareholder value through improved operational results, a return of capital strategy, and ultimately maximizing value through our strategic alternative process. The second quarter, if you turn to slide five, was another strong operational success for HighPeak. Our production remained in the high 40,000 B.O.E.

Jack Hightower: Financially, we generated positive free cash flow for the fourth consecutive quarter, even taking into account that the second quarter will be our highest level of CapEx spend this year. And we continue to use our free cash flow to prioritize debt reduction while also executing our opportunistic share buyback program as we implement our primary objective of increasing shareholder value through improved operational results, our return of capital strategy, and ultimately maximizing value through our strategic alternatives process.

Jack Hi: Financially, we generated positive free cash flow for the fourth consecutive quarter, even taking into account that the second quarter will be our highest level of capex spend this year.

Jack Hi: And we continue to use our free cash flow to prioritize debt reduction while also executing our opportunistic share buyback program.

Jack Hi: As we implement our primary objective of increasing shareholder value.

Jack Hi: Through improved operational results, our return of capital strategy, and ultimately maximizing value to our strategic alternatives process.

Jack Hightower: The second quarter, if you turn to slide five, was another strong operational success for HighPeak. Our production remained in the high 40,000 VOE range, which was a nice beat compared to our consensus estimate for the quarter. It's also worth noting that we were delayed bringing online a keypad, which pushed out some of our well turn-on dates no later than we initially expected in the quarter. This materially reduced expected second quarter production volume.

Jack Hi: The second quarter, if you turn to slide five was another strong operational success for IP.

Jack Hi: Our production remained in the high 40, thousands Boe range, which was a nice beat compared to our consensus estimate for the quarter.

Jack Hightower: range, which was a nice beat compared to our consensus estimate for the quarter. It's also worth noting that we were delayed bringing online a keypad, which pushed out some of our well turn-on dates no later than we initially expected in the quarter. This materially reduced expected second quarter production volume. Further, the quarter is off to a very strong start in the third quarter. As production volumes have averaged over 52,000 barrels a day, and I want to emphasize that when you think of an average of 48.5 for the last quarter, and then already in the third quarter here, we're over 52,000 barrels a day and seeing impressive early results from our recent Northern extension wells in our flat top operating area.

Speaker Change: It's also worth noting that we were delayed bringing online a key pad, which pushed out some of our well turn on diets. No. Later two later than we initially expected in the quarter this materially reduced expected second quarter production volumes.

Jack Hightower: Further, the quarter is off to a very strong start in the third quarter, as production volumes have averaged over 52,000 barrels a day. And I want to emphasize that when you think of an average of 48.5 for the last quarter, and then already in the third quarter here, we're over 52,000 barrels a day and seeing impressive early results from our recent northern extension wells in our flattop operating area. Mike will provide additional insights into our continued strong production results later in the presentation.

Speaker Change: Further the quarter is off to a very strong start in the third quarter as production volumes have averaged over 52000 barrels a day.

Speaker Change: And I want to emphasize that when you think of.

Speaker Change: An average of 48 five for the last quarter and then already in the third quarter here, we're over 52000 barrels a day and seeing impressive early results from our recent northern extension wells and our flat top operating area.

Jack Hightower: Michael provide additional insights into our continued strong production results later in the presentation. But after achieving an impressive first quarter reduction in lease operating expenses, our operations team continue to maintain a significant sub-$7 per B.O.E. cost level, even considering the lower production volumes due to the pad delay. Our continued operational success led to HighPeak maintaining its perillating cash margins, which equated to a netback for the quarter of over 80% of our realized price on a B.O.E. basis. And our cash margins per B.O.E. continue to be over 65% higher than our peer average, which Michael will emphasize is very important to our income stream and our success as a company.

Speaker Change: Mike will provide additional insights into our continued strong production results.

Jack Hightower: But after achieving an impressive first quarter reduction in lease operating expenses, our operations team continued to maintain a significant sub $7.00 per BOE cost level, even considering the lower production volumes due to the pad delay, to 45,000 to 49,000 VOE a day, an approximate 4.5% increase compared to our initial 24 range. Our production volumes continue to remain strong, and we are confident in lifting this bar for the remainder of the year.

Mike: Here in the presentation.

Mike: But after achieving an impressive first quarter reduction in lease operating expenses our operations team continued to maintain a significant.

Mike: $7 per Boe cost level, even considering the lower production volumes due to the pad to lie.

Mike: Our continued operational success led to high peak, maintaining its peer leading cash margins, which equated to a net back for the quarter of over 80% of our realized price on a Boe basis, and our cash margins per Boe continued to be over 65% higher than.

Mike: Our peer average, which Mike will emphasize is very important to our income stream and our success as a company.

Jack Hightower: As a result of our solid production volumes and sustained lower operating expenses, we generated another strong quarter of cash flow and remained in a very healthy financial position. We also reduced long-term debt by another $30 million at par and continued to opportunistically implement our share buy-back program by acquiring over 413,000 shares during the second quarter. Now, if you'll turn to slide 6, this is really an important slide because we are exceeding our expectations. As a result of our successful first half 24 results, we're updating our 24 guidance ranges in a few key categories. We're raising our production guidance to 45,000 to 49,000 B.O.E.

Mike: As a result of our solid production volumes and sustained lower operating expenses, we generated another strong quarter of cash flow and remain in a very healthy financial position.

Mike: We also reduced long term debt by another $30 million at par and continued to opportunistically implement our share buyback program.

Mike: Acquiring over 413000 shares during the second quarter.

Mike: Now if you'll turn to slide six.

Mike: This is really an important slide because we are exceeding our expectations as a result of our successful first half 'twenty. Four result, we're updating our 24 guidance ranges.

Mike: Key categories, we're raising our production guidance to 45000 to 49000 BOE a day.

Jack Hightower: a day, an approximate 4.5% increase compared to our remaining strong. We're confident in lifting this bar for the remainder of the year. We're also lowering our lease operating expenses per B.O.E. to $6.50 to $7.50, which is a 12.5% reduction from our initial expectation.

Mike: An approximate four 5% increase compared to our initial 24 range. Our production volumes continued to remain strong and we are.

Mike: Confidence in lifting the bar for the remainder of the year.

Mike: We're also lowering our lease operating expenses.

Per Boe to $6 50 to $7 30.

Mike: Which is at 12, 5% reduction from our initial expectations.

Jack Hightower: Operations. Our operations team has done an exceptional job optimizing our fill wide program throughout the first half of this year. And I'm hopeful that there are incremental savings that will continue, that we will continue to see throughout the remainder of the year. We're also narrowing our capital budget from our initial band of $85 million down to a band of only $40 million. This slight increase is due to some additional infrastructure projects that we undertook primarily related to our northern extension area. And Michael provides some additional color on this in a few minutes. The key takeaway is that we've had a very impressive start to the year, with our results exceeding initial expectations, and we're confident in our ability to continue to achieve higher production volumes and lower costs for the remainder of the year.

Speaker Change: <unk> team has done an exceptional job optimizing our field wide program throughout the first half of this year and I am hopeful that there are incremental savings that will continue that we will continue to see throughout the remainder of the year.

Speaker Change: We're also narrowing our cap narrowing our capital budget from our initial band of $85 million down to a band of only $40 million. The slight increase is due to some additional infrastructure projects.

Mike: We undertook primarily related to our northern extension area and Mike will provide some additional color on this in a few minutes. The key takeaway is that we've had a very impressive start to the year with our results exceeding initial expectations and we're confident in our ability to continue to achieve.

Mike: Higher production volumes and lower costs for the remainder of the year.

Michael Hollis: With that, I'll now turn the call over to our president, Michael Hollis, to provide an operational update as well as some additional details supporting our improved guidance. Thanks, Jack. Now turning to slide seven. As Jack discussed, we've also agreed to start this year, shown by our higher than expected production volumes. Our first half production averaged approximately 49,100 BLE per day, which is an increase of roughly 8% compared to our 2023 annual average. Further, our third quarter is off to a great start as well at over 52,000 BLE a day. And our current two rig development program is expected to continue to support higher volumes throughout the remainder of the year, as evidenced by our raising the production guidance.

Mike: With that I'll now turn the call over to our President My call is to provide an operational update as well as some additional details.

Mike: Porting our improved guidance.

Mike: Thanks, Jack now turning to slide seven as Jack discussed we are off to a great start this year as shown by our higher than expected production volumes.

Speaker Change: Our first half production averaged approximately 49100 Boe per day, which is an increase of roughly 8% compared to our 2023 annual average.

Jack Hightower: Further, our third quarter is off to a great start as well, at over 52,000 BOE a day, and our current two-rig development program is expected to continue to support higher volumes throughout the remainder of the year, as evidenced by our Raising the Production Guidelines.

Speaker Change: Further our third quarter is off to a great start as well at over 52000 Boe per day and our current two rig development program is expected to continue to support higher volumes throughout the remainder of the year as evidenced by our raising the production guidance a.

Michael Hollis: A few key drivers of this success are new wells in our northern and north eastern extension areas in Flat Top have exhibited higher initial performance than we originally modeled. Again, as prudent operators, we always start off very conservatively as we move to any new area. Our Judith Well, located in the northeast corner of Flat Top and is referenced by the number one on the map, exhibited a peak 30-day average IP of over 1,350 barrels of oil a day plus associated gas. It has cumed approximately 85,000 BLEs during the first 70 days of production. Our first 10,000-foot wolf camp A well located in our northern expansion area, that's number two on the map, is currently making over 700 barrels a day of oil and is continuing to increase production as we can pull on the well longer.

Speaker Change: A few key drivers of this success, our new wells in our northern and North Eastern extension areas in flat top have exhibited higher initial performance than we originally modeled again, it's proven operators, we always start off get very conservative as we move to any new area.

Speaker Change: Our Judith well located on the north in the northeast corner of flat to up and as referenced by the number one on the map exhibited a peak 30 day average IP of over 1300 50 barrels of oil a day plus associated gas.

Speaker Change: It is home to approximately 85000 Boe.

Speaker Change: During the first 70 days of production.

Speaker Change: Our first 10000 foot wolfcamp, a well located in our northern expansion area. That's number two on the map is currently making over 700 barrels a day of oil and is continuing to increase production as we can pull on the well longer.

Michael Hollis: We also have a two-well pad further to the east on this new acreage denoted by the number three. The Wolf Camp A and Lower Spray very wells on that pad have been drilled, completed, and we expect to turn them online during the third quarter. The petro physical analysis and cuttings from these two wells confirm that the reservoir is consistent with what we see in our core flat top area. So we continue to be very encouraged and excited about this northern area of the field. And in addition to the successful new wells in our northern extension areas, we're continuing to see strong well performance across our entire area.

Speaker Change: We also have a two well pad further to the east on this new acreage denoted by the number three.

Speaker Change: The Wolfcamp, a and lower sprayberry wells on that pad has been drilled completed and we expect to turn them online during the third quarter.

Speaker Change: The Petro physical analysis and cuttings from these two wells confirm that the reservoir is consistent with what we see in our core flat top area. So we continue to be very encouraged and excited about this northern area of the field.

Speaker Change: In addition to the successful new wells in our northern extension areas, we're continuing to see strong well performance across our entire acreage and the operations team is firing on all cylinders and we continue to see better uptime and lower costs across the board now turning to slide eight.

Michael Hollis: Gridge. The operations team is firing on all cylinders, and we continue to see better uptime and lower cost across the board.

Michael Hollis: Now turning to slide eight. As Jack previously mentioned, our team has been intensely focused on reducing cost across the board, and they delivered again this quarter. HighPeak's beaten raise to production and beaten lower to L.O.E. guidance. Assuming second quarter pricing equates to $55 million of additional EBITACs as well as free cash flow for 2024. Some key drivers to our step change in L.O.E. year-over-year are. Optimization of our chemical program throughout the field. Our operations team has been keenly focused on this initiative and continues to make further strides. Chemical calls is a significant component of our OPACs.

Yeah.

Speaker Change: As Jack previously mentioned our team has been intensely focused on reducing cost across the board and they delivered again this quarter.

Speaker Change: Hi peaks beaten raise to production.

Speaker Change: Beaten lower <unk> guidance.

Speaker Change: Assuming second quarter pricing equates to $55 million of additional EBITDAX as well as free cash flow for 2024.

Speaker Change: Some key drivers to our step change in <unk> year over year, our optum.

Speaker Change: Optimization of our chemical program throughout the field.

Speaker Change: Our operations team has been keenly focused on this initiative and continues to make further strides chemical.

Speaker Change: Chemical causes a significant component of our opex.

Michael Hollis: As I mentioned last quarter, we continue to fully exploit a world-class, life-filled infrastructure system. Part of this exploitation is being able to dispose of 100% of our produced water that is not being used for recycling through our company-owned system and not having to rely on any third-party disposal. This drives significant OPACs cost reductions, as third-party disposal is inherently more expensive. On that note, a key contributor to our higher L.O.E. in the second quarter, compared to the first, was the Central Tank Battery delay that Jack commented on earlier. The battery commissioning was delayed about a month.

Speaker Change: And as I mentioned last quarter, we continue to fully exploit our world class life of field infrastructure system.

Speaker Change: Part of this exploitation is being able to dispose of a 100% of our produced water that is not being used for recycling through our company owned system and not having to rely on any third party disposal.

Speaker Change: This drives significant opex cost reductions as third party disposal is inherently more expensive.

Speaker Change: On that note a key contributor to our higher LOE in the second quarter compared to the first was the central tank battery delay the Jack commented on earlier the.

Jack Hi: The battery commissioning was delayed about a month, we turn those wells on in the second quarter had all of the usual costs associated with production and no Boe to divide by but as you can see in our quarter to date production numbers. Those wells are now contributing pad the wells come on.

Michael Hollis: We turned those wells on in the second quarter, had all of the usual calls associated with production, and no BLEs to divide by. But, as you can see in our quarter-to-date production numbers, those wells are now contributing. Had the wells come on a month earlier, our L.O.E. would have been more in line with the first quarter. Our overhead electric power distribution system continues to pay huge dividends for IP. Not only does it provide more reliability to our operations, i.e. uptime, but we've expanded it to the point to where we've been able to tie in extension area wells into the overhead electrical system at startup, versus having to run new areas of the field on more expensive generator power until the overhead electrical system is ready.

Jack Hi: A month earlier, our LOE would have been more in line with the first quarter.

Jack Hi: Our overhead electric power distribution system continues to pay huge dividends for IP.

Jack Hi: Not only does it provide more reliability to our operations I E uptime.

Jack Hi: But we've expanded it to the point to where we've been able to tie an extension area wells into the overhead electrical system startup <unk>.

Jack Hi: Versus having to run new areas of the field on more expensive generator power until the overhead electrical system is ready.

Michael Hollis: And it's no secret that electrical power supply is getting tight in the Permian Basin. An additional power project timelines are being substantially pushed out. Our team has done a fantastic job in recognizing this situation well in advance, taking the initiative to secure an abundant supply and construct a distribution system that efficiently delivers reliable power across our entire field. IP is in a great position for life-of-field development, even at an increased development cadence. In addition, our solar farm is now fully operational and is providing consistent, renewable power to supplement our flat top overhead electrical systems. One thing's for sure, there's no shortage of abundant West Texas sunshine during the summer months, and now we're able to exploit this to our material benefit.

Jack Hi: And it's no secret that electrical power supply is getting tight in the Permian basin.

Jack Hi: An additional power project timelines.

Jack Hi: Being substantially pushed out our team has done a fantastic job in recognizing this situation well in advance taking the initiative to secured abundant supply and construct a distribution system that efficiently delivers reliable power across our entire field.

Speaker Change: <unk> is in a great position for life of field development.

Speaker Change: Even at an increased development cadence.

Speaker Change: In addition, our solar farm is now fully operational and is providing consistent renewable power to supplement or flat to up overhead electrical system.

Speaker Change: One thing's for sure there is no shortage of shortage of abundant west, Texas Sunshine during the summer months and now we're able to exploit this to our material benefit.

Michael Hollis: The solar farm will also help insulate our power cost during electrical spot pricing spikes that the region periodically faces throughout the summer months. Again, our operations team has done a tremendous job over the past few years in building out our world-class infrastructure and optimizing all field operations, all of which are now starting to materially improve our bottom line.

Speaker Change: The solar farm will also help insulate our power cost during the electrical spot pricing spikes.

Speaker Change: That the region periodically phases throughout the summer months again, our operations team has done a tremendous job over the past few years in building out our world class infrastructure and optimizing all field operations all of which are now starting to materially improve our bottom line.

Michael Hollis: Now turning to focus on our capital budget for a moment. As we previously mentioned in message, our 2024 capital program was first half weighted, and that's due to a number of reasons. Our first half turn-in line cadence is slightly higher at 55 percent of our annual guide range. This is primarily due to the additional wells that we carried into this calendar year from running a three-rig program during the fourth quarter of last year and partially in Q1 of 24. Furthermore, our second quarter turn-in lines were approximately 32 percent of our entire 2024 program, which speaks to Q2 being our hottest cathex quarter for the year.

Speaker Change: Now turning to focus on our capital budget for a moment.

As we previously mentioned and message.

Speaker Change: Our 2024 capital program was first half weighted and that's due to a number of reasons.

Speaker Change: Our first half turn in line cadence is slightly higher at 55% of our annual guide range.

Speaker Change: This is primarily due to the additional wells that we carried into this calendar year from running a three rig program during the fourth quarter of last year and partially in Q1 of 'twenty four.

Speaker Change: Furthermore, our second quarter turned in lines were approximately 32% of our entire 2024 program, which speaks to Q2 being our highest capex quarter for the year.

Michael Hollis: In addition to the extra wells turned-in line during the first half, our infrastructure projects were also first half weighted. As we extended our systems to our new northern acreage areas in Flat Top, these extension projects providing immediate returns and were constructed in a manner to support full development of these new areas with only incremental future capital requirements. Our facility stand was also first half weighted as we constructed new tank batteries in these extension areas of the field. As we progress in our development plan and drill more wells in these areas, our facility cost on a dollar per foot basis will drop considerably.

Speaker Change: And in addition to the extra wells turned in line. During the first half are infrastructure projects were also first half weighted.

Speaker Change: As we extended our systems to our new northern acreage areas and flat top.

Speaker Change: These extension projects, providing immediate returns and were constructed in a manner to support full development of these new areas with only incremental future capital requirements.

Speaker Change: Our facility spend was also first half weighted as we constructed new tank batteries in these extension areas of the field.

Speaker Change: As we progress in our development plan and drill more wells in these areas our facility cost on a dollar per foot basis will drop considerably.

Michael Hollis: DC&E costs are holding steady at prices that we realized during the first quarter. As the industry has seen a reduction in rigs and fracks breads over the last quarter or several quarters, I would expect some additional softening this year, albeit small. To that fact, we've narrowed our cathex budget for the remainder of the year and feel very confident that we will remain within our guided range.

Speaker Change: Do you see any cost or holding steady at prices that we realized during the first quarter.

Speaker Change: As the industry has seen a reduction in rigs and frac spreads over the last quarter or several quarters I would expect some additional softening this year, albeit small.

And to that fact, we've narrowed our capex budget for the remainder of the year and feel very confident that we will remain within our guided range now turning to slide nine.

Michael Hollis: Now, turning to slide 9, high peaks margins per DOE continue a commanding lead amongst our peer group. Our second quarter unhed EBITDAX margins remain strong at $50.7 per DOE, which continued to be over 65% higher than our peer group average. The chart on the slide highlights that high peaks EBITDAX margin over the past five quarters has average over 60% of average 9x oil prices are set another way for every DOE that high peak produces. We realize a net profit of approximately $50, assuming an $80 9x index. Price. But in comparison with our peer group, who on average only generate profit margins of roughly $30 per BLE at an $80-90 sexual price.

Speaker Change: Hi peaks margins per BOE continue a commanding lead amongst our peer group or.

Speaker Change: Our second quarter Unhedged EBITDAX margins remained strong at $50 <unk> per Boe.

Which continued to be over 65% higher than our peer group average.

The chart on this slide highlights that our high peaks EBITDAX margin over the past five quarters as average over 60% of average Nymex oil prices or said another way for every Bowie that high Tech produces we realized a net profit of approximately $50 assuming in <unk>.

Speaker Change: $80 Nymex index price.

Speaker Change: But in comparison with our peer group, who on average only generate profit margins of roughly $30 per Boe.

Speaker Change: At an $80 Nymex oil price.

Michael Hollis: Another way we like to evaluate our margins is to compare our EBADACS margin per BLE as a percentage of our realized price per BLE. This is less of a comparison versus our peers. And more of a view of how efficient we are converting our produced BLEs into net profit for high P. Our second quarter margins show that for every BLE that HightPeak produced, we converted over 80 percent of the realized sales price per BLE into net profit for the company. We have built a very efficient machine here at HightPeak, which will allow us to cost-effectively convert our deep inventory of undruved locations into substantial profit.

Speaker Change: Another way, we like to evaluate our margins is to compare EBITDAX margin per Boe.

Speaker Change: As a percentage of our realized price per Boe.

Speaker Change: This is less of a comparison versus our peers and more of a view of how efficient we are converting our produced Boe.

Speaker Change: And the net profit for IP.

Speaker Change: Our second quarter margins show that for every boat that high peak produced we converted over 80% of the realized sales price per Boe.

Speaker Change: <unk> net profit for the company.

Speaker Change: We have built a very efficient machine here at <unk>, which will allow us to cost effectively convert our deep inventory of <unk> locations into substantial profit.

Michael Hollis: And as we always say, not all BLEs are created equal. Our high oil cut and our approved cost rupture will allow HightPeak to continue to generate the differential profits for decades to come.

Speaker Change: And as we always say not all <unk> are created equal or high oil cut and our improved cost structure will allow <unk> to continue to generate the differential profit for decades to come.

Jack Hightower: With my comments now complete, I'll turn the call back over to Jack.

Speaker Change: With my comments now complete I'll turn the call back over to Jack.

Jack Hightower: Thanks, Mike. And let's turn to the next page on slide 10.

Jack Hi: Thanks, Mike, Let's turn to the next page.

Jack Hightower: And I want to congratulate our operations team for a very successful quarter. This slide is an important slide to look back and see where you've come from, from a historical growth comparative analysis. And if you look at that, we've been in business now four years since we went public, and we want to take the opportunity to highlight a few noteworthy company facts. As you can see, HightPeak has demonstrated a track record of significant, financially responsible production growth on an annual basis over the past four years. Production has increased by a factor of over 14 times during a short four-year life of the company.

Speaker Change: On slide 10.

Jack Hi: I want to congratulate our operations team for a very successful quarter.

Jack Hi: This slide is an important slide to look back and see where you've come from from our historical growth comparative analysis.

Jack Hi: And if you look at that we've been in business now for years since we went public.

Jack Hi: And we want to take the opportunity to highlight a few noteworthy company facts as you can see how <unk> has demonstrated a track record of significant financially responsible production growth on an annual basis over the past four years production has increased by a factor of over 14 times during a.

Short four year life of the company.

Jack Hightower: Think about that in terms of looking forward into the future. Through 24, we've drilled 289 operated horizontal wells across our acreage position. Collectively, this amounts to drilling over three and a half million lateral feet. And on a combined basis, our wells have produced over 50 million gross BOEs since going public. This has led to HightPeak generating over 2.7 billion of revenue over four years. And we're now in track to generate over a billion dollars per year from this year on. So it shows you our history, but also can project into the future as to what our growth can be going forward.

Jack Hi: Think about that in terms of looking forward into the future through 'twenty four we've drilled 289 operated horizontal wells across our acreage position.

Jack Hi: <unk> lay this amounts to drilling over $3 5 million lateral feet.

Jack Hi: And on a combined basis, our wells have produced over $50 million gross Boe since going public.

Jack Hi: This has led to happy generating over $2 7 billion of revenue over four years and we're now on track to generate over $1 billion per year from this year on.

Jack Hi: So it shows you our history, but also can project into the future as to what our growth can be going forward.

Jack Hightower: I think it's important to look back as well as look forward as you go forward in the future.

It's important to look back as well as look forward.

As you go forward feature.

Jack Hightower: So HightPeak, and when you think about on the next slide, slide 11, the takeaways I want to leave you with today is we're continuing to execute on all cylinders. Our asset base continues to deliver strong production results, full of oily, high margin barrels. We expect this trend to continue, which is why we're confident in raising our production guide. Conference. To us, the past year, we have been intensely focused on optimizing our field-wide operations, expanding our world-class infrastructure system to reach all areas of the field, and, as Mike likes to say, life of production going forward.

Jack Hi: So happy and when you think about on the next slide slide 11.

Jack Hi: Takeaways I want to leave you with today is we're continuing to execute on all cylinders our asset base continues to deliver strong production result.

Jack Hi: All of oily high margin barrels we expect this trend to continue which is why we're confident in raising our production guidance.

Jack Hi: Throughout the past year, we haven't been intensely focus on optimizing our field wide operations, expanding our world class infrastructure system to reach all areas of the sale and as Mike likes to say lack of production going forward.

Jack Hightower: These have led to the realization of significant operating cost reductions, as evidenced by our results through the first half of this year. We expect to maintain this lower step change in operating expenses going forward, and as such are confident in lowering our L.O.E. guidance range.

Mike: These have led to the realization of significant operating cost reductions as evidenced by our results through the first half of this year, we expect to maintain this lower step change in operating expenses going forward.

Mike: And as such are confident and lowering our LOE guidance range.

Jack Hightower: Second, we position the company for optimal value creation. We've amassed a sizable, highly continuous acreage position, prime for large-scale development. It's truly one of the few remaining opportunities of significant scale in the most sought-after basin in the country, the Permian Basin. We've rapidly increased our all-way did high-margin production and reserves to a significant level. We've eliminated a long-run way of high-value inventory, which spans our entire lease-hope position. The scarcity of $50 per barrel break even inventory, amidst the current market trend of extreme consolidation, puts high peak in a very unique and lucrative position. We've built out a world-class infrastructure system which will support life with field development and helps insulate our peer-leading profit margin for decades to come.

Mike: Second we've positioned the company for optimal value creation, we've amassed a sizeable highly contiguous acreage position prime for large scale development. It is truly one of the few remaining opportunities of significant scale.

Mike: And the most sought after basin in the in the country in the Permian Basin.

Mike: We have rapidly increased our oil weighted high margin production and reserves to a significant level, we'd voluminous delineated a long runway of high value inventory, which spans our entire leasehold position.

Mike: The scarcity of sub $50 per barrel breakeven inventory amidst the current market trend.

Mike: Extreme consolidation.

Mike: So it's happy in a very unique and look lucrative position.

Mike: We've built out a world class infrastructure system, which will support last fulfill development and helps insulate our peer leading profit margin for decades to come.

Jack Hightower: I can't really provide specific details at this time, but I do want to say that our strategic process is making significant progress, and I'm very excited about what the teacher holds for High Peak in our shareholders.

Speaker Change: I can't really provide specific details at this time, but I do want to say that our strategic process is making significant progress and I am very excited about what the future holds for high peak and our shareholders.

Operator: With our comments now complete, I'll open the call up to questions from analysts. Our first question comes from the line of John White with Roth MKM Capital. One second, please, John. Your line is now open.

Speaker Change: With our comments now complete I will open the call up to questions from analysts.

Speaker Change: Our first question comes from the line of John White.

John White: With Roth capital.

Speaker Change: One second please John your line is now open.

John White: Good morning, gentlemen. Congratulations. Nice production.

John White: Good morning, gentlemen.

John White: Congratulations.

John White: In terms of lease-hope rate expense, you talked about the pathways related to the tank battery, but weren't there a higher amount of well-workover expenses in the quarter?

John White: Nice production.

Vince: In terms of lease operate Vince you talked about the past place related to the tank battery.

Speaker Change: Werent there some werent there a higher amount of well workover expenses in the quarter.

Michael Hollis: I'll take that one, John. Yeah, absolutely.

Vince: Yes.

Vince: I'll take that one yes, absolutely and thank you for the question and good morning.

Michael Hollis: Thank you for the question, and good morning. So, if you're referring to a quarter of a quarter, Q1, we averaged about 39 cents per BoE for workover expenses, and we were closer to 69 cents or 68 cents this quarter. What drove a lot of that again? We did 32% of our completions this quarter for the year. If you look at a general number and a good go-forward modeling number for high peak on a workover, expense basis at our normal cadence, it's somewhere between the 30 to 45 cents of BoE is kind of where I think we would run.

Speaker Change: So if you're referring to quarter over quarter Q1, we averaged about 39 per Boe for Workover expenses, and we're closer to 69 or 68 cents. This quarter what drove a lot of that again, we did 32% of our our completions this quarter.

Speaker Change: For the year.

Speaker Change: So if you look at kind of a.

Speaker Change: General number and a good go forward kind of modeling number for high peak on a workover expense basis at our normal cadence it's somewhere between the.

Speaker Change: 30 to 45, a Boe as kind of where I think we would run.

Michael Hollis: So, that 25 cent difference between each Q1 and Q2 was associated with a lot of the work that we did bringing these wells on and completing those 26 wells throughout the quarter. And whenever you do that, you do impact some of the wells on either side of what you're completing. And that heavy cadence of completions did drive us to have to do some expense workovers on some of the all-set wells around there. So, that's what drove the chain. and Q2.

Speaker Change: So that 25 said difference between each Q1 and Q2 was associated with a lot of the work that we did bringing these wells on and completing those 26 wells throughout the quarter and whenever you do that you do impact some of the wells on either side of what you are completing.

Speaker Change: Heavy cadence of completions did drive us to have to do some expense workovers on some of the offset wells around there. So that's what drove the change in Q2.

John White: Okay, thanks for that detail. I appreciate it, and I'll turn the call back to the speaker.

Speaker Change: Okay. Thanks for that detail I appreciate it and I'll turn the call back to the.

Operator: Thank you.

Operator: Our next question comes from the line of Jeff Robertson at Water Tower Research. Jeff, your line is now open.

Speaker Change: Thank you. Our next question comes from the line of Jeff Robertson at waters higher research.

Speaker Change: Jeff Your line is now open.

Jeff Robertson: Thank you.

Jeff Robertson: Jack and Michael, I apologize on this part of the prepared remarks, so if you'd answer these questions, I'll read about in the transcript, if you want. But two questions, one on slide 11. Your last follow-up point, you talk about infrastructure supporting life-of-field development in laptop, and can you just talk about how that infrastructure investment that you have made would impact capital efficiency and returns going forward as you progress to your development program?

Jeff Robertson: Thank you Jack.

Jeff Robertson: Jack and Mike I apologize I missed part of your prepared remarks, so if you've answered these questions I'll read about it in the transcript if you want.

Jeff Robertson: But two questions one on slide 11, the last bullet point you talk about.

Jeff Robertson: Infrastructure supporting life of field development.

Jeff Robertson: In laptop.

Can you just talk about how that infrastructure investment that you have made would impact capital efficiency and returns.

Speaker Change: Going forward as you progress through your development program.

Michael Hollis: Yeah, Mark, you can answer that. You bet, Jeff, and thank you for that question because it's often overlooked: the value of the infrastructure that you put in. Obviously, it helps us initially when we build out infrastructure to, for instance, our new northern area where we built a lot of infrastructure to tie in one battery. So, from a capital efficiency standpoint of the initial dollars you put in, it's pretty low day one. However, when we develop that area and have 35, 40 wells coming through that same infrastructure, your kind of dollar per completed lateral foot cost associated with future wells goes down dramatically.

Speaker Change: And Mark you can answer that you bet Jeff.

Mark: Thank you for that question, because it's often overlook the value of the infrastructure that you put in obviously it helps us initially when we build out infrastructure to for instance, our new northern area, where we built a lot of infrastructure to tie in one battery so from a capital efficiency standpoint.

Mark: At the initial dollars you put in it's pretty low day. One however, when we develop that area and have $35 40 wells coming through that same infrastructure you are kind of dollar per.

Mark: Completed lateral foot cost associated with future wells goes down dramatically. So as we've built out and have already spent the money on the vast majority of all the infrastructure that high peak needs again is as Jack mentioned for life of field and Thats for all of the multiple zones that we plan to drill.

Michael Hollis: So, as we've built out and have already spent the money on the vast majority of all the infrastructure that Hype needs. Again, as Jack mentioned, for life-of-field, and that's for all the multiple zones that we planned to drill and at whatever cadence. You know, at one time we were running as many as six rigs. So again, in the future, depending on commodity price and balance each strength, if we ever wanted to increase activity, we could, and we've always kind of talked about the ability to pull back the reins at full prices, work to go lower into the future. We have the leasehold position that's a very differential leasehold position that allows us to hold this whole 137,000 acres with just one rig or less running.

Speaker Change: And at whatever cadence at one time, we were running as many as six rigs so again in the future depending on commodity price and balance sheet strength, if we ever wanted to increase activity, we could and we've always kind of talked about the ability to pull back the reins if oil prices were to go lower into the future we.

Speaker Change: The leasehold position of.

Speaker Change: A very <unk>.

Speaker Change: <unk> differential leasehold position that allows us to hold this hole 137000 acres with just one rig or less running so it's a very unique.

Michael Hollis: So it's a very unique system that we've built, and as you pointed out, every additional well that we drill in the future gets the benefit from that money that we've spent over the last three and a half years building out that infrastructure. And I would add Jeff to that. If you think about it, we've got an infrastructure now that can go all the way up to 550,000 barrels of product to support our growth. And when you think of 2,600 locations potentially, even if you go back to 1,150 locations just in the Wolf A and the Lower Sprayberry, and with success in the Middle Sprayberry and some other zones, that's expanding rapidly.

Speaker Change: System that we've built and as you pointed out every additional well that we drill in the future gets the benefit from that money that we've spent over the last three and a half years building out that infrastructure.

Speaker Change: And I would add just to that if you think of that we've got an infrastructure now that can go all the way up to 550000 barrels of product to support our growth.

Speaker Change: When you think of 2600 locations potentially.

Speaker Change: Even if you go back to 1100 50 locations just in the Wolf.

Speaker Change: Lower sprayberry and with success in the middle Sprayberry and some other zones, that's expanding rapidly and so we and others have invested almost $1 billion now in infrastructure here and that will allow us to expand all over across.

Michael Hollis: And so we and others have invested almost a billion dollars now in infrastructure here, and that will allow us to expand all over across our entire acreage position and be able to handle with 100% recycling of the oil and the water, as well as completions in the future, and be able to handle that and dispose of the excess. with our own saltwater disposal system. So that infrastructure now is basically in place.

Speaker Change: Our entire acreage position.

Speaker Change: And be able to handle with 100% recycling of the oil in the water as well as completions in the future and be able to handle that and dispose of the excess.

Speaker Change: With our own saltwater disposal system.

Speaker Change: That infrastructure now is basically in place we will spend on a few additional capital dollars going forward, but it'll be very limited expenditures.

Michael Hollis: We'll spend a few additional capital dollars going forward that will be very limited expenditures. And Jeff, also on, you know, obviously we reduced Eloed and the guy down from a midpoint of $8 to a midpoint of $7. And again, being conservative, we want to make sure that we meet and beat that as well. And you kind of see that on kind of slide seven on the production side where we're sitting with production and the guy that we increased the midpoint from $45,000 BOE's to $47. And since you were on the may have missed this in the prepared remarks, those two changes in guide over the 2024 calendar year equate to an EBITDA change of about $55 million.

Speaker Change: <unk> also on you, obviously, we reduced LOE and the guide down from a midpoint of $8 to a midpoint of seven.

Speaker Change: Again being conservative we want to make sure that we meet and beat that as well and you kind of see that on slide.

Speaker Change: Slide seven on the production side, where we're sitting with production in the guide that we <unk>.

Speaker Change: Increased the midpoint from 45000 Boe to 47.

Speaker Change: And since you weren't on the May have missed this in the prepared remarks, those two changes in guide over the 2024 calendar year equate to an EBITDA change of about $55 million and since we're in a free cash flow.

Michael Hollis: And since we're in a free cash flow mode going forward this full year as well as going forward, all of that additional EBITDA goes to free cash flow as well. So again, all of this money and systems and infrastructure we've put in place is paying dividends now and will continue in the future.

Speaker Change: Mode going forward this full year as well as going forward all of that additional EBITDA goes to free cash flow as well. So again all of this money in systems and infrastructure. We've put in place is paying dividends now and we will continue in the future.

Operator: Our last question comes from Nicholas Pope with Seaport Research. One second, please. Nicholas, your line is now open.

Speaker Change: Thank you our last question comes from Nicholas Pope with Seaport Research.

Speaker Change: One second please.

Speaker Change: Nicholas Your line is now open.

Nicholas Pope: Good morning, everyone. Can you hear me? Yes, sir. Good morning.

Nicholas Pope: Good morning, everyone can hear me.

Nicholas Pope: Yes, Sir good morning.

Nicholas Pope: So I'm hoping you guys could talk a little bit about the uses of cash. And obviously it's a good problem to have, but we're kind of looking at three items here with dividends, share repurchases of the last two quarters, and options to pay down debt. And I was curious how you're thinking about that going forward. Obviously, that debt is very high; interest payments, I think it's 20% of EBITDA. So curious, like how you're kind of weighing that relative to these other two to shareholder return options that you have in place.

Nicholas Pope: I was hoping you guys could talk a little bit about the uses of cash.

Speaker Change: And obviously, it's a good problem to have but we're kind of look at it.

Speaker Change: Three items here with dividends.

Speaker Change: Share repurchases, the last two quarters and options to pay down debt and I was curious how youre thinking about that going forward, obviously that that is very high.

Unnamed: High Interest Payments.

Speaker Change: Hi interest payments I think it's 20% of EBITDA. So I'm curious like how you are kind of weighing that relative to these other two to shareholder.

Speaker Change: Return options that you have in place.

Jack Hightower: Nick, that is a great question.

Speaker Change: Nick that is a great <unk>.

Jack Hightower: And we're going to stick with our program to pay down debt. Now we're going to keep the cash on the balance sheet because right now we have to make poll provisions, and we want to make sure we pay that debt down at par. And of course, our make poll provisions run out in March. We are fully aware that we could refinance our, and our cost would double; be rating would go down to six something, even with a new issuance in the seven something percent range. But we've got a pretty well make make that make whole payment between now and March.

Speaker Change: Question.

Speaker Change: We're going to stick with our program.

Speaker Change: Pay down debt.

Speaker Change: Now youre going to we're going to keep the cash on the balance sheet because right now we have make whole provisions and we want to make sure we pay that debt.

Speaker Change: Down at par and of course.

Speaker Change: Our make whole provisions run out in March.

We're fully aware that we could refinance.

Speaker Change: And our costs.

Speaker Change: That will be writing would go down to six something even with a new issuance in the 7% range.

Speaker Change: But we've got a pretty well, Mike make that make whole payment between now and March so it will probably be after that before we would consider changing but our goal is to pay down debt now we have the optionality.

Jack Hightower: So it'll probably be after that before we would consider changing. But our goal is to pay down debt. Now we have the optionality of drilling more if all process happened to go way up. But we're going to stick with our program and stick with what we've been doing in the past.

Mike: Of drilling more if oil prices happened to go way up.

Mike: But our we're going to stick with our program and stick with what we've been doing in the past.

Jack Hightower: and eventually, if we don't successfully have a strategic alternative by them, we would refinance our term debt and pay off our bonds and go forward. Of course, the difference in the cost of that debt compared to what a bond would be today is almost $220 million a year of additional cash flow. So, we have good optionality, but we're very encouraged by our strategic alternative process.

Mike: And eventually if we don't.

Mike: Successfully have a strategic alternative.

Mike: By then we would refinance our term debt.

Mike: Pay off our bonds and go forward and of course, the difference in the cost of that debt.

Mike: Compared to what a bond would be today is almost $220 million a year of additional cash flow.

Mike: So we have good optionality, but we're very encouraged by our strategic alternative process.

Nicholas Pope: That's helpful.

Speaker Change: Got it Thats helpful.

Nicholas Pope: Switching to some more fun, these new wells, curious, like going into these northern, in the eastern kind of extension areas and the newer acreage, I'm curious if kind of as you went into those, were there any big questions that you thought needed to be answered and as you get the data from the production of these new wells? Is there new zones, new productivity? How does that match up, I guess, with what the expectations were going into the wells, and do you think that affects inventory and kind of the numbers that we've talked about in the past?

Unnamed: Switching to something a little more fun. These new wells. Curious, like going into these northern and northeastern kind of extensional areas on the newer acreage. Curious kind of as you went into those, were there any big questions that you thought needed to be answered, and you know as you get the data from the production of these new wells.

Speaker Change: Switching to something a little more fun these new wells.

Just curious like going in into these northern and northeastern kind of extensional areas.

Speaker Change: Our acreage.

Speaker Change: I'm curious kind of as you went into those were there any big questions that you've thought needed to be answered and as you can get the data from the production on these new wells.

Speaker Change: Is there new zones new.

Speaker Change: New productivity, how does that match up I guess with what what the expectations were going to go in going into the wells and do you think that affects inventory and kind of the numbers that we've talked about in the past.

Michael Hollis: I'll add my answer to that, and then I'll follow up if he leaves something out that I think of.

Speaker Change: I'll, let Mike answer that and then I'll follow up with tea leaves something out.

Michael Hollis: Yeah, so Nick, great questions. Again, any operator, as you move more than a couple miles away from known production, we're all kind of engineers in the background, so we like to be conservative. When we say they beat expectations, yes, these wells beat the expectations they were using as we were modeling to make sure we had enough risk for that kind of two-mile walk out or as we went north to go yet another two miles north of where we were. But from a petrophysical standpoint, from log analysis, from the cuttings, everything suggested that it should be just as good as what we had down in what we call the core of the flat top area.

Mike: Yes, so Nick great questions.

Speaker Change: Again, any operator as you move more than a couple of miles away from known.

Known production, we're all kind of engineers in the in the background. So we like to be conservative right. So when we say they beat expectations. Yes. These wells beat the expectations. They were using as we were modeling to make sure we had enough risk for that kind of two mile walk out.

Speaker Change: As we went north to <unk>.

Speaker Change: Go yet another two miles north of where we were.

Speaker Change: But from a petro physical standpoint from log analysis from the cuttings.

Speaker Change: Everything suggested that it should be just as good as what we had down in what we call the kind of the core of the flat top area.

Michael Hollis: So were we not expecting to see what we did? No, the answer was, we fully expected to get this result. To answer your question about additional zones, these wells were Wolf Camp A wells and Lower Spray Bury. Now, I mentioned it at the end of last quarter that we were most likely going to drill a middle spray bury well sometime in the near future. Well, we have already drilled and completed our first middle spray bury well, which sits down in kind of the center part of Flat Top and we are running the pump in the ground today.

Speaker Change: So where are we.

Speaker Change: We're not expecting to see what we did know the answer was we fully expect it to get this result.

Speaker Change: And to answer your question about additional zones.

Speaker Change: These wells were Wolfcamp, a wells and lower sprayberry.

Speaker Change: Now I mentioned at the end of last quarter that we were most likely going to drill in middle sprayberry, well sometime in the near future. While we have already drilled and completed our first middle sprayberry, well, which sits down and kind of the center part of flat top.

Speaker Change: We are running the pump in the ground today. So we will have some information for the third quarter call.

Michael Hollis: So we will have some information for the third quarter call. Again, there is offset wells touching the west side of our acreage block, and as we drilled that middle spray bury well, all things were encouraging from cuttings to oil cut that we saw in some of the returns while drilling. So again, we should be able to give an update on that additional zone that we have targeted in Flat Top. But no, these two new areas are acting as we suspected they would and as they should for modeling. It is just when we do guidance. We always try to put a little left in there for the good guy.

Speaker Change: Again, these there is offset wells touching the.

Speaker Change: The west side of our acreage block and as we drilled that middle Sprayberry well all.

Speaker Change: All things were encouraging from cuttings to oil cut that we saw in some of the returns while drilling. So again, we should be able to give an update on that additional zone that we've targeted and flat to up but no. These two new areas are acting as we suspected they would and as they should.

Speaker Change: For modeling.

Speaker Change: When we do guidance, we always try to put a little a little left in there for the good guys.

Jack Hightower: The only thing I would add next to what Mike said is, from a geological and petrophysical and oil-in-place analysis, we feel like our whole acreage position, even moving to the east. And as you can well imagine, we still have certain companies that think, as we move east, that the production is going to decline. And yet, our Judith well, which is our furthest eastern well, outside the well in Scurry County, the Virginia well, is our most successful well. And it was a little bit of, we anticipated potentially, but it's turning out to be one of our very best wells.

The only thing I would add Nick to what Mike said is.

Speaker Change: From a geological and Petro physical and oil in place analysis, we feel like our whole acreage position, even moving to the east.

Speaker Change: And as you can well imagine we still have certain companies that think as we move east.

Speaker Change: Production is going to decline and yet.

Jude: Jude as well, which is our furthest eastern well outside the well and Scurry County, the Virginia well.

Unnamed: It is our most successful well. It was a little bit of what we anticipated potentially, but it's turning out to be one of our very best wells. As we move east, we are very excited about the potential of those wells and that production and definitely adding more locations to the east and at least being able to prove that to potential suitors. So that was an exciting arrangement, and then going forward, we're probably going to drill another Wolf V well, and we'll drill some more middle sprayberry wells, and we'll probably drill another well down to the south at Signal Peak in the Hutto zone, the Wolf Camp C zone.

Jude: Is our most successful well and.

Jude: It was a little bit of we anticipated potentially but it's turning out to be one of our very best wells and so as we move east. We are very excited about the potential of those wells in that production and definitely adding more locations to the.

Jack Hightower: And so as we move east, we are very excited about the potential of those wells in that production and definitely adding more locations to the east. And at least being able to prove that up to potential suitors.

Jude: East and at least being able to prove that up to potential suitors.

Jack Hightower: And so that was an exciting arrangement. And then going forward, we're probably going to drill another Wolf B well, and we'll drill some more Middle Spray very wells, and we'll probably drill another well down to the south, and Signal Peak in the Huddles on the Wolf Camp season. So a lot of good things are happening for us. And that definitely adds to the number of locations that we have.

Jude: And so that was an exciting arrangement and then going forward, we're probably going to drill another wolf b, well and we will drill some more middle Sprayberry wells and we'll probably drill another well down to the South did signal peak in the heart of the Wolfcamp C zone.

Jude: So a lot of good things are happening for us and that definitely adds to the number of locations that we have.

Nicholas Pope: Yeah, that's all very interesting. I appreciate that. Thanks, guys. You bet.

Speaker Change: Got it that's all very interesting I appreciate the time thanks.

Operator: Thank you, Nick.

Speaker Change: You bet. Thank you Nick.

Operator: This concludes the question and answer session. Thank you for your participation in today's conference.

Speaker Change: This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Operator: This does conclude the program. You may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].