Q3 2024 US Energy Corp Earnings Call
Operator: Good day and welcome to the U.S.
Good day and welcome to the U S Energy Corporation third quarter 2024 results conference call.
Operator: Energy Corporation third quarter 2024 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
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To ask a question you May press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
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Mason McGuire: I would now like to turn the conference over to Mason McGuire, Vice President of Finance. Please go ahead.
Speaker Change: I would now like to turn the conference over to Mike Mcguire Vice President of Finance. Please go ahead. Thank you operator, and good morning, everyone. Welcome to U S Energy Corp, third quarter 2024 results Conference call, Brian Smith, Our Chief Executive Officer will provide an overview of our operating results and discuss the company's strategic outlook and our Chief Financial Officer, Mark <unk> Jack.
Mason McGuire: Thank you, operator.
Mason McGuire: And good morning, everyone. Welcome to U.S. Energy Corp's third quarter 2024 results.
Mason McGuire: Ryan Smith, our Chief Executive Officer, will provide an overview of our operating results and discuss the company's strategic outlook, and our Chief Financial Officer, Mark Zajac, will give a more detailed review of our financial results. After the market closed yesterday, US Energy issued a press release summarizing operating and financial results for the quarter ended September 30, 2020. The press release, together with accompanying presentation materials, are available in our investor relations section of our website at www.usnrg.com.
Speaker Change: We'll give a more detailed review of our financial results.
Speaker Change: After the market closed yesterday U S energy issued a press release summarizing operating and financial results for the quarter ended September 32020 for.
Speaker Change: The press release together with accompanying presentation materials are available on our Investor Relations section of our website.
Speaker Change: Www Dot U S N RG dot com.
Mason McGuire: Today's discussion may contain forward-looking statements about the future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to the various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements.
Speaker Change: This discussion may contain forward looking statements about the future business and financial expectations actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. It as required by law, we undertake no obligation to update our forward looking statements.
Speaker Change: <unk>.
Mason McGuire: Further, please note that non-GAAP financial measures may be disclosed during this call. A full reconciliation of GAAP to non-GAAP measurements are available in our latest quarterly earnings release and conference call presentation.
Speaker Change: Further please note that non-GAAP financial measures may be disclosed during this call a full reconciliation of GAAP to non-GAAP measurements are available in our latest quarterly earnings release and conference call presentation.
Ryan Smith: With that, I would like to turn the conference call over to Ryan. Good morning, everyone, and thank you for joining us today. I'm pleased to share with you our results from this quarter, as well as provide an update on our strategic outlook. Turning to our quarterly results, these reflect the dedication and resilience of our operational team, as well as the positive momentum from our recent business development efforts. Focusing on our recently acquired Montana project, we made significant progress this quarter with the completion of our first industrial gas well in late October. We're currently evaluating the results and finalizing plans to target what we believe are economically promising production zones, which have been independently tested to show non-hydrocarbon helium concentrations of up to 1.5%.
Speaker Change: With that I would like to turn the conference call over to Ryan Smith.
Ryan Smith: Morning, everyone and thank you for joining us today I'm pleased to share with you our results from this quarter as well as provide an update on our strategic outlook.
Ryan Smith: Turning to our quarterly results. These reflect the dedication and resilience of our operational team as well as the positive momentum from our recent business development efforts.
Ryan Smith: <unk> on our recently acquired Montana projects, we made significant progress this quarter with the completion of our first industrial gas well in late October.
Ryan Smith: Currently evaluating the results and finalizing plans to target what we believe are economically promising production zones, which have been independently tested the show non hydrocarbon helium concentrations of up to one 5%.
Ryan Smith: Looking ahead, we plan to commence drilling a second well in early 2025 with additional developments throughout the year aimed at similar zones where we anticipate similar helium concentrations. Importantly, our initial well came in below our projected drilling costs, and we expect these costs to decrease as we move forward with our drilling program next year. We remain highly enthusiastic about this opportunity, confident that the Montana Project not only stands as a substantial value driver for U. S. energy on its own, but also serves as a foundational step towards building a robust industrial gas platform. This initiative represents an efficient and economically compelling use of our existing capital while positioning U.S.
Ryan Smith: Looking ahead, we plan to commence drilling a second well in early 2025 with additional developments throughout the year aimed at similar zones, where we anticipate similar helium concentrations importantly, our initial well came in below our projected drilling costs and we expect these costs to decrease as we move forward with our drilling program next year.
Ryan Smith: We remain highly enthusiastic about this opportunity confident that the Montana project not only stands as a substantial value driver for U S energy on its own but also serves as a foundational step towards building a robust industrial gas platform.
Ryan Smith: This initiative represents an efficient and economically compelling use of our existing capital while positioning U S synergy with heightened relevance in the capital markets.
Ryan Smith: energy with heightened relevance in the capital market. Based on the data gathered so far, we continue to anticipate that these wells will drive highly economic development of our asset base, both in the field and at the infrastructure level, supported by a realistic and achievable capital spending plan that can be funded from US Energy's existing balance. This is advantageous for several clear reasons, with positive impacts expected to flow directly into our realized economy. Looking ahead, our 2025 wells will not only further define the productive parameters of the asset base, but will also enable us to confidently forecast our plant development and strategically execute on our production timeline.
Ryan Smith: Based on the data gathered so far we continue to anticipate that these wells will drive highly economic development of our asset base, both in the field and at the infrastructure level supported by a realistic and achievable capital spending plan that can be funded from U S energy's existing balance sheet.
Ryan Smith: This is advantageous for several clear reasons with positive impacts expected to flow directly into our realized economics.
Ryan Smith: Looking ahead, our 2025 wells will not only further define the productive parameters of the asset base, but will also enable us to confidently forecast our planned development and strategically execute on our production timeline.
Ryan Smith: Lastly, I want to highlight an essential aspect of our recent transaction and the strategic background of our Cuban Dome assets in Montana. It's important to note that the vast majority of helium production in the United States is hydrocarbon based, largely as a byproduct of natural gas extraction. In contrast, the helium and industrial gas streams from US Enrgy's new assets are non-hydrocarbon based. Positioning this project as one of the lowest environmental footprint initiatives of its kind in the country. We are extremely encouraged by the initial results from our first well and will continue to provide regular updates on our drilling and completion progress as we advance.
Ryan Smith: Lastly, I want to highlight in a central aspect of our recent transaction and the strategic background of our Keven dome assets in Montana.
Ryan Smith: It's important to note that the vast majority of helium production in the United States is hydrocarbon based largely as a byproduct of natural gas extraction. In contrast, the helium and industrial gas streams from U S energy as new assets are now hydrocarbon based positioning. This project is one of the lowest environmental footprint initiatives of its kind in the country.
Ryan Smith: We are extremely encouraged by the initial results from our first well and will continue to provide regular updates on our drilling and completion progress as we advance.
Ryan Smith: Turning to our legacy oil and gas assets, we completed the sale of our South Texas properties at the end of July for a purchase price of approximately $6.5 million. Adjusting for this divestiture, which included roughly 100 barrels of oil equivalent per day, our third quarter net daily production reached 1,149 barrels of oil equivalent per day, a sequential improvement over both the first and second quarters of 2024. This progress underscores the dedication and effectiveness of our operations team, who successfully managed to remediate the effects of significant flooding across East Texas and the Gulf Coast earlier in the year.
Ryan Smith: Turning to our legacy oil and gas assets, we completed the sale of our South Texas properties at the end of July for a purchase price of approximately $6 5 million.
Ryan Smith: Adjusting for this divestiture, which included roughly 100 barrels of oil equivalent per day, our third quarter net daily production reached 1149 barrels of oil equivalent per day, a sequential improvement over both the first and second quarters of 2020 for.
Ryan Smith: This progress underscores the dedication and effectiveness of our operations team successfully managed to remediate the effects of significant flooding across east, Texas and the Gulf Coast earlier in the year.
Ryan Smith: For the third quarter, oil accounted for 58% of our total production, with the remainder consisting of a balanced mix of natural gas and NGL. As we close out 2024, the majority of our capital will be allocated efficiently towards completing our recently drilled industrial gas well, supporting the production profile of our legacy asset base, advancing the company share repurchase plan, and maintaining strong balance sheet integrity. Additionally, we remain poised to capitalize on organically generated M&A opportunities that align with our industrial gas growth strategy. As we head into 2025, we will continue to strategically monetize our legacy assets while deploying that capital into our Montana project and maintaining disciplined balance sheet management.
Ryan Smith: For the third quarter oil accounted for 58% of our total production with the remainder consisting of a balanced mix of natural gas and Ngls.
Ryan Smith: As we close out 2020 for the majority of our capital will be allocated efficiently towards completing our recently drilled industrial gas well supporting the production profile of our legacy asset base advancing the company's share repurchase plan and maintaining strong balance sheet integrity. Additionally, we remain poised to capitalize on organic.
Ryan Smith: We generated M&A opportunities that align with our industrial gas growth strategy.
Ryan Smith: As we head into 2025, we will we will continue to strategically monetize our legacy assets, while deploying that capital into our Montana projects and maintaining disciplined balance sheet management.
Ryan Smith: We believe the execution of these efforts will make 2025 a truly transformative year for US Energy. While any development project, of course, requires development capital, we are in an exceptionally strong position compared to our peers with significant access to internally generated non-diluted capital derived from both operational cash flow and asset sales. We firmly believe that U.S. Energy stands apart from other energy companies of similar scale in today's evolving energy landscape. With a highly economic and scalable development project alongside legacy E&P assets that require minimal capital to maintain steady production, we're generating and deploying predictable cash flow that allows us to strategically allocate capital for maximum return.
We believe the execution of these efforts will make 2025, a truly transformative year for U S energy.
Ryan Smith: While any development project of course requires development capital we are in an exceptionally strong position compared to our peers with significant access to internally generated non dilutive capital derived from both operational cash flow and asset sales.
Ryan Smith: We firmly believe that U S energy stands apart from other energy companies of similar scale in today's evolving energy landscape with a highly economic and scalable development project alongside legacy E&P assets that require minimal capital to maintain steady production, we're generating and deploying predictable cash flow that allows us to strategic.
Ryan Smith: We allocate capital for maximum returns.
Ryan Smith: Our approach positions us to withstand market fluctuations and seize emerging opportunities, ensuring that we are well prepared to navigate the complex and ever-evolving dynamics of the energy industry. At US Energy, our focus remains steadfast on operational efficiency, balance sheet discipline, and responsible resource management, underscoring our commitment to sustainable value creation. As we look ahead, we are dedicated to capitalizing on favorable market conditions and leveraging our core strengths to drive continued growth and deliver meaningful returns to our shareholders.
Ryan Smith: Our approach positions us to withstand market fluctuations and seize emerging opportunities ensuring that we are well prepared to navigate the complex and ever evolving dynamics of the energy industry.
Ryan Smith: Our U S energy, our focus remains steadfast on operational efficiency balance sheet discipline, and responsible resource management underscoring our commitment to sustainable value creation.
Ryan Smith: As we look ahead, we are dedicated to capitalizing on favorable market conditions and leveraging our core strengths to drive continued growth and deliver meaningful returns to our shareholders.
Ryan Smith: In the third quarter, we intensified our previously announced share repurchase program. To date, the company has repurchased approximately 886,000 shares at an average price of $1.17 per share, representing 3% of our outstanding shares. This share repurchase activity, alongside meaningful and consistent insider buying by executive management, underscores our conviction that repurchasing our stock at current valuations is both prudent and one of the highest return opportunities available for our free cash flow. We plan to continue this activity as we move forward. Strong balance sheet is always a top priority for US Energy, and I'm pleased to report we ended the quarter with zero debt outstanding on our credit facility.
In the third quarter, we intensified our previously announced share repurchase program to date. The company has repurchased approximately 886000 shares at an average price of $1 17 per share representing 3% of our outstanding shares. This.
Ryan Smith: This share repurchase activity alongside meaningful and consistent insider buying by executive management underscores our conviction that repurchasing our stock at current valuations is both prudent and one of the highest return opportunities available for our free cash flow.
Ryan Smith: We plan to continue this activity as we move forward.
Ryan Smith: Our strong balance sheet is always a top priority for U S energy and I am pleased to report we ended the quarter with zero debt outstanding on our credit facility importantly, despite recent asset sales our borrowing capacity remains unchanged a testament to the solid value foundation of our company's platform and underlying asset base and.
Ryan Smith: Importantly, despite recent asset sales, our borrowing capacity remains unchanged, a testament to the solid value foundation of our company's platform and underlying assets.
Ryan Smith: In closing, U.S. Energy is uniquely positioned at the forefront of a true first-mover advantage as a growth-oriented, non-hydrocarbon, industrial gas-focused public company in the United States. The majority of competitors in this space are constrained by complex equity structures, stressed balance sheets, limited capital access, and exchange listings that deter institutional investors. US Energy is free from these hurdles, and we are confident that as our distinctive position gains recognition in the marketplace, further actionable, scalable, and highly accretive growth opportunities will emerge.
Ryan Smith: In closing U S energy is uniquely positioned at the forefront of a true first mover advantage as a growth oriented non hydrocarbon industrial gas focused public company in the United States. The majority of competitors in this space are constrained by complex equity structures stressed balance sheets limited capital access and.
Ryan Smith: Range listings that detour institutional investors U S energy is free from these hurdles and we are confident that as our distinctive position gains recognition in the marketplace further actionable scalable and highly accretive growth opportunities will emerge.
Mark Zajac: Now I would like to introduce Mark Zajac, our Chief Financial Officer, who will provide a detailed update on the financial results of the third quarter. Thank you, Ryan. Hello, everyone. Let's delve into the financial details for the third quarter of 2024. Total oil and gas sales for the quarter amounted to approximately $5 million, reflecting a decrease from $8.7 million in the same period last year. This decline was attributed to a 30% reduction in volume. partially offset by 18% increase in realized prices.
Speaker Change: Now I would like to introduce Mark <unk>, our Chief Financial Officer, who will provide a detailed update on the financial results of the third quarter.
Mark Jack: Thank you Ryan Hello, everyone, let's delve into the financial details for the third quarter of 2024.
Mark Jack: Total oil and gas sales for the quarter amounted to approximately $5 million.
Mark Jack: Reflecting a decrease from $8 7 million in the same period last year. This decline was attributed to a 30% reduction in volumes, partially offset by 18% increase in realized prices.
Mark Zajac: It's important to recall that prior quarters production was impacted by severe weather events in several of our key operating This quarter's production demonstrates our ability to bring weather-related production issues back online, offset by our South Texas divestiture, which closed early in the third quarter. Sales from oil production contributed 88% of our total revenue for the quarter, demonstrating our continuing focus on optimizing our oil assets. Our lease operating expense for the third quarter was approximately $3 million, consistent with the prior quarter, equivalent to $28.95 per BOE versus $27.69 per BOE in the second quarter. The increase in the LOE per BOE quarter-to-quarter is due to repair costs associated with prior weather events and reduction in daily production volumes from divestitures.
Mark Jack: To recall that prior quarters production was impacted by severe weather events in several of our key operating areas. This quarter's production demonstrates our ability to bring weather related production issues back online offset by our South, Texas divestiture, which closed early in the third quarter.
Mark Jack: Sales from oil production contributed 88% of our total revenue for the quarter, demonstrating our continuing focus on optimizing our oil assets.
Mark Jack: Our lease operating expense for the third quarter was approximately $3 million.
Mark Jack: Consistent with prior quarter equivalent to $28 95 per Boe versus $27 69 per Boe in the second quarter. The increase in the LOE per Boe quarter to quarter is due to repair costs associated with prior weather events and reduction in daily production volumes from divestitures.
Mark Zajac: Severance and ad valorem taxes for the third quarter of 2024 totaled approximately $0.3 million, reflecting a decline from $0.6 million in the same period last year. As a percentage of total oil and gas sale revenue, these taxes accounted for approximately 6% during the quarter. Cash general and administrative expenses was $1.6 million for the third quarter of 2024, a reduction of 27% when compared to the same period of 2023. Year-to-date cash general and administrative expenses have decreased $1.8 million when compared to the same period from a year ago.
Mark Jack: Severance and AD valorem taxes for the third quarter of 2024 totaled approximately zero point $3 million, reflecting a decline from zero point $6 million in the same period last year as a percentage of total oil and gas sale revenue. These taxes accounted for approximately 6% during the quarter.
Mark Jack: Cash general and administrative expenses was $1 6 million for the third quarter of 2024, a reduction of 27% when compared to the same period of 2023 year to date cash general and administrative expenses have decreased $1 $8 million when compared to the same period from a year ago.
Mark Zajac: The decrease reflects lower compensation and a variety of overhead costs as we divest properties and focus on our helium project.
Mark Jack: The decrease reflects lower compensation in a variety of overhead cost as we divest properties and focus on our helium project <unk>.
Mark Zajac: Turning to our net financial performance, the company reported a net loss of $2.2 million in the third quarter of 2024, an improvement of $6.6 million when compared to the third quarter of 2023, due to a significant reduction in operating costs partially offset by reduced Our adjusted EBITDA stood at $1.1 million in the third quarter of 2024, compared to $1.7 million in the same period last year, influenced most notably by a reduction in total cash general and administrative expense and receipt of hedge proceeds from the prior Let's briefly touch on our balance sheet. As of September 30, 2024, there was no debt outstanding on our $20 million credit facility, and our cash position stood at $1.2 million.
Mark Jack: Turning to our net financial performance the company reported a net loss of $2 $2 million in the third quarter of 2024, an improvement of $6 6 million.
Mark Jack: When compared to the third quarter of 2023 due to a significant reduction in operating costs, partially offset by reduced revenue.
Our adjusted EBITDA stood at $1 1 million in the third quarter of 2024 compared to $1 7 million in the same period last year influenced most notably by a reduction in total cash general and administrative expense and receipt of hedge proceeds from the prior period.
Mark Jack: Let's briefly touch on our balance sheet as of September 32024, there was no no debt outstanding on our $20 million credit facility and our cash position stood at $1 2 million.
Mark Zajac: In conclusion, we are pleased with our operating performance and financial results that are able to support the company's initiatives in a way that demonstrate our balance sheet discipline and maintains a full balance sheet integrity. My objective is to ensure that the company's reporting process maintains a high standard of excellence, and we feel confident in our ability to support any growth initiatives we may entertain going forward. Thank you for your participation this morning.
Mark Jack: In conclusion, we are pleased with our operating performance and financial results that are able to support the company's initiatives in a way that demonstrate our balance sheet discipline and maintains a full balance sheet integrity. My objective is to ensure that the company is reporting process maintains a high standard of excellence and we feel confident in our ability to support any gross growth initiatives, we may entertain going forward.
Speaker Change: Thank you for your participation. This morning, we are now ready to take your questions.
Operator: We are now ready to take your questions. Thank you. We will now begin the question and answer session. If you have a question, please press star then 1 on your telephone keypad. If you're using a speakerphone, we ask that you please pick up your handset before pressing the key. To withdraw your question, please press star then 2.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: We have a question. Please press Star then one on your telephone keypad.
Speaker Change: You're using a speaker phone we ask you. Please pickup your handset before pressing the keys.
Speaker Change: Your question. Please press Star then two.
Jesse Sobelson: Today's first question comes from Jesse Sobelson with D'Iberal Capital. Please go ahead. Hello, everyone. Good to hear the great progress in the balance sheet. I'm just curious, can you remind investors of when it's anticipated that you'll be able to bring these helium assets online and what needs to happen between now and then?
Speaker Change: Today's first question comes from Jesse <unk> with <unk> capital. Please go ahead.
Speaker Change: Hello, everyone.
Speaker Change: Good to hear the great progress on the balance sheet I'm. Just curious can you remind investors of wanted to anticipated that youll be able to bring these helium assets online and what needs to happen between now and then.
Ryan Smith: Yeah, good morning. Good question. So, as you know, the ultimate goal is to get a processing plant in place to process the streams and ultimately start selling helium, etc. You know, walking through a timeline, we think, you know, at this point, that's somewhere between three and five wells drilled, some light gathering lines laid for the gas streams, ultimately feeding into a plant. There's a pretty wide range of expectations on how long it's going to take the plant to get built. It's looking like it'll probably be sooner than what we originally thought. So right now, we're still sticking to that very early fourth quarter of next year to have full cycle production to sales.
Speaker Change: Yes, good morning.
Speaker Change: Good question.
Speaker Change: So as you know the ultimate goal is to get a processing plant in place to process the streams and ultimately start selling helium et cetera. So.
Walking through a timeline we think.
Speaker Change: At this point.
Speaker Change: Somewhere between three and five wells drilled.
Some white gathering lines laid.
Speaker Change: For the gas streams ultimately feeding into our plant.
Speaker Change: There's a pretty wide range of expectations on how long, it's going to take the plant to get built.
Speaker Change: Looking like it will probably be sooner than what we originally thought so right now we're still sticking to that very early fourth quarter of next year to have.
Speaker Change: Full cycle production to sales.
Ryan Smith: I do think there's a little significant chance that that timeline can get moved up based on the plant being delivered and commissioned sooner. But right now, we're looking at kind of an over-under on October 1st of next year.
Speaker Change: Do think there is a little.
Speaker Change: A significant chance that that timeline can get moved up based on the plant being delivered and commissioned sooner.
Speaker Change: But right now we're looking at.
Speaker Change: Kind of an over under on October one of next year.
Speaker Change: Okay.
Ryan Smith: Awesome. It sounds like things are going pretty well there.
Speaker Change: Awesome at Sao.
Speaker Change: Things are going pretty well there I think.
Jesse Sobelson: I think, you know, just another additional follow-up question here on the M&A side of things. You know, in your prepared comments, you did mention a continued focus on M&A with what appears to be the open consideration of both acquiring new assets and selling legacy ones. Is the end goal here to be a pure play industrial gas company, or are you guys still expecting to hold on to specific oil and gas assets over the longer term? Thanks.
Another additional follow up question here on the M&A side of things.
Speaker Change: In your prepared comments you did mentioned a continued focus on M&A with what appears to be the open consideration for both acquiring new assets and selling legacy ones is the angle here to be a pure play industrial gas company or are you guys still expecting to hold onto specific oil and gas assets over the longer term.
Jesse Sobelson: And that's it.
Thats It for me.
Ryan Smith: Yeah. So.
Speaker Change: Yes.
Speaker Change: <unk>.
Ryan Smith: The goal is to ultimately create and run this industrial gas platform. kind of full stop. On the legacy EMP asset side, no secret, you know, small SMID cap EMPs trade a pretty ugly valuations. The M&A market, at least the public M&A market on bigger deals is very tough to get done with, you know, equity valuations and the public-private disconnect. That being said, what I'll call the smaller, I mean, I'll define smaller sub-20 type of million-dollar range on these assets, whether it's funded by small privates, family offices. et cetera, is still very active. I view, if we can pull forward value on assets on, you know, again, give give or take a future four year cash flow type of number and redeploy that into, you know, industrial gas assets in the near term, Montana.
Speaker Change: The going forward is to ultimately.
Speaker Change: Create and run this industrial gas platform.
Speaker Change: Kind of full stop.
Speaker Change: The legacy E&P asset side.
Speaker Change: No secret.
Speaker Change: <unk> Smid cap E&ps trade.
Trade it pretty ugly valuations.
Speaker Change: The M&A market at least public M&A market on.
Speaker Change: The bigger deals is very tough to get done with equity valuations in the public private disconnect.
That being said I'll I'll call the smaller I mean ill defined smaller sub 20.
Type of million dollars.
Speaker Change: <unk> on these assets, whether it's funded by small private family offices.
Speaker Change: Et cetera.
Speaker Change: Still very active.
Speaker Change: I view, if we can pull forward value on assets on again give or take a future four year cash flow type of number and redeploy that into.
Speaker Change: Industrial gas assets in the near term Montana.
Ryan Smith: You know, it's a very good tradeoff for us. So I think that, you know, you continue to see us, you will continue to see us. kind of pick off our non-core E&P advantageously to sellers. I expect that to continue.
Speaker Change: It's a very good tradeoff for us so I think that you'll continue to see US you will can you discuss.
Speaker Change: Kind of pick off our noncore E&P advantageously to sellers I expect that to continue.
Ryan Smith: ultimately leaving us with our industrial gas project in Montana, and our EMP assets in Montana. We like those now because It's all oil. It's close by to where all of our operations are. It has strong margins. It covers overhead, etc.
Speaker Change: Ultimately, leaving us with.
Speaker Change: Our industrial gas project in Montana.
Speaker Change: Our E&P assets in Montana, we like those now because.
Speaker Change: It's all oil it's close by to where all of our operations are.
Speaker Change: It has strong margins.
Speaker Change: Covers overhead et cetera, eventually I think all of the E&P assets go just to streamline.
Ryan Smith: Eventually, I think all the EMP assets go, just to streamline the message and the platform. that we have.
Speaker Change: The message in the platform.
Speaker Change: That we have.
Ryan Smith: In terms of the acquisition side, I probably should have been more specific. I don't think you see us acquire EMP assets going forward anymore. That's just not what we're looking at. The type of assets that you acquire at this level usually aren't what I'll call fitting the public company model.
Speaker Change: In terms of the acquisition side.
Speaker Change: I, probably should've been more more specific.
Speaker Change: I don't think Youll see us acquire E&P assets going forward anymore. That's just not what we're looking at.
Speaker Change: The type of assets that you acquire at this level.
Speaker Change: Usually are.
Speaker Change: Or I'll call fitting the public company model model.
Ryan Smith: more, you know, smaller scale stuff, where I do think you see us, you know, make make strides on the M&A front is expanding the industrial gas platform. whether it be on the producer side or on the infrastructure side, because, you know, they kind of go hand in hand. So we're definitely active in looking at further like-kind acquisitions to the ones that we made this summer, and then, you know, just repeating myself a little bit. opportunistically divesting our legacy.
Speaker Change: More.
Speaker Change: Smaller scale stuff, where I do think you see us.
Speaker Change: Make strides on the M&A front is expanding the industrial gas platform.
Speaker Change: Sure.
Speaker Change: Whether it be on the producer side or on the.
Speaker Change: Infrastructure side because.
Speaker Change: They kind of go hand in hand, so we are definitely active in looking at.
Speaker Change: Further light kind acquisitions to the ones that we made this summer.
Speaker Change: And then just repeating myself a little bit.
Speaker Change: Opportunistically divesting.
Our legacy A&P.
Speaker Change: Okay great.
Jesse Sobelson: Great, thanks for the detail there.
Speaker Change: Great. Thanks for the detail there.
Jesse Sobelson: It's exciting to watch the transformation at work. I'll jump back in the queue. Thank you.
Speaker Change: Exciting to watch the transformation at work.
Speaker Change: Thanks, I will jump back in the queue.
Speaker Change: Thank you and our next question today comes from John Davenport Johnson Rice. Please go ahead.
John Davenport: And our next question today comes from John Davenport of Johnson Rice. Please go ahead. Hi, good morning, guys. Thank you for taking my question. I was curious if you would be able to give us either a timeline on when some additional data points on helium concentrations might be available, or what the timeline on a helium reserve report might be. Thank you.
Hi, Good morning, guys. Thanks for taking my question.
Was curious if you would be able to give us either a timeline on when some additional data points on helium concentrations might be available or at the timeline on a helium reserve report might be thank you.
Ryan Smith: Yeah, no, good morning, John. So in terms of, you know, data points, we've kind of gave our first one here a couple weeks back. You know, right now, we're setting up operations up in Montana to complete this well, you know, we'll flow back from, you know, the targets that we have analyzed and deemed the most economic. Ultimately, we're going with this first phase that we think is going to be able to feed a plant, you know, as soon as possible. So I think the next data points we always put out a pretty big offset date.
Speaker Change: Yes, good morning, John.
Speaker Change: So in terms of.
Speaker Change: Data points.
Speaker Change: We kind of gave our first one here a couple of weeks back.
Speaker Change: Right now we're.
Speaker Change: We're setting up operations up in Montana to complete this well will flow back from the targets that we.
Speaker Change: Have analyzed and deemed the most economic ultimately.
Speaker Change: Going with this first phase that we think is going to be able to.
Speaker Change: Feet of plant.
Speaker Change: As soon as possible. So I think the next data points, we always put out a pretty big ops update at the <unk>.
Ryan Smith: very first part of the year, just, you know, post post Christmas time. I think that's going to be when we do it again.
Speaker Change: Very first part of the year, just post post Christmas time.
Speaker Change: I think that's going to be when we do it again I kind of.
Ryan Smith: I kind of am against, you know, multiple incremental data points every couple of weeks, just whenever you can get something more fulsome out there. So I think that, you know, sometime, whether it's early December, early January, we have more. public data release from the completion of this well that goes everything from helium content to further data on the respective zones to flow rate, etc. And then on the reserve report side, they kind of run hand in hand just as we get as we get more data, you know, Ryder Scott is our third party group that is doing the reserves for this asset.
Speaker Change: Against multiple incremental data points every couple of weeks just whenever you can get something more fulsome out there. So I think that some time, whether it's early December early January.
Speaker Change: We have more.
Speaker Change: Sure.
Speaker Change: Public data release from the completion of this well that goes everything from helium content to further data on the respective zones to flow rate et cetera.
Speaker Change: And then on the reserve report side.
Speaker Change: That kind of runs hand in hand, just as we get as we get more data.
Speaker Change: Scott is our third party group that is doing the reserves for this asset.
Ryan Smith: You know, I think they probably come in around the same time, you know, whether it's, you know, very early, very mid January on on the reserve side, but we're working with them on a daily basis now. And, you know, I expect that to be forthcoming in relatively short order.
Speaker Change: I think they probably come in around the same time.
Speaker Change: Whether it's.
Speaker Change: Early very mid January on.
Speaker Change: On the reserve side, but we're working with them on a daily basis, now and I expect that to be forthcoming in relatively short order.
John Davenport: Okay, got it.
Speaker Change: Okay got it. Thank you all that's all for me.
John Davenport: Thank y'all. That's all for me.
Tom Kurds: Thank you. And our next question comes from Tom Kurds, Axe Investment Research. Please go ahead.
Thank you and our next question comes from Tom Curran Zacks investment Research. Please go ahead.
Ryan Smith: Good morning, guys. Can you follow up on the helium full cycle, like you mentioned? You know, everything goes to plan, you have three to five wells, processing plant finished in October. Looking for the next 12 months and without giving guidance, can you tell us what that may mean for revenues or e-methods just from the helium? program.
Tom Curran: Good morning, guys.
Speaker Change: Can you follow up on the helium full cycle like you mentioned everything goes to plan do you have three to five wells a processing plant finished in October looking.
Speaker Change: Looking for the next 12 months and without giving guidance can you tell us what that May mean for revenues or EBITDA just from the helium.
Speaker Change: Program.
Ryan Smith: Yeah, good morning, Tom. So I think, you know, on that timeline, You know, we have. a fairly good feel for where that is going to shake out at. You know, we're still working on an offtake agreement. I personally want to see where we get to on that, right, before we get it. Okay, so you don't want to? Okay. Yeah, I think, yeah, I mean, I think I think a full cycle plant for this first one. And you know, I'm stalling a little bit on you just because There's ranges of the plant size that, you know, we haven't determined yet.
Speaker Change: Yes, good morning, Tom So I think.
Speaker Change: On that timeline.
Speaker Change: We have.
Speaker Change: A fairly good feel for where that is going to shake out at.
Speaker Change: We're still working on and off take agreement.
Speaker Change: I personally want to see.
Speaker Change: There we were we get to on that right before we get it.
Speaker Change: Okay.
Speaker Change: Okay. So you don't want to okay.
Speaker Change: I think yes, I mean, I think I think a full cycle plant for this first one in <unk>.
Speaker Change: Starting a little bit on your just because.
Speaker Change: Theres ranges of the plant size that we haven't determined yet and that's based on.
Ryan Smith: And that's, that's based on flow rates, that's based on helium content, that's based on the zones we go after. And all that requires, you know, the the capital allocation to get that right, I think a fair number to use. And this isn't a formal guidance number. But we kind of see this first this first plant, assuming it's a nitrogen based plant, you know, coming in at the five $6 million five, you know, give or take EBITDA type of number range. And again, what once we tighten that number down Well, we'll get like a formal guidance and timeline on that.
Speaker Change: Flow rates based on helium content, that's based on the zones. We go after and all of that requires.
Speaker Change: The capital allocation to get that right I think a fair number to use and this isn't a formal guidance number but we kind of see this first.
Speaker Change: This first plant is assuming it's a nitrogen place based plant.
Speaker Change: Coming in at the.
Speaker Change: $5 6 million dollar five give or take EBITDA type of number or range and again.
Speaker Change: Once we tighten that number down.
Speaker Change: We'll get.
Speaker Change: Formal guidance and timeline on that but but right now.
Ryan Smith: But right now You know, I think that's a fairly accurate conservative number to give on an annual run rate that begins next year.
I think thats, a fair fairly accurate conservative number to give on an annual run rate that begins next year.
Ryan Smith: Got it. And on the well cost, you said it keeps going down. Is that still about a million dollars per helium well drilled? That's probably about right. This first one, you know, we had an AFE for I think it was right around 1.8 million.
Speaker Change: Got it and on the well cost and certainly keeps going down is that still about $1 million per helium oil drill.
Speaker Change: So that's probably about right. This first one.
Speaker Change: We had an <unk> four I think it was right around $1 8 million.
Speaker Change:
Ryan Smith: Undoubtedly, you know, this first well we knew going in was going to be the most expensive well, just, you know, setting up operations up there, getting a first well drilled, you know, the internal mandate was to, you know, literally Cadillac this process to make sure that, you know, there wasn't a corner cut, saving dollars just to make sure that, you know, we got a very good lay of the land. drilled the three zones, and I think it was a 22-day drill. Going forward, once we start, you know, going after singular zones. probably upgrading our rig a little bit now that we know we need one with a little more power.
Speaker Change: Undoubtedly this first well we knew going in was going to be the most expensive well just.
Speaker Change: Setting up operations up there getting our first well drilled.
Speaker Change: The internal mandate was to literally Cadillac this process to make sure that.
Speaker Change: There wasn't a corner cut.
Speaker Change: Saving dollars just to make sure that we've got a very good lay of the land.
Speaker Change: Drilled the three zones and <unk>.
Speaker Change: I think it was a 22 day drill.
Speaker Change: Going forward once we start going after singular zones.
Speaker Change: Probably upgrading our rig a little bit now that we know we need one with a little more power, we see that number coming down significantly.
Ryan Smith: We see that number coming down significantly. 1, 1.1, there's always a little swag in that number, but I think it's going to... come down, you know, 30 plus percent from the realized cost on this. Got it.
Speaker Change: 111, there is always a little swagger in that number but I think it's going to.
Speaker Change: Come down 30% from the realized cost on this first one.
Ryan Smith: And can you kind of give us a primer on helium pricing? I know a lot of it's contract based, but, you know, where does that look now? Can you look in the 2025 and see how that looks? You know, what's sort of outlook for that, or how you guys look at helium pricing? Yeah, no, great, great question, right? So the numbers we have modeled and kind of the number that I gave you is based on what we see on the low end, which, and I apologize, I don't know the exact number, but call it in the four to $450 range.
Speaker Change: Got it.
Speaker Change: Can you kind of give us a primer on helium pricing I know a lot of its contract base, but.
Speaker Change: What does that look now can you look into 2025 and see how that looks.
Speaker Change: What sort of outlook for that or how you guys look at.
Speaker Change: Okay.
Ryan Smith: Yes, great Great question, Ryan So the numbers, we have modeled in kind of the number that I gave you is based on what we see on the low end, which.
Ryan Smith: John I don't know the exact number but call it in the 4% to $450 range.
Ryan Smith: You know, spot helium isn't necessarily the best way to look at it, because so much of this is based on off-take agreements. Historically, You know, the producer. has contracted with a broker, and the broker has middle-manned a deal with the larger. You've seen a couple of groups, I'll say, kind of get smart on that process and cut out the broker because there's only so many end users here, which, you know, significantly improved.
Ryan Smith: Spot helium isn't.
Ryan Smith: Necessarily the best way to look at it because so much of this is based on offtake agreements historically.
Speaker Change: The producer.
Speaker Change: Has contracted with <unk>.
Speaker Change: Broker and the broker has middleman or deal with the larger end user you've seen a couple of groups.
Speaker Change: I'll say kind of get smart on that process and cut out the broker because theres only so many end users here, which significantly improves.
Ryan Smith: and Mark Zajac, John Davenport, Mark Zajac, Mark Zajac, Mark Zajac, Mark Zajac, Mark Zajac, going directly to an end user, which is what we're going to try to do. But that's kind of the range we're seeing now. There's some Depending on who you ask, there's forecasts out there that have it going higher, have it going a little bit lower, but we're comfortable. in that range, especially keeping our forecasting number in that, you know, low to mid $400. All right, sounds good, thanks.
Speaker Change: The price that you're realizing because youre not paying the middleman so.
Speaker Change: Of our 450 to $600 type of number is what we see in the market we model to the low end of that.
Speaker Change: Forecast into the low end of that I think there are significant upside to that number at least varying towards the high end of the range.
Speaker Change: Yes.
Speaker Change: Going directly to an end user which is.
Speaker Change: What we're going to try to do.
Speaker Change: But that's kind of the range, we're seeing now there is some.
Speaker Change: Depending on who you asked there's forecast out there that haven't quite higher have it going a little bit lower.
Speaker Change: But we're comfortable.
Speaker Change: In that range, especially keeping our forecasting number in that low to mid $400 type.
Speaker Change: Alright sounds good. Thanks, one more from me quick one the oil and gas PV 10.
Ryan Smith: One more for me, quick one, the oil and gas PV-10. Has that changed much from those July numbers, or will it be an attempt to use a new number? It'll be in the materials. I don't think we filed our actual reserve number in the SEC filing. It's around $35 million now, give or take a little bit with where pricing is. Post. I'm sorry. That's a wrong number. It's right around 51. I just got corrected.
Speaker Change: Because it seems much remove July numbers or will it be in the 10-Q, a new number.
Speaker Change: It'll be in the materials I don't think we filed our actual reserve number in the SEC filing.
Speaker Change: It's around $35 million now.
Speaker Change: Give or take a little bit with where pricing is.
Speaker Change: Post.
Speaker Change: I'm sorry.
Speaker Change: Yes.
As a round number is right around 51, I just got corrected.
Speaker Change: Okay.
Ryan Smith: Okay, thanks, that's a big drop.
Speaker Change: Okay.
Speaker Change: That's a big drop alright.
Speaker Change: Alright, Thats all right.
Operator: All right, that's all we have.
Speaker Change: Yes.
Ryan Smith: Thank you.
Speaker Change: Ill get back in the queue.
Operator: All right, I appreciate it. Thank you.
Speaker Change: Alright I appreciate it thank you.
Speaker Change: Thank you ladies and gentlemen. This concludes the question and answer session I would like to turn the conference back over the remainder of the day for any closing remarks.
Operator: And ladies and gentlemen, this concludes the question and answer session.
Operator: I'd like to turn the conference back over to the management team for the closing remarks.
Ryan Smith: This is Ryan Smith. We thank you for joining us. We're excited about what we're doing here. We think we have a very big year coming in 2025 with the project and the new projects we have on deck and that we're working on. And we look forward to updating the market on our results and speaking on our next call. Thank you.
Speaker Change: Yes. This is Ryan Smith, we thank you for joining US we're excited about what we're doing here. We think we have a very big year coming in 2025 with the project and the new projects. We have on deck and then we're working on and we look forward to updating the market on our results and speaking on our next call. Thank you.
Operator: Thank you sir, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker Change: Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker Change: [music].