Q3 2025 Riley Exploration Permian Inc Earnings Call

Speaker #4: Ladies and gentlemen , thank you for standing by . Hello . My name is Dustin , and I will be your conference operator today .

Speaker #4: At this time, I would like to welcome you to Riley Exploration Permian Incorporated's third quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Speaker #4: After the speakers remarks , there will be a question and answer session . If you'd like to ask a question at that time , please press star and the number one on your telephone keypad .

Speaker #4: If you'd like to withdraw your question or your question has been answered , please press star one . Again , thank you . I would now like to turn the conference over to our CFO .

Speaker #4: Philip Riley , please go ahead , sir .

Speaker #5: Good morning. Welcome to our conference call covering our third quarter 2025 results. I'm Philip Riley, CFO. Joining me today are Bobby Riley, Chairman and CEO.

Speaker #5: And John Suitor , COO . Yesterday we published a variety of materials which can be found on our website under the investors section .

Speaker #5: These materials in today's conference call contain certain projections and other forward looking statements within the meaning of the federal securities laws . These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements .

Speaker #5: We'll also reference certain non-GAAP measures. The reconciliations to the appropriate GAAP measures can be found in our supplemental disclosure on our website.

Speaker #5: I'll now turn the call over to Bobby .

Speaker #6: Thank you . Philip Riley . Permian delivered another solid quarter marked by disciplined execution and strategic progress on multiple fronts . In July , we closed the Silverback acquisition and began integrating the asset where we are already realizing synergies .

Speaker #6: In just a few months . We have reduced costs and increased production for September and October combined production on the acquired asset exceeded our underwriting case by more than 50% .

Speaker #6: We executed our development and capital plan during the third quarter , which contributed to significant free cash flow generation over the last nine months , we have generated $100 million of upstream free cash flow , approximately flat compared to the same period a year ago .

Speaker #6: Despite a 14% lower realized oil price . We continued to progress our midstream and power generation projects , securing equipment and advancing build outs .

Speaker #6: These critical infrastructure projects should enable Riley Permian to scale operations in 2026 and beyond . Today , we are paying our 19th consecutive quarterly dividend as a public company .

Speaker #6: In October , we increased the dividend to $0.40 per share , up 5% from the previous quarter . Maintaining a consistent and growing dividend underscores our commitment to capital discipline and focused on sustainable free cash flow .

Speaker #6: With that overview , I'll turn the call over to John Suitor , our CEO for operational highlights , followed by Philip Riley , our CFO , who will review financial performance and forward looking guidance .

Speaker #6: Thank you , Bobby , and good morning . Riley . Permian is once again shown its commitment to safe operations , achieving a total recordable incident rate of zero in the third quarter .

Speaker #6: We achieved 93% safe days , a metric requiring no recordable incidents . Vehicle accidents or spills over ten barrels . As for activity in the third quarter of 2025 , we completed five and turned in line ten gross operated wells .

Speaker #6: Five of those wells turned in line were completed at the end of the second quarter . Average daily net production was 18.4 thousand barrels of oil per day and 32.3 thousand barrels of oil equivalent per day .

Speaker #6: For the third quarter of 2025 , oil volumes increased by 3200 barrels per day during the quarter , benefiting from the addition of acquired silverback volumes , incremental production gains from Silverback Workovers , along with strong performance from several new wells on legacy acreage , total net oil production increased from 1.38 to 1.69 million barrels of oil quarter over quarter in Q3 .

Speaker #6: This is an increase of 22% quarter over quarter and an increase of 19% compared to the same quarter last year . Total equivalent production is up 34% quarter over quarter from 2.22 to 2.98 million barrels of oil equivalent , and up 38% compared to the same quarter last year .

Speaker #6: Total equivalent volumes grew faster than oil last quarter for two reasons . First , because our Texas midstream partner completed some upgrades , which led to materially more gas sold .

Speaker #6: And second , with the contribution of the silverback asset , which has a gassier mix currently , this will become more oily as we bring on new horizontal wells at Riley Permian .

Speaker #6: We pride ourselves on being a low cost operator . We nearly doubled our operated well count in New Mexico through the Silverback acquisition .

Speaker #6: Many of the acquired wells are lower volume vertical wells with a higher cost per barrel . However , we maintained low per boe near $9 per boe , which is only 6% increase over Q2 and a 5% increase over the same quarter last year .

Speaker #6: We believe we can reduce costs further as a result of synergies . We're realizing through the Silverback acquisition that we'll discuss shortly , as well as increasing the mix of horizontal wells as we continue to develop , Riley Permian picked up a drilling rig in October , getting a head start on our development for 2026 .

Speaker #6: We are drilling 8 to 10 gross wells in Q4 , which will set us up for some early completions in Q1 of 2026 .

Speaker #6: In addition to the drilling program , 3 to 5 gross operated wells will be completed in Q4 , cementing in a solid exit rate for 2025 and base production for the year to come .

Speaker #6: Our initial look at DNC pricing for the upcoming wells in our Red Lake asset is down nearly 10% over our last campaign in New Mexico .

Speaker #6: This is the result of softening of prices in both rigs and frac spreads , as well as lower steel prices than realized earlier in 2025 .

Speaker #6: Moving to midstream , our gathering and compression project in New Mexico continues to add value in the form of increased flow assurance by reducing downtime and allowing us to bypass some of the legacy low pressure systems in the area that struggle with reliability .

Speaker #6: In the fourth quarter , we plan to upgrade the initial compression facility . We installed earlier this year with an incremental 40,000,000 cubic feet per day nameplate compression capacity .

Speaker #6: This will allow us to utilize 15,000,000 cubic feet per day in addition to what we're currently delivering to our existing provider , and will be able to utilize all remaining high pressure capacity when our transmission line is in service in mid 2026 , low pressure gathering lines are currently being installed to expand the input capacity to the compressor facility , allowing us to utilize the additional capacity it will have by year end .

Speaker #6: The high-pressure transmission line we are planning to install continues to progress. Permitting is submitted and underway, and secured. Pipe is scheduled to arrive late in the fourth quarter or during the first quarter of 2026.

Speaker #6: Shifting to power , our joint venture , Rpcs project in Texas continues to grow in scope and improve in reliability . In the third quarter , we added 5% more of our total load to the generation and Texas with 100% uptime .

Speaker #6: In September in New Mexico , RPC is progressing on the plans for another behind the meter generation project . We've begun permitting designating a location and securing long term lead items , including ten megawatts of generators .

Speaker #6: The pilot generation station , as well as the distribution system , will . Begin construction in 2026 . We continue discussions to advance both water and oil infrastructure projects that will maximize our ability to control development , pace .

Speaker #6: We also look forward to better realize pricing on our oil barrels as we consider moving away from trucking , where opportunities exist . The silverback acquisition is already realizing value through synergies and cost saving opportunities .

Speaker #6: Since closing, we've been able to drive down fixed costs in the field through things like combining multiple field offices and managing headcount.

Speaker #6: We expect that those fixed costs will come down 10 to 20% . Following those and other changes we mentioned last quarter that we intended to leverage our expertise in water handling to drive down costs in both silverback and Legacy .

Speaker #6: Red Lake assets . In a few short months , we've seen a $70,000 per month decrease in costs due to our integration efforts .

Speaker #6: We're nearing completion of low pressure gathering lines that will tie back some of the gas in the silverback acreage to our compressor station .

Speaker #6: We've built , allowing for better reliability , maximizing production from the area . Significant progress has been made in maximizing production from the asset without bringing on any new wells .

Speaker #6: The Riley Permian operating team has increased production over the purchase case forecast by over 50% for the months of September and October , combined .

Speaker #6: This was achieved primarily through strategic workovers returning wells to production as well as artificial lift optimization . We're pushing forward with several RFQ processes attempting to leverage the larger economy of scale achieved through acquisition .

Speaker #6: We anticipate notable savings on frequently used materials such as steel , tubulars and production chemicals . As a result . Overall , it's been a very successful quarter for the operations team .

Speaker #6: We're progressing our efforts on both our midstream and power endeavors . We're already seeing costs come down on our latest drilling program . We're maintaining disciplined operating costs and all of this while achieving record levels of production .

Speaker #6: Congratulations to the team on a job well done , Philip . I'll now turn the call back to you .

Speaker #5: Thank you John , third quarter results reflect the Silverback acquisition . Given the deal closed on the first day of the quarter . The transaction was accounted for as a business combination .

Speaker #5: Cash paid at closing was 120 million . 15% lower than the 142 million unadjusted purchase price . Upon announcement . Benefiting from cash flow from the January 1st effective date through closing , as well as other favorable adjustments overall , company third quarter results were either within or favorable to guidance levels .

Speaker #5: Prices after hedges were roughly flat quarter over quarter , and oil represented all of our revenue last quarter as we experienced negative natural gas and NGL revenues after fees , as discussed by other operators reporting recently , the industry experienced an especially weak September and October gas market in the Permian , with select operators voluntarily shutting in and estimated one and a half to two BCF a day of gas production .

Speaker #5: Illinois was higher quarter over quarter , driven by two primary factors first , from the contribution of higher cost Silverback vertical wells that John discussed earlier .

Speaker #5: And as I previewed on the second quarter call and second from increased workover activity associated with the positive results , John described earlier , which drove higher corresponding workover expense .

Speaker #5: A quick clarification is in order here . Investors often associate most dollars spent supporting new production volumes in the form of capital expenditures .

Speaker #5: While we often opportunistically pursue workovers like these , which get expensed and are embedded in low on the income statement , production taxes were higher as a percentage of revenue as more volume shifted to New Mexico , which has a higher tax rate than Texas .

Speaker #5: Third quarter administrative costs included transition costs associated with the acquisition and other non-recurring items , which should normalize over time on a per Boe basis , costs were squarely within the guidance ranges for low and administrative costs .

Speaker #5: We had nearly $5 million of favorable income tax benefits in the third quarter , resulting from the new federal legislation allowing for increased bonus depreciation , which we realized across our legacy assets .

Speaker #5: The acquisition and from our midstream project . Third quarter cash flow from operations before changes in working capital was $54 million , higher by 17% quarter over quarter , primarily from higher volumes and from slightly higher oil prices .

Speaker #5: Before hedges, adjusted EBITDA margin was 59%, down from 66% last quarter, primarily as a result of the cost items noted above on costs and margin.

Speaker #5: Consider that we've just closed the silverback acquisition , our team has made good initial progress and is excited by the potential to drive synergies and develop the asset we're optimistic to lower our cost structure and improve margins over time .

Speaker #5: We take confidence in this potential given our track record in this area . Since the Pecos acquisition two years ago , we've reduced Loe per barrel for that specific asset by more than 30% .

Speaker #5: During the third quarter, we reinvested only 27% of cash flow from operations before working capital and upstream CapEx, and only 36% for the nine months year-to-date.

Speaker #5: Third quarter upstream accrual based CapEx was nearly 40% below midpoint guidance as a result of some delayed non-activity and infrastructure spending . Some of this will be shifted to the fourth quarter .

Speaker #5: We generated a very robust $39.4 million of upstream free cash flow in the third quarter , representing 73% conversion of operating cash flow before working capital .

Speaker #5: Year to date , we've generated $100 million of upstream free cash flow , or 64% of free cash flow from operations , an amount equal to the same nine month period for 2024 .

Speaker #5: Despite 14% lower realized oil prices . On our other projects , we invested $14 million in our New Mexico midstream project and empower .

Speaker #5: We invested $8.5 million with the latter into the JV , with the latter being slightly over guidance as we simply accelerated most of the fourth quarter spend to secure some equipment .

Speaker #5: Year to date , we've allocated 31% of total free cash flow to dividends . Debt was 375 million at quarter end , corresponding to 1.3 times leverage based on pro forma adjusted EBITDA , including Silverback .

Speaker #5: Now I'll move to guidance . We're raising oil production guidance for the fourth quarter by 4% at the midpoint to 19.2 thousand barrels a day .

Speaker #5: This fourth quarter . Oil production rate at the midpoint corresponds with 5% quarter over quarter growth and 21% year over year growth from the fourth quarter of 2024 .

Speaker #5: This leads to a 2% increase in guidance at the midpoint for full year oil production to 17.1 thousand barrels a day , corresponding to 13% year over year .

Speaker #5: Volume growth . We're maintaining guidance for full year total CapEx and investments at the midpoint at $92 million of CapEx , with some shift in spending from third quarter to the fourth quarter .

Speaker #5: The combination of increased production with flat CapEx evidences , doing more with less fourth quarter drilling and completion activity will primarily drive 2026 results , with only modest impact on fourth quarter volumes .

Speaker #5: DNC cost savings in New Mexico and some schedule flexibility allowed us to accelerate two completions from 2026 into the current quarter . These wells will support 2026 production with no impact to fourth quarter 2020 .

Speaker #5: Five volumes . Looking to next year , we're striving to balance excitement around development potential and our asset base with capital allocation discipline in the face of softer oil markets .

Speaker #5: While some longer term planning commitments are required , we'll watch the markets and aim to maintain flexibility with shorter term commitments . We believe the current state of the oil service market affords , such flexibility .

Speaker #5: Fortunately , we're in a situation that allows for resiliency and confidence across a range of prices . I'll offer the following examples based on preliminary forecasts .

Speaker #5: We believe we could maintain our third quarter 2025 oil volume level of 18.4 thousand barrels a day over the full year in 2026 , which would equate to 8% year over year growth .

Speaker #5: While reducing 2026 upstream CapEx by approximately 15% . This scenario partially benefits from the fourth quarter of 2025 . Forecasted volume tailwind of 19.2 thousand barrels a day at the midpoint .

Speaker #5: Next , if we focused instead on maintaining upstream CapEx and not volumes , then we believe we could keep our 2025 upstream CapEx level generally flat while growing full year oil volumes year over year by approximately 12 to 15% .

Speaker #5: If oil markets improve , we can grow beyond these levels with increases in capital spending supported by our deep inventory of development locations .

Speaker #5: Finally , we forecast the dividend being well covered across these 2026 activity and oil price scenarios . Benefiting from this capital efficiency and hedges in place .

Speaker #5: We have over 60% of 2026 oil volumes hedged at a weighted average downside price of $60 , with upside optionality as 44% of hedges are in the form of collars .

Speaker #5: I'll turn it back to Bobby for closing . Thank you .

Speaker #6: Thank you . Philip . Once again , we appreciate your time and interest in Riley Permian . While we're pleased with our Q3 2025 results , our focus remains firmly on the future .

Speaker #6: We are committed to creating long term value through disciplined capital allocation , strategic infrastructure investments , and operational excellence . We believe these initiatives will position us for sustainable growth and shareholder value .

Speaker #6: We appreciate ongoing support and confidence in Riley Permian . Operator . You may now turn the call over for questions .

Speaker #4: Thank you . We will now begin the question and answer session . If you'd like to ask a question , please press star and the number one on your telephone keypad to raise your hand and enter the queue .

Speaker #4: If you'd like to withdraw your question, simply press star one again. Thank you, and we will take our first question from Derrick Whitfield from Texas Capital.

Speaker #4: Please go ahead .

Speaker #7: Good morning . Good morning guys , and congrats on a solid overall print .

Speaker #8: Thank you .

Speaker #7: Wanted to start with a bigger picture question on capital efficiency and capital allocation . As we think about slides five and seven and Philip's ending commentary , it's clear your business has differential capital efficiency and can accomplish in all of the above funding strategy .

Speaker #7: While continuing to grow in a relatively low to mid cycle pricing environment . As you think about your cash flow , priorities in a below $60 per barrel environment , how would you prioritize capital allocation in that environment ?

Speaker #7: And are there pathways where you can continue to fund all three segments of your business while maintaining control of each?

Speaker #5: Yeah . Fair question . Thank you . Derrick . You know , in a in a $55 scenario , you know , that starts to get to the point where on a corporate level , full cycle , you know , we're mindful of of spending too much .

Speaker #5: I think our half cycle economics as evidenced there on that slide , you reference can work down below $40 . But there's no pressing need to develop that sooner .

Speaker #5: So I think in a 55 scenario , you're going to see us in that lower potentially volume maintenance scenario where we're spending some $100 million .

Speaker #5: Maybe it's in the $85 million range . We can maintain volumes that way . We've got the dividend . Well covered . I think we are funding CapEx for the midstream find that way , and I can talk more about that in a bit .

Speaker #5: If you'd like . But that's that's probably a fair inflection point . I think there's also probably some psychology bias there at that inflection point of 55 things below , it starts to get , you know , start to get tougher for our industry .

Speaker #5: That said , it's never just a single variable equation . You know , we'll see how the oil field services market reacts . Some believe that there costs won't go lower , but you never know should those continue to decrease then then that can change some of the economics as well .

Speaker #7: Terrific . Yeah that makes sense . And maybe for my follow up I wanted to shift over to the New Mexico midstream project .

Speaker #7: While the ability to control pace of development and flow assurance are the primary drivers , could you offer some color on the potential improvement you'd expect in Netbacks for the upstream business and the amount of third party volumes that could accrete value for midstream business ?

Speaker #5: Yeah , I can start and then maybe John , if he wants to fill in on some of the volumes , look on Netbacks .

Speaker #5: This has never a binary clear impact . I think the way that works is first and foremost , we start with the flow assurance we're getting in to good , good systems .

Speaker #5: There . Newer generation gathering compression pipe and their facilities . We think we're going to get some economic improvement based on more efficient , best in class type of processing and treating facilities .

Speaker #5: So we've got some of that modeled that we hope to realize . And then the Netbacks themselves sometimes what that involves is making an additional commitment to get capacity , basically buy your way into some capacity that reaches the Gulf Coast .

Speaker #5: You see some companies , I think there's a company hosting a call at this exact time that that's done that where you make a commitment to the midstream counterparty for that capacity , and they can offer you a bit closer to the ship channel pricing .

Speaker #5: Now , there's there's a negotiation involved and , you know , not not everybody can do that because clearly , most of the Permian would like to have the the ship channel versus the Waha pricing .

Speaker #5: But I think it represents a spectrum . We hope to get some of our gas closer to that , but it'll be something that that takes place over time .

Speaker #6: Yeah . Derek , I'd like to add from an operational perspective , I think , you know , this this midstream project is just a must have for our company to be able to grow the New Mexico asset .

Speaker #6: I think not only are we going to get a little bit better processing outcome from the new provider once we put about 15 million more into the , you know , as I said in the in our initial discussion , that will be all that current provider can handle .

Speaker #6: And so there will be without gas decline , there'll be no more room . So this really allows us with a , you know , 150 to 200 million more capacity within this new line .

Speaker #6: I mean , it's going to let us do what we're our main objective to drill oil and gas wells . You know , we'll we'll have a home for our product .

Speaker #6: So it really is a must have . Again , we can right now our pace is very limited in New Mexico . Just because of of that .

Speaker #6: So given that new capacity opportunity , then we can make the choice as commodity price swings , as our our value from making more oil and gas is enhanced , we can step it up and and fill that need quickly .

Speaker #7: Terrific . Well , great update guys . Very helpful commentary . I'll turn it back to the operator .

Speaker #8: Thank you .

Speaker #4: Thank you . Our next question comes from the line of Jeff Robertson from Water Tower Research . Please go ahead .

Speaker #9: Thank you .

Speaker #10: Thank you . Good morning . Bobby , maybe to follow up on your last comment , essentially , the midstream project , once it's completed , will allow Riley to produce more oil because you can more you can taste the development of your field .

Speaker #10: However you see fit with commodity prices . It . Since that's where the at least currently , that's where the real value is .

Speaker #10: Is that the right way to think about it ?

Speaker #6: No , absolutely . I think that was John . That was talking there . But but he's right on point . I mean , our objective is to get unconstrained , take capacity for both gas oil and water so that we have full flexibility in our pace of development to to develop the asset .

Speaker #11: I mean , you know , we've been drilling some pad locations with anywhere from 3 to 5 wells coming on at the same time .

Speaker #11: So it's a substantial bump in all of those that commodity mix all at one time . So the track we're on is just to to get us in a position to have all the options on the table .

Speaker #10: And Philip , can you talk about the capital spend for the midstream project ? Complete it in the first half of 2026 ? And then how that impacts your free cash flow flexibility in the back half of the year .

Speaker #10: With that burden behind you .

Speaker #8: Yes , sir .

Speaker #5: So I think this weaves into how I am. I prepared remarks talking about some of those maintenance scenarios and the level of spending there.

Speaker #5: You know , if you look at what we've disclosed in the very beginning of 2025 , we saw spending roughly $130 million on this midstream project to get it completed with the pipe and through initial areas in our kind of core core development area .

Speaker #5: Since buying silverback , we could expand that . But we don't have to do that right away . So we're considering a number of options .

Speaker #5: Jeff , you know , at if we if we bump along in this kind of $60 level or even a little bit low , we , we're going to be watching the prices and watching our cash flow , we could maintain the status quo and keep this on the balance sheet .

Speaker #5: I think based on the scenarios I described , we can be roughly free cash flow positive , even after combined upstream and midstream CapEx .

Speaker #5: So maybe that's somewhere in the 170 to $180 million range , or possibly just short after the dividend at $60 . WTI , in which case , you know , you've got a slight deficit there , but you've got plenty of capacity because you are creating value .

Speaker #5: So we take comfort there because we've we've created real asset value . We've got implied 120 , $130 million of spend there into the midstream at that point .

Speaker #5: And so, because of that, I guess I could segue. We're also considering some financing options at the project level. We've considered using a credit facility.

Speaker #5: Our existing credit facility is an RBL , a reserve based loan that allocates zero value to the midstream assets . Right now , because it's all about the upstream reserves .

Speaker #5: But they're very much is material hard asset value there . As I just described . There could be cumulative basis 100 and $130 million of book value by the end of next year .

Speaker #5: If we proceeded with that , we've also considered bringing on an investor partner , which could take different forms . And so we've had those and other options that we're working through .

Speaker #5: We take confidence that we have a number of alternatives. Nothing's been definitively decided at this stage.

Speaker #10: If you went some sort of project route in any economic benefit from third party . Volumes would flow through that type of entity .

Speaker #10: Is that right ?

Speaker #5: Yeah . And just to be clear , I'm talking more capital partners . Jeff , we can we could have third party operators that could come through the pipe and we could sell them some capacity , in which case we're collecting more fees .

Speaker #5: That's something that's possible too . And that's something that that helps with .

Speaker #8: Okay . Sorry . We got some .

Speaker #10: I'm sorry .

Speaker #5: Sorry . That's something that would help with revenue and cash flow over time , but not with the upfront capital to build the project that has its pros and cons .

Speaker #5: Pros is you know , you got true third party incremental revenue . There . You know the balance is with silverback and the size of our footprint .

Speaker #5: Now , I mean , we see potential to fill up the entire capacity by ourselves . Now that takes time to do it .

Speaker #5: Maybe it's 7 or 8 years . And so the question then is do you sell some of that capacity for a shorter term basis ?

Speaker #5: Do you sell it for a longer-term basis at a higher price? Do you expand this and so forth? So, it's kind of an organic thing that we're working through.

Speaker #5: But going back to the capital , you know , we'd be looking at some capital type partners that could come in different forms , whether it's an equity or credit .

Speaker #10: And lastly , on the on production , on the silverback assets , John or Bobby , is there more to do on those assets to continue the solid performance that you had in September , October in terms of workovers and lift optimization and those types of projects ?

Speaker #10: Or have you done the the the most obvious projects at this point ?

Speaker #6: Yeah , this is John . No , I would just say we've we've barely touched it . We've just gotten some obvious things .

Speaker #6: We're wells were offline when we took it over . You know , they had gone through this divestiture process a while . So missing a little TLC that we have found just , you know , some easy things to do .

Speaker #6: But we've also tried bringing over some of the more technology based , the way we do our , our cleanouts that we think are different from what other people do .

Speaker #6: And have had some really nice success on a couple of those . We , you know , we obviously have several hundred wells that we can work on .

Speaker #6: I , I think there's probably like 30 horizontals and , and upper two hundreds of of vertical wells . So there's quite a bit of playground there .

Speaker #6: We're frankly just , you know , very excited about it .

Speaker #10: Thank you .

Speaker #4: Thank you . Our next question comes from the line of Nicholas Pope from Roth Capital . Please go ahead .

Speaker #12: Morning , everyone .

Speaker #5: Good morning . Good morning .

Speaker #12: I was hoping you could expand a little bit on that last question . Just kind of looking at the the workovers y'all mentioned that that was a part of operating expenses being a little up for the for the quarter .

Speaker #12: Just a lot of opportunity . Just trying to quantify a little bit how much , I guess . Workovers were as a percentage of total operating expenses for the quarter .

Speaker #12: And like how you anticipate that split of of opex kind of over the next year or so .

Speaker #5: Nick , I'll take a first stab at this . I think this quarter it was a few like probably 3 million , 2 to $3 million higher than normal .

Speaker #5: You know, the reality is this is always in there. Sometimes it's in the nature of our wells versus a shale, but we're always doing workovers.

Speaker #5: Last quarter was relatively light , and this quarter we did more . You only see that on the line called lease operating expenses .

Speaker #5: But I , I think we had something like 8 to $9 million total here of , of Workovers and so on . An incremental basis .

Speaker #5: That was probably 2 to 3 higher than the the prior quarter .

Speaker #6: Yeah . For instance , Workover was 59% of total low this quarter versus last quarter , 27% . And I think it tends to range , you know , more in the 45 , 50% .

Speaker #6: So really there was I think $5 million silverback came in at around a $13 per barrel cost versus our two assets , typically average more in the 850 range .

Speaker #6: And so that kind of tells you how that blended up to , you know , a little bit over $9 per boe total low with , again , Workovers being typically 40 to 50% .

Speaker #5: And just to add a final point there, just how we manage the groups is that this is a mix of reactive and proactive work.

Speaker #5: Reactive is something that is down and it's a big miss , but proactive to go out and do these exciting projects . The groups are given a budget and we can monitor with , you know , real time analytics and stuff how our costs are coming in for the month .

Speaker #5: And so they have certain budgets to work with . And that's a way we can have that vacillate from quarter to quarter . But then come out smooth on the overall cost per boe .

Speaker #12: Yeah , that was very precise . I appreciate it . Looking at the the the the activity , the no drilling this quarter , bringing the rig back I guess .

Speaker #12: Where's the focus of kind of that near-term drilling with the with the rig coming back to , to start drilling right now .

Speaker #6: Yes . So we're over in champions in Texas . Like I said , we've got 8 to 10 wells coming by year end .

Speaker #6: This will kind of refill our inventory of ducks that we will use to complete. It gives us a great bit of flexibility with this whole commodity price challenge.

Speaker #6: So , you know , we'll be able to frack these things as we need them . Kind of move that throughout the year .

Speaker #6: Depending when when the markets are in our favor . So we have that . And around the turn of the year we will shift our focus to New Mexico and we will plan to start drilling a program there .

Speaker #6: I think we've only drilled 12 wells in New Mexico and the last year and a half that I've been here and we've had some great results there so far , so I'm excited to get back and prove out some more territory .

Speaker #6: There .

Speaker #5: And then on the turn in lines , Nick , the first half of the year next year will generally be Texas . The second half then would be New Mexico , contingent on our pipe coming online around mid-year .

Speaker #5: Again , we've got that flexibility with the ducks as John described , to throttle those more or less based on price , or if things are faster , if the project is faster or slower around the mid-year .

Speaker #12: , and that is great . It's very helpful . Should be fun to watch . That's all I had , guys . Thank you .

Speaker #4: Thank you again . If you'd like to ask a question , please press star and the number one on your telephone keypad . Now our next question comes from the line of Noel Parks from Toll Brothers .

Speaker #4: Please go ahead .

Speaker #13: Hi . Good morning . You know , I was interested to hear your thoughts earlier about . Some external financing , possibly . You know , being in site and , you know , we're in such a sort of unusual , uncertain macro environment and interest rate environment .

Speaker #13: And I was just wondering , as you as you consider that project level financing . Are you talking to pretty much usual suspects , the names we would kind of all be familiar with or I was wondering if you're you're seeing , you know , interest or capital coming in from , you know , more more unexpected players or new players .

Speaker #5: Sure . Well , let me take and respond to the first half of the question , which I think was a comment about uncertain macro and economic situation .

Speaker #5: You know , I admit and agree that the upstream energy industry is , is out of favor at the moment . It's a it's a tougher situation .

Speaker #5: On the equity markets , credit markets , whether for upstream or the wider market , are very , very healthy right now . This is on the upstream just real quick .

Speaker #5: You know , we've had a lot of consolidation . So a lot of paper has come off from the banks . They are really wide open lending , high yield markets , bond markets are wide open .

Speaker #5: Again , generally . And upstream we've got some very , very low spreads . That's not exactly what we're looking at here . But it just gives some context .

Speaker #5: What I'd also say is aside from just pure upstream , you know , there is a tremendous amount of appetite for capital for interesting new projects , infrastructure projects .

Speaker #5: You know , if I if I go to the extreme , we look at what's happening with the hyperscalers , AI and data centers , and you see the tremendous amount of capital being thrown at that .

Speaker #5: Well , that's you know , we're we're on the spectrum there of an infrastructure asset midstream being much , easily , more easily financed than upstream .

Speaker #5: Typically we've got some real hard asset value here . We're going to have some contracted volumes and values . And that's something that you can lend against .

Speaker #5: Like I said , the credit facility currently has zero allocated value for that . And so there's some debt capacity there . So just one example to start is just a plain vanilla bank is happy to do some lending .

Speaker #5: There . You know down we don't talk about it because it's not in our financials directly but our JV partner or our JV RPC power has a plain vanilla credit facility with a regular way bank for financing some of that .

Speaker #5: And that's seven 8% cost of capital . Something like that could be available for midstream . Or if we wanted more capital , we could bring in type of private capital investor who could be investing in some kind of common or preferred .

Speaker #5: If we structured it that way at the at the midstream level , you can go look at case studies of different groups that have that have done this at those midstream projects , private capital providers are excited to do this .

Speaker #5: I'm probably going to get a lot of calls after this is done . Just for saying this , but but yeah , they're excited to do that .

Speaker #5: And that represents , you know , something between credit and equity . And then you've got just pure common equity . If you wanted someone to be , you know , really investing all of it .

Speaker #5: Hope that's helps .

Speaker #13: Very much so thanks . Sort of staying on that topic of where there's a lot of interest these days . I'm just curious , compared with a few years ago when you decided to go forward with the the Power JV , mainly with an eye to your your internal needs , first and foremost .