Q2 2026 Kolibri Global Energy Inc Earnings Call

August 13, 2026

Speaker #1: Good day, and welcome to the Kolibri Global Energy's second quarter 2026 financials conference call. All participants will be in a listen-only mode. Media may monitor this call in a listen-only mode.

Operator: Good day, and welcome to the Kolibri Global Energy's Q2 2026 financials conference call. All participants will be in a listen-only mode. Media may monitor this call in a listen-only mode. They are free to quote any member of the management, but are asked to not quote remarks from any other participant without the participant's permission. If anyone has any trouble and needs assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone, and to withdraw your question, please press star then two. Please note this event is being recorded. I advise participants that this conference call is being recorded today, 13 August 2026. This call will be available on the company's website at www.kolibrienergy.com. Here is a disclaimer.

Speaker #1: You are free to quote any member of management, but are asked not to quote remarks from any other participant without that participant's permission. If anyone has any trouble and needs assistance, please signal a conference specialist by pressing the star key followed by 0.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touch-tone phone.

Speaker #1: And to withdraw your question, please press star then 2. Please note this event is being recorded. I advise participants that this conference call is being recorded today, August 13, 2026.

Speaker #1: This call will be available on the company's website at www.kolibrienergy.com. Here is a disclaimer: This call may include forward-looking statements. Forward-looking information regarding Kolibri's strategic plans, anticipated production, capital expenditures, exit rates, cash flows, reserves, and other estimates and forecasts.

Operator: This call may include forward-looking statements. Forward-looking information regarding Kolibri's strategic plans, anticipated production, capital expenditures, exit rates, cash flows, reserves, and other estimates and forecasts. Forward-looking information is subject to risks and uncertainties, and actual results will vary from the forward-looking statements. This call may include future-oriented financial information and financial outlook information, which Kolibri discloses in order to provide readers with a more complete perspective on Kolibri's potential future operations, and such information may not be appropriate for other purposes. For a description of the assumptions on which such forward-looking information is based and the applicable risk and uncertainties and Kolibri's policy for updating such statements, we direct you to Kolibri's most recent annual information form and management discussion and analysis for the period under discussion, as well as Kolibri's most recent corporate presentation, all of which are available on Kolibri's website.

Speaker #1: Forward-looking information is subject to risks and uncertainties, and actual results may vary from the forward-looking statements. This call may include future-oriented financial information and financial outlooks, which Kolibri discloses in order to provide readers with a more complete perspective on Kolibri's potential future operations, and such information may not be appropriate for other purposes.

Speaker #1: For a description of the assumptions on which such forward-looking information is based, and the applicable risks and uncertainties, as well as Kolibri's policy for updating such statements, we direct you to Kolibri's most recent annual information form and management discussion and analysis for the period under discussion.

Speaker #1: As well as Kolibri's most recent corporate presentation, all of which are available on Kolibri's website. Listeners should not place undue reliance on forward-looking information.

Operator: Listeners should not place undue reliance on forward-looking information. Kolibri undertakes no obligation to update any forward-looking, future-oriented financial or financial outlook information other than as required by applicable law. I would now like to turn the call over to Mr. Wolf Regener, the President and CEO of Kolibri Global Energy Inc. Please go ahead, sir.

Speaker #1: Kolibri undertakes no obligation to update any forward-looking, future-oriented financial or financial outlook information, other than as required by applicable law. I would now like to turn the call over to Mr. Wolf Regener.

Speaker #1: The President and CEO of Kolibri Global Energy Inc. Please go ahead, sir.

Speaker #2: Thank you.

Wolf Regener: Thank you. Thank you everyone for joining us today. With me on today's call is also Gary Johnson, our Chief Financial Officer. As hopefully everyone has seen, we released our Q2 2026 results this morning. If you looked at them, I hope you share our excitement about the results. To say we are very pleased is an understatement. Our Q2 resulted in the company having its highest quarterly revenue, production, and adjusted EBITDA in the history of the company. This is in spite of having three of our wells shut in for one-third of the quarter. We also finished drilling the three Clifton Mack wells, and are looking forward to beginning the completion operations on those shortly.

Speaker #3: And thank you, everyone, for joining us today. With me on today's call is also Gary Johnson, our Chief Financial Officer. As hopefully everyone has seen, we released our second quarter 2026 results this morning, and if you looked at them, I hope you share our excitement about the results.

Speaker #3: To say we are very pleased is an understatement. Our second quarter resulted in the company having its highest quarterly revenue, reduction, and adjusted EBITDA in the history of the company.

Speaker #3: And this is in spite of having three of our wells shut in for one-third of the quarter. We also finished drilling the three Clifton Mack wells and are looking forward to beginning the completion operations on those shortly.

Speaker #3: I'm also very excited that we're starting to drill the Levina 8-5-1 HF well, which is our first test of the Falls Canyon formation. I'm looking forward to testing this bench in our field.

Wolf Regener: I am also very excited that we are starting to drill the Lovina 8-5-1 HF well, which is our first test of the False Caney Formation. I am looking forward to testing this bench in our field. I am excited about this because of all the data we have. We have a whole core that showed that the False Caney is highly oil-saturated, and it has excellent characteristics on logs from numerous wells in the field. So I am looking forward to exciting times ahead from our company. With that, I will now turn over the call to Gary to discuss our financial results. Go ahead, Gary.

Speaker #3: I'm excited about this because of all the data we have. We have a whole core that showed the Falls Canyon is highly oil-saturated, and it has excellent characteristics on logs from numerous wells in the field.

Speaker #3: I'm looking forward to exciting times ahead for our company. With that, I'll now turn the call over to Gary to discuss our financial results.

Speaker #3: Go ahead, Gary.

Speaker #4: Thanks, Wolf. And thanks, everyone, for joining the call. I'm just going to go over a few highlights of the second quarter and the year-to-date results.

Gary W. Johnson: Thanks, Wolf, and thanks to everyone for joining the call. I am just going to go over a few highlights of the Q2 and the year-to-date results, then we can take questions at the end of the call. All amounts are in USD unless otherwise stated. I will start by going over the Q2. As you may have seen in our press release, our Q2 revenue was $22.5 million, which was our highest quarterly revenue in the company's history. Revenue increased by 109% from the prior year Q2, due to a 46% production increase and a 41% increase in average prices. Average production was up 46% to 4,690 BOE per day, compared to 3,220 BOE per day in the prior year quarter.

Gary Johnson: Thanks, Wolf, and thanks to everyone for joining the call. I am just going to go over a few highlights of the Q2 and the year-to-date results, then we can take questions at the end of the call. All amounts are in US dollars unless otherwise stated. I will start by going over the Q2. As you may have seen in our press release, our Q2 revenue was $22.5 million, which was our highest quarterly revenue in the company's history. Revenue increased by 109% from the prior year Q2, due to a 46% production increase and a 41% increase in average prices. Average production was up 46% to 4,690 BOE per day, compared to 3,220 BOE per day in the prior year quarter.

Speaker #4: Then I'm going to take questions at the end of the call. Our amounts are in US dollars unless otherwise stated. I'll start by going over the second quarter.

Speaker #4: As you may have seen in our press release, our second quarter revenue was $22.5 million, which was our highest quarterly revenue in the company's history.

Speaker #4: Revenue increased by 109% from the prior year's second quarter, due to a 46% production increase and a 41% increase in average prices. Average production was up 46% to 4,690 BOE per day.

Speaker #4: Compared to 3,220 BOE per day in the prior-year quarter. That increase was due to the production from the wells that were drilled and completed during the second half of '25.

Gary W. Johnson: That increase was due to the production from the wells that were drilled and completed during the H2 of 2025. Net income was $8.5 million, and basic EPS was $0.24 per share, compared to $2.9 million and basic EPS of $0.08 per share in the prior year's Q2, which was an increase of almost 200%. The increase was due to higher revenue and an unrealized gain on commodity contracts, partially offset by higher operating expense and depletion expense due to the higher production. Adjusted EBITDA was $16.4 million, compared to $7.7 million in the prior quarter, which was an increase of 114% due to higher revenues, partially offset by higher OpEx and a realized loss on commodity contracts.

Gary Johnson: That increase was due to the production from the wells that were drilled and completed during the H2 of 2025. Net income was $8.5 million, and basic EPS was $0.24 per share, compared to $2.9 million and basic EPS of $0.08 per share in the prior year's Q2, which was an increase of almost 200%. The increase was due to higher revenue and an unrealized gain on commodity contracts, partially offset by higher operating expense and depletion expense due to the higher production. Adjusted EBITDA was $16.4 million, compared to $7.7 million in the prior quarter, which was an increase of 114% due to higher revenues, partially offset by higher OpEx and a realized loss on commodity contracts.

Speaker #4: Net income was $8.5 million and basic EPS was $0.24 per share, compared to $2.9 million and basic EPS of $0.08 per share in the prior second quarter.

Speaker #4: This was an increase of almost 200%. The increase was due to higher revenue and an unrealized gain on commodity contracts, partially offset by higher operating expense and depletion expense due to the higher production.

Speaker #4: Adjusted EBITDA was $16.4 million compared to $7.7 million in the prior quarter, which was an increase of 114%, due to higher revenues partially offset by higher OPEX and a realized loss on commodity contracts.

Speaker #4: Our netback from operations increased to $4,392 per BOE compared to $2,966 per BOE in the prior quarter, which was an increase of 48%.

Gary W. Johnson: Our Netback from operations increased to $43.92 per BOE, compared to $29.66 per BOE in the prior quarter, which was an increase of 48%. This was due to higher average prices for the quarter, which were partially offset by higher operating expenses. Production and operating expense averaged $8.90 per BOE for the quarter, compared to $7.15 per BOE in the prior quarter, which was an increase of 24%. This increase was due to workover costs for a non-operated well, which added $0.59 per BOE, and also temporary higher water hauling costs compared to 2025. Moving on to the year-to-date June results. Net revenue increased by 55% to $42.1 million, compared to $27.2 million, due to a 29% increase in production and a 19% increase in average prices.

Gary Johnson: Our Netback from operations increased to $43.92 per BOE, compared to $29.66 per BOE in the prior quarter, which was an increase of 48%. This was due to higher average prices for the quarter, which were partially offset by higher operating expenses. Production and operating expense averaged $8.90 per BOE for the quarter, compared to $7.15 per BOE in the prior quarter, which was an increase of 24%. This increase was due to workover costs for a non-operated well, which added $0.59 per BOE, and also temporary higher water hauling costs compared to 2025. Moving on to the year-to-date June results. Net revenue increased by 55% to $42.1 million, compared to $27.2 million, due to a 29% increase in production and a 19% increase in average prices.

Speaker #4: This was due to higher average prices for the quarter, which were partially offset by higher operating expenses. Production and operating expense averaged $8.90 per BOE for the quarter.

Speaker #4: Compared to $7.15 per BOE in the prior quarter, which was an increase of 24%. This increase was due to workover costs for a non-operated well, which added $59.10 per BOE, and also temporarily higher water hauling costs compared to Q2 '25.

Speaker #4: So, moving on to the year-to-date June results. Net revenue increased by 55% to $42.1 million, compared to $27.2 million, due to a 29% increase in production and a 19% increase in average prices.

Speaker #4: Average production for year-to-date June was up 29% to $4,688 BOE per day compared to $3,646 in the prior year period. And this increase was again due to production from the wells that were drilled during the last half of '25.

Gary W. Johnson: Average production for year-to-date June was up 29% to 4,688 BOE per day, compared to 3,646 in the prior year period. This increase was again due to production from the wells that were drilled in the last H2 of 2025. Net income was $12.5 million, and basic EPS was $0.35 per share, compared to $8.6 million and basic EPS at $0.24 per share in the prior year period. The increase was due to higher revenue, partially offset by higher operating expense and depletion expense due to the higher production, higher interest expense, and a realized loss on our commodity contracts in 2026.

Gary Johnson: Average production for year-to-date June was up 29% to 4,688 BOE per day, compared to 3,646 in the prior year period. This increase was again due to production from the wells that were drilled in the last H2 of 2025. Net income was $12.5 million, and basic EPS was $0.35 per share, compared to $8.6 million and basic EPS at $0.24 per share in the prior year period. The increase was due to higher revenue, partially offset by higher operating expense and depletion expense due to the higher production, higher interest expense, and a realized loss on our commodity contracts in 2026.

Speaker #4: Net income was $12.5 million and basic EPS was $35 cents per share compared to $8.6 million and basic EPS of $24 cents per share in the prior year period.

Speaker #4: The increase was due to higher revenue, partially offset by higher operating expense and depletion expense due to the higher production, higher interest expense, and a realized loss on commodity contracts in Q2 '26.

Speaker #4: Adjusted EBITDA was $31.3 million compared to $20.5 million in the prior year period. An increase of 52% due to higher revenue partially offset by higher operating expenses and a realized loss on commodity contracts.

Gary W. Johnson: Adjusted EBITDA was $31.3 million, compared to $20.5 million in the prior year period, an increase of 52% due to higher revenue, partially offset by higher operating expenses and a realized loss on commodity contracts. Netback from operations increased by 21% to $41.18 per BOE, compared to $34.05 per BOE in the prior year period. This was due to higher average prices, partially offset by higher operating expenses. I also wanted to add that our credit facility was redetermined in the Q2, and our borrowing base was increased by 15% from $65 million to $75 million. The continued increase in our borrowing base gives us more flexibility in managing our working capital going forward, and it also demonstrates the growing value of our property.

Gary Johnson: Adjusted EBITDA was $31.3 million, compared to $20.5 million in the prior year period, an increase of 52% due to higher revenue, partially offset by higher operating expenses and a realized loss on commodity contracts. Netback from operations increased by 21% to $41.18 per BOE, compared to $34.05 per BOE in the prior year period. This was due to higher average prices, partially offset by higher operating expenses. I also wanted to add that our credit facility was redetermined in the Q2, and our borrowing base was increased by 15% from $65 million to $75 million. The continued increase in our borrowing base gives us more flexibility in managing our working capital going forward, and it also demonstrates the growing value of our property.

Speaker #4: Net back from operations increased by 21% to $41.18 per BOE compared to $3,405 per BOE in the prior year period. This was due to higher average prices partially offset by higher operating expenses.

Speaker #4: I also wanted to add that our credit facility was redetermined in the second quarter, and our borrowing base was increased by 15%, from $65 million to $75 million.

Speaker #4: The continued increase in our borrowing base gives us more flexibility in managing our working capital going forward, and it also demonstrates the growing value of our property.

Speaker #4: As you can see, last year's drilling program led to significant increases in revenue and cash flow across both the second quarter and the first half of the year.

Gary W. Johnson: As you can see, last year's drilling program led to significant increases in revenue and cash flow across both the Q2 and the H1 of the year. We anticipate the four new wells in our 2026 drilling program will add on to this growth, primarily in the Q4, when the wells are expected to be contributing a full quarter of production. With that, I will hand it back to Wolf.

Gary Johnson: As you can see, last year's drilling program led to significant increases in revenue and cash flow across both the Q2 and the H1 of the year. We anticipate the four new wells in our 2026 drilling program will add on to this growth, primarily in the Q4, when the wells are expected to be contributing a full quarter of production. With that, I will hand it back to Wolf.

Speaker #4: We anticipate the four new wells in our 2026 drilling program will add on to this growth. Primarily in the fourth quarter when the wells are expected to be contributing a full quarter of production.

Speaker #4: And with that, I'll hand it back to Wolf.

Speaker #1: Thanks, Gary.

Wolf Regener: Thanks, Gary. As Gary laid out, we had a great quarter, with us hitting our highest ever quarterly revenue, production, and adjusted EBITDA. We are looking forward to more growth with the four new wells coming online. In addition, as I said in the beginning of the call, we are also really looking to this False Caney test. Having a successful False Caney well can open up the door to many more locations, reserves, and thus value creation for all shareholders. That is what I believe we are all here to do. This concludes the formal part of our presentation, and we would be happy to answer any questions you may now have.

Speaker #3: As Gary laid out, we had a great quarter with us hitting our highest ever quarterly revenue, production, and adjusted EBITDA. And we're looking forward to more growth with the four new wells coming online.

Speaker #3: In addition, as I said at the beginning of the call, I'm also really looking forward to this Falls Canyon test. Having a successful Falls Canyon well can open up the door to many more locations, reserves, and thus value creation for all shareholders.

Speaker #3: And that is what I believe we are all here to do. This concludes the formal part of our presentation. And we'd be happy to answer any questions you may now have.

Speaker #2: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. We will pause momentarily to assemble our roster. The first question will come from Steve Ferazani with Sidoti. Please go ahead.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We will pause momentarily to assemble our roster. The first question will come from Steve Ferazani with Sidoti. Please go ahead.

Speaker #2: If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. We will pause momentarily to assemble our roster.

Speaker #2: In the first question, we'll come from Steve Ferrazzani with Sadodi. Please go ahead.

Speaker #5: Good morning, Wolf. Morning, Gary. Obviously, great quarter. Wolf, the surprise to us was the strength in the 2Q production and the fact that there really even if we factor in the volume adjustment by the gas purchaser, it's largely offset by the shut-in of the Alicia Renee wells.

Steve Ferazani: Morning, Wolf. Morning, Gary. Obviously, great quarter. Wolf, the surprise to us was the strength in the Q2 production and the fact that there really, even if we factor in the volume adjustment by the gas purchaser, it is largely offset by the shut-in of the Alicia Renee wells. We exclude that, and there is virtually no sequential decline in production, even though you added no new volume, in the H1. I am just trying to figure out how that happens.

Speaker #5: We exclude that. And there's virtually no sequential decline in production, even though you added no new volume in the first half. I'm just trying to figure out how that happens.

Wolf Regener: Wells did well in my view. But the wells are performing well and when we bring these wells on, they flow for a while, then we put them on a lift. So we got a little boost again when we put them on lift, had a little decline, and then came back up again on that. And now they'll start their normal decline after that as well. We're not going to stay flat-lined unfortunately until we bring new wells on.

Speaker #3: Well, it did well. But yeah, no, the wells are performing well. And when we bring these wells on, they flow for a while, then we put them on lift.

Speaker #3: And so we got a little boost again when we put them on lift, had a little decline, and then came back up again on that.

Speaker #3: And now they'll start their normal decline after that as well. So we're not going to stay flatlined, unfortunately, until we bring the new wells on.

Steve Ferazani: Unfortunately.

Speaker #3: Which will go back up again. So, yeah.

Wolf Regener: Which will go back up again. So yeah.

Speaker #5: When I.

Steve Ferazani: When I think about-

Speaker #3: But when I think of what's going on.

Wolf Regener: But that's what's going on.

Speaker #5: Well, when I think about that, were those the 4Q wells? Was it the Barnes and the Vale, and were you still optimizing those wells within Q1?

Steve Ferazani: Well, when I think about that, the Q4 wells, the, was it the Barnes and the Velin?

Wolf Regener: Right.

Steve Ferazani: Were you still optimizing those wells within Q1? Is that part of the factor here?

Speaker #5: Is that part of the factor here?

Wolf Regener: Yeah. Well, it is more along the lines of what I mentioned as far as bringing the gas compression in to the gas lift. That helps it out again, right? So you have some decline before it is happening, and then you can reverse some of that when you bring that on.

Speaker #3: More along the lines of what I mentioned, as far as bringing the gas compression into the gas lift. And that helps it out again, right?

Speaker #3: So you have some declines as far as what's happening, and then you can reverse some of that when you bring that on.

Speaker #5: Got it.

Steve Ferazani: Got it.

Speaker #3: Yeah.

Wolf Regener: Yeah.

Speaker #5: Just, Gary, the gas purchaser volume adjustment—what quarter was that from? I'm just trying to figure out how it factored into your gas and NGL realized price.

Steve Ferazani: Gary, the gas purchaser volume adjustment, what quarter was that from? I am just trying to figure out how it factored into your gas and NGL realized price.

Speaker #3: It's related to several periods in the past, going back to '24, actually. So it's, uh, but it's just certain wells. But yeah, it goes back quite a few months.

Gary W. Johnson: It is related to several periods in the past, going back to 2024, actually.

Gary Johnson: It is related to several periods in the past, going back to 2024, actually.

Steve Ferazani: Okay.

Gary W. Johnson: It is-

Gary Johnson: It is-

Steve Ferazani: Oh, wow. Okay.

Gary W. Johnson: but it is just certain wells. Yes, it goes back quite a few months, quite a few years, actually.

Gary Johnson: but it is just certain wells. Yes, it goes back quite a few months, quite a few years, actually.

Speaker #3: Quite a few years actually.

Speaker #5: Got it. Got it. You provided the updated guidance in late June. Were there any new factors that weren't included in that guide, Wolf? So, we know we had the volume adjustment.

Steve Ferazani: Got it. You provided the updated guidance late June. Were there any new factors that were not included in that guide, Wolf? We know we had the volume adjustment. I am assuming late June you knew that, you knew the shut-in of the Alicia Renee wells. I am sure you had a reasonable sense of the timing.

Speaker #5: I'm assuming by late June you knew that. You knew about the shut-in of the Alicia Renee wells. I'm sure you had a reasonable sense of the timing of the three wells you're completing now.

Wolf Regener: Right

Steve Ferazani: of the three wells you are completing now. Any factors we should be thinking about that were not in that guide?

Speaker #5: Are there any factors we should be thinking about that were not included in that guide?

Speaker #3: No, it'll just depend on how these wells do that are coming on—the four wells. That's really the biggest factor.

Wolf Regener: No, it will just depend on how these wells do that are coming on.

Steve Ferazani: Yeah.

Wolf Regener: The four wells. That is really the biggest factor on.

Speaker #5: But that's really what puts you ahead.

Steve Ferazani: But that is really what puts you from, yeah.

Speaker #3: Our guidance set, yeah. Because it's a lot of production coming on at once, right? And, I mean, our production's been growing nicely, right?

Wolf Regener: How our guidance hits. Yeah. Because it is a lot of production coming on at once, right? While our production has been growing nicely, right? At close to 5,000.

Speaker #3: We're up close to 5,000.

Steve Ferazani: Yeah, absolutely.

Speaker #5: Yeah. Absolutely.

Speaker #3: But still, bringing on four wells at a time that have high IPs can really move the needle a lot one way or another for a forecast.

Wolf Regener: But still bringing on four wells at a time that have high IPs, really moves the needle a lot one way or another for a forecast. That is our biggest variable, I will say.

Speaker #3: So that's our biggest variable, I'll say.

Speaker #5: That's what would put you to the higher end. Because right now, you'd be—I mean, to hit the low end of guidance, the second half would be flat to the first half.

Steve Ferazani: That is what would put you to the higher end. Because right now you would be. To hit the low end of guidance, H2 would be flat to H1. So it is reasonable to start thinking probably the low end is less low risk.

Speaker #5: So, it's reasonable to start thinking that, probably, the low end is less low risk.

Speaker #3: I don't want to overpromise anything, so I'm just.

Wolf Regener: I do not want to overpromise anything, so I am just going to say.

Steve Ferazani: Yeah, I understand.

Speaker #5: Yeah. I understand that.

Speaker #3: Our guidance is what we have.

Wolf Regener: our guidance is what we have.

Speaker #5: I'm trying to get you to, anyway.

Steve Ferazani: I'm trying to get you to anyway.

Speaker #3: Sorry, I'm not going to fall for it. No offense.

Wolf Regener: Sorry, I'm not going to fall for it.

Steve Ferazani: Fair enough.

Wolf Regener: No offense.

Speaker #5: But bigger picture, Q3, based on the guide, Q3 is going to be your low production quarter. Q4 is expected to be the high production quarter for the year.

Steve Ferazani: But bigger picture, based on the guide, Q3 is going to be your low production quarter. Q4 is expected to be the high production quarter for the year.

Speaker #3: Correct. You're absolutely right.

Wolf Regener: Correct. You are absolutely right.

Speaker #5: Okay. And then the is the Levina well in general, so it's a two-mile well. You haven't done two-mile lateral. You haven't done that before.

Steve Ferazani: Okay. Is the Lovina well in general, so it is a 2-mile well, you have not done 2-mile laterally, you have not done that before. How much of that is because it is in the False Caney, or how much of it is the geographical location in the field what is allowing you to try the 2-mile lateral for the first time?

Speaker #5: How much of that is because it's in the Falls Canyon, or how much of it is the geographical location in the field? What's allowing you to try the two-mile lateral for the first time?

Speaker #3: Even on these mile-and-a-half laterals, some of them are a little bit longer because we're sometimes coming into a section back a bit. So some of these mile-and-a-halfs are actually a little bit longer.

Wolf Regener: Even on these mile and a half laterals, some of them are a little bit longer because we're sometimes coming into a section back a bit. So some of these mile and a half were actually a little bit longer. But really, it's a quiet area. We've had no. We've been able to steer still at the end of our laterals, and that was the hardest part for us in the beginning when we just had one-mile laterals, because we do have quite a bit of dip here. We've made this so

Speaker #3: But really, I mean, it's a quiet area. We've had no—we've been able to steer still at the end of our laterals. And that was the hardest part for us in the beginning, when we just had one-mile laterals, because we do have quite a bit of dip here.

Speaker #3: We've made this so that we don't have quite as much dip here. It's in the quiet area of the field where we don't see a whole lot of faulting.

Steve Ferazani: Okay

Wolf Regener: that we don't have quite as much dip here. It's in a quiet area of the field where we don't see a whole lot of faulting. We have good control around it. So we feel comfortable that we can push it to the 2 mile out here on this well.

Speaker #3: We have good control around it. So we feel comfortable that we can push it to the two-mile out here. On this well.

Speaker #5: Got it. That's an exciting time. What would make you—what are the factors in deciding whether you'll complete it or not? Or we don't know?

Steve Ferazani: Well, it's an exciting time. What are the factors in deciding whether you'll complete it or not? Or we don't know?

Speaker #3: Oh, I would imagine, unless we have a horrible drilling issue, then we'll be completing that.

Wolf Regener: Oh, I would imagine, unless we have a horrible drilling issue, we'll be completing that.

Speaker #5: Yeah, which would then— and that's a plan, would be the...

Steve Ferazani: Yeah, which would then the plan would be the.

Wolf Regener: I can't imagine any scenario where we wouldn't.

Speaker #3: I can't imagine any scenario. I can't imagine any scenario where we wouldn't.

Speaker #5: And that would you be using the timing-wise, would you be using the same spread?

Steve Ferazani: Would you be using the, timing wise, would you be using the same spread?

Wolf Regener: It's probably, I don't know if it's going to be the same or not.

Speaker #3: It's probably—I don't know if it's going to be the same or not. It'll just be a matter of timing, who's available, and the right price, too.

Steve Ferazani: Okay.

Wolf Regener: It would just be the matter of timing, who's available.

Steve Ferazani: Yep

Wolf Regener: for the right price too, right? But it is timing as well.

Speaker #3: Right? But it is timing probably as well. So as soon as we're done drilling, we'd like to get the completion crew in as quickly as possible, much like we're doing on the Clifton Mack wells here.

Steve Ferazani: Of course.

Wolf Regener: As soon as we're done drilling, we'd like to get the completion crew in as quickly as possible, much like we're doing on the Clifton Mack wells here.

Speaker #5: Got it. Last one for me, just an update on your production operating costs. The water hauling—do you expect that to continue through this year?

Steve Ferazani: Got it. Last one for me, just on the update on your production and operating costs. The water hauling, do you expect that to continue through this year? The workover is isolated to this quarter, fair?

Speaker #5: The workover is isolated to this quarter. Fair?

Speaker #3: Yeah, the workover is definitely isolated to this quarter. Well, it's actually the first half because it was in the first quarter as well.

Wolf Regener: Yeah, the workover was definitely isolated to the quarter. It was,

Gary W. Johnson: Well, it was actually the H1 because it was in the Q1 as well. The workover

Gary Johnson: Well, it was actually the H1 because it was in the Q1 as well. The workover

Speaker #3: The work over, from our non-op, was both quarters. But yeah, it should stop now. But the water hauling. And I think it should.

Wolf Regener: Correct.

Steve Ferazani: Yep

Gary W. Johnson: from our non-op was both quarters. But yeah, it should stop now. But the water hauling was shocking. I think it should. It should be.

Gary Johnson: from our non-op was both quarters. But yeah, it should stop now. But the water hauling was shocking. I think it should. It should be.

Speaker #4: It's shocking how much was spent on one well.

Wolf Regener: It was shocking how much was spent on one well.

Speaker #3: Yes. We were shocked.

Gary W. Johnson: Yes, we were shocked.

Gary Johnson: Yes, we were shocked.

Speaker #5: And then the water. And the water hauling, Gary, do you think that does that temper here, or is it around this level for the year?

Steve Ferazani: The water hauling, Gary, do you think that, does that temper here, or is it around this level for the year?

Speaker #3: I mean, it's definitely gone—it's definitely gone down throughout the quarter. I mean, throughout the year so far. But, I mean, it might be—it's probably going to be higher than last year a little bit, but not too much.

Gary W. Johnson: It is definitely gone, it is definitely going down throughout the quarter. I mean, throughout the year so far, but, it might be, it is probably going to be higher than last year a little bit, but not too much.

Gary Johnson: It is definitely gone, it is definitely going down throughout the quarter. I mean, throughout the year so far, but, it might be, it is probably going to be higher than last year a little bit, but not too much.

Speaker #3: But it's definitely going to temper down.

Steve Ferazani: Yeah.

Gary W. Johnson: But it is definitely going to temper down.

Gary Johnson: But it is definitely going to temper down.

Speaker #5: Got it. And then just generally on cost pressures, are you seeing them around your field?

Steve Ferazani: Got it. Then just generally on cost pressures, are you seeing them around your field?

Wolf Regener: We have had some increases. Some of our chemical costs have come up, and so we are putting actually some physical things in to try to knock those chemical costs down again.

Speaker #3: We've had some increases. I mean, some of our chemical costs have come up and up. And so, we're actually putting some physical things in place to try to knock those chemical costs down again.

Steve Ferazani: Okay.

Wolf Regener: So we are in early stages of that. We think we are making some progress on that. But, yeah. There has been some cost escalation, but nothing too bad.

Speaker #3: So we're in early stages of that. We think we're making some progress on that. But yeah, I mean, there's been some cost escalation, but nothing too bad.

Wolf Regener: So we are in early stages of that. We think we are making some progress on that. But, yeah. There has been some cost escalation, but nothing too bad.

Speaker #5: Got it. All right. Thanks, Wolf. Thanks, Gary.

Steve Ferazani: Got it. All right. Thanks, Wolf. Thanks, Gary.

Speaker #3: Absolutely. Thanks, Steve.

Wolf Regener: Absolutely. Thanks, Steve.

Speaker #2: The next question will come from Nicholas Pope with Ross Capital. Please go ahead.

Operator: The next question will come from Nicholas Pope with Roth Capital. Please go ahead.

Speaker #6: Hey, Gary. Hey, Wolf. How are you doing?

Nicholas Pope: Hey, Gary. Hey, Wolf. How are you doing?

Speaker #3: I'm good, I'm good. How are you?

Wolf Regener: I'm good. How are you?

Speaker #6: Good. I've got a couple of quick questions here. On the operations front, I'm curious about that Levina well. With the first test here in Falls Canyon, you said you had that whole core look oil saturated.

Nicholas Pope: Good. Got a couple of quick questions here on the operations front. Curious with that Lovina well, first test here in the False Caney said you had that whole core looked oil saturated. Curious what, I guess, what's remaining from a risk standpoint as you look at that well and how you all are expecting to communicate with the street the results of that well or, maybe what you view as successful relative to what we're seeing in the core Caney wells that you're already drilling, maybe comparing it with that.

Speaker #6: I'm curious, what do you see as remaining from a risk standpoint as you look at that well, and how are you expecting to communicate with the Street regarding the results of that well?

Speaker #6: Or maybe what you’d view as kind of successful relative to what we’re seeing in the core Canyon wells that you’re already drilling?

Speaker #6: Maybe comparing it with that.

Speaker #3: Yeah, yeah. So, on a prospective basis, the zone's a little thinner. You can see that on our presentation, too, with how we've—it's more cartoonish, but it is relative to one another.

Wolf Regener: Yeah. So on a prospective basis, the zone's a little thinner. You can see that on our presentation, too, with how we've. It's more cartoonish, but it is relative to one another. So it's a little thinner than the Caney itself. But if you look at how much acreage we have in our proved reserves for our Caney itself, it's like 11,500 acres net to us. The Caney, we think, has perspective over about 9,900 acres. So it's not as thick, and we have a lot of reserves in the Caney, right? We have 40 million barrels proved in the Caney itself.

Speaker #3: So, it's a little thinner than the canyon itself. But if you look at how much acreage we have in our proved reserves for our canyon itself, it's like 11,500 acres net to us.

Speaker #3: And the Canyon, we think, has prospective over about 9,900 acres. So it's not as thick. And we have a lot of reserves in the Canyon, right?

Speaker #3: We have 40 million barrels proved in the canyon itself. And so, even if the Falls Canyon is thinner, even if you want to cut it in half, we're looking at something comparable that we're hoping to be able to get a lot of reserves from if we can make this work.

Wolf Regener: Even if the False Caney is thinner, even if you want to cut it in half, we're looking at something comparable that we're hoping to be able to get a lot of reserves, if we can make this work, and it's repeatable. So really what we're looking for is having a good well that's steered in this interval. We'll get the cuttings and get the analysis as we're drilling it as well, so we have a feel for what the rock looks like. Not anticipating any big surprises on that front. Then it'll come down to just what the flow rates are from it and then what ultimately are the decline rates. But we've liked that core for a long time. Because it's a little thinner, we think the 2-mile laterals really make the economics work really well.

Speaker #3: And it's repeatable. So really what we're looking for is having a good well that's steered in this interval. We'll get the cuttings and get the analysis as we're drilling it as well.

Speaker #3: So, we have a feel for what the rock looks like—not anticipating any big surprises on that front. And then it will come down to just what the flow rates are from it, and then, ultimately, what the decline rates are.

Speaker #3: But we've liked that core for a long time. Because it's a little thinner, we think the two-mile laterals really make the economics work really well.

Speaker #3: And our steering has gotten better and better with the newer tools over the last five or six years, even. So we have high hopes that we're going to keep it where we want it.

Wolf Regener: Our steering has gotten better and better with the newer tools over the last 5, 6 years even. We have high hopes that we are going to keep it where we want it, that our geology is going to be good, and it should be with the control we have. We will make a good well, and then it will be what the flow rates are and what the 30-day rate is and how she declines thereafter. So it is hopefully going to be pretty. I am hoping it is very definitive right off the bat.

Speaker #3: But our geology is going to be good, and it should be with the control we have. That will make a good well. Then there will be what the flow rates are, what the 30-day rate is, and how she declines thereafter.

Speaker #3: So, it's hopefully going to be pretty—I'm hoping it's very definitive right off the bat.

Speaker #6: And how are you expecting these wells, their initial rates, to compare to the Canyon itself? Or is it too early?

Nicholas Pope: How are you expecting these wells, like their initial rates to compare to the Caney itself? Or is it too early?

Speaker #3: I'm hoping it's really too early. I mean, I'm hoping we're making at least what the Canyon wells are. It might have higher IPs. It might be, but the terms look a little better.

Wolf Regener: I am hoping. It is really too early. I mean, I am hoping we are making at least what the Caney wells are. It might have higher IPs, maybe, but the terms look a little better, but we will see. Let us let the production speak for itself when we do it. So I do not want to lead anyone too much one way or another on this.

Speaker #3: But we'll see. Let's let the production speak for itself when we do it. So I don't want to lead anyone too much one way or another on this.

Speaker #6: Got it. Appreciate that, Wolf. And then, looking at these Alicia-Renee wells that are shut in, I'm curious if there's any concern about performance once those come back online when the Clifton-Mack wells are done?

Nicholas Pope: Got it. Appreciate that, Wolf. Looking at these Alicia Renee wells that are shut in.

Wolf Regener: Mm-hmm. Right.

Nicholas Pope: Curious if there's any concern about performance once those come back online when the Clifton Mack wells are done or it's pretty straightforward to-

Speaker #6: Or is it pretty straightforward?

Speaker #3: No, not at all. Yeah, so it's just the way we had to redesign the programs—we had to drill them closer into where those were.

Wolf Regener: No, not at all. So it's just the way we had to redesign the programs, we had to drill them closer into where those were, just to get around some of the faults that we found when we drilled that first one. That's the reason that they're shut in. We're drilling really close to where those other wellbores were. But it's the very toe end of those wellbores that are hitting the heel of the Clifton Mack wells. Even if we frack into it a little bit, it's just at the very heel of it and shouldn't affect the Clifton Mack much or the Alicia Renee much. Our wells in general, we actually get a bunch of flush production after these wells have been shut in for a while because they don't produce a whole lot of water.

Speaker #3: Just to get around some of the faults that we found when we drilled that first one, and so that's the reason that they're shut in.

Speaker #3: They're just—we're drilling really close to where those other well bores were. But it's the very toe end of those well bores that are hitting the heel of the Clifton Mack wells.

Speaker #3: So even if we frack into it a little bit, it's just at the very heel of it and shouldn't affect the Clifton Mack much.

Speaker #3: For the Alicia Renee and our wells in general, we actually get a bunch of flush production after these wells have been shut in for a while because they don't produce a whole lot of water.

Wolf Regener: It's just the water that we've injected, and it slowly comes back over time. I'm anticipating some flush production out of the Alicia Renee when they come back on.

Speaker #3: It's just the water that we've injected over, and it slowly comes back over time. So I'm anticipating some flush production out of the Alicia Renee when they come back on.

Wolf Regener: It's just the water that we've injected, and it slowly comes back over time. I'm anticipating some flush production out of the Alicia Renee when they come back on.

Speaker #6: Got it. All right. Well, that's all I had. I appreciate the time, Wolf.

Nicholas Pope: Got it. All right. Well, that's all I had. I appreciate the time, Wolf.

Speaker #3: No, absolutely. Good to hear from you, Nick.

Wolf Regener: No, absolutely. Good to hear from you, Nick.

Speaker #2: Again, if you have a question, please press star then one. Our next question will come from Richard Darnley with Longport Partners. Please go ahead.

Operator: Again, if you have a question, please press star, then one. Our next question will come from Richard Darnley with Longport Partners. Please go ahead.

Speaker #7: Good morning. The Clifton Mackwells with the casing problem was because one of the things was too much pressure. How much more pressure did they have than what you were expecting?

Richard Darnley: Good morning. The Clifton Mack wells with the casing problem had, was because one of the things was too much pressure. How much more pressure did they have than what you were expecting, or versus the standard average Caney well?

Speaker #7: Or versus the standard Canyon average Canyon well?

Speaker #3: Yeah. And let me say it's not so much a casing issue. It's just that we had to use extra casing strings in these wells, so we had a lower pressure interval that was up shallower, which we've not had in other areas of the field.

Wolf Regener: Yeah, let me say it is not so much a casing issue, it is just that we had to use extra casing strings in these wells. We had a lower pressure interval that was up shallower that we have not had in other areas of the field, just in this area. We had to put an extra casing string across that to isolate that. Then there was some higher pressures down at the bottom. Before we drilled the lateral, we set another string right there before we drilled the lateral in order to hold everything back and keep everything isolated. It has always been a tougher interval for us right at that transition from the Springer into the Caney Shale. Really, that is the extra security that was there for these wells that we felt that we had to do in order to go forward.

Speaker #3: Just in this area. So we had to put an extra casing string across that to isolate it. And then there were some higher pressures down at the bottom.

Speaker #3: So before we drilled the lateral, we set another string right there, before we drilled the lateral, in order to hold everything back and keep everything isolated.

Speaker #3: That's kind of a—it's always been kind of a tougher interval for us, right up, that transition from the Springer into the Canyon formation.

Speaker #3: So really, that's the extra security that was there for these wells that we felt we had to have in order to go forward.

Speaker #3: Yeah, it showed us higher pressures. I don't have a quantifiable number on that, so we'll just see what she does when we come back.

Wolf Regener: Yeah, it showed us higher pressures. I do not have a quantifiable number on that, so we will just see what she does when we come back. Really, the only pressure we can really get is once we actually fracture stimulate and start getting fluid back out of the rock. Before that, we used higher mud weights here to drill it, to keep everything in place. That is the reason for the higher pressures that we mentioned.

Speaker #3: Really, the only pressure we can actually get is once we fracture stimulate and start getting fluid back out of the rock. So before that, we used higher mud weights here to drill it, to keep everything in place.

Speaker #3: So that's the reason for the higher pressures that we mentioned.

Speaker #7: Right. And what did they end up costing?

Richard Darnley: Right. What did they end up costing?

Speaker #3: Well, we haven't specified it specifically, but they were more expensive than our normal wells.

Wolf Regener: Well, we have not specified it specifically, but they were more expensive than our normal wells.

Richard Darnley: Is that classified info?

Speaker #7: Is that classified info?

Speaker #3: No, just that we haven't discussed it. So whatever we didn't specifically put in the press release, I can't say on the call either, because otherwise we'd have to do another press release to disseminate that information.

Wolf Regener: No, it is just we haven't discussed it, so I can't. Whatever we didn't specifically put in a press release, I can't say on the call either, because otherwise we have to do another press release to disseminate that information. Not trying to be difficult, but have to be careful about what we disseminate to everyone per the rules.

Speaker #3: I'm not trying to be difficult, but we have to be careful about what we disseminate to everyone, per the rules.

Speaker #7: Right. Well, it would be useful to know that when you release the IP or EUR estimates. Just background, and—

Richard Darnley: Well, it would be useful to know that when you release the IP or EUR estimates, just for background.

Wolf Regener: Absolutely understand. But the good part is that, or the A part is no matter what these wells cost, we are still guiding toward our normal Caney well still being that same cost because in the rest of the field, we don't have to do these extra casing strings.

Speaker #3: Absolutely understand. But the good part is that, or the good part is, no matter what these wells cost, we're still guiding toward our normal Canyon wells still being that same cost, because in the rest of the field, we don't have to do these extra casing strings.

Speaker #7: Right. Right. And is the gas-oil ratio heading north this quarter? Is that a one-off, or are your base, the average of your base wells, getting gassier?

Richard Darnley: Right. Is the gas oil ratio heading north this quarter? Is that a one-off or the base, the average, your base wells getting gassier?

Speaker #3: No, so part of it is this adjustment that came in that dropped it down a bit lower as well. And you'll see we have a note in our—I can't remember if it was a press release or the MD&A—that...

Wolf Regener: No, part of it is this adjustment that came in that dropped it down a bit lower as well. You will see we have a note in our, I cannot remember if it was the press release or the MD&A that shows-

Speaker #3: Yeah, it was.

Gary W. Johnson: In the MD&A. Yeah, it was 70% in May and June, so it got skewed by that adjustment for the quarter. That is why it was really low. Yeah, so we are tracking, like I said, 70 in the last two months.

Gary Johnson: In the MD&A. Yeah, it was 70% in May and June, so it got skewed by that adjustment for the quarter. That is why it was really low. Yeah, so we are tracking, like I said, 70 in the last two months.

Speaker #4: Seventy percent in May and June, so it kind of got skewed by that adjustment for the quarter. That's why it was really low. But yeah, so we're tracking, like I said, 70 in the last two months.

Speaker #3: Yeah. And basically, the 74 that was in the first quarter was because the new wells that came on had a higher percentage oil content. And while the oil is tracking with the decline it has been, we did start getting additional gas coming in.

Wolf Regener: Yeah, basically the 74 that was in the first quarter was the new wells that came on, at a higher percentage oil percent. While the oil is tracking what the decline has been, we did start getting additional gas coming in. So they actually, on a BOE basis, came up a little bit more than expected. Oil stayed what we expected, but more gas came in, so that dropped that down a bit.

Speaker #3: So, they're actually, on a BOE basis, came up a little bit more than expected. Oil stayed kind of what we expected, but more gas came in.

Speaker #3: So, that dropped that down a bit.

Speaker #7: Right. Okay. And you said that you expect the False Canyon well to be oil-saturated. Well, your base is very oil-saturated already. Are you expecting higher oil saturation from the False Canyon?

Richard Darnley: Right. Okay. You said that you expect the False Caney well to be oil saturated. Your base is very oil saturated already. Are you expecting higher oil saturation from the False Caney?

Speaker #3: No, we won't know what the percentage is until we drill it. But all we're saying is that when you have whole core, our canyon was oil saturated as well.

Wolf Regener: No, we will not know what the percentage is until we drill it. All we are saying is that when you have whole core, our Caney was oil saturated as well. It is just an indication that there is oil in the False Caney, and then what the rates are and what the percentage oil to gas is, we will see when we fracture stimulate and when we produce them back.

Speaker #3: So it's just an indication that there is oil in the False Canyon. And then what the rates are and what the percentage of oil to gas is, we'll see when we fracture stimulate and when we produce them back.

Speaker #7: Yeah. Understand. Okay. Thank you.

Richard Darnley: Yeah. Understand. Okay. Thank you.

Speaker #3: All right. Good to talk to you.

Wolf Regener: All right. Good to talk to you.

Speaker #4: Thanks.

Gary W. Johnson: Thanks.

Gary Johnson: Thanks.

Speaker #2: And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Wolf Regener for any closing remarks.

Operator: This will conclude our question and answer session. I would like to turn the conference back over to Mr. Wolf Regener for any closing remarks. Please go ahead, sir.

Speaker #2: Please go ahead, sir.

Speaker #3: I just want to thank everyone for being supportive of the company and shareholders, and also for taking the time to listen to us today and ask questions, etc.

Wolf Regener: I just want to thank everyone for being supportive of the company and shareholders and also taking the time to listen to us today and ask questions, et cetera. Thank you, everyone. Have a great day.

Speaker #3: Thank you, everyone. Have a great day.

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