Q2 2019 Earnings Call
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After the speakers remarks, there will be a question and answer session.
If youd like to ask a question at that time, you may do so by pressing star and the number one on your telephone keypad.
At this time I would now like to turn the show ever in Cal Pastry Investor Relations coordinator. Please go ahead Sir.
Thank you Nicole good morning, everyone and welcome to the Alco Energy's second quarter 2019 conference call.
Airport covered the forward looking statements carry balance our Chief Executive Officer will review key highlights of the second quarter along with operational result, most part now our Chief Financial Officer will then provide a more in depth financial review.
Terry will then return for some closing comments before we take your questions.
During our question and answer session. We ask you to limit your questions to one and a follow up.
You can always reenter the queue with additional questions.
I'd like to point out that we posted an updated investor deck on our website. This morning that has additional financial analysis comparisons and guidance that should be helpful. With that let me proceed with our forward looking statement comment.
During the course of this conference call. The company, we're making forward looking statements investors are cautioned that forward looking statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward looking statements.
The Alco disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Accordingly, you should not place undue reliance on forward looking statements.
These and other risks are described in yesterday's press release, the presentation posted on our web site and in the reports we file with the FCC, including the Form 10-Q that was filed yesterday. Please note that this conference call is being recorded let me now turn the call over to Carrie.
Thank you al Good morning, everyone and welcome to our second quarter 2019 earnings Conference call.
As discussed in our earnings release yesterday, we grew adjusted EBITDAX to $12.9 million maintains strong production at 3664 barrels of oil per day and increased our cash position to $48.6 million in the second quarter.
In addition, we have also progressed Ford with removing meaningful financial uncertainty from our balance sheet.
We recently finalized the Angola exit settlement in July by making a four and a half million dollar cash payment, which was substantially less than the 15 million dollar obligation previously carried on our balance sheet.
We have no removed all of the Alcos rights liabilities and the outstanding obligations for block five in Angola, and we can focus on our producing assets in Gabon.
We also reached an agreement in principle to resolve legacy a time joint venture owners audit claims dating back to 2007 through two through 2016 for $4.4 million the $4.4 million settlement amount is a tiny fraction of the approximately $2.3 billion of joint venture expenditures over the same period.
It is unusual for these types of claims to linger and accumulate for 10 years under normal circumstances. These issues would have been resolved in a biannual basis with far less impact on our financial statements.
Moving forward, we have procedures in place that will mitigate the chances of significant audit claims in the future and we will work diligently with our partners to settle disputes in a timely manner.
Turning to operational results for the second quarter, we had a 20% increase in sales volumes and our realized oil pricing increased by 7% to $68.62 per barrel compared to the first quarter. This allowed us to grow adjusted EBITDAX to $12.9 million and expand our cash on hand to $48.6 million at the end of the second quarter.
Production for the second quarter averaged 3664 barrels of oil per day, net which was near the midpoint of our guidance range and up 5% compared to the first quarter.
During the second quarter of 2019, the atone for H. well produced an average of approximately 350 barrels of oil per day gross or 95 barrels of oil per day. Net however last month. This well was shut in due to a mechanical issue. We're currently evaluating the most cost effective way to reestablish production.
Also in July we performed an acid stimulation on the norcia Bala to H well.
After the stimulation the well would no longer produce by natural flow, we are monitoring the well and reviewing options to restore production.
During the second quarter of 2019, this well produced an average of approximately 420 barrels of oil per day gross or 113 barrels of oil per day net to balco the timing to restore production from this well is dependent on when we can get the needed equipment on the platform, which make which may take a few months.
In total our volumes have been reduced by about 200 barrels of oil per day net while we work to restore production from both of these wells.
Looking ahead to the third quarter. We are currently underway with our full field maintenance turnaround at home, which is expected to last approximately eight days.
Taking into account the full field maintenance turnaround and the production deferrals from the two wells I mentioned earlier, we expect production for the third quarter to be in the range of 3000 to 3300 barrels of oil per day net.
Please note we are not changing our 2019 annual guidance of 3300 3900 barrels of oil per day.
When we developed our full year guidance estimates earlier this year, we accounted for the annual field shutdown as well as potential issues from producing wells.
As a reminder, the production impact from our 2019 2020 drilling campaign will positively impact production late this year and will have a significantly greater impact on 2020 production.
Now I'd like to update you on our 2019 2020 drilling campaign.
As part of the PSC extension in Gabon, we committed to drilling two development wells and two appraisal well bores by September 2020, as previously announced in 2019, we plan to begin drilling up to three development wells and two appraisal well bores funded from cash on hand, and cash generated from operations. We have secured a rig that will be available to begin drilling. These wells late in the third quarter of 2019, and we plan to continue drilling into the first half of 2020.
We currently expect the first well to come online late in the fourth quarter with the remaining wells online in the first half of 2020.
In our most recent presentation posted to the Balco website on slides nine and 13. We have included a detailed description of the 2019 2020 drilling campaign.
The expected gross production uplift from the drilling campaign is 4000 to 7000 barrels of oil per day for the full year 2020, and the annualized net uplift is 1100 1900 barrels of oil per day for 2020.
These development drilling locations are easily drilled off of our existing platforms with the jackup rig and the wells can be placed on production quickly with minimal increase in operating costs.
The appraisal Wellbores, we are drilling are to assess the dental potential in that Tom and evaluate a gumbo stepout area in southeast.
If the appraisal wellbores prove up resources in these areas. There is the potential to add up to approximately 5 million net barrels of tupi oil reserves and access up to six additional well locations in future drilling campaigns.
Our vision is to repeat similar drilling programs multiple times over the next several years, which should continue adding reserves and production.
In 2019, we expect to spend between 20 and $25 million in capital expenditures with another $5 million to $10 million of capital expenditures in 2020 to complete the drilling campaign.
Over the past several quarters, we have generated significant free cash flow, which has allowed us to build our cash balance and strengthen our balance sheet to the point, where we can fund all of our capital requirements from cash on hand, and cash flow from operations.
To return value to our shareholders and demonstrate the confidence we have in our assets and our ongoing ability to generate cash flow, we announced on June twentyth a share repurchase program. We believe the share repurchase program is an excellent opportunity opportunity to buy our common shares at a significant discount to their intrinsic value and the program also reflects the board's confidence in the current value proposition of our stock.
We are confident that we can execute this share repurchase program and fully fund our 2019 2020 drilling campaign from cash on hand, and cash from operations later on lids will provide additional details regarding the share repurchase plan.
In Ecuador, beginning we are still waiting on the minister of mines in hydrocarbons to approve transferring the states participating interest in block two a new joint venture owner once the transfer of the states interest is approved we are seeking a partner on a promoted basis, who will fund all or substantially all of the cost to drill an exploration well as required by the state as a reminder, the contractor group has one year to begin drilling operations upon the ministry of mines and hydrocarbons approving the state's transfer of interest.
So you are to drill would result in the loss of our interest in the license and we would have to write off $10 million on our books for the undeveloped leasehold costs associated with the block PD license.
We continue to work with our joint venture owners to evaluate the timing and budgeting for development and exploration activities on block PD.
Finally, I would like to update you on our dual listing process.
We initiated a process to pursue a dual listing in the UK to better position Balco alongside our international peer group, we continued to progress forward with the standard listing on the London stock exchange, we believe that a dual listing may generate increased interest in balco through access to specialist international oil and gas investors and a broader range of equity research analysts, we are well into the process and expect to begin trading within one to three months from now.
With that I would like to turn the call over to Liz to discuss our financial results.
Thank you Carrie and good morning, everyone. The second quarter was a busy one for us at Balco as we finalized our exit from Angola settled some long outstanding legacy joint venture audits and move forward with our London exchange listing.
Our net loss of $1 million or one cents loss per diluted share was impacted by several special items.
These include non cash deferred income tax expense of 5.9 million a charge related to the joint venture audits of 4.4 million.
Unrealized derivative gains of 1.5 million.
And a small charge of 8.2 million related to discontinued operations.
These items totaled 9 million net or 15 cents per share.
As a result, adjusted net income for the second quarter of 2019 totaled 8 million or 13 cents per diluted share.
This compares favorably with the adjusted net income of nine cents per share in the first quarter of 2019.
Adjusted EBITDAX totaled 12.9 million in the second quarter of 2019 up 47% compared with $8.8 million in the same period of 2018 and up 32% compared to $9.7 million in first quarter of 2019.
Second quarter oil sales improved.
Totaling 357000 net barrels compared to 319000 net barrels in the same period, a year ago and 297000 net barrels in the first quarter of 2019.
Our realized oil price for the second quarter 2019 average 68.62 cents per barrel an increase of 7% from 60 417 in the first quarter of 2019 and down 8% from 70 436.
In the second quarter of 2018.
In June 2018, the Alco executed crude oil swap at a dated Brent weighted average price of $74 per barrel.
For the period from and including June 2018 through June 2019 for quantity of approximately 400000 barrels.
The final settlement meant for these swaps was in June 2019.
Looking forward the Alco has crude oil swaps at a dated Brent weighted average price of 60 670 per barrel for the period from and including July 2019 through June 2020 for quantity of 500000 barrels.
These contracts were entered into in May 2019, and are the only derivative contracts that we currently have in place moving forward.
We will continue to evaluate ways to mitigate risk ensure future cash flows for our drilling program and allow for upside to rising commodity prices through our hedging program.
In the second quarter, we recorded non cash mark to market unrealized gains related to our crude oil swaps of 1.5 million.
While we realize point fourmillion cash in gains on the swaps, which settled during the second quarter.
Turning to expenses total production expense excluding workovers.
For the second quarter, 2019 was $9.8 million or 20 745 per barrel of oil sales compared with 8.3 million or 26.08.
Per barrel in the same quarter of 2018, and 8.1 million or 20 730 per barrel in the first quarter of 2019.
For the second quarter of 2019, our per barrel costs were below the midpoint of our guidance as we continue to manage our controllable expenses.
For the third quarter of 2019, we expect production expense, excluding workovers to be between $9.5 million and 10.5 million or $31 per barrel to $35 per barrel an annual guidance remains the same at $26 per barrel to $30 per barrel. While total production expense for the third quarter is expected to be comparable to the second quarter. The per barrel cost is expected to increase as a result of lower volumes, which will be impacted by the planned field shutdown of approximately eight days as well as deferred production from the two wells that are not producing.
DDNA for the second quarter 29 team was 1.9 million or 535 per barrel of oil. This compares to $1 million or 324 per barrel in the 2018 second quarter.
And 1.6 million or 523 per barrel in the first quarter of 2019.
The year over year increase in DDNA per barrel of oil reflects an increase in deployable costs associated with the PSC tension, partially offset by a favorable impact of the upward revisions to reserves at December 31st 2018.
We expect our full year DDNA range to remain unchanged.
550 to 650 per barrel of oil cells.
General and administrative expense for the second quarter of 2019, excluding noncash compensation was 2.8 million or 793% barrel of oil as compared to $2.6 million or $8.04 per barrel of oil in the second quarter of 2018.
And $2.7 million or $9.14 per barrel of oil.
In the first quarter of 2019.
We expect our full year gionee, excluding non cash compensation.
To remain unchanged between 9 million and $10 million.
Noncash stock based compensation expense related to stock appreciation rights or Sars was a credit.
A point $7 million during the three months ended June Thirtyth 2019, as compared to an expense of 2.0 million in the comparable 2018 period and an expense of $1.7 million in the first quarter 2019.
Sars are revalued quarterly based on the closing stock price at the end of the quarter, which was $1.67 at the end of the second quarter of 2019.
Versus 224 per share on March 31, 2019.
Stock price variability greatly impacts the fair value of the Sars and there will be an expense or credit back to every quarter associated with the mark to market value of the Sars.
Income tax expense for the three months ended June Thirtyth 2019 was 9.2 million.
This is comprised of 5.9 million of deferred tax expense.
In a current tax provision of $3.3 million and was impacted by $4.4 million related to the joint venture owners audits.
Income from continuing operations, excluding the $4.4 million was $12.7 million.
At an effective tax rate of 79% income taxes would have been $10 million.
The $10 million of income tax expense is reduced by the tax benefit of this 4.4 million dollar expense, which is taxed at the U.S. income tax rate of 29% or 0.9 million, resulting in a total income tax expense of 9.2 million.
For the three months ended June Thirtyth 2018, the company had a current.
Provision of 3.6 million.
And no amounts related to deferred taxes.
The decrease in the current provision is primarily attributable to give on income taxes, which were impacted by an increase in the amount of costs, which can be conducted as a result of the PSC extension obtained in September 2018.
With respect to deferred income tax for periods. Prior to the three months ended September Thirtyth 2018, the company had a full valuation allowance on its net deferred tax assets and deferred income tax was zero.
In July 2019, the company reached an agreement in principle to resolve findings from legacy joint venture owners audits for the periods from 2007 through 2016 for $4.4 million net to the outcome.
The settlement covers a 10 year period during which the Tom joint venture on or shared and expenditures totaling approximately $2.3 billion on a gross basis.
The settlement amount is relatively insignificant to the expenditures over the 10 year period.
The agreement in principle also provides procedures that we believe minimize the chances of significant audit claims in the future.
The accrual of $4.4 million reflected in accrued liabilities. Another line of the company's condensed consolidated balance sheet and Reis recorded as the second quarter 2019 expense in that can dance.
Consolidated statements of operations in the line item other operating income expense net.
The agreement in principle is expected to become final upon signing of a binding settlement agreement by all of the joint venture partners.
As detailed on slide 18 in the presentation deck posted this morning on our web site. We currently estimate the Dow 'cause operational breakeven price in 2019 is approximately $37 per barrel of oil sales and our free cash flow breakeven price in 2019 is approximately $47 per barrel.
With both amounts, including Workover expense in general terms, we estimate that each $5 increase in realized oil prices increases our annual adjusted EBITDAX by $6 million.
This clearly shows our strong leverage to higher oil prices.
Slides 19, and 20 illustrate the further strengthening of our financial position and the continued build of working capital to fund our development drilling program.
At the end of the second quarter, we had a cash balance of 48.6 million, which included $3.8 million of cash attributable to non operating joint venture on or advances.
At the end of the second quarter of Alco had $38.1 million of working capital from continuing operations.
This metric excludes lease liabilities and amounts attributable to discontinued operations.
On June 28, 2019, Balco announced that its board of directors had authorized a stock repurchase program under which the company can repurchase up to $10 million.
Currently outstanding shares of the Companys common stock over a period of 12 months through open market purchases privately negotiated transactions or otherwise in compliance with rule Tenb 18 under the Securities Exchange Act of 934.
From June 20th through August 7th we have purchase 888354 shares of common stock at an average price of $1.73.
Representing a total investment of approximately 1.5 million.
The Alcos cash position remains very strong and this is reinforced by the fact that we can execute this buyback program and also continue to fully fund our planned 2019 2020 drilling program at a time from cash on hand, and cash flow from operations.
The current estimated net capital expenditure range for 2019.
Which is primarily associated with this drilling program is 20 to 25 million.
The 2019 2020 drilling program will include up to three wells and two appraisal Wellbores, we anticipate that it will be completed in the first half of 2020 and the total cost is forecasted at $25 million to $30 million.
In the second quarter 2019, the Alco invested approximately point 4 million and capital expenditures.
We remain focused on strong operational execution and continuing to build cash to fund. Our 2019 2020 development opportunities was 48 million in cash on hand, the removal of the uncertainty from a balance sheet with.
The finalization of the Angola settlement and the agreement in principle to resolve 10 Years' worth of outstanding joint venture audits, coupled with no debt on our balance sheet.
We are in one of the best financial positions in the company's recent history.
With this I will now turn the call back over to Carrie.
Thanks, Liz our foundation is solid with a high performing team capacity for growth and a strong track track record of operating responsibly.
Over the past year, we have taken several actions to help strengthen the balance sheet and better position balco for the future.
We signed the PSC extension in late 2018 that Tom we finalized the exit from Angola that removed all of our obligations there and we reached an agreement in principle to resolve 10 years' worth of a Tom joint venture owners audit claims.
We have removed all debt from the balance sheet and growing cash on hand to $48.6 million, we have significant near term and long term upside opportunities at a time, which we have highlighted in our investment presentation on slides nine and 14.
With all of this potential we believe that our stock price is currently undervalued as such the board approved a share buyback program in June and we have already repurchased almost 900000 shares of Alco stock our strong cash position and continued cash generation will enable us to execute a share buyback program, while simultaneously simultaneously funding.
Our 2019 2020 capital program from internally generated cash and cash on hand, our focus is on profitable and accretive growth from a solid foundation I believe that moving forward, we will create substantial value for our shareholders by growing reserves and production added Tom.
And building our asset portfolio through mergers and acquisitions the outlook for Balco is very promising and we are excited about the opportunities that lie ahead.
Thank you and with that operator, we are ready to take questions.
At this time.
Ask an audio question you may do so by price.
Thanks Star and the number one on your telephone keypad again that is standard one.
For just a moment to compile the Q and a roster.
The first question comes from the line of Bill does really.
Thank you I have a group of questions first of all I would like to circle back to slide nine and just make sure that.
I'm reading this correctly.
That if we take the mid point of your 2020.
Production guidance, which would be 4600 net to Alco and compare that to the 3600 net you are looking for this drilling program to have a roughly 28% increase in a in your production is there anything that we're missing in that calculation.
And I think you got that exactly right bill. Thank you.
Okay. Thank you very much I hope that comes out according to plan or or at the high end. So let me shift to a year legacy issues. You you cleaned up they are more of those this quarter what legacy issues still remain.
There or it's it's hard to say because the legacy issues, you know kind of come out from the woodwork unexpectedly, sometimes but I am not aware of any significant legacy issues that are of the magnitude of the settling this this joint venture audit with our Tom partners and like I said, it's it's meaningful because it's 10 years worth of audit claims.
All settled at one time and if we had settled these routinely on an annual or biannual basis. They wouldn't have been meaningful so anyway, I don't see anything out there that I'm aware of that's a legacy issue that could impact that would have this much impact on us.
Great. Thank you and then.
Where are you at a relative to finding a promoted interest partner for a block PD and equity Oreo gains.
Well, we are we are in the process of seeking a partner of of course, but what we want to do is we any any partner that would come and join Balco wants to know who are the other partners in the block and so we're really prevented from finalizing a farm out agreement or obtaining a partner until the Ministry has approved.
The transfer of interest of the states participating interest to a new joint venture owner. So once that happens we have a group of people or a group of companies that we think are interested in the block and we will pursue them further.
And so the government is aware of of who that new partner is established simply a matter of them approving it as that.
What does your guidance.
That is yes that is what I'm inferring and to be clear, yes. The.
The new partner has been submitted to the state for approval the minister of mines in hydrocarbons. The minister of mines knows who the company is that is proposing to state take over the states participating interest and we're just waiting on the minister to approve.
And now is this something more than a rubber stamp process because it seems that the state.
Oil company is the one who is is providing the.
The new partner for the State Department.
Department of energy essentially to approve so it seems like Thats left and dealing with the right hand and that should be simple.
We would tend to agree with you, but there are other issues internally in Equatorial Guinea that I can't speak to and.
And so the process is taking longer than than expected, but you're right. It is one branch of government, making a recommendation to another branch of government and it should be.
A formality, but it's just taking us longer than we expect.
Okay. Thank you and are you aware of who the.
Who the recommended new partner is and if so are you able to share that.
With.
The with the company that you would potentially do a promoted it partner interest with.
And then secondarily share that with us.
Well, yes, we are aware of who the company is that is proposed to take over the states participating interest and the answer to your other questions are no. Unfortunately, we are not allowed to disclose that information until the the new partners approved.
And that would include disclosing it to a to a perspective promoted partner it.
Also.
Yes.
Okay. Thank you and then.
Lastly.
The.
The acquisition.
Arena would you bring us up to speed as to what you are.
Doing scene and.
And what's happening with that pipeline out there. Please.
Right right well I'd like I've mentioned in the in other calls we we've got a group that is entirely focused it's our new ventures group entirely focused on M&A they are seeing.
Opportunities I'm, we're not at a point, where we can discuss any one of the opportunities in detail, but there are opportunities. There is a pipeline of opportunities. We're focused in Africa and like I've said in the past you know, we're going to probably look at.
Dozens of opportunities to lineup.
A few that did that are of particular interest to us to hopefully get to one where we can close on a transaction and so I want to set the right expectations that we are we have a team dedicated to this they are looking at numerous offers but it's just going to take US time, because we're going to go after go through many many opportunities to find the one that is accretive for balco.
Great. Thank you Carrie.
Alright, Thank you Bill.
Good morning, everybody.
I also have.
Little selection I have questions if I may.
And so thats really going back to the the legacy issue they agreements in principle that youve.
Struck regarding the joint venture audit and I know that you've taken.
A charge in the quarter related to that I was just one.
It is sides.
Charge is that a settled amount or is that perhaps room for adjustment to that in the future.
On wall tile. The final final steps that you have to accomplish on the timeline for those before you are completely clear of fab.
Legacy issue.
Right right, Charlie I view I view this I view, the $4.4 million settlement amount as the final amount I think there is a very low probability that.
Any of the partners will try to renegotiate that amount and so the next steps are to for our partners to take the settlement agreement to their management teams their board of directors and have the have the agreement approved and so I I believe that the next steps are just a formality the.
The individuals from the joint venture partners of the Representatives I should say from or.
Joint venture partners that negotiated the agreement I think negotiated in good faith to a number that their their senior management will approve.
Okay. That's very good on the timeline for that do you envisage that over the next.
Munsell, perhaps longer than that Oh, no no not not longer than months I would say.
Maybe I'm being optimistic, but I would say weeks.
Okay.
Excellent and then operationally.
Obviously, you've got the feel Shelton period in Q3 and.
Production impacted by that and of course also the two wells those are off.
Firstly on those two wells at some for some Nols tchibala too to age.
Do you think those are just mechanical infrastructure issues or is there.
Some subsurface risk that you've identified at the moment.
And then let me in Q4.
Sorry.
And in Q4 do you envisage those wells coming back.
And additional production from the new drilling.
Contributing to the.
Whatever the number is around 4000 plus barrels per day.
Right and so let me start with your last question in Q4, we certainly expect for our very first well to come online towards the end of the year and contribute to 2019 production.
As far as the two wells that are shut in right now, it's we're still uncertain as to when those wells will come back and start producing again and our plan is to give a production update here in the near future. When we have more information regarding for example, when the when the drilling rig arrives when we when we have certainty on that date and so.
Over the next few weeks or months, we will come out with more guidance on production to answer those questions, but right now my expectation is that.
We will certainly have some production from a new well in 2019, and it's uncertain as to whether we will have production from the two wells that are shut in so let me let me talk about very briefly the.
Address your questions on the issues with the two wells that are shut in the Tom for each well is a sub sea wells.
That produces via gas lift.
The mechanical we issue we have is with the sub sea wellhead and it's it's not a significant issue and.
We can repair the wellhead the challenge is finding the equipment and its remote operating vehicles that we can use to go and repair. The wellheads. So we're we're we're sorting through that and looking for the right equipment to repair that wellbore. So it's not the time for each is certainly not a downhole issue.
The north Tchibala to age is they didn't how well it's one of the two didn't how wells we drilled back in 2015, it's it's a flowing well it's flowed for nearly four years now and like like I mentioned.
Back in July we attempted an acid stimulation on that well the the stimulation was designed to remove damage that we felt like may have occurred when we drilled the well.
Once we pumped the acid stimulation, the well would not kick off again, the the acid stimulation fluids are heavier than than the natural reservoir fluids and so what we need to do is bring into again, bringing some equipment into country too.
To go and energize the reservoir and kick the well off so it will start flowing again, so it's again, it's not a downhole issue as much as.
We were trying to improve production from the well and we just can't get the well to kick off again no. There is it like I mentioned earlier, we're monitoring the well there is a chance that the well will kick off on its own and we're watching that and and that would be the very best outcome, but otherwise we need to bring in some equipment, where we can energize, the well and get the well flowing again, so Charlie did that answer your questions Pat Yeah. That's terrific. Thank you very much.
Again to ask an audio question. Please press star one.
The next question comes from the line of Jamie Wilen.
I felt.
First of all just a commentary about the clarity of the presentation of the detail on your charts.
On your website is truly outstanding it makes it really easy to understand where you are and where you are headed and I certainly applaud whoever's putting that together.
Oh, Thank you one for Steve on the non producing wells. When you. When you were trying to stimulate the well you were trying to get more production out of it is.
What was your goal you are trying to fix something but where you are trying to increase the flow just maintained.
Trying to increase the flow great question Jamie.
The well was producing roughly 400 barrels of oil per day, we felt like that if we pumped the acid the acid would dissolve some material that had damage the wellbore and it was an attempt to increase production. So the well was producing flowing just fine at 400 barrels a day, but again the attempt was well, let's see if we can clean clean things up and then produce at a higher rate.
Okay. So once once you have found the equipment and and it's flowing again, you're still not sure whether that was successful or not you won't know till you correct total starts to flow.
That's correct.
Okay.
Couple other little things.
On the balance sheet the payment that you have.
To your partners is that recorded on there the potential payment.
Yes.
And that debt.
That is recorded in accrued liability.
Okay. So it's lumped in with everything else.
Yes and.
And then with the with the drilling program that you have approximately how long does it take to to drill these wells.
Your degree of certainty as your as you are drilling them and then.
I guess from the time that those.
The drilling is finished its a very short time to hook up to.
To your pipeline.
It is and that's that's one of the.
That's that's one of the.
We're fortunate aspects of our operations is that all of our platforms and pipeline infrastructure is in place and so we're drilling wells from platforms.
And I as a just to remind everyone were first in a couple of instances, we will drill an appraisal sidetrack or I'm, sorry, an appraisal well bore first to test some ideas and and hopefully prove up additional reserves that takes a couple of weeks and then it's probably 30 days to drill the development well to drill and complete the development well. So in general from Spud to first production is six to eight weeks.
Okay, and when do you expect to have the rig in your possession onsite.
We're hoping in September but it could be delayed.
But our best guess if someone has an option on the on the rig that they might drill and other correct.
Correct. We're in line behind other operators who have.
Who have contracts to sign their contracts before we signed our contract and of course, there's a certain number of drill slots that are associated with each contract and depending on whether other operators that are ahead of us in line depending on whether they.
Decide to go ahead and utilize all of their drill slots. It may delay us and also if they have any issues and downhole problems that did extend their their drilling that might delay us, but again, our best estimate is mid.
September and as soon as we have a firm date, Jamie we will follow up with the and issue a press release.
Okay and once again, just applauded the stock buyback program, it's a great prudent use of assets I love the way you have hedged out.
Your your program so that your cash flow is well more than sufficient to fund all these things and.
I Love, how well positioned you are for the future nice job.
Great Great. Thank you Jamie I appreciate that.
And with that we are showing no further audio questions.
Alright, well. Thank you everyone for joining our conference call and we look forward to speaking with you next quarter.
And this does conclude today's conference call. We thank you for your participation and ask that you. Please disconnect your line.