Operator: The next question comes from Noel Parks of Tuohy Brothers Investment Research. Please go ahead.
Noel Parks: Hi. Just had a couple. You mentioned earlier that there is interest from Brownfield and Greenfield emitters that are looking to reserve porous space. And I just wonder in talking with parties like that, can you talk about sort of what the terms are that are being discussed? Are they mostly focused on commitments to certain volume or pricing terms, anything about that would be interesting?
Francisco Leon: Yes. So, you have a few very interesting dynamics at play. We see California emitters winning grants from the Department of Energy to capture CO2. But that’s only going to be viable and good if we have a storage side to put the CO2 to work. So, we’re looking for the discussions with the brownfield emitter really circle around CO2 pipelines. We are still waiting for the legislature to issue rulings around the framework on how CO2 pipelines are going to work in the state. We anticipate some progress being made during either the budget session or later in the legislative year. So, that’s something that could be a very positive catalyst. But without those pipelines, then the connectivity to brownfield emitters is not going to be there in putting a risk the DOE funding and some of the big capital projects that these emitters have.
I would say that’s in a nutshell what’s slowing down some of the brownfield emitters. On the greenfield emitters, where we have all of them behind the fence, it’s really about trying to optimize how we allocate the pore space. We’ve talked about a $50 to $75 per ton storage fee that the JV is going to collect from the submitters. Ultimately, they need a storage CCS storage site as well to make their projects clean. And a lot of these markets are unfolding, whether it’s hydrogen or ammonia, these projects are — there’s no market for the clean version of these energy sources. So, the offtake is being discussed. and so, there’s other elements to the greenfield projects in terms of more certainty as to how do we get the CO2 underground once we get the permit, less certainty as to how they’re going to get the products sold and what kind of premium it’s going to command.
So, it’s unfolding, it’s moving, it’s very dynamic, a lot of really interesting discussions happening and that final permit on Class VI will ultimately unlock a lot of these exciting discussions.
Noel Parks: Great. Thanks for that. And I wanted to ask about the Aera acquisition and looking back to sort of where the strip stood at the time that you announced it early in the year. So, looking at WTI, the strip out a couple of years was kind of in that mid-60 sort of range and then with this last rally, we had in crude, it took it more like to low-to-mid 70s. I just wondered if that delta translated to any project, any upside potential that you didn’t include in your valuation. So, you essentially are going to be paying for that might come into play if you could envision a long term stronger oil price?
Francisco Leon: Yes. I mean, definitely, the conditions that supported the decision around the Aera merger are there and are getting stronger in a lot of ways given the confidence that we have on synergies. We have seen in the beginning of the year with stronger brand pricing. As a reminder, as a private company, Aera had a different view on hedging their volumes than we did. They have entered historically into more swaps locking in some of the pricing, which is good, because it gives us more ability to plan. but it takes away some of the upside. They do have some barrels open that would provide some further upside to pricing in the near term. Difficult to quantify at this stage, but we’ll be providing an update once we get to close.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Leon for any closing remarks.
Francisco Leon: Thanks for joining us today. We will be presenting at several Investor Conferences during the summer. Really look forward to seeing you and engaging in more conversations. Thanks so much. Bye-bye.
Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
