Operator: The next question comes from David Locke of Old Mammoth Investments. Please go ahead.
David Locke: Hi, guys. How are you doing this morning?
Kelly Loyd: We’re doing all right. How about you?
David Locke: I am doing all right. Can’t complain. So just quickly on sort of like production levels, would it be fair to say given new wells drilled and resolution of problems that your exit rate was a little bit higher in the September quarter than the average for the 90 days?
Kelly Loyd: So I could say things that you can draw your own conclusion. There were issues that affected us throughout the quarter that exiting the quarter had less of an effect on us. How about that.
David Locke: Okay. And what the heck is going on with all your compression stations? I mean, not yours necessarily, but is this an industry-wide problem at this point?
Kelly Loyd: Well, some of it and some of it, I think, is more specific. EnLink took over in Barnett, I don’t know, about a year ago. So one of the things they did is they evaluated all their lines and all their plants and processors, and they did some overhauls and they tried to optimize and brought things down and move things around. And you combine that with trying to do new projects in addition to what you would normally do to optimize to help with some of the compression. I just think it’s been a challenge for them. We do expect that will get better as they go forward. And I think on that front – that pretty much covered it. Like I said, there were several projects that they had and they should be finished with most of those, so they can focus more on day-to-day operations and getting back to where they’re more efficient going along those lines.
In Delhi, I mean, you’ve seen in the past, right, in the extreme heat and the extreme cold, it’s affected, the density of the CO2, which gets injected, which has ramifications. This summer, in particular was, I would say, a standard deviation higher than normal on the heat front, which is one of the main reasons we wanted to put in the heat exchanger We do think it has had a nice effect already. We think in the winter, you’ll be able to see some real benefits there. And just quickly, I mean, the heat exchanger at Delhi is meant to accomplish four primary functions. First, to reduce LOE by removing a lot of the prior equipment they needed for cooling that was a lot less efficient. We get swap coolers and literally plugging in fans and running cold water over things.
The heat exchanger will help with that and really should improve LOE. You can use more gas and you can have less gas used to call things, less electricity for heating and cooling and less chemicals, et cetera. Second, really cooling the CO2 during the summer heat to allow for better injectability, we saw some of this effect, it’s hard to know how much different it really would have been, but we do feel there was definitely an effect. And then the third, when you look at the heat, you would need to heat up the inlet stream in the winter, this prevents hydrates from forming and freezing issues. And lastly, the fourth one, really, it allows for us to optimize the NGL production. More of it can go to the plant versus being used to warm the inlet stream.
So there’s a couple of benefits from that capital project that we’ve been working on the last couple of years yet to be seen. But anyway, it’s in place, and we’re hopeful for the effects there.
David Locke: Excellent. Sort of switching gears a little bit. The PEDEVCO wells, what sort of initial rates are you guys expecting those to come in on? And what does the decline curve look like on those?
Kelly Loyd: So we have a bit of that in our presentation. But I mean, the IPs that we’re using, we’re trying to be fairly conservative, but they want to grow about 300 barrels a day per well. And then it’s going to decline hyperbolically, until it becomes exponential. And until it becomes linear at the end of its life. So…
David Locke: And
Kelly Loyd: It should not being as steep of a decline as, say, like a Delaware well, right? It’s not — it’s a different rock formation. So we expect it to be a B factor of…
David Locke: And just so I sort of keep my math straight. When you say 300, that’s like gross to the wells, so not net to your interest
Kelly Loyd: That is correct.
David Locke: Okay.
Kelly Loyd: And this first batch of wells is about an 83% NRI. So pretty good on the royalty front, and we’re obviously half of that.
David Locke: Okay. And then lastly, on Delhi, you mentioned quickly in the prepared remarks about Exxon proceeding forward with that potentially being a carbon capture and sequestration sites. To what extent, if any, does that accrue to you guys as an interest owner? Or is that all just Exxon’s money and project?
Ryan Stash: No. I mean I think based on our initial discussions with our tax folks, I mean, as long as they take industrial CO2 right, into the fuel, we should be able to get our proportionate share of the 45Q credit. So — and I think it would do two things for us, right? One is, it can potentially reduce our LOE, right, if they’re not going to take CO2 from Jackson Dome, which is our biggest expense there. And then two, whatever they inject from industrial side, we can get a — we should be able to get a proportion of credit of that.
Kelly Loyd: And the other thing to consider there, I mean this — the line that goes to Delhi is connected to the line that goes to all of the other fields along the green line. So the expectation is it will be considered fungible and Delhi should get its proportion, and we should get our proportion of that, so.
