Evolution Petroleum Corporation (AMEX:EPM) Q2 2023 Earnings Call Transcript

Ryan Stash: Yes. So it’s interesting, right? So when we bought the property, I wouldn’t say we predicted what — we could have predicted what happened, but we were bullish on California and kind of pricing in the West and the winter sort of held true to an extreme nature, right? If you know — if you followed California weather, it’s been a very cold — maybe unusually cold winter out there and with kind of the energy policies in the state, they’re short natural gas. So you get these phenomenons in the winter that we saw here in December. We actually saw it in — we’ve seen it in January as well a little bit. and some in February, prices are coming down a little bit. But I’d say it’s definitely surpassed our expectations. I think we had been hopeful that we would see this winter premium, which we had seen in the historical data we reviewed when we bought the asset.

Just not to this extent. So I mean it’s hard to say or are we going to see us again. It’s certainly possible for abnormally cold winters, but one is going to be a big driver of that along with hydroelectric power and lots of other variables, but we’ve certainly been really pleased this winter.

John Bair: So basically, the pricing tightness there, the spread versus Henry Hub is still ruled a pretty big spread there, right? In other words, in your press release, you said you were getting like $11 per Mcf for the gas, right? So still kind of up in that range, obviously, probably not exactly, but is that a fair statement, ?

Kelly Loyd: Okay. So I don’t want to give too much. I will say, factually, there have been days this quarter where we received gas prices that were at least in that range, that.

Ryan Stash: Yes. I mean I think of all, it’s been — if you follow — look, we sell out of kind of Opal, right, of the tailgate there. So if you follow the daily pricing, yes, it was high in January. It’s come down a little bit in February, right? They go at a premium to Henry Hub, but it’s certainly come down. So we’re hopeful we don’t know how this quarter is going to end. We’re hopeful we’ll have strong pricing again this quarter, but we’re only — we’re not even halfway through this quarter yet.

Kelly Loyd: Yes. And John, look, I don’t want to say anything that sort of falls into the spectrum. So I’m not going to comment on why California’s in the situation it is. But I can say, clearly, there is insufficient natural gas being delivered to California because all the routes are maxed out, and yet they’re still record high prices.

John Bair: Yes. That’s fine. You don’t have to go — I’m with you on the — on that end of it. So as far as the 2 Birdbear wells you mentioned, sidetracks, are those testing new geographical areas like new units? Or is it more kind of infill type?

Kelly Loyd: So the Birdbear itself, and this is something we’re continuing to do work on. And the question is, is it a conventional play? Is it a nonconventional play? And — or is it just very chopped up and so you need to make sure you go out and count or along the way. And the answer is, yes, they’re both infill and yes, they’re both new. It depends on how small the pocket is that you’re going into, and you may encounter several of these across the wellbore. I’d say, let’s put it this way. From a closeology perspective, they’re close.

John Bair: Okay. And then I think I kind of missed this, but you mentioned on the vertical recompletions, are these new zones within the wellbore set rate or not?