Bruce Brown: Hi, Fellas. Appreciate all the color you’ve given us. On the PEDEVCO deal, how long have they been active in that field and how many wells have they drilled? And what’s their success rate been?
Kelly Loyd: Timing of that — they started in, I think, 2019. Maybe 2018. So what — and look it’s a better question for PEDEVCO than for me, but the way we sort of characterized it, they had sort of — they had their Generation 1, more sciency kind of wells where they were trying different landing zones, different frac sort of, I don’t know, resins and different kind of sands and different ways and how the size of the clusters are spacing between the clusters and trying different things. Then they went on to what I would call their Generation 2 sort of style of frac, which they tried and experimented with some of the things that worked. And tried some more stuff to see if they could expand or is this going to work better or worse?
And through that science that they did, they’ve come up with a plan and a style and a way to produce these that certainly they and we also think can be improved upon. But as a base case, if we don’t do any better than what we would call sort of the Gen 2, sort of, completion design and where to land and all those sort of learnings that have been gained, I think we still have a very attractive return. But both they and we expect there to be plenty of room for upside, which again, this isn’t something we just walked into. This has been four months of detailed technical analysis and looking at all the science we can. And again, our staff in-house is — has experience in this and is excellent at this and we did a lot, as I think you even had an industry expert we consulted with.
And so where we’ve become comfortable is what we know can be done and we’re also very, very strong expectations that we’ll beat that anyway.
Bruce Brown: Well, so they’re well up on the learning curve as you probably would put it. So, they’re at a point — it sounds like they’re at a point where perhaps they can maximize the knowledge they’ve accumulated. And a target — their drilling targets would be more carefully planned and selected.
Kelly Loyd: I think that one of the biggest learnings is really what zone you want to land the wells in and like anywhere else, you’re going to try, hey, maybe if we put it here, we might get two of the difference San Andres pay zones. If we put it here, we get it. And so they did all the right stuff you do when you’re trying to learn as much as you can. We walk away — again, we’ve learned a lot from that as have — obviously, they have and they have expectations and ideas and ways to move from that sort of Gen 2 as we call it just sort of the Gen 3. There’s been a whole lot of science and learnings.
Mark Bunch: Yes, so it’s we’re excited. Just so you know, they’ve drilled 10 horizontal wells out there.
Bruce Brown: Okay. Well, so they, yes — so they — yes, exactly. So, that’s good. All right. Well, a good luck with that that whole process, it sounds very promising. The other question I had is, since we’re almost done with the first fiscal quarter of fiscal 2024, oil prices have risen substantially during this period of time from where they ended the last quarter. And natural gas prices have — appear to have improved some, but can you quantify what percentage impact — what kind of range percentage impact that might have on your cash flow in the first quarter? I mean, just in a very broad sense.
Ryan Stash: Yes. So, I mean, obviously, the challenge of being non-op is we’re still delayed on getting actual prices in the field, which can sometimes differ than what we estimate. But if you’re just looking — and I’ll just talk on more on the gas side, right? The gas side was really some of the lowest prices that we’ve seen, right, quarter-over-quarter sequentially, right. So, on the gas side, Q4 was a trough, right? And so if you look at what we’ve seen pricing for — Houston Ship Channel is one of the pricing hubs that we sell our gas Barnett and then Opal up in the Rockies. And so both of those indices are on average, call it, maybe $0.40 to $0.50 higher this quarter-to-date than they were last quarter. So, I don’t have the exact percentage right, but you can — but it’s not a small percentage, right.
That’s a pretty material move if we’re talking about $2 to $3 gas, the Barnett less than $2 gas last quarter if you’re adding $0.40 on to that. So, certainly, we expect to see some improvement this quarter on the gas. Also NGLs, right? I talked about that earlier, but NGLs were kind of falling off a cliff if you look at it from April down to June, June being kind of the low month, they traded down quite a bit. Ethane itself is up 50%, 60% since last quarter. The Barnett has quite a bit of ethane, some of the heavier components are up as much as anywhere from 5%, 10% to 30%, 40%. So, overall NGL price is — I think those are the two pieces. You mentioned oil, but I think NGLs and natural gas are two where it might be more noticeable on realizations.
Bruce Brown: Sure. That’s — obviously, the bulk of your production is in those two areas. So, as a company, yes, yes, yes, I understand. So, that’s great. Okay. I appreciate the color. I think that does it for me. Thank you so much.
Kelly Loyd: No, thank you. I appreciate your interest.
Operator: The next question comes from Joseph Christy, a Private Investor. Please go ahead.
Unidentified Analyst: Hello. Yes, good afternoon gentlemen. My question is about the future development potential of the Delhi Field, assuming the acquisition of Denbury by ExxonMobil closes. Do you anticipate any positive operational changes in the development cycle of the field or changes in asset structure as a result of this transaction due to the size and scale of Exxon flowing through to the per barrel cost structure or is it too soon to begin thinking about this? And that’s it. Thank you.
Kelly Loyd: We appreciate that. So, yes — and that’s a question we’ve had to think about. And I would just say, one thing you need to know about Exxon is that, that they’re not dumb. They’re going to do the smart thing. They’re going to do the right thing. So, I — look, I would anticipate operations will be as good or better. I think Denbury has done a terrific job. I think Exxon has the scale and capability to do just as well and perhaps get prices even cheaper. One of the things we’ve been asked about in the past is the carbon capture, permitting and all that. And we — honestly, we — I still don’t have any way to tell you whether Delhi will get that permit. So, there could be some kind of benefit for that. But look, Denbury was planning on working on that and pushing towards it. And I would just suggest if Denbury can do it, I don’t see why Exxon couldn’t do it just as well.
Mark Bunch: The only thing I would add is just one thing we’ve had in the past with Denbury is capital constraints at Delhi. And so while we don’t know what Exxon’s plans are specifically for the field, the one thing Exxon is not is capital constrained, right? And so, whereas, Denver went through bankruptcy, they went through a period of not spending much money at all. That shouldn’t be an issue here from a capital perspective.
