David Locke: Is there a way to do sort of like a quick recap for civilians of what went haywire in California last year, at least is it regarded the prices that you got in Jonah and what you’re sort of thinking the situation looks like over the course of the next nine months?
Kelly Loyd: I wish I had that crystal ball going forward. But in going past, if you recall, so last winter was unusually, I wouldn’t say unusually, but probably more colder than the normal, right? If you look at sort of the weather maps on the West Coast and California a lot due to La Nina. So, the issue you have in California is very, very little natural gas storage and so they have to buy everything on the spot market. And when cold weather strikes, people will pay what they need to get the gas, to heat their homes right and they can’t pull it out of storage and so you tend to get these really high prices and spikes out air. Not unlike we’ve seen, right, in the power market in Texas, when you’ve had heat waves, you get that in California during the wintertime.
Now, interestingly, we saw that in the summer a little bit too where we saw prices in July and August spike a little bit with the heat out there too. So, anytime there’s a power demand, whether it’s cool your home or heat your home, you’re going to see probably spikes. If you look out in the forward curve, it depends on the day, but this winter last time I looked, you could hedge prices for probably around $3 premium to Henry Hub, it may have gone down a little bit here in the last couple of days, but call it $2.50, $3, maybe even as much as $4 premium hedging in the forward market right now for winter out in California. So, I think the market is still sort of expecting to potentially be short barrels out there. If we saw an unusually warm winter in California, then we might not quite see the demand that we’ve seen in the past winters, but historically, we have seen at least some pop over the winter months.
And I’ll also say, I think I’ve talked about this before, we sell gas, since we take our gas and kind in Jonah and we market it ourselves, we sell it on kind of seasonal contracts of winter and summer contracts and winter contracts, we get a pretty healthy premium even to what you can sell at Northwest Pipeline or [Indiscernible]. So, we would also expect that premium coming up this winter.
David Locke: Okay. So, you’re sort of — you’re kind of hedging, but not like in the futures market per se, just given the nature of the way your contracting works?
Kelly Loyd: That’s right. So, yes, so we basically sell as much gas as we’re comfortable selling firm, if you will, in the wintertime at a fixed price, Northwest Pipeline. First a month, Northwest Pipeline plus a spread, right, which I’ll tell you in the wintertime is a fairly healthy spread. And so we do have a physical contract. Like you said, it’s not really heads. We’re subject to the movements of Northwest Pipeline, but we’ll get a premium to whatever that price is during the winter.
Kelly Loyd: But to be clear, we locked in the premium we’re going to get, not the base price.
Ryan Stash: Correct.
Kelly Loyd: Yes.
David Locke: Okay. I understand. And then sort of cycling back to capital allocation a little bit and acknowledging what’s going on with the stock price this afternoon as low $6s looks an awful lot different than high $9s. How do you guys think about stock buybacks, where would the capital come from for a stock buyback to the extent that you now have functionally committed a fair amount of cash to the Permian assets?
Kelly Loyd: Well, it’s — it would — again, it would compete for dollars. So, again, everything’s on the table at all times. And again, we are very excited to be in this, but — in this drilling partnership, and we want to go forward with it. But our priorities are going to be the best use of every dollar. So, that everything is fair there.
Ryan Stash: Yes, I think the way we might think about it and obviously, we have to — the Board has authorized sort of the overall share buyback plan, but we do authorize — generally we enter into 10b5-1 right on kind of quarterly basis. But I think as we think about capital allocation, I think if you saw — obviously the dividend we’ve now said is very important, which we’ve always said and we’ve said it at $0.12 and so the dividend obviously is a base dividend we’re certainly going to pay. Above that and above any capital from the PEDEVCO Permian asset or any other assets, if we some more outperformance in commodity prices with excess cash flow, especially if our stock stayed as you mentioned below $6s versus high $9s, there might be a reason for us to take another hard look at possibly buying some shares back with sort of outperforms our excess cash flow. Does that make sense?
David Locke: Okay. Thanks for that guys.
Kelly Loyd: Thank you.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Kelly Loyd for any closing remarks.
Kelly Loyd: Just quickly want to thank everyone for taking the time. As you know, we’re always here to answer questions. So, anyway, appreciate your interest and your time. Thank you.
Operator: The conference has now concluded. Thank you for attending today’s presentation and you may now disconnect.
