Jeff Robertson: When you think of 2024 and the capital intensity of the asset base, is it fair to think that a two-rig program over time will decrease the natural decline rate in the existing proved reserve base and therefore maybe decrease the capital intensity? We’re trying to offset decline and maintain or grow production.
Michael Hollis: You bet, Jeff. It’s kind of a kind of a two sides to that equation. One side is obviously every well in the Permian Basin decline. So as you decline out over time, the decline rate reduces. So as the base production ages, the corporate decline will go down over time. And as we’ve reduced activity toward the second half of ’23 that will allow that base portion of the production to reduce its overall decline rate. So again, as you mentioned, it makes it easier to hold that production as well as to have a basis declining left that you can grow off of as you deploy capital. The other piece on the efficiency front for the capital efficiency kind of walk through that on slide 10, where we walk through where costs are today.
And as we’ve mentioned, we’re mainly focusing on co-developing the A and lower Spraberry. They are our two highest rate of return and capitally efficient zones, as well as the cost for services and tangibles are going down as well as the efficiency of the drilling and completion side going up over time. So yes, do we see 2024 from a capital dollar utilized to what we get out of it being much more efficient than where we’ve been in the past? Absolutely.
Jack Hightower: Will that start to show through in your — in the DD&A rate, Mike or Steve?
Michael Hollis: So DD&A rate — and let me give just a little bit of clarity about DD&A rate and for HighPeak versus peers. So again, almost all of the growth that we’ve had at high peak has been through the drill bit. So by nature alone, there you will have a higher DD&A rate. Typically, if you bought something you would classify some large amount of that price being lease hold that gets distributed across all of your PUDs as well as your PDP. We only do it through the drill bit. We take a lot of our leasing calls and divide that only by the proved reserves for those wells. We’ve also built out life of the field infrastructure, and that’s obviously very front end weighted to the life of the company. And most all of those calls are in now and again divided by just our proved reserves.
And then you even go to the BOE mix that HighPeak has, although it’s very, very valuable because it’s very oily and very little gas that’s got a very depressed pricing today, it’s fewer BOEs. So again, if we were producing at the same kind of mix and generating the same EBITDA as our peers and had an 86,000 BOE a day kind of number to point to the same EBITDA, that, again, just by itself would reduce our DD&A down into the $18 range. And then as we continue to infill and drill these wells, that leasehold as well as the infrastructure dollars that are already allocated in our DD&A numbers today will get diluted with reserves that had virtually none of those costs associated with it. So to your point, over time, as we continue to drill these wells our DD&A will continue to trend down and look more similar to what your other operators in the area are at today.
Operator: Thank you. This concludes today’s conference call and thank you for participating. You may now disconnect.
