Operator: [Operator Instructions] Our next question comes from the line of John White from ROTH Capital. Please go ahead.
John White: Good morning. And congratulations on closing your New Mexico acquisition.
Philip Riley: Thank you, John.
John White: I wanted to ask about the RPC Power project. In the press release, you said you put in another $5.6 million, in effect, completes the funding for the current project. So that’s the funding. How would you describe the work out in the field on the actual infrastructure?
Bobby Riley: Yes. I would say we’re kind of right on schedule where we thought we’d be. We’re installing 20 megawatts of power out there. We’ve had 10 megawatts over there for some time and we’re just now receiving the second package of generators to get us up to our total design. We’re currently getting all of that stuff tied into our private use network, which basically allows us to self-distribute power to all of our wells. So I think, operationally, that should be 100% operational probably by end of summer. And so far, I think we’re really excited about that opportunity, at least we’re producing our base load. And then looking at other opportunities that we might see coming our way with power.
John White: Thanks for that. And when it’s fully up and running, how much of your electricity or your power needs will this project satisfy?
Bobby Riley: Yes. So it’s basically almost 100% of our power demand in Yoakum County on what we call our Champions. When we first designed the infrastructure out there, we laid that network in place. And now that’s — we’re able to utilize that and we’ll be self-providing practically 100%. There might be one or two wells that’s still on an isolated meter, but the majority of it will be self-generating.
John White: That’s great. And does the similar opportunity exists on your New Mexico properties?
Bobby Riley: It does. As we’re building out and looking at our infrastructure requirements in New Mexico, going forward, we are instead of tying individual meters back into the grid. We are installing, I don’t know if it’s the term, it’s a private use network or our primary point of take from the provider out there so that eventually we can tie our own gen systems into that as well. But that’s a little bit long term. We probably won’t get there this year, but we’re still on the laying out. It has to do with establishing drilling schedules and time to water infrastructure and all of that at the same time. But it’s definitely what we do in our operation, and we will be doing that going forward.
John White: Okay. Thanks for the additional details. I appreciate it.
Operator: [Operator Instructions] Our next question comes from the line of Jeff Robertson from Water Tower Research. Please go ahead.
Jeff Robertson: Thank you. To follow up on the power venture, Bobby or Philip, can you try to quantify the economic impact of supplying your own power to the Champions acreage compared to the alternative, which might have been selling the produced natural gas just into the grid at a relatively low price?
Bobby Riley: Yes. So that’s what we’re trying to do is basically increase the margins on the hydrocarbons that we produce in the area. So as you know, as Waha goes negative, sometimes the residue gas has little or no value to us. And because we’re able to take that residue gas in time and power our gensets to offset our baseload production, our baseload operations. So from an individual well lease operating cost, it’s probably somewhat neutral. But since we’re a JV partner in the — and the power company roughly will benefit from 50% of the revenues from generating power.
Philip Riley: 35% ownership right now that we’re set to benefit from. And we think it’s kind of a high-teen type of return, Jeff, but that’s a nice stable return, right? This isn’t an oil well that’s declining, so it’s something that we’re excited about.
Jeff Robertson: Is it fair that the other part of the return just comes from having a more reliable source of power, which might lead to…
Bobby Riley: Absolutely. I mean, that was one of the primary reasons there is because we’re kind of at the end of the grid there. And we were experiencing some brownouts or frequent power disruptions that cost an extensive amount of money to bring some of those wells back on. So that’s — again, it’s one of the main reasons for doing this is more reliable power.
Jeff Robertson: In New Mexico, you talked about the saltwater disposal, the wells you acquired in the most recent acquisition and your SWD assets that serve that area. Do you need to spend much capital to either upgrade or enhance those to be able to handle Riley’s activity plus be able to maybe take third-party volumes?
Bobby Riley: I think we’re going to focus on just tying those wells in with some flow lines to loop them into our system to give us excess capacity. Primarily, we want to make sure that our disposal requirements are met with some spare capacity for emergencies and stuff like that. But as we continue to look at opportunities there, I think there would be some coming in where you could be charging some third party. But for the most part right now, we’re 100% focused on our own disposal requirements.
Jeff Robertson: Either way you get some. Well, you ultimately get some LOE benefit from — as you work through that process?
Bobby Riley: Yes, we should. I mean basically, the more wells that we have, the less amount of water each well has to take, which needs less energy it takes to push it down hole, et cetera, like that, so that gives us some savings there. And this gives us some redundancy, some fallback spare capacity. And then the ability to bring in some third-party water if we see that we got the excess capacity and moving water is important to us out there, and that’s one of our main focuses to make sure we stay on top of that.
Jeff Robertson: Thank you.
Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.
