Synergy Resources Corp (SYRG) First Quarter 2015 Earnings Call Transcript

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Operator
Thank you. Our next question is coming from the line of Mike Scialla with Stifel. Please proceed with your question.

Mike Scialla, Stifel
Hi, good morning guys. If I am hearing you correctly, you probably do not bring on any wells in your fiscal second quarter and just trying to get a sense for how to model production. I assume you are above that 8,300 BOE per day level now. Can you give us any sort of sense as to what second quarter production would look like if you don’t bring on anything? Is it flat sequentially with the first quarter or up or down? Can you point us in that direction there?

Jon Kruljac, VP Capital Markets and IR
Yes, Mike. We had somethings built in there. Clearly the pad that we felt would be on at the end of February is not going to be there, so we are taking that out. I would say flattish is probably about right. We got to look at the non-op and what is happening there, and then look at this decline curve on the acquisition that we made. Production in November was above the internal, but we have not seen the full December production yet from that, so that will have an impact. We will give you some second quarter guidance here in a few weeks before the end of the quarter.

Monty Jennings, CFO
I would assume flat and the acquisition helps to keep that flat based upon whether decline.

Ed Holloway, President, Co-CEO
Yes. We are still impacted on those two pads. If we get any relief there that will help. It has been a real struggle on those two pads, the Kelly Farms and the Weld 152, which are both good producing pads. It’s just that there is just a model back there that needs to be cleared up.

Jon Kruljac, VP Capital Markets and IR
This is also goes to one of the earlier questions on LOE. We were at a point there in those Northern pads, Kelly Farms, and Weld 152 that the line pressures are so high, it does not make sense to be battling it. We are not going to be spending a lot of LOE or as much LOE expenses we had in the past. Without bringing some new pads on, LOE could actually still look good in the second quarter. I think modeling forward, we would [unintelligible – 00:44:36] that 450-ish range on lifting cost.

Mike Scialla, Stifel
Okay. That is very helpful. Appreciate that. Then my other question that sounds like probably it’ is kind of along the lines of the one Welles just asked, so maybe it is coming in an update but as curious on the Kelly Farms. For one, probably you did not get that put into an eight-inch line yet or if you did there are still some constraints on that. Then I was curious as to how those two Codell wells were performing there?

Craig Rasmuson, COO
This is Craig. One we were able to run a big versus the highline pressure. The line pressure there has been the worst we have ever seen. We have not had the eight-inch installed yet. It is just now finally on our docket to go ahead and decide if we want to participate in the cost to go ahead and install that. What we would have asked DCP to do is to model what that eight-inch is going to do for us because it is taken it to the same extreme line pressure. The four inches there it serves and gets to the six, gets to an eight, but eventually gets to the Lucerne plant.

The Lucerne plant is just maxed out right now. That is the bottom line. Even putting the eight-inch in over the last 30 to 45 days, we have realized that there may not be until the Lucerne II turns on in May. There may not be a benefit to pay in capital to go ahead and put that eight-inch at this present time. We are still evaluating that.

Long story short is when they do run they are holding up strong, the pressures are unbelievable. They keep increasing — the longer we are shut in, the less they can produce. We have no concerns there that once we get the alleviated capacity and midstream capacity, those pressures alleviate. We are going to have four stellar wells there.

William Scaff, Co-CEO, Treasurer
One thing I have to add, Mike, too, is this is where the acquisition. The strategic nature of the acquisition has been very important for us because line pressures in the southern part of their field are much more conducive towards a fuller production. We now have optionality to move more of our future drilling operations down into the Southern part of the field along with what we are doing on the Western flank, which is also about 100 pounds less or more sometimes in line pressure.

Mike Scialla, Stifel
That makes sense. I appreciate the color. Thank you.

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