And we’re trying to, you know, it’s effectively what we’re trying to do in Sunspear. And then again, you’ve got the longer run. The vast majority of our portfolio is designed for those first two categories. Again, if we were to drill six offshore wells a year, and we’re not quite doing that this year, we’ll probably do that again next year. You could expect four or five out of the six of those wells to be in those first two categories, are those shorter windows utilizing that infrastructure.
Paul Diamond: Understood. Thanks for the clarity. And then just one kind of quick one on HP-1, and the 55 days of downtime, how solid is that number? Should we think about any potential to slip either quicker or longer? Or is it pretty much 55 days is where it is?
Tim Duncan: I mean, look, it’s nothing where it is if it’s 55 days, it’s like the old Einstein quote, right? Every good model is wrong the day you produce it. But, yes, look, I think we feel good about where we are. We’re into the drydock period. It’s down in Galveston. So for anyone local that wants to look at Pier 21 and you can go visit, you know, at least look at the HP-1. It’s been there for a couple of weeks. It’s on schedule. And so there’s two pieces, three pieces of this, leaving the field offshore and arriving at drydock. And there is a period around that, doing drydock itself. And then there is a third period where you do some sea trials before you hook everything back up. Right now it’s on track. And, you know, there’s maybe a little weather dependency as we get back offshore.
You know, maybe we can beat it by a couple of days and get that production back. So I’m optimistic, I don’t want to guide anything other than it’s on track. But, you know, I think we feel good about where we are right now in the drydock schedule.
Paul Diamond: Understood. Thanks for the clarity.
Tim Duncan: All right. You got it.
Operator: Thank you. And your next question comes from the line of Kevin MacCurdy from Pickering Partners. Please go ahead.
Kevin MacCurdy: Hi, good morning. It sounds like the QuarterNorth acquisition is going well and you’re pleased so far. When you think about your consolidation strategy, what was different about the QuarterNorth integration versus EnVen acquisition and what have you learned that you can apply to future M&A?
Tim Duncan: You know, I think just the fact that we had just been through, I think the EnVen acquisition and the EnVen integration and you know, we figured out, and look we’ve been through a lot of these, we’ve had 12 transactions. But as you mature, you figure out how to put the organization together quickly. I think the one thing we wanted to do, particularly in QuarterNorth and one of the reasons you saw us, we thought a 50-50 cash to debt transaction was the right way to do this. You don’t always have certainty around oil price. We want to make sure that we keep the balance sheet in good shape, but we also wanted to close it fairly quickly. So we made that choice to do the primary offering, to close this acquisition quickly, in part because we had a critical well like Katmai, that needed to be designed.
It needed to get executed this year, in the first year. So you want to flip into operatorship mode as fast as you can. So, you know, a couple things different. A little more experience and kind of in how we put together the organization, and then a little more determination on pace to closing, so we could operate the asset sooner, get to the synergies sooner, and get to the well-designed on critical budget items sooner. So I think that was a choice on our part. We’re not going to be able to do that every time, but I think it was the right way to structure QuarterNorth.
Kevin MacCurdy: Great. And as a follow-up, do you have the current production from the assets acquired from EnVen, and then what is the current production from the QuarterNorth assets?
Tim Duncan: Yes. Well, look, I’ve owned EnVen enough that long enough that I don’t know if I can break down the actual number on that. But I would tell you, just as you think about it, those assets, I would tell you a couple of things that came up last year. We had some downtime, right, when we opened up that right when we closed that transaction in the Neptune facility. And we talked about that getting all the way back, and that facility is all the way back. And so, I’m really proud of how we’ve recovered in that Neptune facility is producing at the rate it was producing at before we bought the EnVen assets. And that’s important because we have a Repsol JV around there, largely with the EnVen acreage. And so that’s, you know, again, we talked about earlier in the call, tell me about some of the things.
Did you pay for them? Did you not pay for them? We certainly didn’t underwrite a big JV with Repsol when we did the EnVen transaction. So that value that could be created there is outside the underwritten value. And then the Sunspear discovery, again upside to the EnVen transaction. So that got to — off to a little bit of a slower start, but it’s had a hell of a recovery, particularly around Neptune and around kind of the upside in the drilling program. EnVen is off to a great — excuse me, QuarterNorth is off to a great start, that I’m a little more familiar with because we just closed it. And I can tell you those assets were producing 32,000, 33,000 barrels equivalent a day over the last month. Again, we had some drydock, and that’s how it all flows through our guidance in the second quarter, but we like where that asset is performing today.
Kevin MacCurdy: That’s a great color. Thank you.
Tim Duncan: You got it.
Operator: Thank you. And your next question comes in the line of Noel Parks from Tuohy Partners. Please go ahead.
Noel Parks: Hi. Good morning. I just had a couple. I was wondering, on what you’re seeing out there in terms of M&A opportunities. Your model has been so successful focusing on the underused facilities out there in the deepwater. And are the range of opportunities you see out there, for the — your strategy of the underused facilities, is that pretty, is that a larger subset of what might be out there compared to say, maybe things where the attraction would be more just underutilized technology, say to an existing but maybe still fairly well-used project.
Tim Duncan: Well look, I think the technology advancements that we’ve had in our basin related to seismic technology, related to drilling technology with these seventh generation rigs, related to subsea tiebacks and they’re getting longer. And how you think about flow assurance. We’re not patenting any of this stuff, right? I mean, the best operators in the Gulf of Mexico all understand that. So we’re all employing that within our execution of our business plan. I do think longer term, as you think about us in that counterparty statement, 70% of the production in the Gulf of Mexico is still operated by four names and it’s the three Majors plus Oxy. And so they all have their own economists, they all have their own view on oil price.
They all have their own kind of between Chevron and BP and Shell, how they’re managing their asset set, so there is no predictiveness on when they could come to the market. Now if they do come to the market, we think we’re a good counterparty to be a buyer of those assets, but we simply can’t. As I mentioned earlier, the reason I can’t give you an idea where M&A flow is in the Gulf of Mexico is because some of the private sellers who would probably know about, we’ve done those transactions. And now you’re going back to, again what we think would be ultimately when they come to the market, underutilized deepwater assets, things that we could find some benefit from. Some of the prospects that we talked about in that middle category can be material to companies like us, but maybe a little less material to a company like Chevron.
That’s really interesting to us. But right now, again more tactical and smaller things while we wait to see where those potentially transact in the future, knowing that it’s totally unpredictable right now.
Noel Parks: Right. Thanks. And I wondered if you just had any updated thoughts on the offshore rig market continues to be high utilization there and the pricing power increasingly seems to be to the vendors. So any thoughts there on how that might affect your outlook?
Tim Duncan: You know, it does a little bit. I think there’s a couple. It’s an interesting question. You know, so if when I — again, I go through those categories of prospects, we try to drill those deeper ones, clearly sub-salt that final category. When you’re getting, you know, 24,000, 25,000 feet something like Katmai, you do need those big rigs. You need, you know, managed pressure drilling systems. You need the best efficiency on those. And so, yes, there is a part of our portfolio that does utilize that. But there’s a big, vast part of our portfolio that doesn’t have to have a seventh-generation type of rig. And so we had some success with a smaller rig last year, that they price out at a different price rate. And so we’re going to try to make sure we’ve got the right rig that fits our portfolio.
Look, the other thing that we haven’t done, and I’ll continue to resist doing it, is taking on long-term rig contracts. If you think about how companies in the Gulf haven’t made it, and there’s people that have had horror stories around that over the last 10, 15 years, typically they didn’t hedge when it was appropriate to take on some hedges. And we did that in the second quarter, by the way, at over $80, or they take on too long of a rig contract or somebody asked, they take too high of a working interest in a deepwater project for a company of their size. We’re not going to take on a two-year rig contract at the current rig rates. We’re just not going to do it. And so that could cause capital to be a little lumpier and frankly could generate more free cash flow, maybe a little less predictive on how you think about production, but I’d rather take on a little bit of that lumpiness than take on that obligation.
And so we’re just going to have to be watchful and look for windows. I mean, if the window is, hey, look, we can go execute something for 180 days and instead of doing something for 18 straight months, we’ll do that to make sure we don’t take on too big of an obligation for a company of our size.
Noel Parks: Great. Thanks a lot.
Tim Duncan: You got it.
Operator: Thank you. And we have a follow-up question from Subash Chandra from Benchmark. Please go ahead.
Subash Chandra: Just revisiting again that, I guess, the waterfall of production. Just curious as we sort of, now we got a view of Q2. We come out of Q2, HP-1 is back, and we go into Q3, the uncertainties of a storm, et cetera, et cetera, in the Gulf. Are there any counterbalancing drivers for Q3 that you can tell us about on the production side, above and beyond HP-1 coming back?
