And in every single situation that I’ve seen bar none, the private company, no big surprise, is marking their book at a significantly higher number than what the smaller microcap public guys get marked at every single day. Borrowing costs, it’s a lot tougher to underwrite these things that 9 — or significantly greater than 9% as it was 3% for the last several years. And then on the seller appetite, we absolutely see it. And even though oil properties or oil properties, they still have a lot of gas in them and where gas has gone really drives that kind of incremental value for some of these sellers and it just doesn’t make sense from a risk/reward basis for a company our size to underwrite optimistic commodity price projections going forward.
And I’ll even add a fourth one on, again, no secret, the regulatory environment. While I would say, from like a media perspective, it’s gotten a little bit better, it’s still very serious. It’s still very tough. States are still coming down and monitoring company’s activities and companies very small producing wells and P&A obligations, way more than they ever have and the U.S. energy stays on top of that very much. But a lot of these smaller deals historically have always had a significant P&A component, shut-in component that came along with them. And there was always some tricks that people and companies would do to, kind of, kick that cane down the road, I think you still see people doing that now. But that game is ending. It’s not if, it’s when.
So it’s really become as much of a part of the transaction calculus as the other three items, that I mentioned.
Charles Meade: Thank you for all that added detail, Ryan.
Operator: Our next question is from Tim Moore with EF Hutton. Please proceed.
Tim Moore: Thanks. We really appreciate that asset growth initiatives color as you wrap up the optimization effort there and geographically, it makes sense why that would take so long. But any other comments maybe you can give us for sneak peak on a strategic alternatives over your commentary, Ryan, and we assume they’re going to be mostly oil-weighted assets?
Ryan Smith: Yeah. So good question. I think, as you know, as the Board and management look at strategic alternatives, like it always carries tenacity word historically, especially in the oil and gas business. But where we’re sitting and where we’re sitting, when we announced it, I believe it was in November, is a delevered balance sheet and what I call significant balance sheet value that is not flowing through to equity valuations. I know we’re not the only small micro-cap oil and gas company that represents that. But I do think we’re one of the larger examples out there. So I think how we look at it is my job and when I focus on day-to-day, we have a very good team here that handles our day-to-day operations in the field and accounting, et cetera.
But it’s really finding the right, I’ll say, project or transaction or initiative that transfers, what I think is extremely significant balance sheet value at this company and have it flow through to something that helps expand our equity valuation. I know that’s a very obvious comment, but it’s a tricky thing to do, especially in the oil and gas space for the last few years. So I think it can take several forms. As I think you mentioned on your oil projects, we’re always going to probably trend towards oil, and looking at M&A transactions. I thought we understand it more, and it doesn’t seem to be as volatile as gas. I know it’s easy to say sitting here now. But I do think that, Tim, we’re at a size now and we’re in a valuation now to where all options are on the table for us.
We have a very concentrated shareholder base, lot of those shareholders sit on our board. And the goal of the company is to make the stock price go up as simplistic as that sounds. So I think in terms of the strategic alts, everything is on the table. Of course, we’re going to transact and venture into areas that we already know well and we’re an oil and gas company. So I’ll let you put those two together. But it’s still just as active as it was. And when there is something that comes out of that process, we will announce it at that time. But no, it’s still an ongoing process. We look at it the same way as we did when we announced it back in November.
Tim Moore: Good. That’s helpful. Now we’re looking forward to more on that front. Yes, for lease operating expenses, that decreased nicely, as you mentioned, to $22 BOE averaged something like 25 in the first nine months of a year. How much lower do you think you can squeeze that out? Is there more potential there?
Ryan Smith: I mean I think on an absolute basis, there’s a little bit of potential like some costs have come down. They’re still historically high, but — and again, I’m talking recent times in the graph here, but like steel and the associated pipe, et cetera, that we use very often, prices have started to trend down. Labor costs and availability have started to trend down a little bit. It’s starting — it feels like it’s starting to sway in the employer’s favor for the first time in quite a while, at least down in Houston, Texas, it feels like that. So I do think that incrementally as inflation tapers off, and the industry becomes more healthy. There’s probably some continued reduction to those costs. That being said, the flip side to having a high single-digit-ish corporate decline rate on our assets on a conventional asset base, a little bit higher LOE.
So I’m happy where we were. I think there is some room to still reduce some of what you saw in the fourth quarter. But I think the really big jump that we made from when we initially bought the assets to our fourth quarter, a lot of that is going to be onetime stuff that’s removed. So we still do have some improvement, but a lot of that improvement has been realized.
