Tracy Krohn: Yes. I’d really like to give you more guidance on that. Some of it has to do with old contracts that need to be resolved and — or that were rejected rather. Well, a lot of people lost a lot of money here, and it didn’t really help them very much. We’ve got to manage some transportation issues that we’ll need to get resolved. The former owners left us rather rapidly and didn’t really do a whole lot in the way of managing some of the corrosion issues. So we’ve been dealing with that. Nothing that I would consider to be hazardous just something that needs to be repaired, routine to repair some of these upgrades. Some of them are just valves on production vessels, and we put one clamp on a pipeline that had been shut in by the former operator and increased production 400 barrels a day, it was a $20,000 clamp.
So some of this is pretty simple, but it takes a little bit of time. We have to get personnel coordinated around these fields from existing fields and managed transportation and logistics.
Derrick Whitfield: Great. And then maybe as one nonrelated follow-up. Wanted to see if you could speak to the A&D environment in the GOM at present as you’re clearly taking a conservative cash building position for 2024.
Tracy Krohn: Yes, sure. Well, you’re seeing a lot of mergers, not just with smaller players, but with larger players, too, notably Chevron and Hess. Hess has a lot of production in the Gulf of Mexico, too. So I see that as positive for the industry. I see this positive for this company. It’s certainly indicative of investor interest in this basin as it should be. This is the second largest producing basin in the country and certainly the largest by area. We’ve always appreciated our ability to function in this basin. There’s always another drill — another well to drill. There’s always another property to acquire. We haven’t run out of enthusiasm for it. And we’ve been in a lot of different places. We’ve operated in nine different states in the US in the past, and we still keep wanting to focus in the Gulf of Mexico.
Derrick Whitfield: Thanks, Tracey. Thanks for the color.
Tracy Krohn: Thank you, sir.
Operator: Thank you. [Operator Instructions] The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.
Jeffrey Robertson: Thank you. Good morning. Tracy, a question just philosophically on returns. When you think about what you see with the costs to drill and complete new wells in the Gulf of Mexico across your asset base and the types of opportunities you see in the acquisition environment. Can you compare maybe the risk profile and the types of returns you think you can generate in given what appears to be your preference for acquisitions with what it might be on development drilling or greenfield drilling?
Tracy Krohn: Sure. I think the decision for us is always risk reward based on the amount of cash we have on hand and the amount of leverage that we can apply prudently. We tend to make property acquisitions where it’s available. And we’d prefer to do that. I mean if the — if our ability to make an acquisition is at or equal to our ability to finance and drill wells organically. And clearly, it’s a risk profile that we would prefer to make the acquisitions because there’s certainly a lot less risk. We know we’ve got a cash flow and a proven reserve base, so that’s a no-brainer. Where it gets a little more difficult is when you start talking about what’s exponential growth going to apply. That’s more where the risk profile kind of provokes the question, do I want to roll the dice, or do I want to spend an amount and I know I can get a certain amount of cash flow on and return.
Drilling is always more risky, of course. And I’ve seen companies come and go and fail deciding that they were going to roll the dice and drill more wells. We certainly have the technical capability to drill in shallow water or deepwater and operate in shallow water or deepwater. We have an inventory of good drilling prospects, good exploratory prospects that would certainly attract more attention, and that’s what we’re going to focus on. But I don’t want to do any of these things myself 100%. So we try to restrict that to around 20% to 25% participation. So that’s a little bit problematic. I think part of the world is starting to wake up to our basin and understand that we have a rule of law and we have reasonable pricing parameters that we can predict.
And so in regulatory, although it can appear somewhat harsh at times. We’re pretty sure we’re not going to get a windfall profit tax overnight that we weren’t expecting. So it makes it — takes a lot of the risk out of it when we can predict some of the more regulatory actions that could occur elsewhere in the world.
Jeffrey Robertson: If we think about the joint venture, Tracy, just to follow up on your comments around risk and reward. If you were able to structure a joint venture with a drilling partner, would — I’m sorry, with another operator in the Gulf of Mexico. Would a goal of that be for W&T to contribute prospects and the partner to contribute prospects and have lessened exposure but over a broader portfolio drilling prospects over the next couple of years?
Tracy Krohn: Yes, I mean that’s an admirable goal, sometimes that happens, sometimes it doesn’t. The more immediate thought process for us is to optimize that and make that occur, if that makes sense. On the other hand, we believe that the prospects that we have are pretty superior and that we have a lot of data. We’ve got processing, reprocessing. And I guess everybody could say, yes, our prospects are better. But our success rate in the Gulf over the last decade and almost 1.5 decades has been over 90%. So that’s pretty hard to argue with.
Jeffrey Robertson: Thank you.
Tracy Krohn: Thank you, sir.
