Evolution Petroleum Corporation, Inc.

Q2 2021 Earnings Conference Call

2/4/2021

spk04: We appreciate your time and patience. Please stay on the line and we'll be back in just a moment. Thank you for waiting. Your patience is appreciated. Please hold the line, and we'll be right back with you.
spk02: Good day, ladies and gentlemen, and welcome to the Evolution Petroleum Second Quarter Fiscal Week. 2021 Earnings Release Conference Call. At this time, all participants have been placed on the listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Ryan Stach. Sir, the floor is yours.
spk03: Thank you. Good afternoon, everyone, and welcome to Evolution Petroleum's Earnings Call for our second quarter of fiscal year 2021. Today, we'll be discussing operating and financial results for the quarter. Joining us for the call are Jason Brown, President and Chief Executive Officer, and myself, Ryan Stach, Chief Financial Officer of Evolution Petroleum. If you wish to listen to a replay of today's call, it will be available shortly by going to the company's website or via recorded replay until March 6, 2021. Please note that any statements and information provided today are time sensitive and may not be accurate at a later date. Our discussion today will contain forward-looking statements of management's beliefs and assumptions based on currently available information. These forward-looking statements are subject to risk and uncertainties that are listed and described in our filings with the SEC. Actual results may differ materially from those expected. Since detailed numbers are readily available to everyone in yesterday's news release, This call will focus primarily on key results, volatility in oil prices, and how that affects evolution, and our typical update on operations and on plans for the remainder of fiscal 2021, including capital spending. I'd now like to turn the call over and welcome our President and Chief Executive Officer, Jason Brown.
spk06: Thank you, Ryan. Good morning, everyone, and thanks for joining us today on Evolution's second quarter fiscal 2021 earnings call. We appreciate your continued interest in and support of our company. I'd like to start by welcoming our new CFO, Ryan Stach, to his first earnings call with Evolution. I would also like to thank him and particularly David Joe and the rest of the team for their diligent work in making this such a seamless transition. With the company's focus on growing through acquisition opportunities, Ryan brings a nice skill set of investment banking experience to that effort. We have been encouraged by the recent increase in commodity prices. However, COVID-19 pandemic is not yet in the rearview mirror and continues to disrupt all of us in many ways, which keeps volatility in the price of crude. The delicate balance of supply and demand continues to be uncertain, as evidenced by the futures market. While we cannot predict the duration of such volatility, we are well positioned to weather these times as we've done this past year. We have continued to focus on managing costs and maintaining our balance sheet to protect us and ensure the long-term sustainability that our investors are accustomed to. Although we had recently completed our full credit line determination of $23 million in a three-year extension, you may have seen in our last queue that we were somewhat limited in our ability to draw on it due to some covenants related to trailing commodity prices. Ryan wasted no time in adding value to the company by negotiating our Sixth Amendment with our lender, giving us full access to our credit facility. This, along with our $19 million of cash on hand, will primarily serve to support our continued acquisition strategy, which I'll discuss in more detail later on the call. We remain in continuous conversations with our operators, both at Delhi and Hamilton Dome, to find ways to better optimize our assets, both technically and financially. Our assets continue to provide long-term upside as we believe they have substantial runway with numerous identified remaining projects such as workovers or infill drilling programs and new locations to be developed, particularly at Delhi. I was pleased to see CO2 purchases and injection pickup during the quarter to be normalized levels at Delhi. Purchased CO2 supply came back online at Delhi in late October. At an initial restricted rate of 65 million cubic feet per day, and averaged about 75 million cubic feet per day in December. We've already seen an impact and a softening of production decline. And as CO2 reservoir pressures increase over the coming months, we hope to see production increase. It's also noteworthy that we settled the remaining derivatives contracts entered into last year that were put in place to protect our balance sheet when oil prices precipitously dropped. These contracts did the job that we needed them to do by protecting our balance sheet and dividend during a very tumultuous period, but we were happy to get to their expiration at 1231 so we could participate in the recent uptick in prices. The company has no more outstanding derivative positions at this time as of January of 2021. We continued to see positive earnings this quarter, and as of December 31, we recorded revenues of $5.8 million. It's a 3.1% increase from 5.6 in Q1. We ended the quarter with 19 million in cash and remained debt-free with an undrawn bank revolver. With that, I'm pleased to announce our 29th consecutive quarter of issuing a cash dividend of 2.5 cents per share. In addition, on February 2nd, the Board approved our 30th consecutive dividend to be paid on March 31st of this year. and decided to take the first step on the path toward our long-term goal by raising the dividend by 20 percent to three cents a share. We hope that we can continue taking more steps in that direction as we all gain more and more confidence in the stability of the markets and commodity prices. But we'll only do so when it makes sense, like it did this quarter when the hedge rolled off and we saw near-term improvement in price. We continue to concentrate our focus on cash flow and total shareholder return We provide an attractive cash return to shareholders. With paying our 29th consecutive dividend, we've now returned over $70 million in cash dividends since the inception of the dividend program in 2013. With that, I'll now turn the call over to Ryan to run through our financial highlights, and then I'll wrap up the call by speaking briefly about our strategy outlook and the M&A landscape. Ryan?
spk03: Thanks, Jason. I'll now share some more details regarding our financial results for the second quarter ended December 31, 2020. Please refer to our press release filed yesterday afternoon for additional information and details for the full fiscal second quarter 2021 and look out for our Form 10-Q to be filed likely later today. Now I'll hit some of the financial highlights for the second quarter. As Jason mentioned, we paid our 29th consecutive quarterly dividend on common shares and increased the next dividend payment by 20% from $0.02 to $0.03 per share. Revenues, as Jason mentioned, increased by 3.1% over the prior quarter to $5.8 million. We generated cash flow in excess of the quarterly dividend before the effects of our hedge payments and ended the quarter with $19 million in cash and no debt. We also amended our credit agreement to incorporate a more flexible current ratio covenant that gives us access to the full borrowing base. In December, the last of our hedges rolled off, which had been adversely impacting our recent results. As Jason mentioned also, these hedges served their purpose and protected our balance sheet, but we are... The decrease in production in the Del High field related to the shut-in of the CO2 line, as we've discussed, and a lack of conformance capital. As Jason discussed, with the resumption of the CO2 line and increased conformance work, we hope to see production numbers improve gradually over the coming quarters. We are, however, encouraged to see continuing price improvement on the realized prices for NGLs. Realized NGL prices were up 36% this quarter for an average price of $12.36 per VOE. Lease operating expenses increased 25% to $3 million in the second quarter compared to $2.4 million in the prior quarter. This increase is entirely driven by the resumption of the CO2 purchases at Del High. All of their lease operating costs remained unchanged at $2.4 million. We would, however, expect to see some increases to lease operating expenses at Del High in the coming quarters now that the CO2 purchases and conformance workovers have resumed. Due to the depressed oil price environment we experienced in March through May of 2020, our ceiling test for the book value of our properties was adversely affected. Therefore, we recorded a $15.2 million non-cash impairment during the quarter as a result of the capitalized cost of oil and gas properties exceeding the full cost valuation ceiling. Per the prescribed accounting rules of the full cost method of accounting, quarterly ceiling test is performed and calculated using the trailing 12 months first day of month average prices. The ceiling test impairment was primarily driven by a decrease in this 12-month trailing average price for crude oil used in our ceiling test from $43.63 per barrel in September 2020 to $39.54 per barrel at December 31, 2020. In December, the last of our hedges rolled off, as we've mentioned a few times here, which had been adversely impacting us. As a reminder for those listening, we had We had entered into hedges covering 1,400 barrels a day, which was a substantial portion of our production, from April 1st through December 31st, 2020. G&A expenses increased $500,000 to $1.9 million from last quarter. This increase in G&A is primarily a result of one-time consulting and legal expenses associated with the CFO starts and transition costs, as well as the occurrence of yearly administration and legal expenses associated with our annual shareholder meeting and new equity plans. Our income tax benefit increased $3.2 million, or 39.4 percent, from the prior quarter, primarily due to a higher pre-tax loss associated with our impairment. At December 31, 2020, we continued to carry receivable for income tax refunds of approximately $3.1 million that we still expect to collect. Net loss for the quarter was $12.7 million, or 38 cents per diluted share. The increase in the net loss was primarily driven by the aforementioned $15.2 million full-cost ceiling impairment. Due to the current oil price volatility, the Delhi field operator decided to delay the Phase 5 development project for 12 to 24 months. We do believe that Phase 5 is economic at today's prices, and we continue to include it in our approved undeveloped reserves. The previously planned Delhi Phase 5 development expenditures were expected to be approximately $1.9 million in fiscal 2021, which we no longer expect to incur this year. However, moving forward, we do expect to incur additional maintenance capital expenditures at Delhi and Hamilton Dome as the operators resume conformance work over projects. These amounts are not known or approved at this time, but are expected to be in the range of $250,000 to $500,000 for the remaining six months of fiscal 2021. Finally, working capital increased slightly from the prior quarter to $21.6 million, and we ended the quarter with $19 million in cash after paying out $800,000 in dividends have zero debt and undrawn credit facility. This concludes our review of financial results and operations for our fiscal second quarter. I'll now turn the call back over to Jason for final remarks.
spk06: Thanks, Ryan. As I mentioned before, we continue to invest our time and attention into developing a collaborative working relationship with both of our operators and are starting to see fruits from that effort. We just had our annual working interest owners meetings with both operators and are encouraged by their plans for 2021. DenBerry has emerged from the restructuring process and has indicated to us that conformance work over projects are approved and will soon be underway at Delhi. We're also pleased to have had our technical team invited to work with DenBerry's Delhi asset team to review and high grade future conformance projects. We are encouraged by these actions and are hopeful for the results and additive nature to these projects in the second half of our fiscal year. At Hamilton Dome, MERIT is strategically evaluating their shut-in well and water injection programs, and we expect to see increased production in the coming months as oil prices rebound and more wells are returned to production. We continue to be impressed with MERIT's technical professionals and enjoy being partners with that organization. As previously stated, we expect the total CapEx spend to be in the range of $250,000 to $500,000 for this year remaining. As Ryan mentioned, our previously planned expenditures of approximately $1.9 million net to EPM in fiscal 21 for the development of Phase V at Delhi Field have been delayed. We believe Phase V is economic at today's prices and continue to include in our approved undeveloped reserves. We plan to continue discussions with the operator and look forward to the eventual development of Phase 5, now expected to begin in calendar year 2022 or 2023. We were, of course, disappointed by this delay, but long-term, nothing has changed. We still believe in the Phase 5 project, and so does our operator. They're just being judicious with capital at this time and will continue to assess the economics moving forward with the development. That being said, it does further focus our efforts on selectability and strategically looking for opportunities where we can take advantage of our available cash and add additional assets that will further grow and diversify the company. We believe that the recent stabilization of oil prices should help facilitate that effort and have been encouraged by the opportunities and level of deal activity that we've been able to participate. I will reiterate that we are strategically looking for additional low production decline, long-lived reserves to add to our assets that will contribute to our dividend for years to come. We're in a great position for continued success, and I look forward to the future of Evolution Petroleum. With that, I think we're ready to take some questions. Operator, please open up the line for questions.
spk02: Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from John White. Please announce your affiliation, then pose your question.
spk09: Yes, John White, Roth Capital.
spk04: Good morning. Hey, John. Good morning.
spk09: First, congratulations to Ryan for joining the team. It's a great move. And congratulations on the dividend increase. And you're true to your heritage and your management style. You're raising the dividend very cautiously in this environment. I think that's a good thing. Could you give us, is there any additional comments? And I got on the call kind of late, but the amount of, how do you see the amount of CO2 injection volumes progressing over the rest of the calendar year?
spk06: That's a great question, John, and thanks for the, we saw the write-up that you did for us as well covering them. I'm always surprised how well you guys, you and Jeff and the other analysts, have us pegged pretty well. So we appreciate the coverage. CO2, that's been a constant conversation with Denberry. And they've had some issues at Jackson Dome. They've got three main facilities up there. And it's just kind of everything's been worked over the last few months. So they're kind of making progress. all of the different fields share some CO2. So we'd like to have 85, we'd like to have 95 or 100 right now, but we're limited to about the 75 range. I think that we'll see 75 pretty consistently throughout the spring and the summer. Their repairs are going to be finished before the summer, but in the summer, as you know, with the warmer temperatures, we have a miscibility issue with CO2, so it's not the right time to kind of ramp up to what I would call some make-up CO2. I think we would expect that to come on maybe in late September or October when temperatures start to break. And then I think most of the winter next year we'll see in the 100 to 110 MCF per day of CO2. It's capable of running about 125, but I don't think we probably will run it that hard. But that should give us all through late 21 and through 22 quite a bit of make-up gas. And I would anticipate that reservoir pressures are going to continue to rise We'll make up quite a bit. We've seen some effects already, the softening and the decline. We probably won't get to reservoir pressures to where it was last February for, I would say, at least a year. That doesn't mean that production is going to fall off. We would expect production to climb as it's already kind of softened and arrested. Does that make sense?
spk09: Oh, yes, indeed. That's a very nice detail. So, okay, thanks very much. I appreciate it. Thanks, John.
spk04: Thanks, John.
spk02: Your next question is coming from Jeff Gramp. Please announce your affiliation, then pose your question.
spk08: Hey, guys, Jeff Gramp with Northall.
spk04: Hey, Jeff.
spk05: Hey, Jeff.
spk08: How are you? Good, thanks. Hey, I'm just kind of curious. to get an updated number from you guys. And it sounded like from the release, and I think in your comments, that there's still a little bit of either curtailed or shut-in production on either, maybe both assets, depending on how you want to characterize that. Is there any way to quantify or kind of get a handle on what's kind of left, if you will, in terms of kind of incremental production that could be added, given kind of the rally in prices and a return to normalized operations?
spk06: Yeah, that's a good question. Let's start first at Hamilton Dome. It's a little bit easier. We're excited that they're turning on, I think, 11 wells, four in January and six in, I'm sorry, four in January and seven in February. You know, it's kind of a guess of where those are going to come on, but there are estimates of where the other ones are going to come on, and kind of a risk thing is somewhere in the 100, 110 gross. So what would that be, about 5%, 6%? I think we're making about 1,900 and some of the barrels a day there. So that should push us over the 2,000 mark. I think before everything went down, we were in the 2350, somewhere around there. So we're not all the way back yet, but that's going to be a nice step towards that goal, and that's going to happen pretty immediately. And the other thing I'd say up there is that we've seen the differentials tighten a little bit through this whole process, which is nice. I think somewhere in the $12 range all in off of WTI. So generally at this time of the year that tends to blow out, but that's been kind of a nice silver lining to this whole process. I will make one more comment about Hamilton Dome in that we've seen some recent regulation changes, particularly on BLM land and BIA land in terms of permits and drilling and all that kind of stuff. Hamilton Dome is on BLM land, but none of that affects us. It doesn't affect any current operations. We certainly aren't doing any leasing up there or new drill wells, so none of that's affected us. All right, moving on to Del High in terms of projects. We were, as you probably heard in my voice, we were real thrilled to have some conformance projects. There's three that have already been approved, and they will begin pretty quickly. Actually, our technical team, that whole dynamic's changed a little bit. Our technical team invited to meet with their technical team. We have geologists, we've been doing work there too, to be part of the process in selecting conformance projects to kind of go back and forth between the two teams, and it's really helpful discussion. In fact, we were on the phone for an hour and a half this morning talking about an additional two to those three, which would make five that I think probably are, those two are now going to be pushed up for approvals, but that's pretty high probability. You know, we didn't have any conformance projects in 2020 and none in the second half of 2019 calendar. So I think the last conformance project they did was a month before I started in July of 19. So that's going to be great. So aside from the conformance projects, each of which have their own kind of potential of adding barrels, and we'll be pretty happy about that, in terms of just the normal It's not really curtailed at Delhi. It's just the production's down from a lack of pressure support, and that's going to be a slow rise back up. Like I said, we've kind of curtailed it. I think 8H right now, we're about 4,400 barrels a day. In February 22nd of last year when the CO2 line went down, I think we were at 5,600 barrels a day. So we've got a wedge there that we've got to make up that's basically a loss from that, the CO2 line being down. I would anticipate it's going to take us probably at least a year, maybe a year and a half to get back to those levels, and it might take some conformance projects to get us there. Hopefully that's directionally pointing in the right direction. We don't really give guidance, but we're certainly hoping that that production starts to ease up and then the conformance would add to it as well. Got it.
spk08: Yeah, that's really helpful and definitely appreciate the federal commentary at Hamilton Dome. That's helpful. Switching over on the acquisition side, can you maybe just to give us maybe a little, peeling that onion back a little bit more, is bid-ask narrowing? I guess that's kind of my default assumption given what pricing has done that maybe helps kind of narrow things for buyers and sellers. But conversely, are potential sellers maybe feeling a little bit more you know, confident and maybe there could have been some distress that maybe some folks are getting bailed out. Just kind of curious those counterplaying dynamics and what you're seeing.
spk03: Yeah, I'll take it first and let Jason follow up too. Yeah, Jeff, I mean, I think we're seeing, you know, as soon as the first of the year hit, we've seen an increase in sort of volume, if you will, of marketed deals going to coming out and a lot that actually we think fit us pretty well too. So, it's good to see that increase in, in sort of confidence, if you will, on the seller side. Um, so we are seeing that, you know, that that's currently happening out there as far as bid-ask spread, you know, look, I mean, we're obviously, we've seen a few deals. You guys have followed it just like we have, um, sort of things start to loosen up out there. I do think the bid-ask spread is, is coming in. I think, you know, as people get more confident in the forward curve, you're just naturally going to see, you know, buyers and sellers, you know, come, come to an agreement. I think you have seen some deals, um, you know, of kind of sellers like Earthstone and Warburg taking, you know, stock to participate in any sort of upside. So I think that's a trend you're going to continue to see. You saw Northern put out something last night, right, where Reliance took some warrants. So I think that's the other trend you're seeing is people being willing to take stock now in this market, you know, to kind of ride hopefully the wave of increases with sentiment and pricing. Jason?
spk06: Yeah, sure. You know, we've Jeff, it's just a process, and the bid-ask has been the thing that's really plagued our industry for a long time. I would say, overarchingly, definitely seeing that tighten. We're seeing people that have kind of been kicking the can down the road trying to figure out what to do, and it looks like there's some light peeking through the clouds right now, and we're seeing people motivated to take advantage of that, because the volatility is still there. The forward curve still goes down in the future, which just represents that people are just not quite sure how things are going to you know, to shake out with post-COVID and what the economy looks like afterwards. We like the kind of $50 flat range. We think that's a pretty good buying range, which the strip's pretty darn close to that right now. I would say that we took a pretty good swing in the fall, and we got really close. We were there on price. There were a lot of well bores and a lot of liability, and the contract was pretty gnarly. And as a public company, we can't get stupid. So there's more than just price that's involved here. But I would say over the last six months, we've took a pretty good swing on three or four deals. And some of that is the board getting comfortable with management's assessment and back and forth. And we're starting to get into a groove where we understand where we need to be, and we're all collectively motivated. to grow the company and that's been very good. And that takes a while to build that traction and track record with each other really. So I feel extremely confident right now and I think that we're kind of getting to that place internally with the singular motivation at the right time with some deals coming to us. And like Ryan mentioned, being able to trade some shares, it's all on the table now and we've kind of universally agreed with our board and our management. that their cash, uh, some level, modest level of debt, not more than a turn. And, uh, our paper are all on the table to be able to, to grow the company.
spk08: Got it. That, that sounds great. And best of luck. I appreciate the time guys.
spk06: Thanks Jeff. Thanks for the questions.
spk02: Your next question is coming from Eric Bolting. Please announce your affiliation. Then pose your question.
spk05: Hi, this is Eric with Grand Slam. Thanks for taking my question guys. And, uh, Congrats on a solid quarter there. So you talked pretty well there about the M&A opportunities, which is really what my question was about. Could you maybe talk a little bit more about at what stage the board gets involved? Is it sort of after you've done the preliminary work, or are they involved quite early, or are they actually sometimes helping you source? What's their role?
spk06: Yes, there's certainly avenues of deal flow, but I think generally the process is we see everything that comes in. You've got to have presence with all the investment banks, all the people, the large, the RBCs and the Jefferies and the larger shops that are doing deals, but also the smaller ones that have popped up that have been doing good work, the D-Trings and the Ten Oaks and those sorts of energy nets. And we see everything that comes in. We have to move very quickly, and we've got some defined screening tools pretty fast with to be able to weed them out. We've been having an investment committee meeting for the last six months once a week, which is unusual. We formed an investment committee about a year ago, but that just shows the dedication the board has to looking at this. So that process has been quickened, I guess, because the board is aware of these deals even earlier in the process. Now, deals that you would normally want to get pretty far along before you spend a lot of technical time on I tend to jump the gun on that a little bit, and we do quite a bit of technical work over the holidays. We jumped the gun and got some logs and digitized them, had petrophysicists correcting all of them, decor labs. We're doing pretty solid. I'm very happy with the way the teams come together, doing very, very solid reservoir and geologic and petrophysical work to understand these reservoirs. You've got to stretch a little bit to get something across the goal line. Nobody really wants to sell when these prices are down and their valuations are down. But you can't be stretching on stretched engineering or stretched technical valuations. So we really focus on putting effort into that to make sure that all of the financials that Ryan's pulling in his model to look at what it does to us corporately and how we would structure capital to be able to get the type of returns we need to support our dividend, all of that standing on very, very firm footing technically, geologically, and all the other ways. So that's kind of along the short of the process. And in the last six months, the board has actually been pretty involved all through that process, kind of weekly getting an update of what's going on.
spk05: Thank you very much. That was very helpful.
spk01: Yeah. Thanks, Eric. Thanks.
spk02: You do have a follow-up question coming from John White.
spk06: All right, Mr. John.
spk09: When you talked about settings, I was going to ask about the conformance projects. But in response to your last bit of commentary, with as long as I've known Bob Berlin, stretching on the engineering is the last thing I'm going to worry about.
spk06: Well, there you go. But he and I get along very well on that. We take a hammer and beat it and make sure that we're not missing something, and that's what makes this game a little bit difficult because you're always second-guessing yourself. But we've got a really good team, and it's really starting to gel, and that doesn't come easy putting a team together like that. Good luck on finding a deal, and thanks. Thanks, John.
spk09: Thanks, John.
spk02: Your next question is coming from John Baer. Please announce your affiliation, then pose your question.
spk07: Thank you. John Bear with Ascend Wealth Advisors. Good afternoon, Jason. Hey, John. Ryan, and I'm sure David's listening. I didn't get a chance on the last call to wish him good luck, and congratulations on the retirement.
spk06: I'm sure he hears you. I'm sure he hears you. You heard my comment in the script about he just went over and above what he needed to do to help, and he's He's still a dear friend of the organization. He was very, very helpful in Ryan getting him up to speed. It was great.
spk07: I hope I can get down to Houston here sometime and certainly try to get a hold of him. Anyways, I do want to echo previous callers' congrats on the quarter and the dividend increase, of course. Several of my questions have been answered as far as the CO2 purchases and so forth. But a couple other questions. Going around to the M&A, you previously indicated looking at some more gas-centric acquisition possibilities. Is that still in the mix or is it sort of whatever's best that comes along, we're going to grab it? Does that make sense?
spk06: It does. And I would probably reiterate that a little bit. Our gas interest is pretty narrowly focused. There's a lot of things that I like about gas that are very evolution-esque in that it's a long life, it's very low lifting cost, and generally it's very flat. So it has that long life nature that works really well for us. However, gas is super sensitive to midstream marketing transportation. So it really is all in the midstream marketing game. So our efforts, and we're looking at gas projects. In fact, I was looking at one this morning. They've got to be really close to, let's just say, the Carthage pipeline going up to East Texas to get over to Sabine Pass. We would probably look at something in the Barnett in East Texas. You start getting into Oklahoma, you start getting further away, there's just too much transport to get it to anywhere that it's going to be a sustainable market, i.e., an LNG type of market that I know that's been a little bit deflated right now, but that's the long-term goal for gas. If you get over to Eagleford and West Texas and whatnot, there's just too much associated gas coming in to compete with over there, and I think you're going to get deflated on price with all the people trying to produce oil and producing the gas as a side product. So does that give you any thoughts we like about it, but it's got to be pretty special.
spk07: Sure. Got it. And then, as you mentioned, you get a bit of a premium for your Louisiana suite. Is that still holding up in that regard?
spk06: Well, that's a really good question, John. No, it's not. It is. In fact, it's a couple bucks, $1.60 to $2 over. I think we probably anticipate that for the next year, at least through 21, probably the first half of 22, it's probably going to hang somewhere in the $1.60 to The $2 above WTI is what LLS would trade at. That being said, our transport, our all-in, is about $3.30 to $3.40 off of that price. So right now we would be about $2, $1.50, $2 under WTI net back. So just as a point of reference, We generally have been, I think last year's reserve report was $1.65 over WTI. So that would mean the LLS was, what, $5 over WTI. So our net back 340 would still have us at $1.65 above WTI. So that's been quite a bit of a hit, not only oil price but also the differential, so that you're asking the right questions. to kind of see what that translates to revenue for us. I think I would anticipate probably our marketing consultants, we work with a company called Arm, pretty well known here in Houston, to kind of look at marketing forecasts. I mean, it's probably going to be in that. For us, $1.50 realized all in after our transport and gathering and everything, $1.50 to $2 under. What do you say, Ryan? somewhere in there?
spk03: Yeah, that's right. Obviously, depending on factors for LLS, as Jason mentioned. I mean, what we pay is fairly, it's fixed, right, on the transport basis. But, you know, we're subject to how LLS moves compared to WTI. To the extent that improves, obviously, we're going to see better pricing relative to WTI.
spk07: Okay. And then one last quick question. Unfortunately, one of the headwinds that you all face is the industry faces, of course, is ESG. And I'm just wondering, given that these fields are older and so forth, do you have any issues with or addressing anything in regards to, you know, like methane escape and so forth where that could potentially be an issue down the road? down the road as far as higher capex that might not be really in the picture right now?
spk06: That's a really good question. That's something that our industry in general is going to have to face down, as it seems like the growing tide in the court of public opinion is going one way, regardless of whether we think a lot of those opinions are practical or not. Ourself and our assets are in pretty favorable situation. So let's talk about Hamilton Dome first. We're just not making any gas up there, so there's not really any VOCs going anywhere. Environmentally, the BLM has got a great relationship and Merit runs an absolutely wonderful operation. So I'm not concerned about having to spend a lot of capex on things that would make that more environmental friendly. In Delhi, we're actually even in a better situation. In Delhi, 30% of the CO2 that we buy comes from industry. So on an annual basis, that's removing 750,000 cars from the road. That's fairly substantial. So I know that Denbury is looking at some carbon capture because they've got the infrastructure of CO2. We're getting a little bit of a benefit there being their partner in Delhi. But this was brought up at the board, and I think we're going to focus some efforts as management, Ryan and I, looking at other ways that we can improve our ESG kinds of policies and anything that we can do to make it better. But overarchingly, we're actually in pretty good shape, relatively speaking, with other oil companies. And specifically to the question you're asking, which is a really good one, don't foresee any sort of capex spending that would be required to kind of get us to a better place ESG-wise. Do you agree with that, Ryan?
spk03: Yeah, no, I absolutely agree. I mean, it's definitely a focus at the board level, and no doubt in the investing community, as you know quite well, you know, just our industry is under the spotlight right now, and ESG is kind of higher on our list to sort of address here in the near term.
spk07: Well, maybe you ought to change your colors from blue to green then, since you're using up all that CO2. I would just suggest as well that maybe on a website or whatever that you maybe bring some attention to the fact that you and Denberry are utilizing CO2 and taking it off the market, so to speak. And, you know, Just a thought. That's all I got.
spk06: You must have had a bug in our boardroom. We're reworking our website this month, and it's definitely going to include that now. So, yeah.
spk07: Okay. All right. Well, good luck next quarter and quarters on, and look forward to your next call. Thanks a lot.
spk06: Sure. Thanks, John.
spk07: Bye now. Yep.
spk02: There are no more questions in queue.
spk06: All right. That was great. Thank you for your participation today. Please feel free to contact Ryan or myself with any other questions. I look forward to providing you with an update on our next conference call. It should be in early May. Thank you.
spk05: Thanks, everyone.
spk02: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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