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spk00: Thank you for standing by and welcome to High Peak Energy's fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's call is being recorded. Should you require any further assistance, please press star 0. I would now like to hand the call over to Stephen Tholen, Chief Financial Officer. Please, go ahead.
spk02: Thank you. Good morning, everyone, and welcome to High Peak Energy's fourth quarter 2021 conference call. Representing High Peak today are Chairman and CEO Jack Hightower, President Mike Hollis, Vice President of Business Development Ryan Hightower, and I am Stephen Tholen, the Chief Financial Officer. During today's call, we will make reference to our March investor presentation, our fourth quarter 2021 earnings release, and our 2021 Form 10-K, all of which can be found on High Peak's website. Today's call participants may make certain forward-looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions, and future performance. So please refer to the cautionary information regarding forward-looking statements and related risks in the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control. We will also refer to certain non-GAAP financial measures on today's call, so please see the reconciliations in the earnings release, which was issued yesterday afternoon. Our prepared remarks will begin on slide four of our March investor presentation. I will now turn the call over to our chairman and chief executive officer, Jack Hightower.
spk03: Thank you, Stephen, and good morning, everyone, and welcome to today's call. As you probably realize, every CEO is always excited to talk about their company and the performance of the company. I'm more of a macro person in terms of annualized performance, but this is a great, exciting time with High Peak and with oil and gas prices in the world, unfortunately, some of which contributing to the Ukraine crisis. But we had a great fourth quarter. Our average production averaged over 14,900 barrels a day, which was an 81% increase compared with our third quarter average. We successfully executed our drilling program and averaged almost three rigs throughout the quarter. We had a large number of wells that are in the process of being completed. And most of these wells will come online and be completed and contributing to our production towards the end of this year. The majority of the wells are anticipated to ramp up and be reaching peak rates towards the end of the year again. We added our fourth rig in January. and are now very active with four rigs running in the market. We continue to consider adding to our rig count if commodity prices remain strong. And so we are contemplating adding to our drilling activity. And with our cash flow, as we go through the numbers, you can see we could do so without increasing our outspend. High peak is a growth story, and we're going to take advantage of current market strength in oil and gas prices to create additional value for our shareholders. So I'd like everyone to point to slide four over our March investor presentation. And this gives you an overview and key statistics for the company. I previously mentioned that our average production was 14,900 barrels a day, consisting of 95% liquids This contributes tremendously to our economic success. We continue to realize peer-leading prices and cash operating margins. And on a BALY basis, our fourth quarter unhedged cash margin was $60.26 per barrel of oil equivalent, approximately 84% of our fourth quarter realized pricing. Also, in the first quarter of 22, we entered into a series of acquisitions, which in the aggregate include 9,500 acres and almost 2,500 barrels a day of production, and an additional 40 locations with a saltwater disposal system, including three disposal wells and rights to local non-potable water sourcing of approximately 35,000 barrels a day. These acquisitions also contribute to about $3 million per year in savings on water. The acquisitions just in closing in the first quarter add 15% increase to our total acreage position and 29% to our flat top acreage position. If you think about it and looking back, A year ago in 2021, we had about 51,000 acres. And today, with the closing of that transaction, we will have almost 72,000 acres. In a little over a year, a 40% increase for High Peak, increasing our scale and giving additional locations to our inventory. The acquisitions check all the boxes. They're immediately available for development, and related gathering infrastructure is already in place. We paid less than a three times multiple on cash flow, and we're projected to increase our EBITDAX in 2022 over $50 million, more than that with present pricing, but $50 million assuming commodity prices that stay in the range of $70 to $90 a barrel. The assets are contiguous to our flat top operating area. They provide many synergies, including adding to our robust infrastructure system. The acreage is 100% operated and will be easy to integrate into our development plan. The 40 locations with $15 to $20 million of net present value And of course, it's hard to pick pricing right now because prices are so high compared to the numbers that we've been utilizing. But they add potential upside value to high peak in addition to the current PDP value. In other words, we will be actively developing that area and each well at approximately $20 million net present value with 40 locations can add significantly to our value. If you'll turn to page five, or slide five, I'm only going to pick out a few things in this particular slide. We still have the highest oil cut amongst our peers in the basin. Our income stream was 88 percent oil, 95 percent liquids. Our realized price was $72.07 on a BOE basis, which was 93 percent of the weighted average of NIMAC's oil price during the quarter. And this is because we have such a high percentage of oil. Our hedge price was $67.50, still a great price compared to a lot of our peers that are having significant write-downs because of their hedges. We lowered our LOE by $0.60 a barrel in the third quarter compared to the third quarter. But I look at what's happening in the future. And Mike's going to talk about operationally what's happening with our lease operating expenses But they're going to continue decreasing once the substation and other things become operable that are active things in progress. Our EVA tax was $72.4 million, which was a 117% increase. But that was at a very low oil price, at $72. Think about what it would be today on an unhedged basis. It gives you a sense of what's happening in the future and how excited we are about our future plans and our future drilling and our future EBITDAX. If you'll turn to slide six, our track record of delivering capital-efficient oil-weighted growth will continue into the future. You look at 2020 from 1,900 barrels a day all the way up to almost 15,000 barrels, and then take our guidance for this year of averaging on the low end 27,000 barrels to 32,500 barrels with the four rigs drilling and going all the way up to around 45,000 barrels. That's tremendous growth. If you look at our EBIDACs as a function of increasing production, and we'll talk about drilling performance in terms of single well performance, payouts, and reserves. But if you think about, this was based on roughly $70 to $90 oil at $600 to $800 million average for 2022. And exiting the year at between $850 and $1,100,000,000, At a higher oil price of around $110 a barrel, that takes us up to $1.4 billion to $1.6 billion in 2022. And so that you can see what oil and gas prices are doing for High Peak in terms of cash flow. And now if you turn to slide seven, High Peak is continuing to provide rapid, proved developed reserves growth. I've mentioned many times, and I'm going to mention many times in today's presentation, we are a growth company. If you look at our growth from 2020, going up from $51 million to $400 million to $744 million to exiting this year, at over $815 million in approved developed reserves and another added up to $1,498,000,000 counting our approved reserves. And that's at a low price deck. It's much higher than that at today's prices, just a month or so after the end of the year. And then look at, and this is very important, to look at our rapid growth and what that's going to do to us going into the end of 2022. And we did some numbers at a price deck of $110 a barrel, basically $14 a barrel below, actually oil prices are higher than that right this minute, almost $19 a barrel cheaper, I mean more expensive today than what we projected And it takes us up to $3.8 billion of approved reserves in just this 12-month period. I'm counting what will be in process of being completed at year end. So we're on a rapid growth. We're very excited about what's taking place. We're going to drill over 100 wells this year. And as you can see, and use your own imagination as to what price deck you want to use, we are having tremendous success. And with that, I'll turn the presentation over to Mike, who's going to talk about the next few slides and give you an update on operations.
spk06: Thanks, Jack. I'd like to start by saying that our hearts, minds, and prayers are with each and every Ukrainian. Their perseverance, strength, and sheer determination are awe-inspiring. High Peak will absolutely do our part to provide the world with clean, cheap, and reliable energy. We do not and should not have to be asked to do the right thing. That's just embedded in our DNA. We are blessed here to have the acreage position, the rock quality, and a fortress balance sheet that will allow us to lean in during this time. With a heavy heart that you can't do more I'm very proud that High Peak and our employees are doing what we can to reduce our nation's need for foreign energy. Now turning to slide eight, middle and basin benchmarking. Slide eight illustrates how consistent our well performance has been to date. The red curve shows our middle and basin peer average. The yellow dotted curve shows how our flat top average wells compare. Our wells' shallower decline leads to outperformance in later months. Our low call structure, strong well performance absolutely drive peer leading economics and efficiencies. The blue dotted line shows our signal peak average. The results in signal peak although very early and include many vintage wells, strongly compete for capital not just in ours, but in anyone's portfolio. Turning now to slide nine, flat top single well economics. Slide nine details our single well economics based on the blended average type curves from our year-end 2021 reserve report. for 12,500 foot laterals in the lower Sprayberry and Wolf Camp Bay formations. Since we're focusing on co-developing these zones in flat top, we feel this is a great way to display our average single well economics. This provides a representative view of our investment opportunity. Our wells achieve payout quickly and provide very high net present values as shown on the chart. They deliver tremendous rates of return in today's commodity price environment, of course, but are still extremely economic at low prices. At $80 oil, they have a recycle ratio of 5.7. Again, phenomenal. The average well and flat top has a break-even of only $28 a barrel. Again, blended break-even. We get asked a lot about inflationary pressures. They are real, and we have accounted for them. We are carrying roughly 10% more CapEx in our budget for 2022 from what we achieved in the fourth quarter of 2021. The graph also shows payout sensitivities compared with capital cost. At any reasonable oil price, our wells have a fantastic rate of return and recover our investment in a short period of time. We show the effect of what a half a million dollars per well will do to the payout period from first production. And our strong well economics are resilient to inflationary cost and payout timing is not affected significantly at any oil price shown. If you'll turn now to slide 10, 2021 margins. Again, displayed on slide 10 are margins for the full year of 2021, which were driven by our low cost, high OO cuts, and great realized pricing were peer-leading on both a hedged and unhedged basis. Our margins were approximately 27% higher than our closest peer on an unhedged basis and 45% higher than our closest peer on a hedged basis. But remember, we've positioned ourselves for continued margin growth with our LOE reduction initiatives which will further distinguish us from our peers. For example, increased recycling, our horizontal Ellenberger SWDs, full-field electrification, and energizing our solar farm. I should also note we are extremely lean, and a very lean shopping will continue to be that way. And as our production grows, so too will our G and A per barrel decrease, again, further magnifying our margins. If you'll turn now to slide 11, operational update. At flat top, again, we are in full manufacturing mode, co-developing the Wolf Camp A and Lower Sprayberry. In Signal Peak, we have two new 15,000 foot Wolf Camp D wells. They're about to come online in the eastern one-third of our block. That's a 30,000 lateral foot test. We also have a 10,000 foot Wolf Camp D well on the far east of our acreage. We're encouraged by the early flow back of our recent Wolf Camp A and lower sprayberry wells. Again, very early time, but look extremely encouraging and following our tide curve. We are also drilling or in the process of drilling two additional 15,000 foot Wolf Camp D wells in the southern portion of our block In complimentary to our operated wells, we've recently participated in three gross non-operated Wolf Camp Ds on the western side of our acreage position, as well as we are currently participating in the drilling of four additional gross non-op Wolf Camp D wells as well. With that said, we'll have full insight into the delineation of our Wolf Camp D zone across our entire block in the coming quarters. If you'll turn now to slide 12, ESG and sustainability highlights. In the fourth quarter, we recycled 58% of our simulation fluid company-wide. As Jack mentioned earlier, we have access now through the recent acquisitions to 35,000 barrels a day of non-potable water. So in addition to reducing our need for freshwater makeup, we stand to save roughly $3 million a year in capital costs. And we can now supply 100% of the stimulation fluid needs for one frack crew and flat top with recycled and non-potable fluid. The high peak substation is fully constructed and set for a second quarter commissioning date, eliminating the need for multiple local generators and the cost and emissions associated with them. Our solar farm is on schedule to be completed this summer. The oil pipeline construction commenced and our gas infrastructure upgrade is in process. Phase one is operational today, or has been. These will result in trucking and emissions reductions. Deliveries from our local sand mine will commence in the third quarter, assuring sand availability and efficient completions operations and reduced truck emissions. We are also proud of the fact that we have had zero employee safety incidences to date.
spk03: And with my comments now complete, I'll turn the call back over to Jack. Thanks, Mike. If you'll look on slide 13, that gives you an overview of our budget, increased up to $800 million. We show our production range in terms of guidance for this year. This has been a year of growth. We revised our capital guidance, as I mentioned to you. The graph on the right, which is very interesting, shows that our 2022 average production at the midpoint is 220% higher compared to our 2021 average. Our 2022 exit production rate at the midpoint is 350% higher than what we did in 2021. So that basically signifies unparalleled organic growth into 2023, keeping in mind that we are not going to get out over our skis. And I'll re-emphasize that we have a pristine balance sheet. Our overspend has almost been completely absorbed with where oil and gas prices are today, and this growth profile will continue on as we go forward into the year. If you'll turn your slide to the next page on liquidity and financial overview, it shows our financial position at year end, and it shows that subsequent to year end, we closed our 225 million senior unsecured notes We took those dollars and we paid off our RBL in full, and we still have $225 million of liquidity between our cash position and our undrawn RBL. We expect, in April, we have a redetermination period. We already know that we can increase our RBL significantly. We haven't specifically outlined exactly what we're going to apply for that. but we're not going to have any problems relative to liquidity or having access to necessary capital. We maintained our low leverage position at 0.2 times net debt to annualize fourth quarter EBITDAX. And it just shows how little leverage we currently have. compared to the value of our PDP and our approved reserves. And if you look at the box on the lower right-hand corner, that just simply, for you financial experts, gives you an overview of what our coverage is relative to our debts. And as you can see, we just have tremendous coverage relative to total debt and net debt. And with that, I'll reemphasize that we're always going to maintain a debt to EBITDAX of less than a one-time leverage. So we've been able to do this very effectively, very responsibly as we go forward. And if you'll turn to slide 15, that continues our responsible growth story. We're going to continue our efficient production growth while maintaining a very low responsible debt level. We've increased our liquidity position, as mentioned. Our focus will continue being capital and operational efficiency, especially in light of current industry-wide inflationary pressures. And as Mike mentioned earlier, we've done many, many things to eliminate these inflationary pressures by going out into the forward market and buying capital. materials and planning for all of our LOE savings as we go forward. We have one of the most attractive product mixes in the industry, and that leads to high oil and liquids production stream, great realized prices for our products, and a low cost structure that will continue to drive our peer leading margins for high peak. I'm going to emphasize in closing that prior to the Ukrainian crisis, we recognized the massive underinvestment in energy over the past several years. Many of the banks were coming out with forward projections, and many were saying prices are going to go down. And contrary to industry sentiment, we forged ahead and positioned ourselves for responsible growth. High Peak is uniquely poised to take advantage of current market conditions, excellent well economics and performance, operational expertise, and a strong balance sheet. We contemplate accelerating our drilling activity this year, which at today's prices we could accomplish without increasing our near-term outspent. In fact, we would have no outspend with prices where they are today if they maintained close to this range. I want to reemphasize, we are a growth company. We're going to take advantage of all available opportunities, and with our quick payouts on our wells, our high rates of return, we will continue leaning into, as Mike mentioned, increasing our drilling activity and making sure that our shareholders have the returns that they expect to have going forward. So now I will turn the call and open up the call to questions.
spk00: As a reminder, to ask a question, you'll need to press star 1 on your telephone. Again, that's star 1 on your touch-tone telephone to ask a question. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of John White of Roth Capital Partners. Your line is open.
spk01: Good morning, gentlemen, and congratulations on a very impressive quarter.
spk06: Thank you. Thank you, John.
spk01: If you could, I'd like to get the breakout on fourth quarter completed wells. in flat top and signal peak if you have that handy or if you have some ballpark number.
spk06: Yeah, John, this is Mike Hollis. Basically, we've had six wells that were completed that came online in the fourth quarter. Again, kind of the third quarter going into fourth is when we really began our ramp up. We went from the one virtually up to three rigs and picked up the fourth in January and Again, we brought these rigs in, drilled large multi-well pads. As we mentioned in our press release, we've got 27 wells in the first quarter that will be turned online, most of which will be in the latter portion of the first quarter. What you saw in the fourth quarter were the six turn-in lines that we had, as well as battery of wells in the center part of Flat Top that came on earlier, kind of late 1Q into Q2, that really started to perform into the fourth quarter and what drove that performance. Again, we kind of mentioned a little bit of the lumpiness from the second quarter into third. You saw that. Again, you'll see a little bit more of that going into the early part of 2022 as we bring on these 27 wells. But again, the blended data that we showed in the presentation of our average flat top wells drive net present value dramatically as well as rate of return. So again, we're very excited about what's coming. We feel very confident in our guidance for 2022. But again, you did not see all of the wells that were drilled and completed In fourth quarter, you're going to see all of those coming on toward the latter half of the first quarter of 2022. So hopefully that'll give you a little bit of clarity. But you have six wells, and the six wells coming on versus the 27. And then from a go-forward standpoint, think about a rateable eight wells per month coming online that are being drilled and completed. And again, it'll smooth more out as we go forward into 2022 and 23, that it'll be closer to that eight. Again, as we do pads, you may have 10 one month, and eight or six the next month. But in general, eight each month. Signal Peak, we have completed two of the 15,000 foot wells. If you look back in fourth quarter, we barely finished fracking the two Wolf Camp A and the lower Sprayberry well. We've now had them on for roughly a week and a half, and again, as we said, we're very encouraged with those results. The two 15,000-foot wells, we've now fracked those, and we'll begin drill-out operations and continue to complete wells in Signal Peak on a rateable basis, again, at about that split of $25.75 of our cap expense for 2022 for Signal Peak versus Flat Top. Long-winded, but hopefully that gives you a good sense.
spk01: Okay. Yeah, you know, thanks for all the detail. 27 wells, that's a lot of wells to be completed. So for 2022, about the drilling plans are about 75% flat top, 25% signal peak. Is that right? That is correct, yes, sir. Okay. I'll pass it along. All right. Thank you.
spk00: Thank you. Our next question comes from Nicholas Pope of Seaport Research. Your line is open.
spk05: Morning, guys. Morning. I was hoping you could talk a little bit more on the Signal Peak area as you kind of delineate that acreage. You laid out the map here of what wells we're going to be looking at in the near term and over 22, but I'm curious what I guess what data that you are going to get from this first set of wells. And I guess maybe what's missing with the data at this point with a fairly early stage and what the focus is going to be as you start to see these wells come on and how we should think about that set of wells and what it means for kind of inventory.
spk03: Yeah, Nick. Overall, from a big picture perspective, we're looking at a lot of development from the western part off of our acreage with offset operators that have drilled four wells, and now we're participating with them in four more wells. And we're moving from west to east from a depositional perspective, coming off the shelf edge to the east. And so from a geological perspective, we have enough well control to know that the zone is there. We know the thickness of the zone. We're trying to make sure before we start. We want to delineate the area to make sure that from the eastern part all the way to the western part that we're going to have the performance that we feel like we should have with the thickness of the reservoir, with the porosity, with the permeability, and making sure we are completing the wells properly in the various areas because of increasing clays, the stabilizers, the friction reducers we're using. We apply a lot of technology that a lot of smaller companies don't do. We come from building major oil companies, so we're very, very deliberate in making sure everything's good. Mike now can speak more specifically about what we learn in each area in terms of drilling, the performance, what we're waiting to see, and why we are moving slowly to do this in the proper manner. Go ahead, Mike.
spk06: You bet. Yeah, Nick, in Signal Peak, the math that we've shown on page 11, that gives you an idea of what is in progress today. So a lot more activity is going to take place at Signal Peak throughout the year, but This is the initial phase of the delineation. As Jack mentioned, moving kind of from east to west, the eastern third of the block, we're doing a 30,000-foot lateral test that's almost done fracking today. So what we're looking for there, as Jack mentioned, is the economic evaluation. We know the rock is there. We know it produces oil and gas. And every indication is that it will meet our expectations. Again, being a very pragmatic engineer, I like to see oil in the stock tank. So we had oil in the stock tank a mile and a half to the west that absolutely met our expectations. The rock here is thicker, looks to be better. We expect the same. So we should be able to be forthcoming with that information very quickly. As Jack mentioned, we want to do it systematically and delineate. So over the next couple months, we'll have all the way from the west to the east and the north to the south delineated into the Wolf Camp D. The lower Sprayberry, we offset a well that was drilled by an offset operator. So everything there is, again, progressing as we had expected. I mentioned a Wolf Camp A well. is a step out in the test. That well we have drilled, it's flowing back and again meeting tight curve early time right now. So everything is producing and reacting as we had expected. Jack mentioned there's a lot of science going on out here. We talked about just the completion side of things. Again, on the drilling side, we love putting a rock in the ground or a bit in the ground The ROC talks to us a lot, and we're able to optimize. So we would be very surprised if we're not able to see extreme optimization on the drilling front, much like we saw up in Flat Top, to very much differentiate ourselves from our peer group in the area for our drilling cost, completion cost, and well results, again, driving the economics to be differential as well.
spk05: That is very thorough for both of you. I appreciate it. That's very helpful. And then kind of changing topics here a little bit on the financial side, I'm curious with the outstanding warrants that are still out there, is there anything, is there any timeline on the warrants? Are they just indefinite? Is there anything that could happen with converting those to shares, or should we all continue to treat those just as, you know, they're fully in the money and and kind of potential to lose it out there?
spk03: Good question, Nick. The warrants are, it's amazing how many continue to be exercised where people are looking for long-term capital gain and realizing that our stock should be continuing to go up in value. And we had another 40,000 shares exercised this last week. But gradually the warrants will be exercised They were originally for five years, so they're still well over three years in order for them to be able to exercise the warrants. And that will be taking place, and they should be well into the money and continue increasing in value over the course of the next year and a half to two years.
spk05: Got it. And should I assume on the CVRs, I mean, at this price, Stock price, they shouldn't even come into the conversation. Is that right? I'm trying to remember. It's been a while since I've focused on this.
spk03: Yeah, eventually they come due in August. And in August, as long as the original investors have a 20% gain, as long as our stock stays at $12, they have no effect and they will expire and be gone. And that should happen in August.
spk05: Got it. That's all I had. I appreciate the time, guys.
spk03: Thank you.
spk00: Thank you. Our next question comes from Jeff Robertson of Watertower Research. Your line is open. Thanks. Good morning.
spk04: Jack, you talked about potentially adding a fifth rig, and I'm curious, one, where you would take that rig and would you accelerate some of what you had talked about previously doing at Signal Peak? And then secondly, If you add a rig, does it change anything you will need to do on your saltwater disposal or other infrastructure assets in Flat Top?
spk03: Good question, Jeff. In adding a fifth rig, when we say we're contemplating that, lots of things go into that decision process. Part of the process is deciding where we're going to go with it, and where we're going to keep it because we want to be very efficient with pad drilling in terms of economics and cost. And we have multiple places we could go with it right now. We could go on some of our new acreage acquisitions. It's basically development drilling on these 40 locations. We could go with it. Depending on the outcome of what's happening down at Signal Peak, we could go down there with it and keep roughly four rigs running up north and maybe having a half a rig down at Signal Peak plus the other rig down at Signal Peak. We have enough locations and enough opportunity already identified that we could actually go to six rigs instead of five rigs. But we're going to... We're going to study this over the course of the next three to four weeks and make a decision probably around mid-March as to expanding our operational and our drilling activity. But with prices where they are and four- to five-month payouts, we feel like it's in the best interest of our shareholders to to really be proactive in where we would go. And that can happen almost anywhere. We have so many locations and so many areas. We're not going to go out and do speculation or what I would call more exploratory. Anything we do will be close-in drilling, development drilling, increasing our PUDs, and increasing our cash flow.
spk06: Hey, Jeff, on the SWD question, absolutely not. Look, when we built the pipeline system, again, being a 20-inch pipeline that basically encircles the center part of a flat top, allows us to move very, very large volumes of water anywhere in the field such that we're able to either dispose of it very efficiently in our high-volume deep horizontal Ellenberger wells. And so again, to increase activity and increase the water production from the field slightly, now it will have zero effect. Now, would that mean we might have to drill a future SWD instead of a year out, maybe nine months out? Yes, but again, it's because we are receiving unparalleled kind of returns drilling those wells from the oil side. So the system was built to be expandable. And, you know, again, we talked the last conference call about the split and one of the future or earlier questions about the 75%, 25% split on CapEx for the D, C, and E side. However, on the infrastructure side, it's about split the other direction between flat top and signal peak. So as soon as we get our delineation information from our wells, we've already have designs and everything ready to go to implement a SWD system and recycle system down in Signal Peak. That's what you see that the vast majority of the infrastructure dollars that we have in the budget for 22. Again, we just want to get confirmation that we know the sizing that we have is right, the modeling is easy, we can change the sizing based on well performance and water cuts. So again, we will have Signal Peak very quickly built out like we did in Flat Top. Again, we're all about doing this efficiently and making sure we get the highest return for our shareholders.
spk04: Thanks. Similar to Nick's question on Signal Peak, can you talk Mike or Jack, about any offset activity off the southern end of your flat top acreage or the eastern flank of flat top that's helping you delineate through what others are doing that side of your acreage position?
spk03: Mike, go ahead.
spk06: You bet. Jeff, it's pretty obvious who the operator is to the south of us. Look, we're all We're all really tight. We're friends out here. We share all of our data, drilling, completion, production with all of our offset operators. The operator in particular you're mentioning to the south, directly south of us, they're fairly active. They're running two rigs, a frack crew full time. They've got wells right south of our acreage block all the way to the east that, again, are extremely encouraging. Many of these wells IP well above 1,000 barrels of just oil a day. So, again, they're Similar rock, similar depth. Cost will be very, very similar if we were operating that. They're very good operators as well, so we're learning a lot from each other, and it does encourage us. They're also a little bit farther along. We're more co-developing our known zones of Wolf Camp A and Lower Sprayberry. They've done a little bit more delineation. Right south of our flat top area, they've got several wolf camp bees and boy wells. Again, they're roughly 600,000 barrel oil wells with associated gas. Highly economic at these prices, but even all the way down into the $35, $40 range, they're economic. Another more exciting thing that some of the operators near us are doing in Flat Top are Wolf Camp D's and dog tests. There's a well right south of us that's been completed and flowing back that again has got us very encouraged and I think it would be reasonable to expect that in 22 you'll see us test a Wolf Camp D on our southern acreage block. Again, we like to do close ology and The geology looks good well north of where their well is, but you'll probably see us test a Wolf Camp D close to where their well is. So, again, we really appreciate those guys getting out in the forefront for us.
spk04: Thank you. You bet. Thank you.
spk00: Thank you. Our next question comes from John White of Roth Capital Partners. Your line is open.
spk01: Just wanted to follow up. on your acquisition in the fourth quarter, the 9,500 net acres. The press release described that as contiguous to flat top. I'm looking at slide four, your acreage map. Can you verbally walk us through where that acquisition acquired acreages?
spk03: John, we intentionally didn't put that On the map at this stage, we are acquiring additional acreage. The area has become very competitive from the northern side, as you mentioned, we said Borden and Howard, from the northern side all the way to the eastern side, and then also to the southeastern side of Flat Top. Until we are successful or not successful in possibly additional acquisitions and additional acreage add-on, we're not going to specifically say where it is. But when I say contiguous, it is contiguous either north, south, east, and west.
spk01: I like it. The undisclosed locations. Well, I can appreciate that, and I don't blame you for tight-holing me.
spk03: Yeah, it's a very competitive area, and one of our peers has gone out all the way now six miles to the east into Mitchell County. And we have a lot of control, a lot of information out there, and it's really – the whole area is – Like we started when we first bought our first 7,500 acres, and if you remember the SM presentations of moving from the western part of Howard County to the east, they kept delineating, moving further and further east, and they only went so far east as the Viper Well and that area to the west of us, and we bought our acreage thinking this isn't gonna change, it's just gonna continue moving to the east. That's happening, and that's exactly what's happening. And even the wells to the south in the B and then the D and in the lower Sprayberry and the Wolf A, they're coming in really well. And to the north, in the Wolf A specifically, those wells are coming in really well. The 15,000-foot laterals are all over a million barrels. Our whole area is really looking good, and we're very excited about what's taking place.
spk01: Well, great. We'll look forward to seeing some more leases get signed up, and good luck with that. I'll pass it on.
spk03: Thanks, John. Thanks.
spk00: Thank you. At this time, I'd like to turn the call back over to CEO Jack Hightower for closing remarks. Sir?
spk03: Well, in closing, I just want to thank everybody for attending the call. And I don't really have anything else to say. I think we've said it all other than we are, I just am extremely excited about our performance. Our operational guys are doing a super job. I hate that we had to have a war to increase oil prices because we felt like that oil prices are going to go up anyway. The industry as a whole on a worldwide basis is just not reinvesting enough capital We're going to have shortages, whether we had the Ukraine situation or not, and those are on the horizon. And if you look at all the major company five-year plans, every single company, from sovereign wealth to the big majors, are way behind in reserve replacement. almost less than 20% of what the five-year averages historically have been on the last part of this year, I mean of last year, 2021. So we've got some serious problems in terms of being able to supply the world and maintain our quantity and quantity of lifestyle, and fossil fuels are going to be a very important part of that, and we plan on making sure that we provide as much as we possibly can. Thank you very much for your time.
spk00: This concludes today's conference call. Thank you for participating. You may now disconnect.
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