Welcome to the annual general meeting of shareholders of Petrus Resources Ltd. The meeting will now come to order. My name is Ken Gray, and I am the President of Petrus. I will act as Chairman of the meeting. In order to attempt to deal with the formal portion of the meeting as efficiently as possible, we have pre-arranged with designated shareholders to move motions. This is in no way intended to discourage any comments, questions, or discussion on any motion. Appointment of secretary and scrutineers. Jeff Oke of BD&P will act as secretary of the meeting and a representative of Odyssey Trust Company, our transfer agent, will act as scrutineer. Notice of meeting. I have received a declaration from Odyssey with respect to the due mailing of the proxy materials and the 2021 audited financial statements of the company were required.
The reading of the notice of meeting will be dispensed with. Quorum and scrutineers report. In accordance with the bylaws of the company, business may be transacted at the meeting if there are not less than two persons present or represented by proxy, not less than 25% of the shares entitled to be voted at the meeting.
All right, we just made it.
The scrutineers report shows that a quorum is present. I now declare that the meeting is regularly called and properly constituted for the transaction of business. To my knowledge, each resolution to be considered today will be passed by the proxies deposited in advance of the meeting. Voting in respect of the election of directors will be by ballot. Voting in respect of fixing the number of directors and the appointment of auditors of the company will be by show of hands. Any registered shareholders and holders of valid proxies were given a ballot when they registered with Odyssey at the entrance. I don't know if that actually happened or not.
Yeah, sure.
Okay. We would like to collect all remaining ballots at this time. If you have not returned your ballots, please raise your hands so that the scrutineers can collect them now. Okay, pause. Financial statement and auditor's report. The first item of business is the presentation of the audited financial statements for the year ending December 31, 2021. A vote on the financial statements is not required or proposed. Copies of the financial statements are available to shareholders upon request. The next item of business is to fix the number of directors of the company to be elected at the meeting. Oh, no. That's you.
Yeah. I can move it. You can second. I move the number of directors to be elected at a meeting to be fixed at five directors. You can go on then. You can read it. Second the motion.
You want me to second?
You can second.
I second the motion. Any discussion? All those in favor, please raise your hands. I guess, who's voting here? Do you guys vote for all the proxies or who?
We do.
I do. Okay. I'll raise my hand.
There are no other than the scrutineers.
Okay. Any contrary? No. Carried. Election of directors. The next item of business is the election of directors. Our bylaws contain advance notice provisions, which provide a procedure to be followed for the nomination of directors at meetings of shareholders of the company. In accordance with the advance notice provisions, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in the company's information circular and proxy statement dated April 5, 2022. Accordingly, Patrick Arnell, Donald Cormack, Don Gray, Ken Gray, and Peter Verburg are hereby nominated as directors of the company to hold office until the next annual election of directors or until their successors are elected or appointed, subject to the provisions of the Business Corporations Act of Alberta and the bylaws of the company. Is there any discussion?
In accordance with our majority voting policy, the election of directors has been conducted by way of a ballot, allowing registered shareholders and holders of valid proxies to register votes for or to be withheld from each individual director. I have been advised by the scrutineers that the results are more than 50% in favor of each director. In accordance with legal requirements and our majority voting policy, those nominated are duly elected as directors. The next and final item of business is the appointment of auditors. I move. Oh, that's you.
I move that Ernst & Young LLP, chartered accountants, to be appointed auditors of the company until the next annual meeting or until their successors are appointed, and that their remuneration as such be fixed by the directors.
I second the motion. Is there any discussion on the motion? All in favor signify by raising their right hand. Any contrary? Carried.
Other than
Unless there are any questions from the floor, I would entertain a motion that the formal portion of the meeting is terminated.
Terminated.
I second the motion. All in favor signify by raising their right hand. Any contrary? Carried. I declare this meeting terminated.
All right, great. Well, that's it.
Mm-hmm.
It's time to join the call.
Is there somebody on the call? Hello?
Hi. Did you scare them away? Maybe it was a wrong number.
All right. Well, that's the formal portion of the meeting.
We are not gonna have a formal partner presentation, but if you guys have any questions you wanna ask.
Yeah.
I'll try to.
What is the right offering? Debrief for the rights offering in what way?
What degree we're oversubscribed, everything, please. Syndicate all at BMO.
The syndicate, I don't know. I don't talk to the syndicate.
We are 180, basically 184, but 84% oversubscribed on the rights offering. I believe the bankers should be very pleased to pay down debt. As you see an announcement of a refinancing of existing banking facilities.
Thanks, guys.
Thanks.
Thank you.
Okay.
Thank you.
Yeah. Thank you.
Thanks, Trevor.
Thank you.
Exactly.
Yeah, we just refinanced with ATB, so I'll be closing at the end of this month, make the announcement.
Because they let me have kind of month's set from the other guy.
I hope so.
You know, a local bank, you know, Alberta bank, I can't see them not supporting the oil and gas industry or changing their mind like some of the other banks have. Yeah, this, I mean, this is a lot of pressure in those guys.
On the ESG.
Yeah, I guess that's true. You know, I think it's misplaced. Even their concern is misplaced in my mind. I mean, we still need oil and gas, you know. Yeah, I can understand there's certain groups that are pressuring, but it's not really a realistic kind of scenario that they're presenting, right? I would've hoped that the banks could have been a bit more reasonable about it.
I mean, you know, my mentorship guys are just sort of starting to retire. I mean, I think, you know, my generation of people who are in those type of businesses have also absorbed, not in a particularly sophisticated way, like we do, but things we don't understand well, but I think they've absorbed the point of view. Like, one of my buddies who just died, but he used to run the Yale University Endowment. You know, the guys who ran that ran some of the companies were really sophisticated, but I mean, they would, you know, they wouldn't touch oil since, you know, since 1980s, right?
It's just, it's not like they might have had their own opinions about it, but they just understood that it wasn't going to be well received, that it was gonna be a problem. My perception of banks is the same.
Yeah. I think you're right about that. Although it would have been nice to see somebody come out and kind of say, you know, present maybe a little bit more of a realistic view of things. I mean, when I look around the country, for instance, we're primarily a natural gas producer. I think most of our houses are heated by natural gas.
Yeah.
What are we gonna do if we have no natural gas?
Yeah. The timeline's not there.
It seems amazing that we can't seem to move it in that direction, though. I mean, everybody can go home and they should realize that, okay, It'd be pretty cold around here or very expensive. Like, if you're heating with electricity, very expensive.
Yeah, but people have a limited amount of attention, which in some ways.
I suppose.
Pipelines are a great example of that.
Yeah.
I sort of started out as an environmentalist who got frustrated and went into chemical engineering. You know, there are people who have a practical sense that you know, there's a price for stuff and some stuff that sort of, there's a need for compromises and there's a need for efficiency. You know, natural gas is a great fit. I think in reality it will continue. You just, you know, a lot of sort of my generation, conventional people just sort of shut off on that. I don't know how you have the conversation on that, I guess.
Maybe you can't, but I think we'll see though that the reality isn't quite the way it's being presented.
Yeah.
You know, my feeling of it always was everybody's environmentalist until it starts to cost you some money. Then people maybe aren't as adamant or enthusiastic about being environmentalists. So far it hasn't cost us a whole lot of money yet, right? It's going to. I mean, it's coming, and that's the part that's always left out of any of these conversations, is that there's a huge cost to this. Once that really starts hitting people and they start to realize that, "Hey, wait a minute," I'm not sure that the support for some of these environmental initiatives is gonna be as strong as it has been, so.
Yeah.
It all sounds good, you know, and everybody's like, "Oh yeah, it doesn't cost us anything." And that's kind of how it's being portrayed, right? Is that, "Oh, this won't cost anything. We can do this, we can transition, you know, it'll all be good. It'll create jobs." That, the reality is just that's not true.
Yeah. Some of that stuff has happened faster than pragmatic people thought, which is nice.
Yeah. Well, yeah. In retrospect, I think even now people are maybe starting to rethink a few things. Yeah. Anyways, to your question on the rights issue, I think it was very strongly supported by our shareholders. We kind of expected that. We could have raised probably a lot more money. As a matter of fact, we've had a number of kind of the investment banks around town and stuff that have been asking us to raise money, right? They wanna give us money.
Well, I love the way you did it.
Well, we felt like if you've got support from your shareholders and they wanna invest more money in the company, well, you should go to them first.
Yeah.
You know?
Fair.
Yeah, absolutely. That just seemed like a no-brainer to us that we would go that route. It was a little more complicated than I really had thought it would be, so we were definitely scrambling a little bit. It turned out to be very complicated for U.S. investors, which I hadn't realized.
It never seemed very kind of like, it just seems so simple. I mean, understanding that all the little problems come up, but it's like it seems such an appropriate way to do something that, you know, save money by not bringing other investors. But I can't think of sort of encountering someone who's done it that way.
Yeah, I think that it has been done. I think a lot of times it's done by companies that are more in trouble, like they can't raise money outside the company.
Well, I'm not saying raising money, but the way you did it, sort of do it by yourselves.
Right. Yeah. I don't know.
We're very supportive of that on your top range.
Yeah.
We're actually about to sell Western Energy Services, which operates as Horizon Drilling, and that's the process now.
Right.
That's totally kind of appropriate way to go about it. In Western's case, it did have to take a haircut on some debt.
Right.
We did appreciate solving financial hardship.
Yeah.
Way to treat everybody fairly and get money in the door.
I think, yeah. That, that's one of the things that we were trying to get across in our press releases, was that this was not something that we had to do. Because I think it is a lot of times it's companies that are more in distress. They can't go outside the company, so you have some insiders that are willing to kind of back it but are reluctant, and so they wanna see who else they can get to help them out with that, and then they'll sort of fill in. In this case, it was the exact opposite of that. It was like, "No, we want to invest more." You know, the major shareholders wanted to invest in the company. They didn't want to go outside and that.
We had that support, and we hope to kind of get that idea across to everybody, that this was something that just seemed like a good idea to us. It's not like this was the only option that we had. We do have. You know, it does appear like there's plenty of money out there for us if we were to need it for anything. But certainly right now we're looking at cash flow, you know, just investing cash flow, and we think, you know, we can achieve some fairly substantial growth just organically.
Yeah. Presumably your hardest question is deciding which way to jump.
Yeah, no, I think the company is in really good shape now. I think the balance sheet is fixed. I mean, I don't think we have any issues there anymore. We have a supportive bank on board with ATB. We're not planning on having very high debt levels, so they're enough. We've got, you know, my brother filled in as a second lien loan, which, you know, we kind of would like to get that paid off in the next year or two. On the interest rate, the way we did that was we actually were talking to third parties about debt, you know, and replacing our syndicate. Because we were basically looking. We talked to everybody.
Believe me, Mathew's been very busy talking to everybody to figure out what would be the best way to go to sort of replace our current syndicate because they wanted out. Okay, we've got to replace you guys. You know, and ATB was willing and that, but they were only gonna come in at a limited level. We talked to private debt guys because there weren't a lot of other banks, frankly. You know, there aren't very many banks in Canada to begin with. We're a relatively small oil and gas company and, you know, they just look at us differently for some reason.
They lend to all kinds of small businesses, but when you're an oil and gas company, which we're really not that small of a business, you know? But in their minds, we're in this category, you're an oil and gas company, and you're a small oil and gas company, so we don't want to have anything to do with you. Okay. We did talk to a number of third-party lenders, which a number of other companies have gone with. I'll be honest with you, the terms that they offered us were horrendous. When we looked at those, we just said. Well, we knew we could do better. We knew that, you know, my brother had the resources. We went to him and said, "Listen, would you loan us some money here?
We'll pay you a fairly good rate, but we won't. We needed to make a good deal for Petrus. We actually kind of split the difference with him. You know, one thing, it's tough for us to get across in press releases and that, but on these debt things, the interest rate is not telling you the whole story. There are so many fees and conditions around most of these debt deals that are done, especially with the private banks, but also with the main banks as well, that the cost of that debt is a lot higher than what's indicated by the interest rate. Having said that, the deal we negotiated with my brother is a way better deal for the company than anything else we could get.
The headline interest rate probably looks a little high, and we expected that. We expected that maybe some people would question that. We had our bankers kind of review it and to give us a third-party opinion on it, review the other options as well. Mathew went through all the numbers and stuff and, you know, the other debt options we've had were more on the order of 50% and other kind of tough conditions.
Maybe I should know this, but is there a repayment penalty if you pay your brother?
No. Like, there's no conditions on this. We can pay it off whenever we want to, provided we got to get approval from ATB, but there's nothing from his standpoint. We can pay it off whenever we want to. There's no conditions.
Is it one year or is it after one year or?
Well, it's after a year that we can pay off anytime.
Yeah.
In the three years, and then we have option to renew and our option, no cost.
But even-
The other thing is also a fixed interest rate that represents.
Yeah.
the payment because it's going up.
Prior to the year, when you prepay it off, would you get approval?
We need approval from all the parties, and we could get that.
Yeah.
We have total flexibility with the debt that we got from him. We got it at a much lower cost than anything else we could get. Like Matthew said, it's also a fixed interest rate, you know, which gives us some certainty going forward, especially in rising interest rate environment. If we hadn't gone fixed, which actually increased the interest rate slightly. If we hadn't gone fixed, we were gonna have to pay all kinds of fees to hedge the interest. We were like, "No, we're not paying fees to hedge the interest," you know. We just said, "No, we'll give them another point.
We'll do a fixed interest and, you know, we're gonna keep this thing simple." I have some problems with the banks and some of these guys and all the fees they're charging for some fairly questionable services. Anyways, that's what we decided to do, and I think it's been. I think it was the right decision and it's good for the company. Like, if you're looking at other companies and they're sort of talking about their third-party debt deals, I would, you know. They talk about the interest rate they're getting, you can be guaranteed that there are all kinds of other fees behind that, and the cost of that is a lot higher than what's sort of being indicated.
Sure. Some of your involvement information on Cedar last year, which I appreciated. That sort of communicated some of that pretty well.
Yeah. Yeah. Well, we like to be open about it.
Once we close at the end of the month, we'll do the same thing.
Oh.
Yeah.
Yeah.
Yeah.
No, just in terms of understanding issues, you know, early in the months, not so easy to understand all these complications. You got them.
Yeah. Sometimes you don't even see some of the fees in these, in the financials, really. They get-
Maybe some of them not talk about it.
Well, you don't want to. Nobody wants to talk about them. But they even don't even appear. They get taken off of, you know, like when you're raising equity, the fee comes off of the amount of money you get. It never even shows up there, which I've never understood.
Share issuance cost.
How? What's that?
They're called share issuance costs.
Yeah.
They're hiding that somewhere.
It doesn't come off as a fee, right? It doesn't come out as an expense. It comes out on, you know, how much capital you actually receive. To me, that's deceptive. I never understood that as an accounting practice. Our goal is to pay as few fees as possible to banks, et cetera. You know, we're trying to generate cash flow that we can reinvest on behalf of shareholders and make some money. Those fees tend not to make us money.
How big would you like to grow the business in the next end plan?
Well, I don't know that we have an end plan on that. We're working on that. Lindsay is probably gonna be the key person to kind of figure all this out for us. We're, you know, there's pretty clear path for the next couple of years, right? We have these assets, we have infrastructure. You know, this was kind of the obvious thing. We've got to, you know, drill some wells. You know, the wells are good. It's very low risk. We've got infrastructure that we can produce into, you know, so we're not investing a lot of money in infrastructure. I mean, so that part is very clear. This is what we gotta do first.
Now, beyond that's what we're still kind of trying to figure out, what's next for the company beyond that, right? You know, it could take all kinds of forms. You know, we could decide that we want to become a cash generation machine, if that seems to be the best thing for shareholders. We could continue to grow. I wouldn't say that we're gonna necessarily grow just for growth's sake. I don't think that's been a great move for companies in the past necessarily. I think the marketplace has kind of driven that and maybe encouraged that somewhat. It also encouraged guys to maybe go a little bit beyond or to do things that maybe weren't really smart from a economic decision.
You know, looking more at just production growth and reserves growth and sometimes the actual fundamentals weren't as strong as they should have been on that. You know, whatever we're gonna do here as far as investing shareholder money is gonna have strong fundamentals as far as rates of return and those kind of things. You know, we're not gonna just go crazy on just growth for growth's sake, you know, growing production and that. That's kind of yet to be determined, I would say, as we go. Sorry, go ahead.
Okay. Ryan, just to add to Ken's point, like if you look at the history of the company, we were hitting in 2017, we were at 11,000 BOE a day. Then because we didn't do enough in the last few years, we've come back down. Now we have the infrastructure, as Ken mentioned. The plan is all in place. Right now, in the short term, next six, say a year, we just go back to where we were, like 11,000 BOE. That's like 50%-70% growth by myself. What I think beyond that, we can decide what to do.
Yeah.
It's typically a path of very low cost for economics also.
House cycling.
Yeah.
Economics.
Yep. Oh, yeah. Right now it's all house cycling economics, so.
I'm curious about a couple of specific things about monetary.
Yeah.
And construction. One of the things I noticed in the slides was that you got two different numbers for your working interest on Cedar Olson.
Oh, do we?
In this presentation versus another presentation?
No, this one. On the Ferrier slide, you got it as 18.2%.
Oh.
I see it as 10.8%.
Yeah, you're right.
I thought, "All right, we better fix that.
So-
Lindsay would know what that is.
Yeah. What's been happening at Cedar Olson is that our original working interest was really just around maybe between 6.5% and 7%. Cedar Olson's doing some expansion work at that plant. There were two phases. Phase one we participated in, and that's where our working interest up to this 10.8%. Phase two, I just voted on maybe two days ago. Those results will be up that, and that's gonna take us up to the 8%.
Yeah, that's what.
Yeah, they should both say 18%. I'll make that update in the next 20 minutes in the online. Yeah, we've just been expanding our hosting capacity there so when we do drill more wells here, we've got somewhere to take them.
Are you comfortable with? Is that an area you might need to do more?
Do more?
With the infrastructure.
Yes. Plain and simply, we've expanded our ownership in that plant, but it's still not enough to handle how we would like to develop it. We've got. I think we're gonna have 150 dekatherms a day capacity. I don't know what that is in million, but it's kind of one well a year kinda production. You know, and we'd like to develop it faster than that. That'd be like a 30-year development plan. It doesn't give us the room to develop it the way we'd like to, so we're working through various different things. One possibility is that we build a big pipeline down to our plant down south, take the gas down there. But we're gonna probably fill our plant down south with gas raised in that area.
At least in the short term here. There may be some bringing in that plant longer term, but, you know. We're working through various scenarios about how we can develop that.
How much of your plant's capacity is actually other people's gas that you're processing?
You know, it's.
I don't know the numbers offhand, but it's not a lot. I would say we're 85%, if not even more.
Yeah
Operating in production when we've got plants. That's about a 1/3 full.
We're actually sort of concentrating on higher working interest wells and lands and that kind of thing, for a number of reasons. You know, one is, you know, we don't wanna really fill our plant with third party guys. We need the capacity for ourselves. Likewise, you know, services are somewhat tight right now, and we don't wanna be using the services that we've contracted and pipe that we've bought for other people. You know, there's a limited amount of it, so we want it to go towards Petrus stuff. So we've consciously really tried to target 100% or high working interest development at this stage.
I think our working interest gas going through the plant has increased over the last little while because we've been concentrating on that and will continue to increase. Yeah.
The other thing I was curious about is CAGR. I mean, you guys were. I sort of. Again, I'm an unsophisticated person. I don't practice geology or engineering or anything like that, but I try to keep on top.
Right.
You know, I noticed that you had that well up there some time ago.
Yeah.
You continue to say that's something you're still looking at.
I think that's fair to say.
Yeah.
It was drilled, you know, in 2020, I think, actually, and then brought on production last year. It came on really good. Like, everybody was quite excited about the well, and very oily. I think we were quite surprised at how much oil it had relative to gas. You know, the wells we're drilling in Ferrier are, you know, primarily gas wells with high liquids. This was an oil well, you know, with relatively little gas associated with it. Well, yeah. Yeah, oil was the key. But it fell off fairly quickly.
Yeah. I noticed you wrote down the wrong word, but you-
Yeah, we wrote down some reserves on it, I think, that we probably got a little ahead of ourselves, based on those initial results. So right now, you know, it's still, you know, producing, I think it's around 70 BOE a day, 30 barrels of oil. That's not really an economic well. Certainly, it doesn't compete with our other stuff in Ferrier. Having said that, I'm not sure that's representative of what we have there. We've got to do some more studying on it and see if we can understand it a bit better. Because the one thing we've noticed about it is that it, the pressure seems to have dropped fairly quickly. That doesn't make a lot of sense because we haven't actually produced that much from it.
What that suggests is that we're producing from a fairly small kind of reservoir. That also doesn't make a lot of sense because, you know, when we map the thing, it looks a lot bigger. I think we've got to do a lot more work on it. We're not writing it off by any stretch of the imagination. We're not promoting it, really. It's there. It's got potential for us. We're gonna do the technical work on it to really try to understand the well that we did drill and what's going on there. Out of that, we'll decide whether we want to drill another well out there, whether we think it has additional potential beyond what this well showed. If that needs to be tested.
It's probably not in our plans in the next couple of years. We're not drilling up there this year, probably not next year. Beyond that, you know, we'll either do something with it, you know, drill another well to test it or it'll be something we won't talk about it anymore. You know, we're targeting the Cardium right now because it's the bread and butter, and it's got great economics, and we know what we've got. Having said that, we think there's other opportunities, you know, in our core area, you know, and those lands. We just haven't needed to and haven't had the time to really you know, look at those and work through them yet.
That's coming. You know, like I said, we've got at least a couple years here, just really solid, easy drilling. We're moving a little bit further outside our core in that. Although, you know, we have the acquisition here in just earlier this year. That's given us some more land, so we'll be drilling some of that next year, and that probably carries us into 2024 as well. We've got some other stuff that's a little further out, you know, so it'll require some pipelines and stuff. A little bit of additional investment. We still have quite a bit of running room here, and that's without even looking at any of the other zones in the area. There's some fairly prolific ones.
Le Blanc is one that's being pursued by a number of companies in that area, and there's some fairly good results. Yeah, we think there's still a lot of potential there too. We'll hope to start drilling. You know, I would like to see us drilling, you know, maybe the next year, but certainly in 2024, a few wells or, you know, one or two wells that are testing some different ideas, you know, rather than just the Cardium to kinda take us to that, you know, the next sort of step, I guess. That North Ferrier is a great area. The wells, the activity. I drove up there the other day. You'd be amazed what's going on up there. You know, there's a number of companies that are quite active up there.
CNRL is drilling, like, five wells just offsetting us. Peyto's super active up there. Who's the other one? Westbrick, that's drilling up there. There's just trucks flying all over the place and pipes laying here. A beehive of activity. It was quite impressive. It's nice. Yeah. We've got a nice little land position up there and, you know, that's gonna be a really good area for us. That first well we drilled, we kinda laughed about it because it got a fair amount of kind of talk on bulletin boards and stuff, and that, you know, before we ever even started producing it and that. We felt like we needed to put a press release. Normally, we wouldn't press release, you know, individual wells and stuff.
Because it had all this buzz out there, we felt like we needed to. We press released what was sort of an IP30 rate. It didn't look bad. I mean, it was 830 barrels a day. You know, so great well. Actually, we were choking it back quite a bit. Right? Yeah. Yeah. We still are. You know, we tried to say that, but I don't know if anybody believes it. Most people shouldn't believe that stuff.
Yeah.
I don't know if that's a good place to stop. You said it. A lot of people, you know, say things like that, it doesn't turn out to be true. Though we have a production meeting here every Tuesday, and you just have to laugh every time you look at the chart because it's just going up, right? I mean, well, we spoke to decline.
Well, we've been reducing the choke.
We've been, yeah, opening up the choke a little bit, and we just get more and more out of that well. So that well, you know, looks great and we'll definitely be drilling some more of those here, as soon as we can figure out where we can take all that gas. Almost too much gas, right? You know.
Good problem to have.
Yeah, it's a good problem to have. That's been a fun well. Yeah, it'll be great to get up there and drill some more.
Sorry, like an academic type of question. What is the thing that you're thinking about that you just don't have an answer to yet that you're looking at?
That we don't have an answer to? Well, the one thing that you're always worried about in this business is what is the price gonna be at?
Yes.
Our strategy given, you know, and that's not really a fair answer. I think for us probably is, you know, what direction is the company gonna take? Which direction do we wanna pursue? Like, which strategy do we think is gonna be the best, you know, for generating value for our shareholders and that? That's probably, you know, the biggest question that we're gonna be working on here over the next six months to a year, is just trying to figure that out. We have a number of different options. They're all gonna be pretty good, I'll tell you that right now. It's just which one is the best? Like, what's the best thing to do here? That's gonna be a little tricky.
You know, 'cause you're always making a ton of assumptions. You're making assumptions about what prices are gonna be and all this kind of thing. You know, but anyways, you have to do it. We have to have the strategy going forward, and you know, what we wanna do with the company. You know, that's what we're gonna be thinking about. Yeah.
I said, this guy David Swensen, who died a year ago, when I was a student, he was a grad student in economics before he went on to Wall Street, but then ended up on that. One day we're sitting around our house, and lunch was shared. I'm working on this senior thesis, and I'm just wrestling with it, and I can't write it. He talks to me for like, I don't know, sort of half an hour, and I'm just kind of going through bright ideas, and he's just this really smart guy who's really interested in them. Finally we get to the point where we're saying, "Yeah, I don't know.
I don't know how we deal with that. He sort of shuts me down and he says, "You know, this is my job every day." He's like, "And what I do is every person I take." He had no interest in what I was talking about. He said, "I take them to the point where they don't know the answer, but I just wanna see if they bullshit." That's a smart thing because you know, nothing's better than working with people who earn our trust. Whenever you're doing anything having trust, you're dealing with a high level of uncertainty, and you're dealing with a high level of uncertainty in cooperation with others. If people bullshit you, then they know they lose the stakes. It's a very profound idea.
Yeah.
Yeah.
I would agree with that.
Yeah, we're gonna try not to bullshit here.
No, no. That's. I mean, that's my, you know, my perception from a distance is you don't bullshit.
Yeah. I don't think we need to be honest, you know. Like when you start doing that, you're probably in trouble.
Well, you know, we'll come back and see how much you can do, but.
Yeah. I'd be very interested to hear your kind of impression of the company over the last year and what
It's so much better.
Yeah. It's better? Well, that's good. I mean, you know, I know a lot of the stuff has been sort of insider stuff, right? You know, my brothers invested, they bought out NGP there. Then they did the next thing, they did some kind of private issue, right, to get out that Macquarie debt. Now we've done, you know. We actually, to be honest, when we did the one last year to take out Macquarie, we would have preferred that to be a rights issue as well, but we didn't have the time to sort of get it done. We had tried to do it, but it just wasn't gonna work. We ended up doing just a private placement on that one then. This time we were able to do the rights.
I know there's been a lot of insider kind of stuff, but, you know, we've got a very high ownership among just, you know, a few individuals there. I don't know how that's viewed by the rest of the investors in that. I think from our standpoint, we're certainly trying to do everything in all shareholders' interests, right? It's not sort of something where we're trying to do something and not sort of look out for the minority shareholders. We're trying to do things that benefit all shareholders. That's kind of our view, but I hope that that's kind of the view of our minority shareholders as well.
Well, it's mine. I mean, I'm kind of an oddball. I mean, you know, I sort of look for that.
Okay.
I'm not sure, you know. I'm not sure. I'm not representing them much.
Right. Well, you are though. I think, you know, you're an independent investor and, so.
Well, as to how you communicate that or whether you communicate that's a puzzle, isn't it?
Well, I don't know. I don't know how, if we've done a good job of communicating that or not. I hope we kind of have, but.
Yeah. My only observation is having bigger flows is generally better for liquidity and probably for valuation, but.
Right.
Share ownership.
Yeah.
Like high issues on our ownership is also very telling on what people are thinking around the board table, making a couple of allocations.
You bet. Yeah. Yeah. No, I think, you know, certainly my brothers were very , bullish on the company. Yeah, the liquidity thing, we'll have to see what we can do about that. I'm not sure. That's an interesting question, though, because to me, I mean, I think as an investor, and again, I'm still unrepresentative, but I wanna have a long time horizon. I'm quite happy to find things that are illiquid. Right. I understand that's not the way the world works for a lot of other people. I think there's, you know, a lot of the bargains are in things that are less liquid because people who need to trade, you know, support it. Yeah.
I mean, you can have different shareholders with different priorities, and maybe the way you do stuff will attract people who like the way you do stuff.
Yeah.
You take that's liquidity special. I think you can't make everybody happy.
No, you can't make everybody happy because, I mean, eventually, you know, if you're looking for things that maybe deals in illiquid investments, you're kinda hoping that at some point they become more liquid and that value gets realized.
Yeah. I mean, human nature is a puzzle and that, you know, we can look around the world and see all these train wrecks that we're fairly confident aren't gonna happen today or tomorrow, but in 85 years.
Yeah.
If you're under pressure to do things quickly, then you have to deal with that if you're not. No?
No.
Well, that's true. We have the university endowments.
Yeah.
That's one of their great advantages is that they have a long time horizon.
Right.
As long as they can borrow their, you know, management.
Mm-hmm.
University endowments.
Yeah.
I have a question I'm gonna ask you. I think Ken kind of mentioned about a different path that we can take after we build the plant.
Mm-hmm.
Either we return to shareholder any dividend or something, or we can continue to grow in acquisition, grow our production. It's a different pathway, but for my investors, my associate minority investor-
Yeah.
You guys already give more return and got share price appreciation and what more do you guys want?
For me-
I'm looking to keep.
I'm the guy, if I love the TV show, it gets canceled, right? I'm not the guy. My view is just whatever you think is the best use of the money. You probably know a lot better than I do. I don't personally. You know, I mean, the less you understand the situation, I guess, the more comfortable you can do this, like if there's money on the back, then you know certain stuff is always true. I mean, I think, for a lot of people, that's a very valuable thing. I suspect you guys, at a time like this, you're going to get maybe more pressure to do stuff like that than I would think is necessary. Again, I'm coached on what to do on that.
My point of view is if you have enough high quality and inventory with high rates of return, you should do it.
Yeah.
We can't, as investors, necessarily get 60% ROIs on our next investment. If you can, let it ride in the stock price.
Yeah. I think what I'd like to see is that we're flexible in that regard, right? Like I said earlier, I don't wanna be investing money where we're not getting good returns, just because that's kind of the thing to do. I think you know, I think that was the case in the past. I think now because more companies are distributing some cash and the public markets have a little bit different expectation, I think, from oil and gas companies. I think that gives us the flexibility now to sort of do both, you know. If we don't have really good opportunities right in front of us, we can distribute the cash. If we do, then we should be investing.
That can go back and forth, I think. I think we will certainly endeavor to make sure that what we are investing money is in good, high return, relatively low risk type things. If we don't have those opportunities, then we will be happy to distribute the income, you know. I don't like it when you're sort of pressured into reinvesting funds, and you maybe don't have the best things to invest that. I think that gets companies into trouble and they really get.
Especially on the A&D side.
Yeah, yeah. A&D side, even drilling side, you know. Sometimes you just swing for the fences, you know. You're hopeful. You're always hopeful, but a lot of times, you know, they're definitely riskier than other ones, right? We'll try to stay true to what we're doing here, you know. We have some incredibly good rates of return right now with what we can do right in the immediate future. This is just kind of a no-brainer. Now, as we go forward, we'd have to add some infrastructure and stuff. The economics aren't as strong as they are right now, but right now they're kind of ridiculously strong, right? It's a by-product of having invested a whole bunch of money in 2015, 2016.
Now that's, you know, those are sunk costs, and we can take advantage of that. That's not necessarily a sustainable type of thing. Having said that, you know, once we do fill up the plant and get all that done, the next level of investment I would expect is still gonna be very economic. You know, it can't quite match what we're doing now, but it's gonna be very good. It's certainly something I think that we'll be pursuing for sure. But it becomes more that we've seen where, you know, where your costs are kind of the cost of a full development.
That's the kind of thing that you can repeat fairly readily, providing you keep finding the right opportunities. Yeah. Anyways, we're quite excited. You know, everybody, we've been just kinda trying to get all the debt stuff fixed up here, and we were able to drill a few wells last year and, you know, they've been real good. We just can't wait to get drilling here. You know, we're gonna start in about a month, right? Everybody's just been getting fired up, getting ready for it. It's gonna be a busy place for the next six months and, you know, even longer. Certainly to sort of do the drilling that we want to do this year, we're gonna be very busy.
How's commercial issue with supplying that drill certain place where it's like?
It's in place. We've got them contracted and stuff. Yeah, no, it's an issue. You know, rates have gone up. But, you know, we've had a fairly good idea of what we wanted to do. So, you know, we've been a little bit ahead of the curve, if you will, and been able to contract the rates. You know, when you have the time to sort of plan it out, you can get those services. Casing is another thing, you know, just getting pipe. It's not the same as it used to be, you know. It used to be just phoning up, and there's pipe there, and you just have it delivered. Well, now, the lead times are much longer now.
You know, we had to get ahead of that and make sure that we had pipe available to us. I was even worried about it. Like, we've got probably three or four wells worth of pipe right now. I was asking our drilling engineer. No, it wasn't Lindsay in charge of it. It was another guy. I was a little worried because the other pipe we've got contracted is actually contracted from the mill, right? It's being milled over in China. I'm like: "Are we sure this is gonna show up?" You know, it's still got a long way to come, and they're shutting down for COVID over there.
He told me that the one order that we've got is already in Vancouver, so I'm feeling better about that one. That gets us another 10 or 11, 15 wells, I think. We've got another order coming in after that. We feel like we're in pretty good shape as far as that goes. All those services, right? Fracking services. Everything's tightened up quite a bit. Because we had, you know, a good idea of what we wanted to do, we've been able to talk to and line up the services and commit to them. I'm sure we're gonna have some hiccups, so I'm gonna tell you that right now. I'm just not sure exactly where it's gonna be. We'll manage it.
Yeah, no, we're excited. We're gonna have two rigs running. We're a pretty small staff here, you know. We've got one drilling engineer. We just hired another engineer. We had only two engineers here when I came in. You know, Matthew's been working, like, two or three jobs, I think. Lindsay's had to pick up all kinds of extra stuff. So it's a small but really good group that we've got working. We're gonna test everybody to see how much we can actually do. But I think everybody's excited about it, so excited about the prospects. Eager, you know, after. Lindsay could probably and Matthew could fill you in much more than I can, you know, that the last few years have been tough in this business, you know.
You know, prices were low. There were times when, you know, you didn't even know if the company was gonna make it. This is a breath of fresh air now to be able to actually, you know, to have better prices and be able to now be active, right? Not just one well here, one well there, and praying that you don't have a problem, because if you do, that's probably gonna put the company under kind of thing. No, this is. It's a much better environment right now. Much more positive. It's almost getting fun.
Right.
Anyway, that's all I've got. Do you have any other questions?
No. I'm just grateful for your time.
Well, thanks for coming by. You know, if you ever have any questions or whatever, just give me a call, give Lindsay a call. You know, we're happy to answer any questions of that. We try to make sure we keep everybody as informed as we can. Lindsay puts out a monthly activity report every month. You know, we're trying to make sure that people know, you know, what's going on here. Trying to communicate as much as we can, you know, what we're doing. Yeah, if there are any questions, just give us a call.