Earnings Call: Q4 2021

Sep 14, 2021

Good day, ladies and gentlemen, and welcome to the Evolution Petroleum Fiscal Year End 2021 Earnings Release Conference Call. All lines have been placed on a listen only mode and the floor will be open for questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host, Ryan Stash. Sir, the floor is yours. Thank you. Appreciate it. And good afternoon, everyone, and welcome to Evolution in Petroleum's earnings call for our Q4 fiscal year end 2021. Joining us today on the call are Jason Brown, President and Chief Executive Officer And myself, Ryan Stash, Chief Financial Officer for Evolution Petroleum. After I cover the forward looking statements, Jason will review key highlights along with operational results. Then I will return to provide a more in-depth financial review, and Jason will then add some closing comments before we take your questions. 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 view a recorded replay until December 13, 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 risks 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 earnings release, This call will primarily focus on Evolution's strategy as well as key operational and financial results and how these affect Evolution moving forward. Please note that this conference call is being recorded. Now let me turn the call over to Jason. Thank you, Ryan. Good afternoon, everyone, and thanks for joining us today on Evolution's Q4 fiscal 2021 earnings call. This past year has been an extraordinary one for Evolution with the backdrop of low commodity prices and our primary operator Going through bankruptcy, restructuring early in our fiscal year to a swift recovery of prices and a substantial acquisition in the second half of our fiscal year, I'm pleased with the resilience and the dedication of our team. Although we're very happy to see commodity prices return to even pre pandemic levels, We do believe the volatility still remains going forward and are cautiously optimistic amid the continued uncertainty of global markets. We were able to take advantage of an opportunity to diversify our commodity footprint and materially increase our exposure to natural gas Through the acquisition of OneLife Asset and International Shale. We're excited about this accretive acquisition, what it does for our company and shareholders moving forward. As I've stated before, we are interested in and continually evaluate both oil and natural gas deals And I'm pleased that we were able to add these natural gas reserves to our portfolio. Through the past year's challenges, We've maintained our commitment to returning meaningful value to our shareholders through a consistent dividend program. We've increased our Q1 dividend of fiscal 2022 to $0.075 per share of common stock payable in September of 2021. This decision is in line with what we previously stated and is supported by a continuing improvement in commodity prices and the additional cash flows generated by the Barnett Shale acquisition. Including the 1st quarter dividend that will be paid on September 30 To shareholders of record as of September 20, Evolution will have paid out over $77,000,000 or $2.34 per share back to shareholders as cash dividends since 2013. Maintaining and ultimately growing our common stock dividend along with achieving disciplined growth through accretive acquisitions remain our key priorities moving forward. As we look to fiscal 2022, I'm very excited about the trajectory of evolution. In the fiscal Q4, our production grew to 4,378 net BOE per day, which is an increase of about 156% over the prior Quarter substantially due to the production benefit of the Barnett Shale acquisition that closed in May, even though it only contributed for 55 days of the We generated $4,700,000 in adjusted EBITDA in the 4th quarter, almost doubling the $2,500,000 we generated in the Q3. Our year end proved reserves increased 129 percent to 23.4 1,000,000 BOE as well. Although both Delhi and Hamilton Dome had positive reserve Revisions net of production, the majority of the increase was due to the acquisition of the non operated interest in the Barnett Shale. It added 48.6 Bcf of natural gas, just under 5,000,000 barrels of natural gas liquids and a small amount of oil. That's a little over 13 millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters Boe of long life reserves, which is a substantial add of extended support to our dividend program. The SEC pricing used at year end was $49.72 per barrel $2.46 For MMBtu of gas, you'll note that's quite a bit below the current commodity pricing. Proved SEC reserves for the year ended sixthirtytwenty 21 consisted of approximately 65% of liquids, That's about 36% crude and 29% NGL and 35% natural gas. At fiscal year end, approximately 92% of crude reserves were classified as proved developed producing and 8% as proved undeveloped. Turning to our operational highlights at Dell Hi and Hamilton Dome, we continue to have good activity in both areas and are seeing field work and new projects pick up due to the uptick in commodity prices. Our operating partner Delhi returned to conformance projects in early 2021. Net production at Delhi in the current quarter was 121,911 BOE or approximately 13.40 BOE per day, and that's about a 3% increase Over the prior quarter, purchased CO2 volumes were up following the pipeline repair and the operator completed several performance projects. As we discussed Last quarter, it will take a while for the to recover the reservoir pressure and production loss following the CO2 purchase pipeline failure last year. We are starting to see a trend in the right direction and are pleased with the attention and capital support that Delhi is getting in 2021. In Hamilton Dome, we saw a quarter over quarter increase in production of 4% to 36,453 barrels or Right at 400 barrels a day, primarily driven by the reactivation of wells that were shut in during the last quarter. During fiscal 2021, in response to commodity prices, operator at Hamilton's Dome shut in a number of wells. At present, all wells that were shut in Substantially, all wells that were shut in due to the volatility of pricing have been returned to production. We were very impressed by Merit's responsiveness to the pricing challenge that they faced over the last year. Net production at the Barnett Shale for the Q4 of fiscal 2021 was 240,000 BOE, which represents approximately 55 days of production as we closed on the acquisition in the 1st week of May. 43.64 BOE per day based on 55 days of production. I would like to note that Black Beard Operating, the primary operator in the Barnett Shale, sold their interest to Diversified Energy in July of 2021. We will be able to provide more detail on the expected future Capital and operational plans of the Barnett, once diversified, has finalized their plans upon completion of the transition period. We feel that this is an exciting time for Evolution and we build as we build size and scale through accretive acquisitions, while continuing to deliver strong operational and financial results that support our dividend. With that, I'll now turn the call back over to Ryan to run through some of our financial highlights. Then I'll wrap up the call by speaking briefly about our strategy and outlook on the M and A landscape. Ryan? Thanks, Jason. I'll now share some more details regarding our financial results for the Q4 fiscal year ended June 30, 2021. Please refer to our press release from yesterday afternoon for additional information and details. But some of our key highlights include, As Jason had earlier mentioned, we increased our 30 second consecutive quarterly dividend to be paid September 30 to $0.075 per share, which is a 50% increase over the prior quarter. We also paid our 31st consecutive quarterly cash dividend on June 30 at $0.05 per share, which was a 67% increase from the Q3 of fiscal 2021. In May, we closed on the acquisition of the non operated liquids rich natural gas, minerals and working interest in the Barnett Shale for $18,300,000 which is net of preliminary purchase price adjustments. We expect these final purchase price adjustments to occur in October. As Jason also mentioned, adjusted EBITDA increased about 50% in the fiscal 4th quarter to $4,700,000 again, primarily driven by production from the Barnett Shale Acquisition as well as strong commodity pricing. Total revenues increased approximately 80% over the prior quarter to $13,700,000 Also, we funded all operations, development CapEx and dividends out of operating cash flow and we maintained our strong balance sheet with 0 net debt and $5,300,000 of cash on hand at June 30, 2021. We ended our fiscal year with a $30,000,000 borrowing base. This, however, does not yet include any impacts for our Barnett acquisition, and we are currently working with our lender to redetermine the borrowing to include the reserves from the Barnett acquisition and incorporate our year end reserves from Delhi and Hamilton Dome. This combination of $5,300,000 of cash on hand and $26,000,000 of availability under the revolver at our current borrowing base Gives us total liquidity of $31,300,000 as of June 30. Because of the Barnett Shale acquisition and its overall impact to our results, I'm going to focus more on the current quarter results as they are a much better indicator of our financial strength and capabilities moving forward. I mentioned the approximate 80% increase in total revenues for the quarter to $13,700,000 from $16,600,000 in the prior quarter was primarily due to A 50 6 percent increase in production to 4,378 BOE per day, driven again by the Barnett Shale acquisition, But also coupled with the 16% increase in realized oil prices, which averaged $62.30 per barrel for the Q4 of fiscal 2021. Our lease operating expenses increased to $7,600,000 in the 4th quarter compared to $3,600,000 in the prior quarter. This increase is driven by the Barnett Shale acquisition And also increased CO2 costs due to higher CO2 injection volumes and increased oil prices. As a reminder, the purchase cost Of CO2 is directly tied to oil price. But despite these increases, production costs per BOE decreased 17% to $19.02 compared to the prior quarter. General and administrative expenses were $1,800,000 which was consistent with the prior quarter. And net income for the quarter also nearly doubled to $2,200,000 or $0.07 per diluted share compared to $1,200,000 or $0.04 per diluted share in the previous quarter, again primarily due to the increase in income from operations related to the Barnett Shale. For the 3 months ended June 30, 2021, we invested $16,400,000 in capital expenditures, consisting of $16,000,000 for the acquisition of the Barnett Shale Assets, which as I remind you is net of a $2,300,000 deposit that we paid in the prior quarter. And we also spent $400,000 at Delhi for Field Capital Maintenance. Based on discussions with Delhi and Hamilton Don't operators, we do expect To continue conformance work over projects and will likely incur additional maintenance CapEx as oil prices remain strong. As Jason mentioned, the majority of the volumes at Hamilton Dome or Substantial majority, I should say, of Hamilton Dome shut in during the low oil price conditions during calendar year 2020 have been restored And any future reactivations will be considered depending on economics. For fiscal year 2022, based on discussions with the operators, The company's total capital expenditures for Delhi and Hamilton Dome are expected to be in the range of $1,000,000 to $2,000,000 primarily consisting of conformance, workover and maintenance capital projects. Again, as Jason had mentioned, the capital spending program has not yet been established for the Barnett Shale due to the recent sale by Black Beard operating to Diversified. Working capital decreased $8,600,000 from the prior quarter to $11,500,000 And this decrease is primarily attributable to the Barnett Shale acquisition, which I had mentioned before had a purchase price of $18,300,000 net of preliminary purchase price adjustments. This now concludes the financial review of results and operations. And with that, I will turn it back over to Jason for his final remarks. Thank you, Ryan. Our reserves in production are not the only additions this year. We've grown as an organization as well. We added a Controller, Michael Gough, to the team as well as the Senior Financial Analyst, Karen Jensen. As Rod Schultz, our Chief Accounting Officer retired after 9 years of reservice. We are very grateful to him for his effort in helping the team transition through the year end and 10 ks process. I continue to be impressed with our team and Evolution is I'm feeling encouraged and excited for the year ahead as we begin to evaluate new opportunities for accretive growth and sustainable development. We worked hard to build meaningful relationships with our operating partners and have already begun fostering a dialogue with Diversified Energy It was in the transition process of assuming the majority of operations for our Barnett assets. We are in communication at several levels within the organization as appropriate for And Ryan and I have been pleased with the responsiveness of their upper management through several conversations. As they get further into the resumption of responsibilities, we'll be able to give a little more insight as to capital spending plans. We believe that to be limited to minor workovers and return to production type activities at this point. We remain focused on generating cash flow, Returning cash to our shareholders through dividends and evaluating accretive acquisitions that help profitability and sustainability to grow evolution. We are seeing an influx of marketed and negotiated transactions lately and are optimistic that we will be able to build upon the successful Barnett Shale acquisition with additional assets over the next fiscal year. I believe that we've proven our ability to source and vet and successfully on various opportunities that support this strategy and evidenced by our Barnett Shale acquisition. This acquisition was a significant step for our company to grow in size and scale. We remain focused on adding shareholder value. Finally, we're excited about the future and believe that Evolution is very well positioned to grow and return meaningful cash value to shareholders. We will continue to focus on assets that bolster our cash flow in the short term without specific biases to any commodities. We will look to take advantage of our strong financial position And add additional assets that will further grow and diversify the company. Thank you for your continued support and interest in Evolution. Our first question comes from John White with ROTH Capital. Please state your question. Good afternoon, guys. Congratulations on the very nice results. Hey, John, thank you. Thanks for the notes as well. We appreciate those. Of course. The press release said CO2 injections at Delhi are 82,000,000 a day. Do you think we'll see that increase over the next quarter or 2? Yes, I do. We actually just had our operational call with Denbury this morning. As you'll recall in the past, August September, generally the warmer months where they're limited in terms of miscibility How much CO2 they can put away. In past years, they've even dropped it below that 82. So holding at the 82 level, we were pretty pleased with that. I think that we'll be able to kick up once temperatures break a little bit. I think they're anticipating in October being able to kick it up in the 90s and maybe as much as 100 MCF Day, I think that the goal is to try to get it close to the $100,000,000 mark through a substantial part of the winter, again to try To make up some of that principal pressure loss that we've talked about. Yes, that'd be nice. The buyer of Black Beard Diversified Energy, I would guess you're pretty pleased With them, I took a look at their presentation. They operate a large number of wells and it Looks like they have a significant footprint in the Appalachia area. So I would guess they're up they've got experience operating a lot of natural gas flow. They do. They also have substantial position in East Texas. Natural gas is a thing, low cost operator. We talked to Brad, Ryan and I did their COO and trying to get a feel for what type of projects that we'd be looking There are quite a few drilling locations out there and at gas prices where they are now, although we didn't underwrite this thing, I I think we underwrote it on kind of $270,000,000 gas to somewhere around there. We're substantially over that at this point. A lot of those locations will be just Viable, but I think their MO and frankly ours as well. He said it best that he doesn't like to do anything that doesn't have more than about a 6 month payout. So they think in terms of payout, which is great. That's what we think of in terms as well. It's real money that's going to return back to you and then contribute to cash flow. So We think we're pretty aligned there. I think we'll be limited to that sort of activity before there's any rigs that are standing up. So this is going to be work over and return to production type of things. Okay. Sounds good. I'll pass it on. Thanks, John. Thanks, John. Okay. Our next Congrats on the Barnett deal. You might have just bottom ticked natural gas. So The question I have Not bad, David, to get a win every now and then, right? Hey, we've been waiting 15 years, right? That's right. That's right. So, you said you'd been seeing more deals recently. So Was curious just directionally how sort of asks have responded in the last few months to the improvements in commodity prices? And then relatedly, could you just talk about how you evaluate using Capital on external acquisitions as opposed to, just buying back your own assets with an extremely cheap stock price? Yes. Good questions. Let me start kind of from the last going forward. In terms of the buybacks, We're pretty thinly traded right now. I think the vast majority of our owners or shareholders are long term holders and low We'll turn over holders. So I think buying back isn't We think we're undervalued at this point, but we also think that we'd like to get some more shares out there and grow through some scale. So I think we've done some buyback programs in the past that have been more defensive because we are thinly traded. It didn't take very many shares to kind of arrest some Near term volatility in the market. We're really looking to grow through accretive acquisitions. And so to that end, the deals that we've been seeing lately. The ask bid has been tightening a little bit. I think said another way, it may be a little more reasonable In the sense that when prices were low, we felt like that might be an opportunity to get deals done, but nobody really wanted to take the mark down. At this point, we're seeing people that are reasonable to take kind of what The current projections are in terms of strip and are different by acquisition pricing. Rather than thinking that it's going to double or triple again, when prices were down in the low 40s, Nobody really wanted to take the hit hoping that prices have gotten back in the 60s. And even though there's some speculating that prices are going to go to 80 or whatever, most people are pretty happy to Take the mark. And the thing that's been attractive to us is people looking to do something for a little bit of equity and a little bit of cash, Which we have the option of doing, so they can participate a little bit, which allows them to do something in a way that Give them some potential to participate on any more upside. So lots of opportunities that are coming our way, like I said, and negotiated, Which is nice. So Ryan, do you have any thoughts on that? Yes. I mean the only thing I would add just to what Jason said You mentioned buybacks. We sort of think about it as shareholder return, right, return of capital to shareholders. So we certainly consider the dividend as part of that. And We continually evaluate it at the Board level whether or not it makes sense to pay a dividend or to buy back shares. And as Jason mentioned, certainly Giving the float higher is a big kind of focus of ours. And we do think that our share is undervalued. But we're continually having those conversations. And you can definitely expect us to have shareholder Kind of return of capital kind of forefront in our minds. Okay. And if I could just ask an Unrelated follow-up, which is, again, after a 15 year bear market, I think a lot of people are looking at the natural gas Strip and San, well, hell yes, I'll take 450. So what's the current thinking and strategy on hedging? And what if anything would make that change? Well, that's also something that we talk about every Board meeting. We're constantly watching it. We don't like to hedge. And right now, I think you'll find a lot of operators are struggling to try to how to present their numbers To the public in both net income and EBITDA because they want to show if we didn't have the hedges on, we'd be making so much more money, Very few of them because they're so largely levered and by extension have to be largely hedged Are not receiving the benefit of these high prices right now. We're unhedged and so we're receiving all of that. That hurts on the downside. We've only put in 2 hedges In our history, one is in 2014 when everything collapsed and the other one was a short term in April of 2020 that expired last December. We look at it, but David, it's still pretty backwardated and we'd like to be an option, a call option on commodity. And I think with 0 debt, we feel like we're in a pretty good position to do that. We start taking on a little bit of leverage. There might be a small amount, but I think generally the posture of the Board is that We're not going to be speculative. That's kind of other traders business and you can lose your share pretty fast if that's not your expertise. Our expertise is trying to make accretive acquisitions and so we'll probably stay in that fairway. Brian? Yes. I mean, I think To Jason's point, I mean, you mentioned gas. I mean, the curve is so backwardated right now that certainly we don't think it makes sense to go out a number of years in hedging. But like Jason said, if We took on some additional leverage. To make an acquisition, we might look to hedge a portion of that through the period we think it will take to pay off the That's right. Just to kind of preserve the balance sheet because that's obviously a big selling point for us and something that the Board and Jason and I focus on So we might look at that in the short term or short run sort of hedging scenario if we took on some debt. Okay, thanks. And just one more quick one, and maybe it's in the proxy, but I haven't seen it. How do you guys get paid visavisortofsharepriceappreciation, dividends, growth of the business, etcetera? Well, clearly not enough, I guess, is the answer to that. I'm kidding. I'm kidding. It's I think on our long term I think this last year our STIP was designed 50% through M and A. The Board felt like a Strategic acquisition was the most important thing to us. And I think in hindsight that's what we delivered and they're happy that where we're at on that. I think there were some part of earnings per share, 25% and then 25% discretionary on the S TIP. LTIP is the TSR. So 1 third kind of time vesting, 3rd, 3rd, 3rd and then 2 thirds based on a TSR compared to a peer group. And now that's an interesting situation there because finding peers like us that are E and P that deliver dividend We're fairly low beta. There's very few companies that don't have any debt and over 8 years of consistent dividends. And so what you find there is some of our peer group were kind of in the middle. A lot of them underneath us went bankrupt And some of them above us in this last year have a higher beta with the reserves. So that's kind of a mixed bag anyway, but Essentially, it's a quartile thing in terms of percentage of our shares at best. Yes. And the one thing on the That's actually the long and short of it. Just on the proxy, so right, so we have 120 days after the end of our fiscal year. So by the end of October, we'll have filed Our proxy for our upcoming annual shareholder meeting, which will be in kind of early December. So that will have our fiscal year 2022 STIP and LTIP, as adopted by the Board. I will say one more thing about that and that was what it was last year on the STIP. The Board has made a pretty big commitment so as management this summer to commitment to ESG. And as I stated in the intercom Presentation I sort of ignorantly a year ago thought that EFC was health and safety, environmental safety. But of course it's not. We're coming out with our inaugural, what they call CSR, Corporate Sustainability Report. And the governance Nominating committee has advised the comp committee to include ESG as one of our markers, is a component of our Ryan and I have asked tips and the entire company. And so, comp committee has done that. We haven't come out exactly with what that is, but we're probably somewhere in the 10% Our bonus dependent on some ESG hurdles. So I think this just kind of shows the Board's commitment and focus to ESG. And with that consumer or that corporate sustainability You'll see a new website that we just rolled out with the sustainability section and we're trying to be responsible and But not like overreact to. We're non operators, so some of the things that we don't have any control over. And so we're focused on it and we'll have that report out Somewhere around the proxy time or is that late October? That's right. We'll send that out. All right. Well, sorry for monopolizing the call. I'll turn it over. Thanks for your time. Thanks, Our next question comes from John Bair. Please state your question. Thank you. Good afternoon, Jason and Ryan. Thank you for the dividend increase, always nice. Question on are you seeing any tighter spreads between The oil prices you're receiving at HamDome versus WTI, was that Canadian West Canadian Select? And also, you're getting pretty good spot prices then for the Delhi production? You should keep that in mind. Go ahead. No, no, that's fine. Go ahead. Yes. No, I well, you're welcome for the dividend. We appreciate our shareholders in May. I talked to the significant portions and I think that you're one of them as well, most of which We're pleased that we cut the dividend, even though everybody really likes the dividend to preserve our cash balance, which we did, in May of 2020. But it's of course our hope to get that back to some levels. I'm not sure that we're going to prudently do that and I think you've seen the Board Be able to do that, go from $0.025 up to $0.03 and then $0.03 to $0.05 and now $0.05 to $0.075 Now I'm not sure that we'll go back to 10 anytime soon. We're going to be prudent about that. But I was very pleased and I think that The Board made a good excellent decision there. Getting on to pricing, we've seen kind of a different thing in both of those areas. Hamilton Dome has tightened and has been very pretty consistent In an unusual way. Normally, it blows out in the winter and then tightens in the summer. And we saw it to be pretty consistent around the $10 to $11 range. We generally get a bonus of around $1.5 to $2 off of that. So we've been getting sub-ten differentials In Wyoming, which we've been very happy about. So in Delhi, it's been the opposite. Brent is still a premium to WTI, but not near the premium as it was last year. So just for a point of reference last year in the SEC report, we had the trailing 12 months diff at 1.65 Over? So that was our net realized price. So that means we have 3.4 dollars which is the transportation cost at Plains, so roughly. So then it would be $1.65 plus 3.40 So that means that Brent was about $5 averaging over WTI and that's what it's been in years past. This year has been closer to, I think, the trailing 12 months with an average of $2 under. Although we've seen that pricing Improve over the last 4 or 5 months and we feel like going forward, it's going to be closer to the $1.15 under. So that would actually be $2.40 over That's about what Brent is trading. So whatever Brent's trading over WTI, subtract $3.40 and that's pretty darn close to what we're getting at Delhi, does that make sense, John? Yes. We feel like that tightened spread We probably will see that we're hoping through 2022. Yes. And then as far as Barnett, I don't know how much of a discount you're getting there over these Spot prices, I think yesterday I saw $5.25 or so for October. Yes. So the capture most of that or Yes. So the Obviously, we're marketing ours under Black Beard and now Diversify, right, is going to market on behalf. And they have a longer term contract that's tied to Houston Ship. But it is tied to sort of a 1st day of the month FERC index. So if you see a big movement in pricing throughout the month, you may not benefit as much. But for the most part, on a month to month basis, as prices have gone up, we will obviously benefit for that Houston Ship Channel pricing, which is generally right around, if not A little bit better than Henry Hub. Good. And one last question. Have you had any impact, Weather related impact to operations given the last month of ugly weather down there? No. We talked to Denbury about that. Ida had There's a couple of wells that we there's a couple of wells that were low lying that we shut in for a couple of days, but there was no damage to the field And the field itself didn't shut down, the plant didn't shut down or anything like that. So very, very, very minor. That's good to hear. Very good. Well, good quarter and congrats. Nice timing on the purchase and Look forward to seeing what you come up with next. Thank you, sir. Appreciate it. Thank you. Okay. Take care. Okay. Our next question comes from Paul Hackett. Please state your question. Sure. So I was one of the new investors in May, that you had met on the tour. And so I just wanted I better understand, when you were negotiating with Tokyo for the Bonnet acquisition, I assume you were doing your due diligence all under Blackbeard's profile and assumptions. So, how soon will you know or be able to dovetail what your expectations are with the new operator? And what could the delta be positive or negative? Or in other words, how do you get a read through on that relative to what I assume you did pretty Prior to that acquisition or did you know at the time that they were going to sell their stake Black Beard? Yes, we did. It was kind of in parallel. It was a little bit behind our process. In fact, we looked at We're not really an operated company, although we looked at potentially making run at that. Diversified has been pretty aggressive. I would say more qualitative at this point than quantitative. And the qualitative nature of it is that Black Beard, although very competent operator, they got handed these assets through a combination of several SmashCos That NGP, which is their back end private equity, had gone through a number of companies. This is originally through Bluestone, which is an NGP company, John Redmond, his crew. So I think there's some nature of this that Black Beard's main focus was in the Permian. And Again, really sharp guys, but I get the feeling qualitatively that they had this to kind of shepherd over until prices stabilized enough for them NGP to be able to send it out the door, which they did. Diversified is coming into these assets with complete different purpose and Underwriting and plan and capital structure. They're publicly traded. They're more like us in terms of long term. They give a dividend like The way they develop assets are more like us. So I think qualitatively, we're pretty excited. They're going to focus on squeezing value out of it and we're going to benefit from that. Brian, any thoughts on that? Yes. No, yes, absolutely. I mean, we as Jason mentioned, with sort of Black Beard inheriting the assets, Well, Jason like Jason said, they're a good operator. We could see in looking at the data, they've done some nice things on the cost side. They hadn't really looked at much Upside at all, returning well to production or doing any workovers whereas Diversified has done a lot of that. And so that was One of the things when we looked at the deal that got us a little bit excited is knowing that you had an operator that got handed an asset that is going to sell it to someone who really wants to work it. So that was part of the thing that we looked at. Okay. All right. Thank you very much. Thanks, Paul. Thanks. Okay. Our next question comes from David Locke. Please state your question. Hey guys. Just a quick Delhi follow-up. How far below peak is that producing right now? And Is there any likelihood of it getting back there and what would the timeframe be? I'd say we're a couple of we're 30% below peak And the likelihood of getting back there probably will not be for a few years. And I would probably say at this point, probably not all the way back there. I think the peak was somewhere around 7,000 barrels a day of oil. There's a couple of reasons for that. 1, we've had the lack of CO2 during the 9 month period. We dropped some reservoir pressure. As John asked before about CO2 levels. We're going to over inject not over inject, but inject more than we have the past to sort of make up some of that reservoir pressure. We think that's probably, as I've stated before, kind of an 18 to 24 month build. It just takes a while while you're continuing to pull out oil to overcome that that you're producing plus makeup that we lost. So I think that's probably around the rest of the decline. We also have in place the Test Site 5, which is a further expansion of that area, that 5th phase. And that's not that's been put off for 2 years. That was supposed to start this past spring. They put that off at least a couple of years. Oil prices coming back up May bring that in a little sooner, we don't know, but we're not planning on that before 2023. That would have a drilling program of around 12 to 13 wells. And what we've seen in the past with our different phase programs is a substantial kind of arc, so that over a 3 year period, you sort of average Much higher. So I mean, I think we have a chance to get north of certainly north of where we are now and substantially higher. I don't know that we're back into peak levels that we saw probably 2 or 3 years ago. That's my best guess at this point. A lot of variables there, David. Our next question comes from Stefan Mihalik. Please state your question. Hey, guys. I was just wondering if there's any continuing dialogue with Tokyo Gas on those remaining stranded assets left over in the Barnett. I know there's maybe about $5,000,000 left. Yes. We definitely have been in touch with those guys. We're actually still going through our post closing settlement that will settle up here in October. I think our intention there was to see if there was some sort of a resolution to The dispute there, the parties have put that on hold and they I believe they filed a complaint against the operator. But the operator diversified didn't see it was a problem and closed over that. So, I think we're on pause to not get involved Until that reaches some sort of resolution. The other thing is we didn't agree on a set price to it. So prices have come up pretty significantly. I think probably we're not really planning on that at this point. Okay. All right. Thank you. And it looks like that was the final question. Excellent. Okay. Well, thank you for your participation today. Please feel free to contact us if you have any other questions. We appreciate the continued support of our shareholders and look forward to providing everyone with the further updates on our business and potential targeted growth opportunities on our next earnings conference call in November. Thank you. Thank you. This concludes today's conference call. Thank you for your participation. You may disconnect your lines at this time.