Battalion Oil Corp (BATL) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2008 RAM Energy Incorporated Earnings Conference Call. My name is Jasmine and I'll be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question and answer session towards the end of the conference.

(Operator Instructions)

I would now like to turn the presentation over to our host for today's call, Mr. Bob Phaneuf. You may proceed, sir.

Thanks very much, Jasmine, and thank all of you for joining us today on the RAM Energy conference call to discuss third quarter 2008 operating and financial results. Today with us on the call we have Larry Lee, our CEO, Les Austin, our Senior VP and Chief Financial Officer. We also have Sabrina Gicaletto, our VP and Controller, Paul Homan, our VP of Operations and myself.

Our agenda for the call today is to review our financial results for third quarter ended September 30th given the recent market focus on the balance sheet and the borrowing costs. So we'll also emphasis our debt position, liquidity and cost of funds. Also, while the market is significantly impacted the price of most stocks, we continue to be comparatively good value and we have a few slides in the presentation to speak to that point as well, and then we'll open it up for Q&A.

Briefly before we begin, I'd like to just make a few comments about the Safe Harbor statement; in our call today we may make a few statements that are other than historical fact. Information in the presentation and all such statements that refer to management plans or expectations, including capital spending, drilling plans, derivative positions, production targets and other industry conditions are basically forward-looking statements within the meaning of the Securities and Exchange Act of 1934.

The Company cautions that forward-looking statements are necessarily based on certain assumptions, which are subject to risk and uncertainties which could cause actual results to differ materially from those stated today. Further information on these risk factors is included in the Company's filings with the SEC, as well as at the beginning of these webcast slides. The management at RAM encourages you to review the disclosure in both of these documents.

And so without further ado, I will turn it over to Larry Lee for the presentation this morning.

Thank you, Bob. I think we delivered a very solid third quarter. If everyone will look at the third page in our slide presentation, our production was 645,000 barrels of oil equivalent. This is up 92% from the 336,000 that we produced in the third quarter of 2007. This significant increase in production, of course, is being driven by our Ascent acquisition in late 2007, plus the successful drilling program that we've enjoyed during 2008.

Our realized average prices were up significantly; oil was $116.81 a barrel, natural gas liquids were $66.16 a barrel, natural gas was at $8.85, so our total BOE realized prices for the quarter was $83.92. Higher production, combined with these increases in prices, drove our total oil and gas sales to $54.2 million, or up 177% above last year.

If you go to slide four, exclusive of the impact of the unrealized derivative losses, adjusted net income, non-GAAP, for the third quarter was $11.4 million or $0.15 per share. This is up from $5.3 million or $0.13 per share in the third quarter of 2007. Maybe as important as that, our free cash flow from operations, once again a non-GAAP measure, in the quarter was $26.7 million or $0.35 per share. That compared to just $0.08 per share in the second quarter of 2007.

Our EBITDA for the quarter was $31.5 million, which represented a 200% increase from the same period a year ago. Our total non-acquisition capital spending for the quarter was $18.8 million, and that of course was fully funded by our free cash flow, as well as the acquisitions that we made during the quarter.

Our area of operations, on page five, has not significantly changed. We continue to drill in our Legacy oil properties at the Fitts/Allen field in southern Oklahoma, and our Electra/Burkburnett field in north Texas. The Barnett Shale -- we added four wells to production at various points during the month of August, and those wells did help us in the third quarter and we expect those wells to obviously continue to help us as we move into Q4 of this year.

Our south Texas operation continues to be a real star for us and we are currently completely a well in south Texas. We have a drilling rig over one well at the moment, and when that rig completes the well it's currently on it will move to another well which will be probably the last well we'll get drilled in south Texas this year; but our south Texas program continues to work.

And if you'll look at page six, I'll quickly cover a few key items, I think. If you look at our developing fields, which are our South Texas, our Barnett Shale and our Appalachian play, the production from those developing fields has increased almost 24%, 23.7% production increase in the third quarter versus the first quarter of this year.

Our mature oil fields have actually increased production by 9.5% from the first quarter to third quarter. We did not really anticipate that kind of performance out of our mature oil fields this year, but it continues to add significant production volumes for us.

Our mature gas fields were negatively impacted in the third quarter, principally as a result of the shut-ins related to loss of power in southern Louisiana and in South Texas. We did have some production shut-ins in South Texas during the quarter, not related to physical damage, but related to the inability of the gas system to accept some of the volumes and some power losses down there.

In West Virginia -- I want to talk about that just briefly while I'm here, we have four wells that are producing in West Virginia. We're currently testing one that we've recently fraced. We have two wells that are in the process of -- we're doing our frac mapping that we've got scheduled, and that process should begin to take place later this week where we have one well that's a monitoring well, and we have another well that we'll be fracing, so that we can map it and finally get a good picture of how the frac jobs are working. We have one well that is waiting on a completion and we have one well drilling.

In West Virginia we continue to get fairly acceptable initial rates out of these wells, but the volume is falling off faster than we would like, that's why we are continuing to experiment with frac jobs. We did execute our joint venture agreement on our 22,000 acres north of the Kanawha River. Our joint venture partner there is Penn Virginia.

Penn Virginia has drilled four wells north of the Kanawha River. And, we are in the process of scheduling a technical meeting between our technical staff and Penn Virginia's technical staff to share the information that we've learned from our drilling and to share the information they have learned from their drilling, and decide how we want to proceed with our various completion techniques in the Appalachian basin.

If you look at slide seven, it shows you the production growth. And I think this demonstrates that we've been able to drive our production at a fairly nice pace this year with a relatively modest capital program. And we did suffer a decline in June due to weather-related issues in north Texas and Oklahoma, and then of course we suffered in September from the production shut-ins that resulting from hurricanes Ike and Gustav.

All of that production, as you can see, has been restored in October and we have reconfirmed the upper range of our second half of production, based on our view of what we're doing in October and what we have on our plate for November and December. So we have reaffirmed our production guidance for 2008.

If you'll go to page eight, I'll turn this over to Les Austin, our CFO, to let him talk a little bit about some of the success we've had as it relates to our balance sheet.

Thanks, Larry. If you look on slide eight, you can see the Company continues to improve its net debt to cap ratio. We have reduced it again in the third quarter to 54% and our short-term goal is to get that number somewhere below 50%. If you slide on over to page nine, this slide demonstrates that the Company's weighted cost of interest continues to decline with the slight spike in LIBOR we had a few weeks ago, interest rates were up on a blended rate a little bit, but have settled back down here in October to the range that they were at the end of the third quarter.

We still have three years remaining on our revolving credit facility. That currently sits at LIBOR plus 175 and we have four years remaining on our term facility and that sits at LIBOR plus 750. Those rates are looking a little better now in the current credit environment that we have. I'd also like to point out that although debt has increased about 67% in the third quarter of '08 versus the third quarter of '07, total interest expense is essentially flat between the two quarters based on the interest rate and our free cash flow over that period of time has increased nearly eight times.

If you'll move on to slide ten, you can see that our liquidity situation over the last four quarters has ranged from $46 million to about $50 million, relatively flat over that time period. And as Larry has told you earlier, we have been able to fund all of our capital programs out of our operating and free cash flow, while at the same time reducing our debt.

And again, if you'll turn to page 11, you can see that debt reduction. We currently sat a debt position of about $247 million. From the high water mark of the first quarter, we've reduced our debt $105 million, $86.6 million of that reduction came from the Warrant exercise in May. The other $18.4 million debt reduction came from operating cash flows.

And if you look on slide 12, we've put some more information in about our derivative positions for 2009. For the calendar year, we'll have about 2,900 barrels of oil hedged at a floor price of approximately $64. We also have about 3.8 Bcf of gas hedged for all of 2009. That average floor price is about $7.14. At the third quarter production rates, that represents about 69% of our daily liquids production and about 61% of our daily natural gas production.

And with that, I'll turn it back over to Larry to tell you about our valuation.

Thanks, Les. If you look at page 13, or slide 13, we continue to have a very attractive valuation compared to our peer group, if you look at it on a price to NAV basis and this is using reserves for our peers and RAM at 12/31. Not everyone reports interim reserve volumes. And the share price closed as of 11/3.

If you look at page 14, or slide 14, once again our enterprise value for BOE is, once again, continues to be below our peer group at $8.80 a BOE. And we think that we'll continue to deliver strong results, and hopefully will begin to close that valuation gap.

To summarize it before we open it up for Q&A, we continue to have a very successful drilling program and are developing as well as our mature fields. We have a tremendous inventory of growth opportunities and one thing I would point out here; all of our growth opportunities in our traditional assets are oil properties and are gas properties.

Our South Texas properties and our Barnett Shale properties are on acreage that is helped by production, so we don't have any real pressure as far as having to drill some leases when we don't want to. We can get to -- to determine the timing of that development.

The only place where we have significant lease position is in West Virginia, and most of those leases are five to ten year leases, and many or most of the five-year leases have renewal kickers, so we're very -- strong position in terms of being able to time when we want to drill those properties.

We do have stable cash flow because of this long life, 15-year reserve life index that is very heavily weighted towards oil and natural gas liquids. As I said, we have a high degree of operating control over our assets. We continue to show that we can create value, both through acquisitions and the drill bit, and management's alignment is very much with the shareholders.

I'd say as a wrap-up, we continue to increase our production, particularly in our developing fields and our mature oil fields. Our cash flow is not only funding all of our non-acquisition CapEx, but so far in the third quarter, it also funded $11 million worth of acquisitions that we made in that quarter.

Our debt is substantially reduced from where it was at the beginning of the year. Our credit facility is solid, it has a long time to run. And we are sort of perplexed why we appear to be trading as if this Company is somehow distressed financially, which it is not.

And so with that, I'll wrap it up and we'll open it up for Q&A.

(Operator Instructions)

And your first question comes from the line of Neal Dingmann of Dahlman Rose. You may proceed.

Morning, guys, great quarter.

Thanks, Neal.

Say, Larry, I guess I agree with you. Given where the stock's trading, and I guess we know where your asset value is, can you speak a little bit more on your growth, I guess? By living within -- maybe you and or Les, living within your cash flow, maybe the perception is that the growth is not going to be as good as once was or as good as others. Could you maybe address how a little bit both and the mature properties and then some of the other areas?

Yes, Neal. I think that's one of the reasons I was trying to highlight. We've grown our production almost 24% this year in South Texas. We've grown our production 9.5% this year in our mature oil properties. The one area that hurt us in the third quarter was the mature gas, which was impacted because of the hurricane activities. Had that not hurt us as much, we would have been up very nice sequentially and would have been up higher on an overall basis.

But we seem to be driving our production up between 5% and 8% fairly consistently with what I think is a relatively modest investment level that we're putting in these properties. We think we can continue to do that for a while. We've not yet set our 2009 capital budget, but our plan will be to set that budget within our free cash flow. And we think we can still deliver very solid production growth, as well as solid value in terms of increasing the value of the Company.

As I've often said, these things -- the oil and gas business is a marathon, it's not a sprint. And I think what you're going to see is many companies are already announcing significant cutbacks in their '09 capital programs and that's going to affect their growth rate. So, what I'm hoping is the growth rates of much of my peer group will begin to look more like what our growth rate has been.

And then for the follow-up, do you have any idea yet, I guess maybe you don't, as far as number of rigs both the mature area, and maybe specifically up in Appalachian what you'll be running, and have you seen costs come down yet either on the rig side or some of the completion side yet?

We're seeing costs come down on the rig side. We've not yet seen significant decreases in cost on the completion component. I am expecting to see that because I think not only us, but I think the industry in general, particularly on these gas shale plays, costs have got to come down to get more in line with where the commodity price is going to pay us for it, or otherwise these shale plays will have to wait for a later date for development, I think.

As I said, we're in the process now of putting together our program for next year. We will have a program, we will spend a reasonable amount of money drilling next year and we think we'll be able to increase our production going into next year. And as soon as we get our capital program, we'll probably be giving the market some guidance on where we think we'll be, certainly, probably within the next thirty days.

Thank you, guys. Nice work. I'll get back in the queue.

Thanks, Neal.

Your next question comes from the line of Leo Mariani of RBC. You may proceed.

Yes, good morning here, guys. Just a question on some of your near-term activities, in the Barnett. If I recall correctly, you guys were fracing you're first operated well. Just curious as to whether or not you've got that testing or producing at this time. And just looking to get a better sense of how much your near-term plans are going to be in the Barnett on the operated side and what Devon's been telling you, and then what your plans are in Appalachia.

Okay. In the Barnett, Neal, we did -- we drilled the Brown 2H well. We had a little bit of cement job problem at the tow, and so what we originally did was we just fraced the first two stages and tested those stages. And then we wanted to see what that would do. And then we came back in, and we've just recently fraced the remaining four stages, it was a six stage frac job. We just have completed that frac work and we're flowing the wells back now.

We've not yet gone, and won't for a while -- we won't go back in and drill out that bridge plug and commingle all six wells for a little while. We want to test these four because we think we're going to get a better test on those than we did on the first two stages. The first two stages came in -- just the two stages alone came in at about 800 a day equivalents and declined down to about 300 a day.

And as I said, that was the one we didn't have as a good as cement job as we would like too. So we're anxious to get these other four stages tested and on line, which we will be able to test them into the sales line.

We have proposed the Reddell 2-H, and that well is currently scheduled to spud sometime in late December or early January. And once again, we'll own 80% of that well, so we're planning on doing that.

Initial discussions with Devon has not -- they've not yet finalized their plan, but there's an indication that they're going to drill at least maybe still one well in our Rawle/Burress property this year, or at least spudded in before the end of the year. If they don't, that will kick over into early '09. And they're probably going to drill at least two more wells on the Rawle-Burress area in -- between now and the end of the year and in early '09.

We also are in that 50 square mile chute with EOG and Devon, and so that has now been shot and it's in processing stage and we'll see what that results in additional drilling, on either joint EOG acreage or joint Devon acreage. But that rig that was doing those wells for us, the Dickinson's and the [Molly's], that well is currently working for Devon, is to the west of us. It's an H&P rig and it's my understanding that's the rig that they'll bring back over and finish up drilling the additional locations.

We still have about five or six locations within the Rawle/Burress lease, and then of course that is only about one-third of our joint Devon-owned acreage. So, we're expecting to -- based on everything I'm hearing Devon say publicly, and what we're getting when we talk to them, is that they continue to drill in the Barnett and have not indicated any slowdown in the Barnett as opposed to some of the other operators in the play.

In the Appalachian, as I've said -- we've drilled at a number of wells, we've tried various frac techniques. We finally got everything buttoned up on our JV with Penn Virginia and we're very anxious to sit down with them and talk about what we're going to do in the Appalachian, both on our joint acreage, north of the Kanawha, as well as that will help us decide how much additional drilling we're going to do in the Appalachia in '09.

A lot of that, I think, will be driven by what kind of prices we get. I'm glad to see that the gas market seems to have firmed up a little bit, and I would expect it to maybe stay in these $7 to $8 ranges for near-term and that will allow us to continue to try to unlock our Appalachian play. We still don't have the key to it, we're not satisfied with the sustain rates we're getting out of these wells, and so we're continuing to work, as I said as to how's the best way to complete these wells and get our gas volumes up to a level that we think makes us play commercial.

Okay, and you mentioned that Penn Virginia had drilled four wells on your jointly-owned acreage; have those wells been flowed at this point or tested, or are they in production? Where are those wells at?

I think that two of those wells -- they did drill and completed and are on production. They experienced the same thing we did; they got acceptable initial rates, but the rates tailed off quicker than they would want. I know they've drilled and are in the process of completing the third well and I think they have the fourth well drilled but not yet completed. That's the reason we want to get together our engineering and geological staff with their engineering and geological staff and begin to look at all of the results that we've had together.

I know they've drilled other wells up in the play, not just in our joint acreage, but there's four wells that are within our joint acreage. And as I've said before two heads will be better than one in terms of trying to figure out how to crack that [Heron] play.

Okay, great. And I guess last question here; any update on your asset sale initiatives and in terms of whether or not you've got properties in a [data room] at this point and any expectations for potentially getting something closed in the asset sale side?

Leo, we've got some small miscellaneous properties on the Internet and we sold a few of those in the third quarter at very acceptable prices. We're kind of anxious to see what kind of prices we get with this -- credit issues that are out there. We do have our east Texas package on the market and we'll see what we'll get on it, if we get an acceptable price we'll probably take it and let that asset go.

If we don't receive an acceptable price, we'll hang on to it. So, I don't have much color on it at this point except that we do have some assets in the marketplace and we'll begin to see the results of whether those are successful or not here in the next two to three weeks.

Okay, so on your east Texas package, do you have any color on how long it's been out there? Have you guys received indications or bids or anything like that at this point or --?

It has been out there for only about three or four weeks. It went out about the first of October. I know several people have been looking at it and working it, and we're expecting bids in on it here in the next several days and then we'll see whether or not there's anything acceptable or not.

We do have some Haynesville acreage underneath that we own and we also have production in the Cotton Valley and others over there. So it's a little bit of an interesting package in that there is production and there is some deeper potential as well as some proved undeveloped locations with it.

So, we're anxious to see what the market tells us about that package and as soon as we know something we'll -- I mean, obviously if we make a deal and sell it we'll announce it and if we decide to keep it we'll probably let everybody know that as well.

Okay, and what's the acreage there, Larry?

It's about 6,000 gross, about 4,000 net. I don't have it right in front of me, Leo. There's about, I can't remember -- 6 or 8 Bcf approved reserves and we had about 800 acres of Haynesville potential. About 600 acres of that was in Harrison County, which looks like it's in the fairway of the Haynesville. So as I said, if someone gives us a reasonable price, we'll certainly consider it, if they don't, we'll hang on to it and move forward with whatever development plans we want to put in place there.

Okay. Thanks, guys.

Thanks, Leo.

Your next question comes from the line of Ron Mills of Johnson Rice. You may proceed.

Morning, Larry.

Hi, Ron.

Just one last question on west Virginia; as you sit down with Penn Virginia and you go over your different completion techniques, what's the next step? Have you all started to do data swaps potentially with [Cabot] or Equitable to see what they're doing?

There was just recently, probably [I believe even] -- maybe two weeks ago, Ron, there was a big Appalachian shale conference in Pittsburgh that some of our guys went up and attended. The Equitable guys were there, Cabot was there, all the players were up there.

And I think what's happened is, I think the leasing foray is over and it seemed like -- the message I got, I obviously didn't attend, was that the companies are being more open about what they're doing in terms of how we go about completing these wells. And that's what we're doing, is that we've used and continue to use several different kinds of completion techniques to see which ones appear to be the best.

This frac mapping that we're doing, I think will be very beneficial to us in evaluating it and so it seems like the information flow is starting to free up, up there. Clearly, Penn Virginia has more of a relationship with the Appalachian operators than we do, being new to the play. So I think we'll benefit from PVOG's knowledge and working relationship with the other players in the basin. So, I look at that very positively.

Okay. And then, even before you come up with your 2009 budget, West Virginia, I assume, will be somewhat of a wildcard depending on figuring out what's going on. But in terms of activity levels that you would hope to achieve in your -- developing oil, or mature oil and gas properties, Barnett and South Texas; would you expect similar-type activity levels in those plays?

Clearly with South Texas being up, or our developing fields in principally coming out of the Barnett and out of South Texas being up 24% so far this year we're going to continue to put money in those two plays. With our oil production being up 9.5%, we're going to continue to put money in our mature oil properties.

And I would think that, depending on where gas prices are, the Appalachian piece would be the swing piece. I think the two components of our '09 capital program that we definitely want to protect is South Texas, Barnett and mature oil. And then coming after that, would be our -- this Appalachian play, particularly in this kind of a gas price environment. So, we continue to be committed -- and I think this is critical for the market, as we continue to be committed to essentially operate within our cash flow.

I've been in this business 32 years and I've seen lots of ups and downs in this industry, and the people that tend to get in trouble are those that are actively borrowing money from the market and raising equity to grow their reserves on a drill bit basis.

If you focus in those properties, are those -- do you have enough of an inventory there to continue your 2% to 3% type sequential growth going forward?

We think so, for sure. We've got a lot of drilling opportunities in South Texas, in the Barnett and in the mature oil fields. We probably still have 150 locations within our mature oil fields. We probably still got 60 or 70 locations in South Texas and we probably got maybe as much as 100 locations in our Barnett.

We still have a lot of places to run and the key to all three of those is they're HBP'd acreage. They're not going to go away, so we can time when we want to drill those, Ron. And I think that's a real important distinction that I'm trying convey to the market. We can drill those when the prices make sense and we can hold on to them when they don't.

Right.

Yes. South Texas has been a real surprise -- successful surprise to us. As we've drilled down there, we've begun to move probable locations to PUDs and possible locations to probable locations. So we still have a fairly deep inventory in all three of these areas that are really driving our growth this year.

Right. Okay, great, guys. Thanks.

Thanks.

Your next question comes from the line of Robert Setrakian of Helios. You may proceed.

Hi, good morning, guys.

Good morning, Robert.

You have commented in the press release and on this call on our long-term debt and liquidity, but I want to ask a couple of questions that I think in the most fear-filled days in the markets over the last few weeks affected our stock price somewhat.

First of all, in terms of our bank facility, what's your comfort level with our bank group participants, number one? Number two, you mentioned it in the press release -- I am understanding this clearly that in the next few years we don't need to do anything unless we want to do something, in terms of our bank facility, right?

That is correct. We have three years to run with our revolver, we have four years to run on our term. And our revolving bank group is solid and they have all been participants in the various governmental capital programs, so we're very comfortable that they are long-term survivors and have not experienced any difficulty with them at all up to this point.

The term lenders, quite frankly, we've got all their money, we're not going to get any more money under our term. So, if some of the term lenders might be distressed, their -- really their opportunity is essentially to sell their position in the secondary market. I don't know if that's been taking place or not. But, we don't have to go back to the market for any additional debt capital for at least three years, Robert.

And number two, in terms of our hedge position, who are our counterparties, and how do you feel about the counterparty risk?

Our trading partner is a wholly-owned subsidiary of Shell Oil Company. And Shell is also our largest single purchaser of our production. And I don't think we have any counterparty risk, I don't believe.

So there's no financial institutions involved in any of our hedging programs at this point?

Not at all. We have never hedged with financial institutions and certainly don't have any intentions of doing so soon. We've always -- we've been a hedging partner with Shell for eight years now. So that relationship has been in place a long time, it's a very solid relationship. In fact, Shell, in our mark-to-market exposure to them has given us a $10 million line of credit to add to the volumes that we deliver to them.

On any given day Shell owes us roughly 50 days of production. And so we have that with which to trade around, plus we have this additional $10 million that Shell has granted us as a credit facility, so we really are well-positioned on our hedge position in terms of any capital calls or margin calls or anything like that. And we don't have any Lehman Brothers-type exposure. I think we're very solid in that regard too, Robert.

Okay. Thank you, guys.

Thank you.

Your next question comes from the line of Ross DeMont of Midwood Capital. You may proceed.

Hi, guys. Great quarter.

Thanks, Ross.

Thanks.

I know you probably haven't finalized your CapEx budget for next year, but in terms of just absolute dollars, I think we did $80 million this year; would you expect it to be up or down from that level?

Ross, as I look at the price deck today, I would expect it to be lower than that next year.

Okay. I guess this year we've had $20 million going to West Virginia, where we didn't get a lot of production, increase production out of that CapEx. Would you expect the majority of next year's CapEx to be directed at increasing production?

Yes, and I think that's a good point, Ross. If you look at -- West Virginia is still a science project. We did not expect any production out of it, but yet we've invested a lot of money in that play because we think its potential is there.

So if you really look at where the production growth has come, it's come out of a much smaller dollar amount going into South Texas, the Barnett shale and our mature oil properties. So if you -- we could cut back our '09 capital program fairly extensively and continue to put that money in the three areas I've just described and we think we'll have production growth next year.

Okay, that's great. And then last question; at this conference that you referenced in Pittsburgh, has anyone hinted at or suggested they've got a completion technique which doesn't suffer from the higher declines that you guys are seeing? Are you hearing that anyone's figured this out yet?

It appears that Equitable Resources have had the best overall success.

Okay.

And the frac job that we're currently doing, we've sort of adopted their method to see what we're going to do with it. And so, we continue to -- it's like a cocktail mix, its how much nitrogen, how much foam, and how much sand you end up putting in it. We've tried, I guess, four or five different completion techniques at this point, and it seems to us that the stuff Equitable is doing appears to be the best.

That's one of the reasons that we were so keen to get into this JV with Penn Virginia. They've been out there in this play a lot longer than we have, and we've drilled a number of wells and tried several different things, so I think that it will be very helpful for both of us to just sit down and technically look at it. But it looks like to us Equitable has been the most successful and how they're doing it is now starting to come out. So hopefully, it will help us.

Okay, thanks for taking my question.

You bet, Ross.

(Operator Instructions)

Your next question comes from the line of [Seth Yellin] of Helios Partners. You may proceed.

Hi, guys, its Seth.

Hi, Seth.

Hi, Seth.

For many different reasons in our history as a public company, we've never received the valuation relative to our peers that essentially highlights our intrinsic worth. And we could argue about the reasons; maybe it was our origination as a SPAC, geographic diversity, because people just want simplicity, from an investor standpoint, because we're a small cap. But we didn't benefit at all like our peers are in the hay days of $150 oil.

However, we're disproportionately suffering on the way down and who knows why. You can site these computer programs deleveraging, investor redemptions, whatever it may be. But we're sitting here trading at absurdly low valuation, our balance sheet is in a lot better shape than a lot of our peers, we're comfortable being able to finance our CapEx plans, yet you can see it again this morning nobody cares.

And I guess my question, Larry, for you is once the capital markets become "rational" and stable, how much more time can you give before addressing this disconnect?

Well, I think we've got to see the markets make some sense. Right now the markets make no sense, not only for us but most of our industry. And, Seth, what we have to do now is continue to run the Company, continue to deliver increased production, have good results and then we can address the future of what we want to do when these markets begin to behave a little bit better.

But you are right, I have the same frustration that you've just expounded. It makes no sense to me. And here we have generated $0.96 of free cash flow during the first nine months of this year and our stock's trading at $1.25 today or something. We're going to probably generating something well north of $1 plus in cash flow per share this year, and here we are trading at basically our cash flow. That will not last for any extended period of time.

I mean just an observation; it seems like we were punished in the past because we weren't showing the production growth that the sell-side and maybe other buy-siders wanted because it's sexy to show all this production growth, but that was being attained throughout spending your operating cash flow. And here we are the tortoise, having the steady Eddy mature fields, which really should be seen as a margin of safety, yet you get punished anyway.

Yes. It's a complete and total disconnect.

Yes. Thanks for your time.

Thanks, Seth.

You have no further questions at this time. I'd like to turn the call back to Larry Lee for closing remarks.

Well, I want to thank everybody for taking time. I know a number of our long-term shareholders are on this call with us and analysts that follow us, and all I can say to you is we delivered another good quarter. We think we'll continue to do that as we move forward, and I look forward to seeing all of you at next conference or the next call. Thank you very much.

Thank you for attending today's conference. This concludes your presentation. You may now disconnect. Good day.