Battalion Oil Corp (BATL) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 2009 RAM Energy, Inc. Earnings Conference Call. My name is Modesta and I will be your Operator for today. At this time all participants are in listen-only mode. Later we will conduct a question and answer session. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Bob Phaneuf. Please proceed.

Thanks Modesta, and thank all of you for joining us on RAM Energy's Conference Call to discuss the fourth quarter 2009, and full year 2009 operating and financial results, as well as recently announced 2009 proved reserves.

With us today from RAM is Larry Lee, our CEO; Les Austin, our Senior VP and CFO; Larry Rampey, Senior VP of Operations; Drake Smiley, Senior VP of Land and Exploration; Sabrina Gicaletto, VP of Finance; and Paul Homan, VP of Business Development. So on the call today we'll be following the agenda I laid out with our prepared remarks, and then we'll open it up for Q&A.

As part of our housekeeping today we need to remind you that we will be making statements that are other than historical facts, and all of these such statements that refer to management plans or expectations, including targets or guidance for such items as annual production, expenses, property dispositions, capital spending, EBITDA, drilling activities, derivative positions, borrowing availability and estimates of our project inventory, as well as the assumptions of hydrocarbon prices and other company or industry conditions, are all forward-looking statements within the meaning of the Securities and Exchange Act of 1934.

So the Company cautions that such forward-looking statements are necessarily based on assumptions which are subject to risk and uncertainties which could cause actual results to differ materially from those indicated today. Further information on these risk factors are included in the Company's filings with the SEC, and the management of RAM encourages you to review the disclosure of these documents.

So with that, I'll turn it over to Larry Lee to (inaudible) prepared remarks.

Thank you, Bob, and I want to welcome everyone to our 2009 year end and fourth quarter call. What we plan on doing this morning is I'm going to cover our strategy then go through the highlights of the year of 2009, and kind of how we think those fit in and support of what our strategy is. Then Les is going to cover kind of the fourth quarter of some of the financial information. And then at the end of the presentation I'll kind of quickly go through the 2010 plan and give everybody an update on kind of what's been happening in the first quarter.

So with that, let me just kind of quickly run through the strategy. I know many of you have heard this before but our strategy is, I think, pretty straightforward. We like to follow a balanced risk strategy that is increasing our shareholder value, and our net asset value, net reserves and cash flow per share. And we try to do this through the acquisitions, development exploitation and exploration.

Our game plan has been historically, and we did again last year, is fund our non-acquisition capital program with operating cash flow. We've been very active in the hedging to underpin our cash flow and make sure we've got predictable cash flow to fund that non-acquisition capital program.

We concentrate in our core areas which we believe are Texas, Oklahoma and Louisiana. And we develop our existing oil and gas properties, and we think we have a very deep and a very attractive inventory of drilling prospects that we own. We do continue to look for selective acquisitions and divestitures. And we continue to try to maintain some emphasis on exploratory activities to create new opportunities for us as we move into the future.

As far as 2009, I have to say I think 2009 was probably the toughest business -- the toughest year in the oil and gas business since 1998. I'm very pleased with the fact that we've produced 2.542 million barrels of oil equivalent last year. Only 12,000 barrels short of our 2008 year which was a record production year for the company.

We did that with investing slightly less than $30 million worth of CapEx, and I think that was quite an achievement. Our operating expenses, we declined those by $9.4 million or 14%. Obviously, our oil and gas revenues went down dramatically because of the decline and hydrocarbon pricing, but I think we reacted pretty early in the year. And I think we did a good job of cutting our operating expenses in a very difficult environment.

Also, I think our drilling success last year was -- while we didn't drill as many wells, we did have a good drilling success again last year. In that we had 41 wells that we're producers. We have one dry hole for the year. And at the end of the year we had three wells that we're drilling or completing, and those wells have since that time been completed.

So we feel like we had a real good year with our drill bit. And I think if you look at the reserves which we put out the other day, we are very pleased with the reserves that we were able to report at the end of the year, on an SEC using the new methodology. We had just slightly less than 34 million barrels of oil equivalent, and a PV-10 of $336 million.

If you look at our bank pricing case, which is what is in our loan documents, where we use a three-year NYMEX strip that held constant beginning on the first month of the fourth year for the balance of the properties. We had almost 39 million barrels of oil equivalent at the end of 2009, and a PV-10 of $682 million.

Some of the key items that we think that -- last year we found and discovered through extensions and discoveries about 4 million barrels of oil. Price of oil last year helped us, it actually added 2.3 million barrels to our reserves for 2009. But gas was a downer for us like it was for most people in that the gas pricing had cost us 1.4 million barrels of gas reserves that were written off the books. And we also had 750,000 barrels that were --that exploded from the reserve report at the end of the year because of the new five-year rule that the SEC has.

If gas prices were to recover, we'll be able to recapture some of that 1.4 million barrels of oil. And as time goes on and we drill those wells, that we're excluded because of the five-year rule, those should come back into our reserve reports as well.

One of the things that we did last year that because of the tight capital budget we spent a lot of time processing our seismic, spending a lot of time on geological and geophysical activities. We reprocessed a lot of our South Texas acreage and our seismic, and we now have identified 70 drilling locations in our South Texas inventory.

We did complete late in 2008, early 2009 the 50-square-mile joint shoot that we did with Devon and EOG on our Barnett Shale acreage. And we now have identified over 60 drill sites on our Barnett acreage and we're continuing to work that seismic, and would expect to add more drill sites as we work that seismic.

In our mature oil areas, we have still over 270 drill sites yet-to-drill in Electra/Burkburnett and Fitts Allen. And we think that that gives us a very deep inventory of nice oil projects that have extremely attractive returns.

And 2009 was the year that we finalized our concessions, our 80-square-mile concession with the Osage Nation. We shot the first 25 square miles of that seismic in the summer of 2009. We have processed it, we've identified drill sites that we are in the process of doing archeological surveys for them and it looks like we will begin drilling sometime in the month of April.

The weather issue has slowed down a little bit -- we had, hopefully, might be able to spud the first well at the end of the first quarter, but it looks like it's now going to probably be mid-April before we'll be able to kick that drilling program off. But we have identified our first three structures that we're going to drill. So we should be able to give everyone a little update on that in the second quarter.

That's kind of, I think, how we -- the things we did last year to support our strategy. And I think we're very pleased with the year, we're very glad that it's behind us. And we're seeing, certainly, much better oil and natural gas liquids pricing as we move into 2010.

I think, with that I'll turn it over to Les, to kind of cover the fourth quarter and some of the financial highlights.

Thanks, Larry. I'll just make some brief comments on our quarter and year-to-date results. In the fourth quarter of 2009 our production was approximately 604,000 barrels of oil equivalent. This is down about 8% from the fourth quarter of 2008. Excluding the sales that we did in July of this year, it's down about 5%. And we had about a 5,000 to 10,000-barrel of oil equivalent impact due to weather late in December.

The total cash expenses per barrel held steady at about $31.91 compared to the $31.45 cash expenses that we had in 2008 in the fourth quarter. As far as revenue, our oil price was averaged at $73.36 a barrel versus $57.56 in 2008, up about 27%. Our NGLs were at $38.19 a barrel versus $26.32 in 2008, up about 45%. And our natural gas was at 393 an Mcf versus 505 an Mcf in 2008, that was down 22%.

When you look at EBITDA for the fourth quarter we did about $15.1 million versus the $16.2 million we did in 2008. And on a free cash flow basis, we did about $10.8 million in 2009 fourth quarter or $0.14 per share versus $11.1 million in 2008, also at $0.14 a share a year ago.

The shortfall I spoke of probably had anywhere from 300,000 to 500,000 incremental impact on our EBITDA in the fourth quarter.

When you look at the year-to-date highlights, free cash flow for the year was $44.6 million or $0.57 a share. And if you look at that free cash flow that we generated, it was more than ample when you add the $6.5 million of cash flow from asset sales to cover our $30 million of capital expenditures. The $16-million cash settlement that we had to pay in the second quarter and reduce our debt by about $5 million.

On a total year basis, as Larry spoke of earlier, our production expenses were down about 2% year-over-year. The G&A expenses were down about $3.6 million or 18% year-over-year. And our cash paid interest was down over $12 million or 48% with total interest expense down $5.6 million or 23%.

When you look at the debt outstanding at the end of the year we had $246 million outstanding, that was comprised of $135 million on our $175 million revolver, and $112 -- or $111 million, excuse me, on our term note.

Just as a friendly reminder, the revolver does not expire until November of 2011, and the term note does not expire until November of 2012. The $175 million revolver would have $40 million of availability under the current credit facility at year end.

Based on the current credit statistics that we have, we're limited to $25.3 million currently on that revolver based on our modified EBITDA of $58.3 million. We feel that $25 million plus the free cash flow that we'll generate for 2010 will be ample to cover our liquidity needs into the future.

Finally, I want to talk about our hedge position. At the end of the year we have approximately 957,000 barrels in 2010 of oil hedged at an average price of at about $58.50 floor. And we have approximately 3.9 Bcf of gas hedged at an average floor price of approximately $4.75.

This represents 61% of our total targeted production for 2010. Subsequent to year end, we've added incrementally in excess of 450,000 barrels of oil hedged at a $60 floor price, and we have added about a half of Bcf of gas with a $5 floor price.

And with that, I'll turn it back over to Larry.

Thank you, Les. I'll just kind of run quickly through our 2010 guidance to remind everybody.

Our production guidance is 2.6 million to 2.65 million barrels, and we're at this point sticking with that. EBITDA $65 million to $68 million that was based on a $72 oil and $5.60 gas, and obviously, oil is quite higher than that and gas is a little lower than that. But given the large percentage of our revenue streams that is priced based on what's happening in oil, we still feel very good about those numbers. If anything, they probably could be a little low if the commodity prices stay in where close to where NYMEX currently has them.

We've got cash interest between $16.5 million and $17.5 million, our capital program of $50 million and asset sales of $1 million to $2 million.

Our production in the first quarter has been clearly affected by the almost historic weather that we've had in North Texas and Southern Oklahoma this year. We estimate -- well, to put it in perspective, we had 15 days in January and 28 days of February that we were affected by weather and/or purchaser issues at their various plants. We think the impact to us in the first quarter is probably somewhere in the neighborhood of 40,000 to 45,000 barrels, below what we were projecting internally for the first quarter, but we still are sticking with our guidance of the 2.6 to 2.65.

That only requires us to add about 140 to 160 barrels of oil a day over the three-quarters of the balance of the year. So we don't see that as an obstacle that we can't overcome, particularly with the increase in cash flow that we're seeing at the moment off of our oil and natural gas liquids production. It's very possible that we might increase our capital budget, and certainly we will front-end load it because of the way the cash is coming in.

Just to remind everybody, we plan to drill nine wells in South Texas and invest about $22 million. We expect to participate in roughly two gross wells 0.7 net wells in the Barnett and spend about $3 million there.

We currently are participating with a smaller interest in six wells that Devon is drilling, that will end up being about $800,000 to $900,000 net to our interest. So we do continue to see some activity in the Barnett.

And that we're going to spend about $11 million in our Electra/Burkburnett and our Northeast Fitts fields in our oil fields. And I have to say that probably where we've been affected by the weather the most is Electra/ Burk and Fitts and Allen and Burnsville. These are three of our significant fields that are in North Texas and Southern Oklahoma.

And we've had record snowfall, and things like -- on top of that, a tremendous amount of rain that's just -- that's made it very difficult for the guys to move equipment in the field, or just basically having to drag them around with the dozers. It's a pretty big mess. But it looks like it's clearing up.

We're seeing our production in March recover from what we were seeing in February. And so we're kind of hoping that we'll get a little of that back in in March. But right now we'll say 40,000 to 45,000 barrels in the first quarter but we're not changing our guidance for the full year.

As I said we're going to kick off our drilling in the Osage in April, and so we've got about $6 million budgeted for that and other exploratory drill sites within our portfolio. And with our seismic and G&G we've got about $6 million that gives us our $50 million budget.

So we feel pretty comfortable that that budget will certainly be fully funded by internally generated cash flow this year. I think, Bob, with that we can open it up for questions.

Right.

Ladies and gentlemen, if you have a question please press star followed by one on your phone. If your question has been answered, or you would like to withdraw your question, press star followed by two. Please note that we will take a question, a follow-up question, and then you can reenter the queue should you have any more questions, to allow time for everyone to ask a question. Questions will be taken in the order received. Please press star-one to begin.

Your first question comes from the line of Leo Mariani. Please proceed.

Thank you. Good morning, guys.

Good morning, Leo.

Hi, just a -- I wanted to get a little bit more color on this Osage project that you guys are doing. You talked about having some 3-D out there and it seeing, you know, three structures. Can you give us a little more color on what is the potential of some of these targets? I know it's early days and you haven't drilled anything, but what got you starting to go out and spend $6 million this year --?

Leo, actually what we've identified is the first three drill sites on those structures. We've identified several more structures than just three. And so that's kind of what's got us excited, is that we've certainly seen several structures on the first 25 square miles.

We do have some production that offsets this and so we've got some analogy of wells that we're looking that are in the Mississippi Chat, which is the primary objective for us here. But the thing that we will do is we'll take, certainly, probably these first three -- we'll take these down to the Arbuckle as well. Which is not -- what is Drake another 200 or 300 feet down from the Chat to the Arbuckle. So it's a relatively inexpensive thing to go ahead and drill down and test that. If we find the Arbuckle, that could be very exciting for us.

These Chat wells, we're figuring that those things are going to be 40,000 barrels roughly, which is kind of what we're shooting for. And we're seeing some of those from the others.

Once we get into development mode or, I guess, just regular drilling mode up here, Leo, we're thinking that these wells will only cost us about $250,000 to $300,000. The first two or three wells, we'll probably spend more like $350,000 maybe as much as $400,000 because we'll be doing a lot of extra logging and DSTs as we drill down on these first wells. But we think more like about $250,000, $275,000, Larry?

About that.

Once we get into full mode, hopefully, we do. Also, Leo, there are four other concessions that are active in the Osage and other areas. And most everyone that's in those concessions here are, essentially, chasing the same thing we are chasing. And once you get your concession, nobody can really come in and lease on those concessions.

So there's a lot of information sharing that goes amongst those of us that have these concessions. And we've kind of seen some of the success of the guys who're a little ahead of us on this, and we like what we see. The economics are quite good. It would just be another nice addition to our mature oil plays.

Okay. Any update on Appalachia, it's been a while since we've sort of heard about that. Just curious as to whether or not you guys are revisiting that at all -- and all are deciding to dispose of it, or what your plan is?

We're not doing anything with it. Penn Virginia, and we've met -- we both kind of agreed that --in this gas price environment, it just doesn't make sense to spend drilling dollars up there. We are continuing to renew some of our leases, particularly in the area where we have our gathering system and our pipeline operation up there. You know, if gas prices would recover, get up -- I think we've said that we think gas price is probably going to be $8, $9 or something before you'd ever really reactivate that.

So we continue to watch Equitable who continues to do a lot of drilling in the Huron up there. And so we're kind of trying to -- we anxiously look at their quarterly reports and try to follow what they're doing, and see if maybe they can unlock the key for that. But we don't really have any money budgeted for it for 2010. Just a little bit of money to protect some of our lease position up there.

Okay. I notice that your share account looks like it picked up in the fourth quarter, I think it went from like 74.5 million shares in 3Q to 76.9 million in the fourth quarter. Just curious as to why that occurred?

That occurred from the adoption of a new standard because our restricted shares have rights to receive dividends if they were ever granted. Although the company has never granted, and does not intend to grant dividends because those restricted shares have those rights, they're now required to be included in our basic and fully diluted shares outstanding. So what you're seeing now on the share count is 100% of the shares outstanding under the restricted grants, even though they have not yet vested.

Okay. Thanks, guys.

That's a new FASB rule that we've adopted this year.

All right, thanks for your time.

Your next question comes from the line of Ron Mills with Johnson Rice. Please proceed.

Good morning.

Good morning.

A couple questions on South Texas, which is obviously the lion's share of your capital budget. You're -- what is it -- nine for nine since you acquired Ascent. Is that an area that you alluded to, Larry, that you may look to further accelerate activity. And as based on the kind of performance you've seen so far, is that also where you would expect to be able to make up some of the ground for the lost production in the first quarter?

Yes. Leo, and what we had, I mean, Ron, excuse me. What we had originally scheduled was, you know, drill a well or drill a couple of wells, probably have a break and then come back and drill a couple more wells.

In other words, we were just going to kind of space them out throughout the year. But what we've been doing because of both the results we're getting in South Texas, and the prices we're getting, these wells are pretty liquid rich. We've just had a rig working down there continuously. And at the moment, we've got one set up for completion on what, March 18th, Larry?

Yes.

And then we've got another one that we currently are drilling. And then we'll -- so really, we're just kind of front-end loading, Ron, our drilling activity down there. And if the price of oil and NGL stay at kind of anywhere close to where they are, I can see us adding some more capital to that program later in the year.

Okay. So the plan at this point is just to maintain a one-rig program. How many wells does that account for?

If we -- it takes what about thirty days to drill those wells, Larry? (multiple speakers) Yes, but we've got -- we've got schedule for nine, so I mean, it's conceivable that it could end up being 10, or 11 or 12 for a full year, but that depends on what's going to happen with commodities [index] too.

Okay. In Osage, if you start -- if you start drilling in mid-April or early May, from a deliverability standpoint -- you know, you gave us the EURs. Are these wells expected to be pretty similar to what you've been developing at Electra, Burkburnett, Fitts Allen in terms of deliverability, or anything special you have to do to get the oil to market?

No, there's a very active market for oil and Osage, I mean that's, you know, kind of there's lots of infrastructure for that. And these would be probably closer to what we're seeing in our Fitts Allen; 30,000 to 40,000 barrels, maybe 45,000 barrels. We would hope and some of the others out there have come in what around 100 barrels a day. You know, and after six months, they're down to maybe 40 barrels.

So these are higher volume wells than what we would see in Electra/Burk. And -- but probably more like what we're -- like our Hutton, or Gilchrist, McAllister wells in Fitts Allen. It would fit more of that profile.

Okay. And at the risk of asking one more question before getting back in line. Les, on the hedges you mentioned, did initial volumes you mentioned include the half a B a day, or half a B that you all added subsequent to year end? And in terms of cost guidance on a unit basis to yield the expected, EBITDA, are you expecting cost -- unit operating cost to -- or the fourth quarter operating cost to be representative of 2010?

Well, on the hedging question, the additional volumes that I quoted to you have been added since year end. So they're not included in the 61% of targeted production that we had at year end. Those are incrementally added to that.

And as far as our average cash price, probably what our expectations are -- is to try to hold those prices flat for the yearly average. So, on the production side that was about $14.73 a barrel for all of 2009. Of the G&A side it was $6.56 a barrel for all of 2009. So our goal would be to try and incrementally hold at those levels.

Okay. And I would assume you would be moving it around a little bit. The fourth quarter units will be higher because of the lost production, and then it should come down a little bit at the end of the year. I guess I'm trying to make sure from a timing standpoint, when or how quickly you all can get back on track?

With the 45,000 or whatever barrel shortfall that we experienced in the first quarter, obviously, those prices are going to be significantly higher on a quarterly basis at the end of first quarter.

Ron, I think we ought to be back on target with our expenses as we move through the second quarter.

In production as well, or is that going to really be -- you're going to make up more of that in the second half of the year?

Probably more of it in the second half of the year, but we should make some of it up in the second quarter because of an earlier schedule of South Texas wells being drilled and completed than we originally had in our internal forecast.

Okay, great. Thank you all. I'll jump back on.

Thanks, Ron.

Your next question comes from the line of Jeff Hayden, with Rodman & Renshaw. Please proceed.

Good morning, guys.

Good morning, Jeff.

Just a couple of follow-up questions, you know, before I jump into one of mine. One, just kind of jumping back to your kind of production guidance and the possibility of incremental CapEx. You had nine South Texas wells planned, if you keep it running, maybe you'd drill three more. So what's that, maybe $7.5 million of CapEx?

If we assume that, how should we think about kind of your -- that 2.6 million to 2.65 million barrels? I mean, if you don't add to the CapEx, so you're probably at the low end of that range, maybe a little below the 2.6. And tacking on those extra couple of wells in South Texas gets you back within the range? Or does that kind of get you to the high end of the range? Just wondering if you could give a little more color on how we should think about that.

I think the extra drilling and acceleration of the drilling of the South Texas stuff, I think should get us back within the range. I wouldn't go so far as say that it gets us back at the high end of the range, but I think -- we think we have a good chance of getting back within the range.

I think the thing that would probably make the biggest impact on where we end up for the full year is what happens in Osage. Because, you know, we don't have any production forecast out of that play. So if that play works then, you know, that's going to be incremental production that we don't currently -- that we currently are not counting on.

So I think South Texas, Electra, Burk, Fitts Allen, the drilling there we think will eventually catch us up and put us back within the range. And then Osage is going to be the thing that could impact it significantly.

(Multiple speakers) So we should be thinking more along the lines of kind of $55 million to $60 million of CapEx to do the 2.6 million or 2.65 million barrels for the year?

Yes. One of the things, you know, and this is something we put out earlier in our guidance that we had projected about $65 million to $68 million in EBITDA and about $50 million in free cash flow. And given what the prices in the first quarter and what the NYMEX is showing us, we could be looking at another $10 million to $12 million in free cash flow that's not in our current 2010 guidance.

Okay. And then jumping a little bit to M&A, just kind of wondering if you could give a little update on, you know, how you guys are thinking about that for 2010?

Mostly what we've been trying to focus on is additions in the area we're in. There's been some opportunities, we haven't cornered one of them, but there's been some opportunities in the Barnett where people are kind of selling some of their production. And, you know, taking that cash and moving it to other Shale plays. We're looking at that. --

You know, we continue to look for other operators in the area for both Electra, Burk and Fitts, I mean, a kind of bolt-on. I think right now the main thing we're looking at is a kind of bolt-ons at this point in time.

I think there's going to be a pretty active M&A deal flow as the year progresses. And how we play in that, Jeff, I'm not exactly sure just yet, but we're more focused on the bolt-ons right now.

All right. I appreciate it, guys.

Your next question comes from the line of Richard Rossi, with Wunderlich Securities. Please proceed.

Good morning, everybody. Just a couple of things left unanswered. One is on this Osage. When might we hear about some results on the first and second wells?

Rich, if we get -- if we can spud in by say mid-April, we should know something on that well and be willing to talk about it probably within 30 days of that time.

Okay.

These are not -- These wells do not take a tremendous amount of time to drill, we're probably talking about ten, 12 days on these first wells, because of the extra science we're going to do on them. And obviously we'll want to test them for a while so, you know, we'll probably be willing to talk about what we see on the first one maybe by mid to late May. And certainly about mid to late June we'd have probably two of them to be talking about, maybe all three. We'll just -- a lot of it will depend on what we see on this first one.

Okay. And the other -- just the other thing, your G&A costs were down significantly over the year, although in the fourth quarter it was up a bit. Is that any indication of a reversal on that trend, or is that just fourth quarter issues?

Rich, that's mostly fourth quarter issues. What we've been doing -- had been curtailing some employee costs and once the performance got to point that it did, there were some incentive compensation booked there in the fourth quarter.

All right. That's all I had, thanks very much.

Thanks, Rich.

You have a follow-up question from Ron Mills with Johnson Rice. Please proceed.

Larry, on the Barnett, it sounds like you have small interest in some Devon activities right now. The two wells that you referenced as part of your capital budget. Are those, you know, G-operated wells or are you operating those wells. What's the status of that?

Ron, we didn't really know -- we expect that to be money well spent with Devon because they're continuing to operate and drill in our area. And so we just kind of quite frankly, picked the number out of the air. There's not a lot of science to that. They haven't told us exactly what they were going to do.

The one interesting thing that they're doing that we're keenly interested in watching. This is the first time in our general area, I'm talking about Wise County, Devon is drilling three horizontal wells off a single pad and doing these kind of what I call significant simul-fracs, that normally we've been seeing that activity down more in Tarrant. And so, it's a completely different pattern than any of the wells that we've participated in with Devon up to this point in time. So we're keenly interested to see how this is going to work in Wise County.

Obviously, Devon has got a reason they want to do it, and that's why we agree to participate in those six wells. We've only got about less than 4% working interest in those wells, and that was about $800,000 to us. So if -- I'm assuming that if Devon sees what they want to out of this kind of drilling pattern, there may be more of that activity going up our part of the world.

Is that included in the $3 million you --?

I've always -- What we've figured is that with the price of gas, that Devon would keep drilling but probably slow down some. And so we budgeted $3 million not really knowing exactly what was going to be drilled into Barnett. But knowing that Devon still had a rig contracted in our area, and was going to continue to drill. So that was kind of our best guess as to what we would see going into the Barnett this year based on commodity prices.

All right. That's it. Thank you.

Thanks, Ron.

There are no further questions at this time.

All right. I want to thank everyone for joining us. And would like to point out that we still trade at a ridiculously small multiple of our cash flow. You know, it's less than three times our free cash flow for 2009 and if you look at any kind of a reasonable projection for 2010, we're probably trading just slightly over two times free cash flow.

So we're going to continue to work to try to see if we can't get people to recognize the value that exists in this portfolio of oily assets. And so with that, I want to thank everyone for joining us and look forward to talking to you guys soon.

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.