SandRidge Energy Inc (SD) 2007 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Third Quarter 2007 SandRidge Energy Earnings Conference Call. My name is Shequana and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS)

I would now like to turn the call over to your host for today, Mr. Dirk M. Van Doren, Chief Financial Officer of SandRidge Energy. Please proceed, sir.

Thank you, Shequana. I have a few housekeeping items including the forward-looking statement to read. Then, Tom and I will discuss the highlights of the quarter. And finally, we will have a question and answer session. We will take all the questions with no time limit and I will be available to take calls later in the day and throughout the week at your convenience. My direct number is on the press release.

If you have not received a press release, please go to our website www.sandridgeenergy.com under the investor relations tab. There's a way also to sign up for our filings automatically. We also filed our 10Q last night as well.

Turning to a forward-looking statement. This conference call could include forward-looking statements within the meaning of various provisions of the Securities Act of 1933, as amended, in the Securities Act of 1934, as amended. These statements express a belief, expectation, or intention and are generally accompanied by words that convey the uncertainty of future events or outcomes. The forward-looking statements include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending.

We have based these forward-looking statements on our current expectations and assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe appropriate under the circumstances.

However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including the volatility of natural gas, our success in discovering, estimating, developing and replacing natural gas and crude oil reserves, the availability in terms of capital and the amount and timing of future development costs and other factors, many of which are beyond our control. We refer you to the discussion of risk in our prospectus dated November 5, 2007, and filed with the Securities and Exchange Commission on November 6, 2007.

All of the forward-looking statements made on this conference call are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated will be realized. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. We also undertake no obligation to update or revise any forward-looking statements. Now, let me turn the call over to our Chairman and CEO, Tom Ward.

Thank you, Dirk, and thank you for joining our third quarter 2007 earnings conference call. You have just heard from Dirk, our Chief Financial Officer. And, we also have in our office Matt Grubb, our Chief Operating Officer. We posted our third quarter numbers on our website and Dirk will discuss those with you momentarily. I do have several items to discuss with regard to operations today.

SandRidge currently has 40 rigs operating. These rigs are distributed as follows -- 30 in the West Texas Overthrust, six in East Texas drilling our Cotton Valley Trend, two in Oklahoma, one in Ector County, Texas drilling for Permian oil and one in our Galveston Bay area. We have also finalized our third quarter reserve numbers and have added 99 Bcfe during the quarter. This brings our total reserves to 1.27 Tcf gas equivalent. Year-to-date through September 30th, we have added over 270 Bcfe of reserves.

Our PUD count has moved down to 59% from 68% at the beginning of the year, and 62% at the end of the second quarter. As we continue to drill the West Texas Overthrust, we expect this PUD count to say fairly constant. Our year-to-date PUD drilling in the West Texas Overthrust is approximately 65%. And, during the third quarter, our PUD drilling was 71%. During the third quarter, SandRidge drilled and completed 48 operated wells in the Western Division, and 21 operated wells in the Eastern Division.

Our drilling finding costs came in over budget at $2.27 per Mcfe for the quarter. However, our finding costs for the first nine months of 2007 was $1.77 per Mcfe. This increase in finding cost was a direct result of the aggressive ramp up of our drilling program.

We were challenged on the cost side of our business during the first half of 2007 as we ramped up from drilling seven rigs to 30 rigs in the West Texas Overthrust. Many of the wells completed and reported in the third quarter were drilled during this ramp-up period. We reached our ramp-up target of 30 rigs in the WTO at the end of the second quarter.

As we have kept our rig counts constant now for several months, our drilling costs have decreased to levels achieved prior to the ramp up. We believe that we will be back at or below our nine-month average finding cost at year end. We currently model $1.75 per Mcfe and continue to feel comfortable with that guidance.

Our all-in finding costs for the quarter were $2.86 per Mcfe and $2.24 per Mcfe for the year-to-date. We are focused on moving that number down to $2.00 per Mcfe, as we have substantially completed our -- or -- as we have substantially completed our leasing program in the West Texas Overthrust.

We produced 16.1 Bcfe for the quarter for an average of 175 million cubic feet of gas equivalent, which is in line with our projections. We also continue to ramp up our drilling production and average just over 220 million cubic feet in November.

We do continue to expand our compression and deliverability from the Pinon Field through our wholly-owned subsidiary, ROC Gas. During the early part of the year, we were capacity constrained. However, we have budgeted approximately $100 million per year to be spent on midstream -- on our midstream business to maximize existing production and ensure that we will be able to deliver gas as we drill.

On November 1st, we began delivery of gas into Energy Transfer's newly-constructed 20-inch pipeline. This pipeline provides SandRidge with an incremental 285 million cubic feet of gas -- of sweet gas capacity out of the field and access to firm transportation to the Katy Hub. With this new ETC line, SandRidge has now take-away capacity of over 400 million cubic feet of gas a day from our Pinon Field and therefore also from the Greater West Texas Overthrust Region.

We continue to be constrained in the production of our hot CO2 gas from the Pinon Field. One of our top priorities is to expand our treating capacity for high CO2 gas. Just this last week, we acquired the Grey Ranch Plant from Enterprise. SandRidge currently treats 50 million cubic feet of gas a day at Grey Ranch. And, we will add approximately 80 million cubic feet of high COT -- high CO2 gas-treating capacity with the startup of our second train by the end of the second quarter 2008.

We continue to explore different alternatives to accelerate the growth of our methane cells from high CO2 gas. We are in discussions with several engineering firms to expedite the construction of the new treating facilities to enable us to ramp up our high CO2 gas development program. We are also moving forward with construction of additional processing facilities at Pinon. And, anticipate having the first our four 100 million a day train at our future Century Plant constructed by the third quarter 2009.

Our high CO2 gas-treating capacity is currently 170 million cubic feet a day. We anticipate growing that to 700 million cubic feet of gas a day by the end of 2010. We modeled a mixture of gas of 70% CO2 and 30% methane. Therefore, we anticipate that we will produce approximately 200 million of sweet gas a day and 500 million of CO2 gas through our Century Plant by the end of 2010.

Lastly, we are in discussions with several companies regarding the potential transportation and sales of our future CO2 production. We believe we will have more to discuss about this project by the time we have our year-end call in March 2008.

As you know, we have had a tremendous ramp up in drilling in West Texas Overthrust in the last year. We have moved from drilling with seven rigs in the third quarter of 2006 to 30 rigs by the third quarter of this year. We now believe our ramp up is nearing completion and only anticipate moving 40 rigs in the West Texas Overthrust by the end of 2008 as we develop new areas that are being shot by 3D seismic.

We have now shot 300 square miles of 3D and we have processed nearly 150 miles out of 1300 square mile shoot. Our next 70 square miles are due to be processed by December 17th. Therefore, we will have 220 square miles shot and processed by yearend out of 360 miles that will be shot. We currently believe that this is the largest continuous proprietary onshore 3D shoot in U.S. history.

As this data comes in, we are in the process of moving rigs out of Pinon and will start testing some ideas during the next quarter. As I mentioned, we currently have 30 rigs running the West Texas Overthrust and 29 continue to work in the Pinon Field. We anticipate using as many as five rigs to test new ideas outside of Pinon by the end of the second quarter 2008. We are seeing very good quality of data from our 3D shoot and are able to imagine several deep structures. We now anticipate with the new processing that will come to us by 2010 that we'll be able to explore these deep structures.

Within 10 miles of the north edge of West Texas Overthrust are some of the very best Ellenberger fields in West Texas. These fields produce high quantities of methane gas and also approximately 30% CO2. We have several wells in the Overthrust that were drilled off-structure that did produce substantial amounts of gas, but also had a very high CO2 rates. It is our goal during 2008 to test at least one of these structures that we see on our 3D seismic. It is our belief that there will be considerable gas. However, we don't know the quantity of the CO2 present. This all coincides with our inclination that we'll have several take-away options with our CO2 gas within the next few years.

Lastly, we'll also be moving two rigs to explore for the Caballos cherts in the Big Canyon area in South Sabino. These areas are the first to have the 3D shot and we're ready to explore for gas in the thrusted part of the Caballos. We're looking for structures rich in thrust faults to determine our locations. Our location in the Big Canyon area will be drilled to approximately 16,500 feet and we'll test zones from the [Pinch Venya] Tesnus Sands through the Devonian cherts. Our location in the South Sabino area will be targeting the Devonian cherts at 8,000 feet. We plan to spud both wells in the first quarter of 2008.

Our third rig working outside of the Pinon Field will continue to drill off of subsurface control in the Thistle Field within the South Sabino area. We recently recompleted a Caballos chert well, which tested 2.2 million cubic feet of gas a day and is consistent with our type curve for lower Caballos wells within the Pinon Field. The second well drilled within the Thistle Field is currently waiting on completion.

We are confident that we can find gas outside of the Pinon Field within the West Texas Overthrust. We're not sure of the quality or quantity of the gas that we'll find. However, we have a great land position put together and our processing capability with -- we are processing -- we have processing capabilities with any reservoir that presents itself to us.

We are very excited about the opportunities at [Cross Reicher's] position in the Overthrust and with the 3D seismic program. We remain confident about our drilling program within the Pinon Field area. Our Pinon Field step-out wells continue to deliver good results. And, we're comfortable with the production forecast that we have given as we continue to drill and search for the limits of the Pinon Field. I'll now turn over the call to Dirk to go through the financial presentation.

Thanks, Tom. I'd like to highlight a few financial items for the quarter and then start the q-and-a portion of the conference call. We filed our 10Q last night. And, in combination with the press release, all the important numbers for the quarter are covered in these two documents. So, I won't go through them.

Our main focus is adjusted EBITDA, a non-GAAP measurement, which was $102.6 million for the quarter, and ahead of our internal model. For the nine months of 2007, the result was $259.7 million. Another result that might be of interest is our net income per share, excluding unrealized hedging. For the third quarter of '07, the number was negative $0.01 per share, compared to $0.15 per share for the third quarter of '06.

A number I'd like to discuss is our shares outstanding after the IPO. Before the IPO, we had 109.3 million shares outstanding. We sold 32.4 million shares in November, so the total is 141.9. To calculate fully diluted, you must add 22.3 million of the preferred stock conversion. Thus, the total fully-diluted shares outstanding pro forma for the IPO is 164.1 million shares.

Today, we plan on filing a registration statement for common stock issued in December 2005, November 2006 and March 2007, as well as the common stock issuable upon the conversion of the preferred stock issued in November 2006. We will also file an 8-K tomorrow that has all of our second quarter financials broken out, since that was not available in our prospectus. This should help anyone building a model.

November was a busy month for financing. First, we successfully completed the Initial Public Offering in early November and raised $795 million net to SandRidge. We used the proceeds to repay debt on the revolver of $515 million and a $49 million note for -- $49 million for an acquisition note. We also closed on a $20 million mortgage on our new corporate headquarters and parking garage in downtown Oklahoma City. And, late in November, we closed on a $32 million acquisition in the WTO and the $10 million acquisition of the Grey Ranch Plant. Thus, pro forma for the all these transactions, we had approximately $210 million of cash on-hand and total debt was $1.072 billion.

Because the road show was a month ago, we do not have new guidance and hence did not include that in our third quarter press release. We plan on having 2008 guidance on our year-end call or sooner. Right now, we are planning on having that call in early March and a half-day analyst meeting a few days later. We will have details of the time and location shortly.

Finally, our conference call scheduled for January and February is as follows -- we'll be attending the Goldman Sachs conference in mid-January in Las Vegas and we'll be at the Credit Suisse conference in early February in Vail, Colorado. That ends my formal remarks. Shequana, we're now ready to open the question and answer period.

Thank you. (OPERATOR INSTRUCTIONS). And your first question comes from the line of Joe Allman with JPMorgan. Please proceed.

Good morning, everybody.

Good morning.

Hi, Joe.

Hey, Tom, the three acquisitions that you made so far in the fourth quarter. Could you talk about any proved reserves or production and acreage associated with those acquisitions?

For the third quarter? Or do you mean, are you talking about the West Texas --?

It seems in your press release you mentioned -- it looks like you didn't make -- you made hardly any acquisitions year-to-date, but you made, I think, $100 something million -- what is it, $116 million worth of acquisitions in the fourth quarter so far. They would be separate properties. One was $74 million --

We got it.

Okay. This is Matt Grubb. We did -- we did do a fairly significant acquisition, it's a $75 million acquisition of West Tex, which is additional interest in the Pinon Field. And, that was approximately 34 Bcfs of proved reserves and we did a small deal with [Haiku], which was, I think, another 10 Bcfs or so.

And, then, we've got the $32 million one.

Yes. We did buy $32 million from Malone Mitchell of additional acreage in the Pinon Field area and also at -- his participation in the wells and associated reserves.

Okay. So, so you got 34 Bcf added of proved, plus 10. So, it's 44. How about part of that $32 million.

We're going to have to -- I'll get. We should have it before we get off the call here. We can breakout the $32 million on how much was proved.

Got you. And, if you could also additional acreage net to you guys? That'd be helpful too.

Got it.

Be great. And then, in terms of -- in terms of your rig activity. You said you got 30 in the WTO, 1 outside of Pinon and you went through some of this stuff fairly quickly as I didn't catch it. So, what's that one rig doing right now?

The one rig is drilling in the Thistle Field, which is really also -- it isn't shot yet with 3D seismic. So, it's a lot like the way we drilled the Pinon to date is off of subsurface control. So, there was some existing wells we're drilling within the limits of the older field, which is just about 15 miles east of Pinon. And, we have one well that's been tested that made 2.2 million a day that's not -- was currently waiting on -- actually I think we have a line just getting to that. And, then we have a well that's down and waiting on completion. So, we continue to have one rig working on what we call the Thistle Field. It's in the South Sabino area.

Okay. That's helpful. And then, so you'll continue working that rig. And then, this seismic data. Could you talk about how much has come in so far? Specifically, where is that? Is that right over the Pinon Field? Or is it outside the Pinon Field? And, I guess you're going to drill first wells outside the Pinon Field based on the site? Besides what you're doing with that one rig, based on the seismic as it comes in?

That is correct. The seismic that we have shot is not over Pinon Field. We've shot 300 square miles -- currently have 150 miles of it processed. Okay. And, that is with two crews. So, it's two different shoots. One is approximately 30 miles east of Pinon and the other is about 15 miles east to the southeast of Pinon.

So, these shoots are considerably -- are a considerable distance away from the Pinon Field. We plan to shoot the Pinon Field in the first quarter of 2008. And, we do have some prospects that we're going to drill in the first quarter off of these two shoots. One is a deep project that's 16,500 feet deep. And, the other is about 8,000 feet. And, both of those will be just testing the Devonian cherts.

Okay. Very helpful. Thank you.

Your next question comes from the line of Brian Singer with Goldman Sachs. Please proceed.

Thank you very much. Good morning.

Hi, Brian.

How close are you, or could you give us an update, on signing contracts for -- uptake contracts for CO2? And have you delved into the PetroSource and the CO2 EOR opportunities, any thoughts regarding that potential?

We are not close yet to signing contracts on the CO2. In fact, we're just really in the initial stages of evaluating the economics of delivering CO2 to the Permian. So, we have a lot of interest, I would say that. And, just, right now, we don't know which alternative that we'll go to in order to -- whether we'll partner with someone else -- partner with a producer, partner with a pipeline company. There's a potential we could be merchant seller ourselves. It's just there are a lot of options right now with delivery of CO2 into the Permian.

Great. And then, I guess going back to the Thistle area. You had, I think, an initial success on a reentry a few months back. Can you be a little more specific on what this rig will be doing and the timing of results from the drilling that you're doing without the 3D?

Sure. That rig is -- it will continue to drill in this area and we have now one rig -- or one well that's ready to produce that had an initial test of 2.2 million. And then, the second well will be frac, I believe, this week. And then, we have the rig that's currently working there. So, by the next quarter that rig will continue to drill wells every 45 days. So, we should have some, I think, a decent amount of production news by the end of the quarter.

Great. Thank you.

You bet.

Your next question comes from the line of Scott Hanold with RBC Capital Markets. Please proceed.

Thank you. Good morning.

Good morning, Scott.

Hey, Tom. Could you give us a little bit of color? I guess, you got some of your seismic in and processed. Can you just tell us kind of what you've seen? And what you're specifically targeting here in the first quarter?

Yes. The seismic data that we have in is very good quality. So, even better quality than we thought it might be whenever we first came out to shoot. In order to get this type of quality, you have to have very long offsets. And, therefore, it requires us to have a very large shoot in order to get data. And, that's -- that's what we're doing now is we're shooting a very large area.

And, so, what we see is that it's our belief that you have to have a structure really to make this chert fractured enough to produce. And so, we look for deep-seated structures and then thrusting along in the Devonian, which is the target zone of interest. So, as we look for a thrust fault, wrench faults and then the structure itself. So, basically, looking for very conventional-type traps.

Okay. And -- and is it pretty consistent with the stuff you've processed? Have you seen similar stuff? And -- and, can you kind of give us a little bit of color on -- on, I guess, what the expectations are here?

Well, it's our expectation that the Pinon Field is -- is also on a structure or several structures. And, so that's -- we don't have that shot yet, but just through the -- through subsurface control and logs, we know that it's a very complicated area. And so, I think that after 2008, we'll have a lot better picture than we do today. However, we feel comfortable with the data that we have to date to go ahead and move forward with drilling wells there. Of the -- I think, we know we have some penetrations that we can get up structure to and feel like the deep-seated structures we're drilling on will cause the fracturing.

Okay. And I think you said that, was it November production was running at 220 a day. Is that correct?

That was our average for November.

Average for November. What -- what was it in the WTO? And, could you give us the -- what the sweet versus high CO2 breakout was?

Yes, Matt, I think, has that.

Yes. For that 220 in November, the WTO was about 120 of that in November. And then the methane developed from the high CO2 reservoir was approximately 40 a day.

Okay. Cause -- cause I think you said that you're constrained a little bit currently on the high CO2. Is that correct?

That is correct. We are maxed out on our plant capacity and we'll be continuing to ramp that up over the next year.

Okay. So, if you kind of look forward in the next say six months with both, I guess, sweet and high CO2, is there any constraints that we need to be thinking about in terms of sort of modeling our production growth?

No. I think we're in very good shape on the sweet side with the new ETP line and the compression work and the infrastructure work that we're doing. We do have 29 rigs run and drilling for sweet gas. So, we're in good shape there. Today, our capacity for treating high CO2 gas is approximately 170 million a day. And, we should be at about 260 million a day by -- in the second quarter of 2008. So, we'll move that along also. The big thing for high CO2 is just getting additional plants built. And that will be in '09 and '10 to really pick that up to 700 million a day.

Okay. Okay. Thank you. And, one last question, I guess, for Dirk. Can you talk a little bit about the DD&A number in the third quarter? I guess it came up a little bit from where you guys were on the second quarter. Can you give a little color on that?

Well, I think it's -- it's really related to a little bit higher finding cost that we had in the third versus the second versus the first.

Okay. Can you kind of --?

And, we've also got from a non -- we've also got all our -- all of our rigs now in as well, so that's the non is up a little as well.

Okay. Okay, got it. And, actually, I lied, I do have one quick question here is that -- you mentioned that there was some severance costs in that G&A number. Could you give us what that amount was in the third quarter?

Yes. I think it was -- the total amount, I think, is about $1 million. And, that was due to a few people from Riata that left the Company in the third quarter of '06. And, we felt it was the right thing to do to give them their stock.

Okay. So the $1 million pre-tax?

Yes.

Okay. Appreciate your time, thanks.

Thank you.

Your next question comes from the line of Jeff Robertson with Lehman Brothers. Please proceed.

Thanks. Tom, you talk -- you mentioned Ellenberger tests in your comments around the exploration program. Are those prospects that are being shot out with the seismic and may be incorporated into the drilling program next year?

Yes, Jeff. What -- after we saw the seismic there -- we believe there's what -- there's pop-up structure in the Ellenberger and we see some of these structures and we're -- we now understand, and what we thought was probably happening is that you had to have a deep-seated structure in order to making the Devonian cherts fracture. And so, what we see is as a pop-up structures like the diagram that we show. They do exist. And so, we're going to probably test one of those. I think it will be -- I think there'll be prolific gas there. The question will be is it 30% CO2 or is it 85% CO2.

Okay. And then at, excuse me, at South Sabino. Are there any penetrations close by that tell you anything about the quality of the Caballos cherts there?

Not close by. This will be a fairly big step out. However, we did drill a couple of wells without 3D last year in South Sabino area. This would be several miles from those. But, we do believe that we will be able to find sweet gas there based off of the Thistle Field area and the wells that we drilled.

Okay. And one last question. On the CO2 take-away issues. Are -- is part of the discussion that you all are having, does it include using other people's capital to build the plants in the related processing capacity?

We do not model having any cost for plants or pipe in our models.

Okay. Thank you.

Your next question comes from the line of David Heikkinen with Tudor Pickering. Please proceed.

Hey, David.

Good morning. Just in your November average production. Matt, can you give the rest of the break-outs beyond WTO -- the remaining 100 million a day?

Yes, I can. Actually, the average exact number was 222.6. We had a -- in the Gulf Coast was 42.9; East Texas 29.5; Gulf of Mexico 17.9; and the Mid-Continent is 11.7.

Thanks. And then, looking at the Thistle Field. Any limits as far as take-away capacity? Or, what is the take-away capacity out of that area with a rig running there next year?

The Thistle Field, we actually -- we have a right-of-way already acquired and we're -- right now, we're just trying to understand what size line we need. We do have a fairly short connection to our main line. We have two lines, their called Sabino lines. We have a 12-inch line and a 10-inch line. One is for high CO2 and one is for sweet gas. And, we can take the 10-inch line, which is currently sweet gas, take it back to Pinon and plug gas back up ETC Interconnect. So, I don't foresee any capacity constraints in that area anytime soon.

Okay. Thanks a lot guys.

And, we should have the line in fairly quickly. Correct?

Well, we -- we, as Tom mentioned earlier, we did recomplete a well in Thistle that tested for 2.2 million. Today, we're flowing it about 1 million a day through a compressor. And, we have a 3.5-inch temporary line. And then, going forward, we're just trying to understand our potential out there in size. We're looking at 8-inch to 10-inch line that we'll be putting in.

Okay.

(OPERATOR INSTRUCTIONS). You have a follow-up question from the line of Joe Allman with JPMorgan. Please proceed.

Hi again, guys. In terms of your proved reserve adds. Could you break out how much came from performance-related revisions? And how much came from extensions and discoveries?

I think we've got that.

Yes. Revisions -- performance-related revisions is 89.7 Bcfe. Extension and discoveries is 15.6. Acquisitions 4.5. Pricing revisions 5.2. And, we produced 16.1. That would be a negative to that total.

Got you. Okay. And, what would you attribute the performance-related revisions to?

It's mainly operations. It has to do a lot with our midstream results of lowing line pressures, adding in more pipe compression, flatten out declines, et cetera.

Okay.

Joe, we inherited a system that really had to have some overhaul to it to be able to produce these rates. It was really not designed to have the Pinon Field grow like it has. So, that's something that we continue to work on.

Okay. Very helpful. Thanks, guys.

Thank you.

You have a follow-up question from the line of Scott Hanold with RBC Capital Markets. Please proceed.

Hey, Tom. Could you kind of give us your view on the gas market? I know you guys have of course your fingers on the pulse. Can you kind of just give us your perspective here?

Oh. Yes, I guess, just my thought is that we need some weather. If we go through the year without any winter we'll be in -- have lower prices coming up next year. If we can't have some winter weather, then I think that it's fairly priced where we are. We continue to look for a way to hedge out our fourth quarter '08 production. And, hopefully, we'll get a chance to do that through the winter period this year. So, as -- what we try to do is just look one year out and hedge our gas into that one-year period. So, no crystal ball here. Just belay that we need to have some winter weather.

Okay. And -- and in terms of sort of a -- I guess, do you have any perspective on -- on expectations for say where production is going sort of on the North American side of things? And, sort of how that plays into your growth outlook?

Well, I - I am constantly amazed at how much gas can be found out of the shelf plays. Those guys are doing a fantastic job of growing production in these different areas. So, of course, that's always the supply side is always concern is, as we grow production. It is a little comforting that we have less rigs running in Canada. And that our rig count, even though still going up this year, has increased at a more moderate rate.

And, I think, depletion, at the end of the day, does still overcome a lot of the new wells that we bring on. So, I think, ultimately, that my belief is that we don't have that much incremental coal generation and that we'll -- we will come up with some demand for the natural gas side as the business moves forward.

Thank you, again.

Thank you.

(OPERATOR INSTRUCTIONS).

Hey, Joe. This is Matt Grubb again. The -- your first question, I apologize, but we were going to talk more in detail about those in Q4. But, as far as the Haiku West Texas and Malone Mitchell acquisitions, that totaled $119.5 million and proved reserves as having 71.3 Bcfs.

We'll get you the acreage position. If Joe didn't catch that, somebody can call him.

You have a follow-up question from the line of Joe Allman. Please proceed.

Well, there he is.

I got it. Thanks. So, you said 71.3 Bcfe. Do you happen to have the production numbers? Any production associated with that?

Yes. I don't remember the exact number off the top of my head, but it's in the six million to seven million a day type range.

Okay. And then, okay, you'll come back with the acreage?

Come back with the acreage. And, the acquisition -- these acquisitions were really made for tying up the last bits of acreage around Pinon Field.

Okay. So, you wouldn't expect any more similar type acquisitions or very few?

I don't think there are any more to be had. We're up to about 93% to 95% in most of our wells that are drilling now in Pinon.

Okay. Very helpful, guys. Thank you.

Thank you.

At this time, there are no further questions, I would now like to turn the call back over to management for closing remarks.

But we do thank you. It's our inaugural call and hopefully as the quarters go by, we'll be a little bit better prepared and ready to answer all your questions. Thank you so much.

This concludes the presentation. You may now disconnect. And, have a good day.