Ring Energy, Inc.
Q3 2016 Earnings Call Transcript

Published: 9 Nov 2016

[Operator:]

Greetings and welcome to the Ring Energy Inc. 2016 Third Quarter Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Tim Rochford, Chairman of the Board of Directors of Ring Energy Inc. Thank you. You may begin.

[Lloyd Rochford:]

Thank you, Aubrey, and welcome all listeners to our third quarter and nine months 2016 financial and operations conference call for Ring Energy Inc. Again, my name is Tim Rochford, Chairman of the Board. Joining me on the call this morning is Kelly Hoffman; our CEO; David Fowler, our President; Randy Broaddrick, our CFO; and Danny Wilson, Executive VP ahead operation. Today, we're going to cover the financials and operations for the third quarter and nine months ended September 30, 2016. We’ll review our results and provide some insights to not only our current progress to give glimpse of the fourth quarter as well. At the conclusion of the third quarter review, we'll open it up for any questions you may have. And with that, I am going to turn it Randy Broaddrick of CFO and ask Randy to review the financials. Randy, if you would, please.

[William Broaddrick:]

Thank you, Tim. Before we begin, I would like to make reference that any forward-looking statements, which may be made during this call, are within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. For a complete explanation, I would refer you to our press release issued Tuesday, November 8. If you do not have a copy of the release, one will be posted on the Company website at www.ringenergy.com. For the three months ended September 30, 2016, the Company had oil and gas revenues of $7.8 million and a net loss of $5.9 million, as compared to revenues of $8.6 million and a net loss of $1.1 in the third quarter of 2015. For the nine months ended September 30, 2016, the Company had oil and gas revenues of $21 million and a net loss of $37.2 million, as compared to revenues of $23.7 million and a net loss of $1.6 for the nine months ended September 30, 2015. The dramatic change in the loss for both the [Audio Gap] 14% increase from 2015. On a per BOE basis, the price received was $36.73, a decrease of 11% from the 2015 price. For the nine months ended September 30, 2016, our oil price received was $36.72 per barrel, a decrease of 22% from 2015. And our gas price received was $2.42 per MCF, a 10% decrease from 2015. On a per BOE basis, the price received was $32.76, a decrease of 27% from the 2015 price. Production costs per BOE for the three months ended September 30, 2016 decreased to $10.94 as compared to $13.98 in 2015. Production costs per BOE for the nine months ended September 30, 2016 decreased to $10.94 as compared to $13.18 in 2015. The primary reason behind the decreases per BOE for both the three and nine-month period a reduction and operating costs an increase in sales volume from 2015. Most production taxes are based on values of oil and gas sold. So, our production tax expense is directly correlated to the commodity prices received. Our production taxes as a percentage of revenues remained relatively flat and should continue to be. Our total depreciation, depletion and amortization or DD&A including accretion of asset retirement obligation per BOE decreased for the three months ended September 30, 2016 to $12.65 per BOE as compared to $22.86 per BOE for the same period in 2015. The nine-month period ended September 30, 2016, our total DD&A decreased to $13.87 per BOE as compared to $22.20 for the same period in 2015. Depletion calculated on our oil and gas properties subject to amortization constitute the bulk of these amounts. For both the three and nine-month period, the primary reason for the reduction per BOE or a reduction in our oil and natural gas subject to amortization as a result of the ceiling test impairment and an increase in reserves from the comparative 2015 period. Our overall general and administrative expense or G&A decreased for the three months ended September 30, 2016 to $8.84 per BOE as compared to $9.59 for the same period in 2015. For the nine-month period, our G&A per BOE decreased to $9.39 per BOE in 2016, as compared to $10.88 for the same period in 2015. The primary reason behind the decreases for both the three and nine-month period is an increase in sales volumes from the comparative 2015 periods. On a diluted basis, the loss per share for the three months ended September 30, 2016, was $0.14 excluding a $9.6 million pre-tax ceiling test write-down and the $556,000 non-cash charge for share-based compensation there was a gain of $0.01 per share. This is compared to a loss per share of $0.04 as reported or $0.01 per share excluding a $651,000 non-cash charge for share-based compensation in the third quarter of 2015. There was no ceiling test write-down in the third quarter of 2015. For the nine-month period ended September 30, 2016, the loss per diluted share was $1. This loss is reduced by approximately $0.96 per share excluding the $56.5 million pre-tax ceiling test write-down and an additional $0.03 per share excluding a $1.6 million non-cash charge for share-based compensation or a loss of $0.01 excluding both items, as compared to a net loss per share of $0.06 as reported or a gain of $0.01 per share excluding a $2 million non-cash charge for share-based compensation during the nine- month ended September 30, 2015. Again, there was no ceiling test write-down during the nine-month period in 2015. As of September 30, 2016, we had a cash balance of approximately $2.2 million and no amounts drawn on our credit facility. We are currently working with the banks and our credit facility on our fall re-determination. We do not anticipate any changes to the borrowing base as part of this re-determination. For the three months ended September 30, 2016, we had positive cash flow of approximately $3.7 million or $0.09 per share compared to approximately $3.6 million or $0.12 per share for the same period in 2015. For the nine months ended September 30, 2016, we had positive cash flow of approximately $8.1 million or $0.22 per share as compared to $11.3 million or $0.41 per share for the comparative period in 2015. Lower commodity prices are the primary reason for the decrease between the periods. It should be noted that the cash flow numbers presented our cash flow from operations adjusted for changes in operating assets and liabilities, which is a non-GAAP measure. Please see our press release regarding financial and operational results issued yesterday for additional information. With that, I will turn it back to Tim.

[Lloyd Rochford:]

Thank you, Randy. Appreciate it. Good job. And with that I would like to turn it over to Kelly Hoffman our CEO and ask Kelly to give us an overview of the third quarter and nine-months operations and general business activity. Kelly?

[Kelly Hoffman:]

Thank you, Tim, and thank you, everyone, for joining us. In the third quarter, we drilled three vertical wells, one on the Central Basin Platform, and two in the Delaware. Additionally we completed a new vertical well drilled in the second quarter on our Delaware property. And as many of you know, we drilled three horizontal San Andres wells on the Central Basin Platform which are currently in varying stages of completion. Also we continue to upgrade the infrastructure on both the Central Basin Platform and the Delaware property. For the nine month ending third quarter, we have drilled four new vertical wells, three San Andres horizontal wells and frac two existing wells on our Central Basin Platform properties and we also drilled three new Cherry Canyon wells at Delaware during the same period. In the third quarter, our sales as a result of production were 212,950 BOE's and this is a 2% increase over the third quarter of 2015 and a 9% increase over the second quarter of 2016. Please note these third quarter numbers do not include horizontal production. Our average net daily production for this period was approximately 23,025 BOE's per day. The average sales price for BOE we received in the third quarter was $36.73 as compared to $41.34 in the same quarter at 2015 and that's 11% increase. For the nine months ending the third quarter 2016, our sales as a result of production was $641,709, a 21% increase over the same period in 2015 and our average net daily production increased approximately 23.42 BOE’s per day, and the average sales price we received was $32.76 as compared to $44.57 for the same period 2015 and that's a 26% decrease. With that, I will turn it over to David. David will give us an update on the acquisition side.

[David Fowler:]

Thank you, Kelly. During the last quarters conference call we mentioned pursuing several acquisition opportunities that we were optimistic within positively. Well due to the successful leasing blips of our land team and the lease acquisition we closed in Q3, we added approximately 16,500 net acres which doubled our net acreage position on the Central Basin platform within our horizontal drilling development area. The newly acquired acreage considerably added 137 gross horizontal drilling locations. We continue to aggressively pursue leases and acquisitions in areas we believe offer the best upside opportunities are only on the platform, but also on our Delaware Basin assets. In addition to our leasing activities, we also continue to cultivate our numerous Permian relationships to identify acquisition opportunities that complement our existing assets and offer upside potential through drilling, production and also reserves. We are currently evaluating a steady flow of deals and remain optimistic in our team’s ability to continue growing our core assets in both the Permian and the Delaware Basin. As you all are aware, we remained employee financially to move quickly and aggressively when the right deals comes along our way. With that Tim, I'll turn it back to you.

[Lloyd Rochford:]

Okay, David. At this time, Danny would you step in here for an operational update?

[Daniel Wilson:]

Sure. Thank you, Kelly. Everyone I want to start off by talking about our Delaware acreage in the work that we've been doing in that area in Q3 and then the plans we have moving forward on into this quarter. I want to start off by saying since we've purchased those properties out in the Delaware Basin in mid-2015, we've been exhaustively evaluating every aspect of the existing producers. We've reviewed how these wells were drilled, how they were evaluated and how they were completed. And through this work, we have increased the number of productive benches in the area as well as expanding the productive area of our properties. The result of this work can be seen in the wells we bought online in the third quarter. Two of these wells were 5,000 foot Cherry Canyon wells that were drilled on acreage that was previously undrilled and the wells came in with an IP of over 110 barrels of oil per day on one well and over 250 barrels of oil per day on the other. The third well was drilled to base of the Brushy Canyon of course were taken across the entire Delaware mountain grid from the lower Brushy Canyon Shale always up to the Bell Canyon. One of the reasons for doing this work was to further evaluate the lower Brushy Canyon Shale as well as the other benches within the Brushy as potential horizontal target. I can safely say as a result of this along with the other data points that we already had, we further confirm that these Brushy Canyon intervals are impactful targets for us in the future. As for Q4 we currently have drilled two additional Cherry Canyon wells both of which again one of which is on acreage that was previously undrilled. One was drilled deep to the Brushy Canyon again to give us another data point in the - throughout the Brushy Canyon. These wells are currently being completed and will be brought online before the end of the fourth quarter. In addition through the previously mentioned we're evaluating our current producer. We have identified a large number of behind five targets and we are aggressively moving forward with a plan for re-completion in Q4 that will extend on into next year and possibly even further. Moving on to the Central Basin platform obviously everybody is extremely interested in the results of our program and where we're at in the horizontal program that we started. As Kelly mentioned we began drilling our first three wells in mid-August and began completions in mid and late September. Production began in October and we're currently in the pump down phase and testing has begun. Even though we're very early in the process we're very pleased with the results that we're seeing. And the wells are exceeding or meeting our expectations. As you recall when we began evaluating and proposing our horizontal San Andres program earlier this year. We started by looking at every horizontal well in Andrews County. We then begin to focus on the 33 wells in our area and then narrow that down to the 16 wells that we felt were on acreage that most closely match the attributes of our own acreage at the time. When we look at those wells we see that average 30-day IP and I want to stress 30-day IP was around 350 BOE per day. And this BOE per day get us to our 400,000 barrel per day target for our 1.5 mile laterals. It also plays to about 55,000 BOE per 1000 for the lateral. There's been a great deal of speculation as the IP obviously some people take peak IPs and report those so I just want to say that we are most focused in on the 30-day IPs that are reported to the Railroad Commission and can be verified for production. As I mentioned the 30-day IP for the 16 wells closes to its average 350 BOE per day and the time that it takes to reach that point or [indiscernible] varies from about once for a month with some wells taking as along as six months to reach their peak. With our average taking us into account let me reiterate that we are very pleased with the results that we are seeing. Now I’m going to pass it now back to Tim.

[Lloyd Rochford:]

Randy. Thank you. Good stuff Kelly, David as well. I know we have a number of people awaiting to ask some questions. So make a couple points first as Danny pointed out lots of good things going on in the Delaware and that's you know as we like to say the gift that keeps giving not only because of the opportunity that we're seeing potentially there horizontally with the Brushy but also in that Delaware group where we’re seeing multiple benches now that we did not - we are not aware of or we’re not appraised of early on when we acquired that. So that's really, really just continued to develop and showing lots of good running room and of course the real excitement on the platform and as Danny pointed out we're very pleased very, very pleased with the production rates thus far and where it's headed and it's on in line and on track with our earlier predictions indicated. So with that I'm going to turn it back over to Aubrey. And ask Aubrey to take the time and go back to our listeners and open it up for any Q&A we may have.

[Operator:]

Ladies and gentlemen at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Neal Dingmann with SunTrust Robinson Humphrey. Please proceed with your question.

[Neal Dingmann:]

Good morning, gentlemen. And nice quarter.

[Kelly Hoffman:]

Thank you, Neal.

[Neal Dingmann:]

Tim the first quarter I had was more I know you all don't have out 2017 guidance yet, but just wondering when you look at the overall plan how you're just you or Kelly when you sit down or David are thinking about overall spending in growth next year versus this year just in broad terms. I mean are we expect to see that continued growth that you guys have seen in the last year or so or maybe just in broad terms anything you could say about the plan Tim.

[Lloyd Rochford:]

You bet. And it’s a good question and one we’re looking forward to spending a little time on this morning. With what we've seen not only as we just mentioned in the Delaware, but particularly what we've seen with our horizontal development of these first three wells. I don't think there's any question that next year is going to be a very active, very busy year for us on both ends of the asset base. But I would – as we've mentioned earlier, we said early on with reference to the pilot program that if we saw the success or anything close to the success that we felt that we were going to enjoy with this horizontal activity that we would most likely look to next year drilling somewhere between 18 to 24 wells. I have not put out of a formal CapEx. I can share with you that by right close to year-end or just into early part of next year, we will put out a formal CapEx. But I can tell the listeners today, Neal that we're probably going to be in that range of about 22 plus or minus horizontal wells on the platform. We’ll drill a number of wells in the Delaware on the vertical side. And then at some point in time, probably the second half of next year we'll be looking to drill that first horizontal Brushy well. Aside from that, as David touched on as it relates to going into the next year, the remainder of this year and into next year we'll be spending some capital, we're going to be definitely reserving capital for the acquisition opportunities particularly on the leasing side. We're leasing, we have a great team of people out there doing that. We also overlaps into the acquisition of some of these leases that are within our target area that are owned by others that were falling from, so the combination of that. I would guess at this point and it is a guess, Neal that we're probably going to be looking at a CapEx, that CapEx is going to range in the absence of any major acquisition, but just on the path that I just described. I'd say somewhere between probably $65 million and $75 million next year.

[Neal Dingmann:]

Okay. Great, great details, Tim. And then secondly Kelly or Danny just looking that Slide 10 that really outlines some of your Andrews and Gaines County and looking at the plan besides the three wells you have going on – the horizontal plan, I should say. Maybe talk about that entire area how your thoughts are I mean is it more just the Northern area you're excited about originally or will you be targeting with that that some of the wells that Tim suggested for next year would you be targeting most of that area?

[Daniel Wilson:]

Neal, this is Danny. And for the most part it will be in that area to the north. But we have also identified multiple targets down into the Southern acreage also. They are going to set some sales reps very nicely. And we are looking at doing that as opposed to infilling and filling out the acreage with vertical wells and we have looked at that and we think we have multiple wells outside of Northern area.

[Neal Dingmann:]

Very good. Then lastly, Kelly you mentioned about continue to work on infrastructure. Now where you sit with infrastructure in both places, do you have ample for all the takeout or basically for all the growth that you and Tim are outlining for next year? Is there still continued work that needs to be done?

[Kelly Hoffman:]

We are always going to be expanding the infrastructure because we like to stay out in front of ourselves quite a bit, as a matter of fact when it comes that. So to answer your question, we have plenty of room today and I feel like that we can stay in front of the development program, a number of wells and that's kind of our customary way of doing it. One of our favorite things to do is, is as we start anticipating the drilling program, as we expand North or South either way is making sure that we have not just redundancy in our systems. But from an ample standpoint we want to have enough places for waterway in a number of places to go to in spite of what the weather does or what anything else does.

[Neal Dingmann:]

Perfect. Thanks for the details guys. And look forward to all of that horizontal activity.

[Kelly Hoffman:]

Thank you, Neal.

[Operator:]

Our next question comes from the line of Richard Tullis with Capital One Securities. Please proceed with your question.

[Richard Tullis:]

Tim or Kelly when you look over at the Delaware Basin acreage and I know in your prepared remarks you mentioned that that area is included in what you focused on to add acreage. Is it possible to get some deeper zones into the portfolio as well on your existing acreage or maybe what you are looking at as well beyond the Brushy and Cherry Canyon?

[Lloyd Rochford:]

Richard, I'm going to let Kelly take a couple of moments and give a little more color on that, but the deeper formations are not something that are available to us. What we're focusing on is down through the Brushy, so you have the whole Delaware Mountain Group and then including the Brushy. Most of our footprint that 20,000 acres there about all, but very little is taken the deeper levels of Horizons are taken. But in terms of expanding beyond that footprint which we are focusing on, again we're focusing on the Delaware Mountain Group and the Brushy, but maybe Kelly you could shed some light or maybe David could shed some light as it relates to what the opportunities for deeper integrals if we were maybe some interest there.

[Kelly Hoffman:]

Yes. Richard as we expand across the area of course there's always room for discussion with a lot of these operators about [people rights] depending on their needs for development or the opportunity for us to include those in our transactions. I know when David talks to a lot of these guys he never exclude that conversation. There are a lot of those people that have already been traded away to different companies such as Chevron, Conoco and some of the bigger boys that are out there. But I want to remind everybody that even though the deeper eyes are very actually you talked about. I've got to tell you the returns associated with the shallower zones in many cases are even better. I mean we are very, very comfortable/excited about what we're seeing on those numbers as it relates to some of the shallower zones, but to answer your question absolutely there's always deeper eye discussion there to the extend we can add and those rights are available, we will always be talking about.

[Richard Tullis:]

That's helpful, Kelly. And I guess the last question for me, we've heard from some operators during 3Q call that service costs maybe getting to a point where they're bottoming out. What are you seeing as far as well cost on your side of things including what you experienced with the three horizontals that you drilled and currently completing?

[Lloyd Rochford:]

Yes. Good question. Danny maybe you could take that question please.

[Daniel Wilson:]

Sure. Richard what we saw obviously in the three horizontal well, let me start there. We bought those wells within budget and there was no issue that we had as far as cost flow concerned or the drilling as matter of fact. And I think we saw some a few people talking about price increases when prices were creeping back up into the $50 range that has gone quite, here the last couple of weeks the prices are bit back down again. But I didn't think there's an opportunity if we win, not yet, the win we move forward with these projects we'll probably doing a lot scale that will allow us to go in and get – locking in prices for a longer period of time whether that’s on frac, drilling rigs, pipe whatever the case might be. We will probably be looking at – contracts are long enough to get some significant savings along that line.

[Richard Tullis:]

That’s helpful. Thank you very much and that’s all for me. Good quarter. Thank you.

[Lloyd Rochford:]

Thank you, Richard.

[Kelly Hoffman:]

Thank you.

[Operator:]

Our next question comes from the line of Mike Kelly with Seaport Global Securities. Please proceed with your question.

[Mike Kelly:]

Hi, guys. Good morning.

[Lloyd Rochford:]

Good morning.

[Mike Kelly:]

Really encouraging commentary on the three horizontal wells [indiscernible] a little bit on this. Just curious on how and when do you expect to fully reveal what you've got here in terms of the initial production? I guess when do you hit that 30-day mark? And then it's just a simple for us to really kind of look at that 30-day rate compared to that 350 barrel a day mark to which you’ve referenced here to see if you're on track with a 400,000 type curve? Thanks.

[Lloyd Rochford:]

Mike, that's again another good question. I think Kelly maybe this be an opportunity for you to visit along maybe with Danny and give a little more color on that and I think that's a good question. So let's take that.

[Kelly Hoffman:]

Yes. Hey, Mike. I want to point out again just give you mass, but when we looked across the board on these well and areas you got this 30 to 120-day kind of peak way discussion that goes on. It's not that important to us, but we do recognize it and with even more the better wells taking 180 days, but I’m want to remember that we're in a very early stage of our process. And I’ll just go ahead and say well we've got everybody on the line here that you know these wells that we put on that came on in difference stages, so we didn’t frac them all the very first day and so we've got two wells that are older than the last well. I tell you about those two wells that we’re already north of 300 guys. So we're hitting right at where we want to be and you saw like we’re ahead of schedule maybe in many, many ways. And that third well is well on its way for the same thing.

[Mike Kelly:]

That tells me [indiscernible] right there. Appreciate that.

[Kelly Hoffman:]

I was hoping it Mike – that might answer your question Mike.

[Mike Kelly:]

Yes. Are those still clean up. Are they still climbing higher?

[Kelly Hoffman:]

Yes they are. Yes and Yes.

[Mike Kelly:]

Okay. Great. Flipping to the leasing side of things here and it's really encouraging that you guys were able to double up your position here. During the quarter, but you could comment how much it's costing you to add acreage there or kind of ballpark figure if it’s if this change versus what you historically been able to lease at. And then just a little bit more commentary on your ability to potentially double-up again. Thanks.

[Lloyd Rochford:]

This is Tim. Let me kind of respond to that first and maybe I’ll let David address it as well. One thing we want to be very careful of and as you know we're very active and as you could see we were very successful in the third quarter as they’ve been pointed out numerous times doubling that position. We're just as active right now if not more active as we go into this last quarter and there’s a lot of moving parts and so I think we want to be very careful as we - have these conversations as it relates to what we're paying, but I can tell you that we're within the window of our expectations. And so I hope all can respect or appreciate that that we don't want to start throwing out numbers quite yet because they are still so much activity going on. And then secondly and maybe David could address this. But yes there's a lot of room here for additional growth that we will be reporting in the near future. David?

[David Fowler:]

Thank you, Tim. Good morning, Mike. One of the things that we as our land team continues to focus on picking up and reducing acreage on what we currently have reducing our gross to net and they’re doing a great job on that, but we continually keep on eyes focused on the Horizon. So that we're able to look at new areas and we’re constantly researching and following and observing where our competitors are, but that’s reflecting the comment that he did, but one thing that we've been able to do is to be incredibly aggressive and if you just witness in the third quarter with the addition of over 60,000 acres. We got our sites on quite a bit more and to give you kind of an idea if you want, it’s kind of a broad range on kind of where our leasing takes place. It’s a range, it could be down on the low end around 200. It could be on the high end around the 1000 normally that’s not the case. It’s more in that average of in between kind of in the maybe a $400 to $500 range in acre, which we feel is very competitive and we're able to pick up good amounts of acreage, we got our sites on several opportunities right now. Let me just share that early on when prices drop we were approached by companies with leasehold with short expiration date. We’ve seen people that have leased that still have some pretty good time left on their leases and their focus all times are gone elsewhere and in the middle under the Delaware Basin and so we're able to acquire chunks of leaseholds that we just – frankly real excited about. And as a result we're still very optimistic that we're going to continue to add not only our platform asset, up where we're drilling horizontally but also on our Delaware. So it's two pronged we're going at simultaneously and so we are excited about where our future holds there on both sides.

[Mike Kelly:]

Thanks for the color guys. Really important call, appreciate it.

[Kelly Hoffman:]

Thank you, Mike.

[Operator:]

Our next question comes from the line of Sam Burwell with Canaccord Genuity. Please proceed with your question.

[Sam Burwell:]

Good morning, guys. Certainly appreciate the calendar you've given so far. I want to switch to hedging actually. I am curious if you guys have any interest in hedging out now you've got a fair amount more visibility on growth into 2017. Strip in the high 40’s, do you have any interest in hedging the regular volumes or maybe doing something with basis swaps.

[Kelly Hoffman:]

You know what Sam. We are looking into that in fact for the last seven or eight weeks, we've been following that. And to answer your question, we do have an interest, we're little or we’re not too anxious to jump at this particular point. But as we approach back to that $50 plus level. I think you'll see us engaging at some level of heading. I won’t say exactly how much or what percentage but we’ll definitely we're seriously considering that and most likely will pull the trigger at some point and again low to mid-50s.

[Sam Burwell:]

Okay. Got it. I think all my other questions were answered. Thanks guys.

[Kelly Hoffman:]

Thank you, Sam.

[Lloyd Rochford:]

Thank you.

[Operator:]

Our next question comes from the line of Blaise Angelico with Iberia Capital Partners. Please proceed with your question.

[Blaise Angelico:]

Hey, good morning. Thanks for taking my question. Just one quick one for me. So I start with those the three horizontal wells you drilled so far how active have you been on the permitting side. Just wonder if you could provide some more clarity on that number of permits you’ve got or in process and then where those would be on the acreage. Thanks.

[Lloyd Rochford:]

Kelly.

[Kelly Hoffman:]

Yes, hi Blaise. We are looking at ideas right now where we're wanting to adjust locations if you will. So we haven't you won't see a lot of permits but now they're on any of the services that are reporting. You know one of the reasons is that we want to gauge the best and possible combination of acreages so we don't strain any acreage and more importantly on that as you know you heard some people ask us about our ability to expand our footprint and David illustrated that we have a high degree of confidence and our ability to do that. So obviously we want to be careful. We'll put down permits and kind of identifying the direction that we're looking and thinking about expansion to the extent that we have lot of opportunities able to do, so I think you will see a little bit more that as we get closer to the end of the year and we will be able to plug in some permits that we think are meaningful and that will get a little higher indication but that's probably going to be after we secure up maybe a little more of our footprint.

[Blaise Angelico:]

Gotcha perfect. Thanks appreciate it.

[Kelly Hoffman:]

Does that answer your question Blaise.

[Blaise Angelico:]

Yes, now I understand it's a couple of things in play, but seems like things are moving in the right direction.

[Kelly Hoffman:]

Yes, you may also see a permit or two from us once in a while that's defensive but remember those permits are just because we file and we don't have to get on top of them very quickly, we can be very strategic in our thinking there.

[Blaise Angelico:]

Gotcha. Thanks appreciate the information.

[Lloyd Rochford:]

Thank you, Blaise. End of Q&A

[Operator:]

That does conclude our question-and-answer session. At this time, I will turn it back to Mr. Rochford for closing remarks.

[Lloyd Rochford:]

Thank you, operator. And thank you to all of our listeners. We know it's a busy time not only in our industry and on the financial markets but what's going on with the election. It has there's a lot distraction. So we’ll let everybody get back to work. Appreciate so much. We all do that to taken the time and the support and always feel free to give us a call on a one-on-one basis. Our doors are always open. We look forward to talking to you before too long. Thank you.

[Operator:]

This concludes today’s conference. Thank you for participation. You may disconnect your lines at this time.