Nicholas Pope: I was hoping to follow on a little bit with Charles’ question on M&A. Kind of in that same line of thinking, curious how you’re thinking about funding any potential acquisitions? Obviously, with the Macpherson you could pull down on CapEx. You got a fair amount drawn on the credit facility here coming out of the quarter. So just curious what the thinking is, as you look at some of this potential M&A about how you might fund it either through cash or through what’s available in the credit.
Mike Helm: Yeah, Nick. This is Mike. A couple of ways to think about that. When you think about kind of the smaller ones, the bolt-on types like Macpherson, we do like using the RBL. And part of the reason we like doing that is we can get it paid off really quickly. And then once that’s paid off quickly, you can get — the cash flow just falls right to the bottom line. To your point, we are on the line. And we just finished the Macpherson acquisition just before the end of the quarter. So it’s not surprising to see the RBL in use there at the end of the quarter. But part of the story there is capital reallocation. So we have started reducing our capital. We’ll continue to do that for the rest of the year and even looking into next year, maybe to really help fund the purchase price of Macpherson, and we would do something to a similar bolt-on.
So that’s why those things kind of pay off quickly. As for larger acquisitions, yes, it really depends on what the opportunity is and kind of who we’re talking to. But we think there’s multiple ways to finance that, including equity in addition to raising debt and in that regard, it would have to make sense from all of our financial metrics, including leverage. We really aren’t — we don’t have the appetite to increase our leverage on a long-term basis. So it would have to make sense from the financial metrics, but those are really kind of the way that we’re thinking about it.
Nicholas Pope: Got it. That’s very helpful. Thank you. And then kind of back to the — this new development work that you are doing in Midway-Sunset. Just clarification, any planned development, is that all expected to be vertical development? Is that like fairly kind of lower cost as in no big horizontals. Is that the right way to think about this?
Fernando Araujo: Yeah. That’s correct. There would be a vertical development. If we were to drill new wells will be vertical with sidetrack — it would be directional just because we would have to access the reservoir through the existing wellbores, but it’s not a horizontal play. It’s a vertical play.
Nicholas Pope: I appreciate. That’s all I had. Thanks, guys.
Operator: [Operator Instructions] The next call comes from Steven Busch with Everglades Resources, Inc. Your line is now open.
Steven Busch: Good morning, gentlemen. Thank you for taking the call. So on these sidetrack possibilities, you’re doing that so that they don’t require permits. Is that correct?
Fernando Araujo: Well, they do require permits, but it’s not a new well permit. It’s similar to a workover permit for an existing well.
Steven Busch: And that’s still being given out in California?
Fernando Araujo: Yes. California is still — the industry is still getting workover permits and sidetrack permits. That’s correct.
Steven Busch: Okay. Perfect. And how is the permanent outlook in general for new wells?
Fernando Araujo: In terms of specific numbers for us, we currently have about 34 permits in hand, sidetrack permits in hand that would expect to execute and utilize in 2024. Now outside of that, we’ve got — in a separate bucket. We’ve got about 26 permits that we call contingent and they’re contingent because they’re contingent on further technical work and results. And on top of that, we’ve submitted well over 100 permits in fact, 145 permits for new wells and sidetracks, many of which already have what we call CEQA approval from CalGEM. And then additional to that, we also have over 100 workover permits in hand. The message here is that we have a lot of permits in hand for activity coming up, especially for the first half of 2024.
