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Clayton Williams Energy, Inc. (CWEI)

Q4 2012 Earnings Conference Call

February 21, 2013 2:30 p.m.ET

Executives

Patti Hollums – Director of Investor Relations

Clayton Williams – President & CEO

Mel Riggs – EVP & COO

Mike Pollard – SVP & CFO

Analysts

Welles Fitzpatrick – Johnson Rice

Ryan Oatman – SunTrust

Mike Kelly – Global Hunter

Gianna Bern – Brookshire Advisory & Research

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Clayton Williams Energy Fourth Quarter 2012 and Year End 2012 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at the time. (Operator Instructions) As a reminder this conference is being recorded.

I would now like to introduce our host for today, Ms. Patti Hollums, Director of Investor Relations. Ma’am please go ahead.

Patti Hollums

Thank you, good afternoon. Thank you for joining the Clayton Williams Energy year-end and fourth quarter 2012 results conference call. Participating on our call today is Clayton Williams, President and CEO; Mel Riggs, Executive Vice President and COO and Mike Pollard, Senior Vice President and CFO. We also have several other members our management team here available for questions.

During this call we will discuss our year-end and fourth quarter results and operations update that were issued this morning. This call will be recorded and will be available for replay on our website at claytonwilliams.com. Our call today will consist of a financial presentation given by Mr. Pollard, an overview by Mr. Riggs, and then an operations update given by Mr. Williams. We will then entertain a question-and-answer session for as long as time permits at the end of our presentation.

Please be advised that our remarks and answers to your questions include statements that we believe to be forward-looking statements. All statements that relate to future results are forward-looking statements that are based on current expectations. Actual results may differ materially from those expressed or implied by these forward-looking statements, because of the number of risks and uncertainties affecting our business, including those discussed in our quarterly and annual SEC filings, and in the cautionary statements contained in our press release and on our website.

With that being said, I will now turn the call over to Mr. Mike Pollard. Mike?

Mike Pollard

Thank you, Patti. For the year, we reported net income of $35.1 million or $2.89 per share on total revenues of $423 million and we generated $189 million of cash flow from operations. For the quarter, we reported net income of $1.7 million, $0.14 per share on total revenue of $102 million and we generated $31 million of cash flow from operations.

Taking a closer look at the quarter, production on a BOE basis was down 1% quarter-over-quarter. Our oil averaged 10,130 barrels per day, gas averaged 20.8 million cubic feet per day, and our natural gas liquids averaged 1,402 barrels per day which is more than double from the previous quarter.

With improvements that we’ve made recently in our infrastructures both in Reeves County and in Andrews County, we’ve been able to flare less gas and get more of it to market which has resulted in increases not only in our natural gas but also [mass] [ph] increases in natural gas liquids.

Our average oil price for the quarter was $85.86, up – excuse me, down 6%. Our average gas price was $4.02, down 18%, and our average natural gas liquids was $36.35 per barrel which is down 34%. Our production costs were $22.46 per barrel of oil equivalent which is up 21% from the quarter in 2011. Most of this increase is due to just the growing number of producing wells. Higher cost of field services which includes salt water disposal is a large component of that and the higher Texas property taxes through increased appraisal evaluations. The volumes of our produced quarter continuing to rise as we bring new wells online, our salt water disposal system though in the Reeves County area is now fully functional. And we saved in the fourth quarter of 2012 about $1.7 million or about $3 per barrel for every barrel disposed just by having our facilities up and running.

We also have our oil pipeline became fully functional in December and about two-thirds of our oil production from the Reeves County area is flowing through the pipeline and natural gas has been on since earlier in the year but showing those infrastructure improvements in development of that is really been working well in the field.

Looking at our derivatives, our gain on settled derivative contracts was $1.6 million for the quarter that is compared to $50 million in the 2011 quarter. And in 2011, we monetized about $50 million of oil contracts for a early gain and that covered about $2.6 million barrels of oil that would have been hedged in 2012 and 2013.

Our DD&A per barrel of oil equivalent was 2,592 which is up 25% from the 2011 quarter. Most of that increase in the rate was attributable to our Andrews County wells. In the Wolfberry play we had a 5 million barrel of oil equivalent downward revision in that area due to well performance.

Turning to the balance sheet, long-term debt rose up to $810 million and it's – an increase of $280 million for the year and $40 million for the quarter. At the end of the year, our outstanding balance on the revolver was $460 million and we had $350 million of senior notes outstanding.

During this current quarter, we increased the bank commitments on a borrowing base from $565 million to $585 million and had $121 million of availability on the line at the end of the year. Oil and gas reserves, we reported a total increase – our total proved reserves increased to 75.4 million barrels of oil equivalent which is a 17% increase from the previous year. Our additions from new drilling where 20.5 million barrels of oil equivalent which replace 365% of our 2012 production.

Oil and natural gas liquids make up about 77% of our total proved reserves and we did realize a 6.6 million barrel of downward revisions during the year but 4.3 million of that was related to well performance and 2.3 million was actually related to just lower commodity prices.

I think that covers the highlights for the results. And at this time, I’ll turn it over to Mel Riggs.

Mel Riggs

Thank you, Mike. That was good. I know everybody has a lot of questions and I’m going to try to put things in perspective for just a moment from the way I see the company and our potential. Clayton is going to add to that I’m sure a lot and then I know, again, the questions there will be a lot of questions about both the past and the future. But if we combine if we took our Permian and our Giddings or kind of our Eagle Ford area put them together 360,000 acres. To put them in perspective that’s about 600 sections or 600 square miles. It’s a big area and even in Texas, we called that a big rent.

It may not be a big one to Clayton because he owns bigger ones but I think he would call that a fair size place. We’ve got a lot to do. We have a lot of work there. It takes a lot of money. And we have experienced that already in the Delaware Basin, which we’ll talk about, it's a very capital-intensive area.

Our acres, the good part of that, it was sitting on the biggest oilfields in United States. And just for fun, if you took this acreage position and say, hey, it’s worth $2,000 an acre and I guarantee you couldn’t replicate this position for $2,000 an acre today. That’s $720 million, and compare that to our market cap of about $460 million right now.

There’s quite a disconnect between what that value of acreage is, the market value of the company because they were not even including the 75 million barrels of oil that we have on the books. So we’ve got a lot of value here and we’re inventory and land-rich and we think we have at least 1,200 wells to drill. Our job really now is to figure out how to maximize or accelerate this drilling and maximize the value of this acreage; it's going to take a lot of work. We’ve to run a really tight operation.

But right now, with three rigs running, it’ll take us 30 years to do that, to drill this acreage, drill those wells and that’s not a good plan for our shareholders and I know it’s not acceptable to the 51% shareholders sitting in this room right now. So we have to deal out what the issues are and the biggest issue right now that’s holding us back is the debt situation and we’ve got a plan that’s underway. And basically, there are several aspects to it, but the two things we’re focused on right now are other ideas that we’re considering, but one we have retained an advisor to assist us in the sale of our Andrews County, Wolfberry. We put that in the press release. That process in underway.

We are also considering – it’s a proposed partnership structure on the property. That way, we’ll retain operations and we’d have some incentives in place to earn back larger positions. We’ve got it working down two paths right now, that asset, and that property continues to be developed by vertical in-field drilling and we are starting to see some horizontal activity in Wolfcamp shales in these areas. So in a way, we’d like to hang on to the piece, if at all possible.

We’ve also made a strategic decision to begin a process to find or seek out a joint venture partner for the Reeves County Wolfbone Area. As we’ve said, we’ve got a large acreage position in the Delaware Basin in Reeves. We’ve got 65,000 acres plus another Radstone under format arrangement of another 25,000 or more. We have actively been drilling there both vertical and horizontal wells in 2011 and 2012.

Mike mentioned the pipeline, we built a pipeline system there to haul natural gas and produce some water. And this was an area there that infrastructure-starved for a while and having the pipeline would help us get our operating cost way down makes it much more efficient. But even all what we’ve done, all the money we spent in 2012, we’re feeling the early innings of this project. It’s going to require substantial capital for many years to develop these leases.

So if you’d take that area and you combine it, the capital needs of both that area and also the Eagle Ford area of about 170,000 to 180,000 acres in East Texas, the capital needs are daunting. And that’s why we decided to go to look for a partner for the Wolfbone. It’s still early to do it. Right now in the Eagle Ford, we’re in the early stages. We’re proving it up. So far, it’s going well. The good news that a large part of that acreage is helped our productions so we’ve got some time to evaluate it and we’re doing that with one rig right now. So it makes a lot easier to say that in Reeves, we’re pushing a lot harder to drill wells, we need to go find a partner. That’s what we’re doing.

So at the end of the day, the combination of these two efforts and they’re going to take some time. I think the Andrews-Wolfberry divestiture will happen to our partnership quicker. The JV will take more time, but it will be I think a pretty sizable transaction when it’s done. And that both those – added together will substantially reduce short-term debt, but at the same time they’re going to leave us in control of a substantial resource position and also improve our well economics net our interest.

So with that, I’ll turn it over to Clay.

Clayton Williams

Well, I don’t think I’ll beat that. But we do have major positions on several hundred thousand acres in major productive basins at Texas, in Permian, number one, the Delaware and the Eagle Ford. To review though, we have 1,200 proven locations and what’s unique about them nearly everyone on were held by production. As we go forward in the Eagle Ford, we have over 100,000 acres there. They’re basically nearly all proven equipment and maybe not spuds but all brand new. They have wells throughout at them that we’re comfortable that they are well be producing.

In the Permian basin, we started with the Wolfberry and Andrew, drilled 185 wells. We’re now in the process of assigning that to take the proceeds and reduce debt. East Permian has been a little bit of a new area for us. We’ve drilled 22 wells, 79,000 feet commercial but it’s not the bigger part of the play but we are in the play and with some large like Devon and many other majors in that play.

The Delaware Basin, the Wolfbone, we have 85,000 acreage in Reeves, Levee and Ward and Winkler and we have the bulk of that which is again unique as held by production. We drilled 82 wells in the Delaware Basin today, 69 vertical, 13 horizontal. We still have two rigs going and we’ve proven and held by production a substantial amount of acreage that lays a groundwork for our future.

The 84 miles of pipeline that Mel mentioned we paid for upgrading. We did that to be able to move our product because there were no other services there except truck.

So in conclusion, we have a lot of locations. They’re basically all proven. We got a lot of work to do and our problem is that we’ve also used up our bank credit. So it’s time to go for OPM which have done all my life other people with money. How do we do that? We’re number one. We’re moving to sale. We are maybe moving to some joint venture and we think we have so much work to do. If you multiply what I just said, it’s about $7 billion of drilling which is many times more than what we were. So that said, it’s something that I started with, OPM, other people’s money. So we’re in the process of lining what we have, growth in data rooms. In some cases, we’re preparing then to raise the money for the next step forward.

As we go forward, we’re not sure exactly how to play out. We will do our best to keep the best but people buy some of the best. We probably end up, probably, and it’s a guess, we will end up selling part and keeping some part particularly of people or maybe not operators that want us to continue to upgrade and manage their property.

So we said here we’re excited. We got a lot of work to do and going forward, we need the sales and properties to pay down debt so we’re going to start back to work. Even when we do that, that’s our normal. We’ve developed so many places to drill, $7 billion work than we need a partner or several partners to exploit what we’ve accumulated. Some years back, we didn’t have 1,200 locations. Now, we have them. Now, we have to deal which means changing over. We did it all heads-up, all our sales. Now, we reached other people’s money in the best form we can and then it will be an expansion for us.

I don’t foresee expansion in people, officer person like that like that but our expansion will be particularly in the field where we have the acreage held by production, even in Reeves County. We now have the infrastructure, so we’re ready to go to town same old deal we need some money.

With that I’ll take questions but before I do that I’m excited about where we are. We got a lot of work to do, and it’s great to live in a free country. God bless America. So I’ll turn it.

Patti Hollums

We’ll entertain questions now.

Question-and-Answer Session

Operator

Thank you, ladies and gentlemen if you have question at this time. (Operator Instructions) Our first question comes from the line of Welles Fitzpatrick from Johnson Rice.

Welles Fitzpatrick – Johnson Rice

Good morning.

Clayton Williams

Good morning, Welles.

Welles Fitzpatrick – Johnson Rice

The Eagle Ford wells can you give us an update on the first well that you had drilled the one that was I think 300 barrels over 90 days? And do you have any others that are flowing back? I wasn’t sure from the wording in the release.

Clayton WilliamsYes. I’ve got our engineer here. Would you answer that question. This

is Ron Gasser who is our production reservoir engineer.

Ron Gasser

Yes. Our estimated reserves for the EUR of that wells is about 200,000 barrels of oil and that we’re pretty satisfied with that. That’s our first data point for a typical well. We were drilling on – we drilled six out there, we booked in the play with better wells [demand] [ph]. And in the center of the play that’s our first well, our second well we’re drilling in right about 4,000 feet and the second one the middle of the play.

Clayton Williams

The play. Yes, right.

Ron Gasser

And we’re getting great shows and we’re pretty excited about it. We’re going to continue to drill that area to delineate the overall profitability of the Eagle Ford there.

Welles Fitzpatrick – Johnson Rice

And that delineation is presumably the reason you guys – if I remember correctly, you said in the past that maybe 120,000 net acres is perspective for the Eagle Ford, now it’s 100,000 – that’s just a function of kind of blocking in that position?

Clayton Williams

That is mostly correct. You remember the Eagle Ford underlies the Austin Chalk, where I drilled my first well in 1974. We’ve added some but yes, roughly 100,000 acres. We believe we’re a little bit more and it’s the formation under the Austin Chalk and it’s about 500, 600 feet deeper and that’s a million and a half more.

Welles Fitzpatrick – Johnson Rice

And the oil from all those wells flowing back is presumably chemically different from the Chalk like it was in the first one?

Clayton Williams

The Eagle Ford is sweet which is – and we’re $4 barrel a closer to Gulf and the sweet is $4 for the – the oil produced in the Eagle Ford is worth about $7 to $8 more than out here in the Permian because it’s sweet and it’s closer to the Gulf.

Mel Riggs

It is different, slightly different. So it’s different than the Chalk but it’s – and we do blend it in with our Chalk production which is a benefit and it has (indiscernible) plus about $8 right now.

Welles Fitzpatrick – Johnson Rice

Okay and I think you said the Eagle Ford was 200,000 barrels. Is there any significant gas contribution there?

Clayton Williams

No. One thing about our Eagle Ford there, it’s shallow and normal pressured so maybe 50 million cubic foot of gas would go with that 200,000 barrels.

Welles Fitzpatrick – Johnson Rice

Okay, that’s perfect. And the divestitures outlined this morning, are those in lieu of some of the other stuff you all talked about divesting in the past or could those assets, those legacy assets and taxes also go?

Mike Pollard

Yes, the things we just mentioned a moment ago they’re – we talked about them in the past. We actually engaged advisors on them, and we do have other options. We do have other properties out here in the Permian Basin, pretty substantially holding some central basin platform and things like that. We’ll evaluate that and see – the market is somewhat soft, I think, right now pretty much everywhere. So there’ll be a time for that. But by now, we feel like we can do the Andrews property. First of all, that pays down quite a bit of debt, and then the JV really needs to happen no matter what because the capital needs there, going forward for the next couple years, are going to be significant so.

Clayton Williams

I’m going to add to those that are new to the company. In my history which is now 56 years had been drill, develop, add a lot of debt and sell something to pay down debt, and it’s been a repetitious project and we’re still more (indiscernible). Now, we’ve added a lot of reserves as you look at the books and there’s time to sell. We sell, we go back to full speed. In the meantime right now, we reached our debt limits, so we could drill in, we sell and we’ll start back. It’s been pretty much – you can count on that.

Mike Pollard

I would like to add one thing to clarify the (indiscernible) situation. At the rate, we’re going right now which is four rigs, we really are fine this year. We could drill at that pace. It would only take us a little bit out of our cash flow. We’d still have close $100 million or so of line of undrawn credit facility that we feel like we’d like to have more cushion and we’d like to drill it at a more rapid pace. Like I said, it’s going to take us at this rate, 25, 30 years, and it is just not the way to maximize the value of our...

Clayton Williams

I may not live that much longer.

Mike Pollard

You got a lot of energy, so.

Welles Fitzpatrick – Johnson Rice

That’s perfect. And just one more quick one if I could, the pipeline that came on in December, I assume that was baked into your differential guidance that you gave a couple weeks back?

Mel Riggs

Yes.

Welles Fitzpatrick – Johnson Rice

Okay, perfect. Thank you so much guys.

Mel Riggs

Thank you, Welles.

Operator

Thank you and our next question comes from the line of Ryan Oatman from SunTrust.

Ryan Oatman – SunTrust

Hi, good afternoon, Clayton and Mel.

Clayton Williams

Hi, Ryan.

Ryan Oatman – SunTrust

Hey, I just want to get a little bit more clarity, if I could, on Andrews County. It sounds like that’s kind of the first and foremost among these potential divestiture candidate. Could you talk about kind of the reserves associated with that asset following the write-down and maybe even the PV-10 understanding that you may or may not want to?

Mel Riggs

Yes, we’re not going to - yes, go ahead. Thanks for your question but obviously we can’t get too far into this.

Clayton Williams

Let me add, it’s a mature property. It’s nearly fully developed. It’s the right property to sell and others are - and inventoried; we got a lot of rigs and we’ll have a lot of development location where Andrews County is pretty fully developed except for future infield drilling and then there’s a lot of that but it’s the most marketable, most mature property we have to turn into money and pay down debt.

Ryan Oatman – SunTrust

Okay. Perfect.

Mike Pollard

In our holdings, we’re roughly about 17,000 net acres. So in the scheme of things, it’s a pretty small piece of our company’s holding and a good part drilled at this point.

Ryan Oatman – SunTrust

Okay. And then with the East Permian Basin, can you remind me of kind of how that first Cline win and then where that acreage is and proximity accounted to others in the play?

Ron Gasser

Yes, this is Ron Gasser. We’re surrounded by Devon, Apache, Loreto and they’re all drilling Cline wells and other horizons out there also. As you recall, we got into this to do the Wolfberry and we drilled several Wolfberry wells. Some have been successful and some haven’t. We found a sweet spot where we made good wells. We did drill the Cline wells last year. We had 3D seismic interpretation that showed our faulting system. We believe (indiscernible). We drilled an east-west lateral and then we followed the recommendation of our service company to frac it with a gelled fracture system.

And at the end of the day, I think yesterday we made 56 barrels of oil, which for a $5.5 million investment wasn’t adequate. But other operators in the area that are having success are going north-south and fracking with a slick water system. But they’re spending $8 million to $9 million. So at the end of the day, we’re pretty happy about our comps to drill it. It’s just our technical evaluation seems to have been incorrect for the Cline at this point in time.

Clayton Williams

Well, let me add one other thing. If you look at our different places to drill, the Eagle Ford, the Wolfbone, the Wolfberry, we think it’s better and we’re putting our money there. It was better than the Clines. That’s why we’re not drilling there.

Ryan Oatman – SunTrust

Right. And that’s very good point. Okay, I think that’s all for me. I appreciate it, guys.

Clayton Williams

Thank you.

Operator

Thank you. And our next question comes from the line of Irene Haas from Wunderlich Securities.

Irene Haas – Wunderlich Securities

Yes. Can you hear me?

Clayton Williams

Yes, we can, Irene.

Irene Haas – Wunderlich Securities

Okay. My question is quick. What do you think is your optimum rig count is four is a little too slow? Is eight the right number in terms of horizontal?

Clayton Williams

I didn’t understand.

Mike Pollard

You mean, what’s the optimal rig count? It would take – really to drill our acreage in about a 10-year period, it would have to run about 10 rigs, I think, somewhere in that range to do that. That’s a lot of capital, too, so.

Clayton Williams

You know what, of course, we’d like to do it if you had this much acreage. You’d like to develop it in a five-year span. That’s been tradition, but over these last several years, we required substantial amounts of acreage as Mel mentioned earlier. It’d take 30 years to drill it. But where we’re headed is to make a sale, increase in oil rig count and then bring some other partners in at some point so we can properly develop our acreage in my lifetime.

Irene Haas – Wunderlich Securities

All right. Thank you. Sounds good.

Mike Pollard

Thanks, Irene.

Operator

Thank you. And our next question comes from the line of Mike Kelly from Global Hunter.

Mike Kelly – Global Hunter

Hey, guys. Good afternoon.

Clayton Williams

How are you doing?

Mike Kelly – Global Hunter

I’m good. Thank you. In the Delaware Basin, 2012 kind of seem like a heavy science year. You did 13 horizontals there, testing multiple intervals, just want to get your sense of far along are you in that process and when do you think you might be able to really pick an interval that you’re going to target and kick it into development mode there?

Clayton Williams

Well, our exploration of BP, we’d like to say we’re in the second inning of a nine inning baseball game.

Mike Pollard

Yes.

Clayton Williams

And so really it’s still too soon to tell. We’ve had four horizontal targets and about four of them that have been productive at the right drilling complete cost but they’re all economic. We’re moving up now currently and testing a new interval and it seems to be a little stronger than the first three that we drilled so we’re still on the learning curve.

We’ve pretty well settled in to whatever drilling down. We’ll probably going to continue doing that for horizontal wells. And our vertical wells, we’ve also grown from – originally, we were doing 10 stages during our completions and we’re down now to 7. We’ve gone from a $4.2 million drilling complete cost to a $3.2 million drilling complete cost. And we’re still seeing cost fall so that area just seems to get better with our knowledge and with the competition for services in the...

Mike Pollard

Let me give you a landman’s perspective. We have about 30 sections. If you drilled eight wells per section, that’s 240 wells. There’s a lot to do and then depending on your location in this piece of Delaware, you have some three to maybe as many as six pays and it varies from area to area.

So it’s hard to categorize as there’s so many, but we have a lot of acreage and it varies, but we have a nowhere list. I was seeing less than three pays I don’t think and the maximum is six difference pays. So we’ve got a lot of work there and that’s probably our biggest future even beyond the Eagle Ford and I’m saying something because there’s so much work to do and there’s not a clear cut, it’s not a one pay of cost, one will be to the 4,000 to 5,000 acres or 10,000 then the next door change so there’s changes and there’s still a lot of work to do. There’s money to be made but it takes a little more caution as you go forward. But you drill one hole, are you going to get three or six pays, you’re going to get some pay.

I guess what I’m trying to say it’s more difficult to quantify but the end results are going to be because it does vary from three to six pays. That’s the best I can answer it.

Mike Kelly – Global Hunter

Okay, thanks. And maybe you could quantify, if you look at your acreage in Reeves County, it’s a big position and if you’ve done enough work right now, where you could really characterize that maybe the eastern portion you think is most prospective versus the west or how do you think about maybe defining the sweet spot?

Clayton Williams

Let me – what you’re saying is the west because highway 17 comes south of Pegasus to where Hyland Pretty much west of that highway does not look good. The balance, east looks good. It’s got a very clear and that’s under about 35 sections on east side I think. That says, 25,000 acres or that’s 50 sections, so there’s a lot of work to do and we don’t know how many wells per section but there’s a good chance we’ll have eight. And you have the different pace and in my summary, you’ll have four and some have two, some have more. We’re still learning, but there’s a lot of work to be done. But it’s on the east side.

Mike Kelly – Global Hunter

Yes.

Clayton Williams

Partly, it’s all held by production now. As I say that all acreage we talked about across our presentation today, that was held by production which gives us some running room before it fell to $50 or something like that. We’ve got a good number.

Mike Pollard

I think what I see is that if you combine what particularly what Thompson’s group is doing, what we’ve done, what we’ve done in Eagle Ford resources vertically, we have indentified the better vertical areas but we’re way early in the horizontal part of this play. And that’s because first of all, there’s multiple zones and there just haven’t been as many wells drilled in time.

Mike Kelly – Global Hunter

All right, guys. Appreciate it. Thanks.

Operator

Thank you. And our next question comes from the line Gianna Bern from Brookshire Advisory and Research.

Gianna Bern – Brookshire Advisory & Research

Thank you. Good afternoon, guys.

Clayton Williams

Good afternoon, Gianna.

Gianna Bern – Brookshire Advisory & Research

A quick question here on the Wolfberry assets. Can you just give us a little bit more color as to your thoughts now that you’ve retained RBC Richardson Barr? What is the market really looking like in Andrews County for the Wolfberry assets and a little bit more color on your perspective on the second quarter of 2013 and what really is that looking like for you all? Thank you.

Clayton Williams

Well, I think initially, it looks – I mean it looks strong initially because we have many companies have called trying to get him the door early and try to preempt, so the interest level is going to be there. I think there’ll be a lot of interest. I don’t – we don’t know what else what ultimate transactions going to be because the market has been kind of quiet and there haven’t been a lot of deals done this year.

Yes, there were a lot last year. Some didn’t really work out very well and some did. It’s a mix. So but at least from a standpoint of interest, we got a lot of interest in it.

Gianna Bern – Brookshire Advisory & Research

Okay. Real good. Thank you.

Clayton Williams

Thank you.

Operator

Thank you. And that concludes our question-and-answer session for today. I’d like to turn the conference back to Mr. Williams for any concluding remarks.

Clayton Williams

I’m in for closing?

Patti Hollums

Yes.

Clayton Williams

Well, I can say that we have adequate trained people, the geologists in place. We’re capable from that standpoint of going forward, we’re capable of drilling physically the 80,000 acres we have across the board and the 1,200 locations we have to drill, all we lack is money. And so I might get a laugh of that...

Patti Hollums

That’s always been a problem.

Clayton Williams

But when you add that up that #6 million well that’s $7 billion future drilling we have on those 1,200 locations. These are proven and maybe not SEC proven but proven to all men. So our job is to manage that which will be done with some of our cash flow which is substantial as you note. We will bring in some form of partner, most likely a partner in a different area rather than across the board.

So we would like our objective if we can accomplish it would be to get the bulk of this drill and complete in six years. And if we do that you’ll be looking at a different color of our company. How about that?

Patti Hollums

That’s good. Thanks everyone. Thanks for tuning in.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day.

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