Synergy Resources' CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: SRC Energy (SRCI)

Synergy Resources Corporation (SYRG) Q3 2013 Earnings Conference Call July 10, 2013 12:00 PM ET

Executives

Edward Holloway - President and CEO

Frank L. Jennings - Chief Financial Officer

William E. Scaff Jr. - VP, Secretary and Treasurer

Craig Rasmuson - VP, Operations and Production

Analysts

Welles Fitzpatrick - Johnson Rice

Irene Haas - Wunderlich Securities

Gabriel Daoud - Sidoti & Co.

David Beard - IBERIA Capital Partners

Jeffrey Connolly - Brean Capital, LLC.

David Snow - Energy Equities

Stephen Berman - Cannacord Genuity

Robert Young - William Smith & Co.

Richard Dearnley - Longport Partners

Jack Aydin - KeyBanc

Operator

Good morning, everyone, and thank you for joining us to discuss Synergy Resources' Third Quarter Results for the period ended May 31, 2013.

With us today are Synergy Resources' President and CEO, Ed Holloway; the company's Executive Vice President, William Scaff; and CFO, Monty Jennings. Vice President of Operations, Craig Rasmuson will be available to answer questions during the Q&A session.

Following the prepared remarks we'll open the call to your questions. And before the conclusion of today's call I'll provide the necessary precautions regarding forward-looking statements made by management during this call. I would like to remind everyone that today's audio conference call will be available for replay through July 24, 2013. The webcast replay will also be available via the company's website at www.syrginfo.com.

I would now like to turn the call over to the President and CEO of Synergy Resources, Mr. Ed Holloway. Sir, please proceed.

Edward Holloway

Thank you, Jessie and thanks everyone for joining us today. We issued a press release this morning announcing our financial results for our fiscal quarter, our third quarter which ended May. We've also filled out our 10-Q which is available via the investor relations section of our website.

We continue to execute on the development and expansion of our assets in the Wattenberg Field which resulted in record revenue this quarter of 12.3 million. Our operating income grew to 4.9 million and generated net income of 3.6 million or $0.07 per share. During the quarter our oil and natural gas production increased 66% over the same year ago quarter to a total 207,543 BOEs. This equates to an average of 2,256 BOEs per day compared to 1,356 BOEs a day in the year-ago period. We also achieved a 9% production growth over the second quarter which is in line with our previous guidance, despite persistent midstream restraint still impacting production.

In May we began drilling our first of five horizontal wells planned on our Renfroe pad. This marks a turning point for the company as we focus on horizontal development of our asset base in the Wattenberg Field. Our participation in non-operator horizontal wells also increased during the quarter. Going forward production from horizontal wells will be our primary growth driver. With the remaining liquidity on our credit facility and the 78.3 million in net proceeds we received from the equity offering we closed on June 19th, we are well positioned to execute on our horizontal drillings plans.

I would like to now turn the call over to CFO, Monty Jennings to go through the details of our financial results for the quarter. Monty?

Frank L. Jennings

Thanks, Ed and good day to everyone. Turning to our income statement, as Ed mentioned our revenues totalled $12.3 million in the third fiscal quarter 2013. This represented a sequential increase of 13% from the previous quarter and up 64% from the same quarter a year-ago. The year-over-year improvement was due to the 66% increase in production which was partially offset by a 2% decrease in our realized average selling price per BOE. During fiscal Q3, 2013 our average sales prices were $83.98 per barrel of oil, $4.76 per MCF of gas, as compared to $91.21 and $3.62 for the year-ago quarter. Our operating income increased to 4.9 million, an increase of 26% from the third quarter of last year.

Net income increased 32% from the previous quarter totalling $3.6 million or $0.07 per basic and $0.06 per diluted share. Net income was up 49% from the quarter a year ago. Adjusted EBITDA, a non-GAAP term increased 19% from the previous quarter to $9.3 million, which represents 76% of revenue and is an increase from $5.8 million a year-ago. Please refer to our more detailed discussion about the use of adjusted EBITDA and its reconciliation to GAAP in our earnings release, which can be found in news section of our website.

Now briefly turning to the balance sheet we continue to deploy capital in a measured and consistent manner with a focus on driving strong production growth. As of May 31st, we had cash and equivalents in the bank of 19.2 million as compared to 19.3 million as of August 31, 2012, and pro forma for the recent equity offering our cash position was 97.5 million.

During the quarter we drew down $3 million from our credit facility with the Community Banks at Colorado, and as of May 31, 2013 we had borrowed $44.4 million. Based on our semi-annual re-determination we announced on June 3rd that our borrowing base increased to $75 million as a result of the increased PV-10 value of our proved reserves to $208 million. The next evaluation will be conducted at the end of our August 31st fiscal year-end. The current interest rate on our borrowings is approximately 3.5%.

We increased our commodity derivative activity during the quarter to mitigate short term price fluctuations in the price of oil. Using swaps and collars we've hedged 310,356 barrels of future production covering the remainder of calendar year of 2013 and all of calendar year 2014. The average price of our swap position is approximately $94.63 per barrel for 2013 and $90.47 cents per barrel for 2014.

During the quarter our hedging position produced realized gains of $38,000 and an unrealized gain of $502,000, both of which were recorded in other income on the income statement. In summary between our cash generated from operations and net proceeds from our recent equity offering we are fully funded to meet our fiscal 2014 CapEx program.

I'd now like to turn the call over to Bill Scaff, our Executive Vice President, who will provide more details of our fiscal 2014 capital expenditure plans and the operational aspects of our business. Bill?

William E. Scaff Jr.

Thanks, Monty. Our solid asset base at Watternberg Field continues to generate positive results, both sequentially and year-over-year. In regards to horizontal wells, today we are participating in 14 horizontal wells as a non-operator in the Watternberg Field. These 14 wells are comprised of Niobrara B, 5 Codell and 2 Niobrara C bench completions. The performance of our non-operator horizontal has been consistent with industry results in the field, including the 2 Leffler Codell wells where we have a majority interest. These two wells contributed to production at the end of the third quarter and they had an average 30 day production, of 365 BOEs per day with an 84% oil content.

In our northern D-J Basin acreage we participated as a non-operator in one well of 4,500 foot length Niobrara B bench well. In addition we have also received another 56 notifications for horizontal wells across our acreage base in the D-J Basin. Regarding our operational horizontal program we commenced drilling the first well on our Renfroe pad near the end of the quarter. The drilling is going according to plan and we recently spudded the fourth of five wells planned on this pad. We expect to finish drilling the final well by early August and proceed to the Leffler pad. At that time we will begin completing the Renfroe well with initial production by late August or early September.

We are planning on a capital expenditure program of $157 million for fiscal 2014, almost entirely focused on the Watternberg Field. We anticipate drilling 20 net operator horizontal wells and participating in five net non-operator horizontal wells and will drill and/or participate in 12 net vertical wells. We also plan on spending 35 million for acquisitions and additional leasehold in the Watternberg Field. We are very excited about the potential growth this CapEx program will provide to Synergy. We remain dedicated to enhancing value to all our shareholders. We thank you for your time and interest in Synergy and we'll now open the call to any questions.

Question-and-answer session

Operator

Thank you. (Operator's Instructions). Our first question is coming from the line of Welles Fitzpatrick, of Johnson Rice. Please proceed with your question.

Welles Fitzpatrick - Johnson Rice

Good morning.

Edward Holloway

Good morning.

Welles Fitzpatrick - Johnson Rice

On that 30 day rate on the Leffler pad am I correct to assume that a two-stream rate.

Edward Holloway

That is correct.

Welles Fitzpatrick - Johnson Rice

Okay, so to true it up they would be something like the fiscal 10% to 15% that folks normally talk about, is that in the right neighbourhood?

Edward Holloway

I would think so.

Welles Fitzpatrick - Johnson Rice

Okay, perfect. And then on the Grennhorn test, do you guys see anything on that, that's going to be targeted moving forward, is it worthy of talking about?

William E. Scaff Jr.

At this point it is productive. We are adding compression to that pad to see what that will help in that determination but it's really not a whole lot to talk about at this point.

Welles Fitzpatrick - Johnson Rice

Okay, and then one last one. Any news from the Carrizo long lateral AFE extension area or the third person working interest AFE from Noble also in that area?

William E. Scaff Jr.

Neither one of them has notified us of a true spud date. They are saying third or fourth quarter of '13, so and that's calendar quarter, so we are expecting in the next four-five months those wells will spud.

Welles Fitzpatrick - Johnson Rice

All right, perfect. That's all I have. Thanks so much.

Edward Holloway

Thanks, Welles.

Operator

Thank you. The next question is coming from the line of Irene Haas with Wunderlich Securities. Please process with your question.

Irene Haas - Wunderlich Securities

Hi, can you hear me okay?

Edward Holloway

Yeah.

Irene Haas - Wunderlich Securities

Okay, maybe just a little follow-up on Nebraska, anything going on at part of the woods?

Edward Holloway

There are things going on. There is several more rigs moving into the area but really nothing from Apache and nothing from a horizontal standpoint. There has been some very encouraging results from some private operators on vertical wells and so since that's made public we will make it public as well. We are watching it very closely.

Irene Haas - Wunderlich Securities

Okay, thank you.

Operator

Thank you. The next question is coming from the line of Gabriel Daoud with Sidoti & Co. Please proceed with your question.

Gabriel Daoud - Sidoti & Co.

Good morning, everyone.

Edward Holloway

Good morning.

Gabriel Daoud - Sidoti & Co.

Just a question on the, I guess the midstream issue and the highline pressure. If you could, maybe just provide some color on that and if things will improve sometime in the summer and then if you could also maybe just give some color in terms of the compression equipment effect on LOEs and how you expect that to trend going forward?

Edward Holloway

The highline pressures, most all of our development for our primary well our development is vertical development and that is what's been impacted the most in the Wattenberg area and if you put it on a scale the singular wells that are in the Wattenberg Field are impacted dramatically, which we do not have a large number of those but we do have maybe 25 of our well count or singular vertical wells.

Then the next area would be our pad sites where we have currently 15 pads on compression which equates to 77 wells which is 44% of our wells. 23 pads do not have compression, which comprises about 97 wells. So we are looking at which areas of the Wattenberg Field really need compression and which do not. This does affect our LOEs and has been the primary effect of our LOEs going up, is just the cost of doing business while these new plants come on line. That's why we have elected to go on a leasing program with the compressors, so when the line pressure alleviates those compressors will be removed going forward.

DCP has notified us that they are still on schedule for probably late August for the new LaSalle plant and they are on schedule for the upgrades to the Lucerne plant. We feel though that with all that coming on it's going to moderate that somewhat but it's still going to be an effect for us for a period of time. Now the horizontal wells do not seem to have been affected by the highline pressure, they are creating the high line pressure. And so that's why we are so anxious to get going on our horizontal side of our production.

Gabriel Daoud - Sidoti & Co.

Okay, great. Thanks Ed. That's all I had guys. Thanks a lot.

Operator

Thank you. The next question is coming from the line of David Beard with IBERIA. Please proceed with your question.

David Beard - IBERIA Capital Partners

Hi, good morning. I was wondering if we could quantify some of the increase in LOE, either in dollars or per barrel related to the compression and looking at calendar '14 where would you expect core underlying LOEs to level out at.

William E. Scaff Jr.

Well, we are actually changing now to a horizontal program. So it's going to be a different component. We actually see the LOEs levelling out at this point, and as we go to a horizontal program, certainly from an LOE basis the point we level out will actually start to come down as we continue the horizontal program. As we said the compression, what's increased thus far is putting compression in all these single well pads and as Ed just stated as we move forward we are not going to have that same problem on horizontals. So we see them levelling out and actually going down overtime.

Edward Holloway

In terms of the current quantification we'll spend about a $100,000 a quarter on compression.

David Beard - IBERIA Capital Partners

So you have been adding extra compression, all right. Thank you, that's helpful.

Operator

Thank you. The next question is coming from the line of Jeffrey Connolly with Brean Capital. Please proceed with your question.

Jeffrey Connolly - Brean Capital, LLC.

Hi, guys, the Grennhorn well, the wells mentioned earlier, is that in the Northern extension area or in Hume County.

Edward Holloway

Neither, that's in the Wattenberg Field. We elected to do a Grennhorn test on one of our pad sites, with this high line pressure it's not fair to give you a true number but it is productive, six, seven barrels a day, 20 to 35 MCF. We are really watch -- we will be putting compression on that pad site to see if that improves from that standpoint. It does look like it's going to be a good secondary or third zone to look at, later on in the life of that well bore, but probably would not be a primary target.

Jeffrey Connolly - Brean Capital, LLC.

Okay, and then you plan to or you expect to drill two test wells in the northern extension area in the next seven months. Can you give us some color on if will be vertical or horizontal and what the target zones will be?

Edward Holloway

Yeah, the two we are looking at are, one of them is in Grover, under our Orr acquisition. We are currently looking at seismic that is in the northeast extension are and we will be drilling that within the next couple of months. The other one is with Vecta. That's definitely a test well in the Grennhorn and the D Sand and the Niobrara also. So we will be drilling that prior to October 31st. We will take five cores on that and look at a possible Grennhorn horizontal well.

Jeffrey Connolly - Brean Capital, LLC.

Okay, thank you and then can you just provide us an update on the Hume County well also?

Edward Holloway

Yes, it's currently in production in the Niobrara. They are putting it on a pumping unit to move water, which is normal in that area and we do not have the latest results from that well but it was in, somewhere around the 100 MCF falling on the pump a day.

Jeffrey Connolly - Brean Capital, LLC.

Thank you very much. That's it from me.

Operator

Thank you. The next question is coming from the line of David Snow with Energy Equities, Inc. Please proceed with your question.

David Snow - Energy Equities

Yeah, hi. How has the drilling of the horizontals gone? If you had any -- encountered any difficulties or is it going as per plan?

Craig Rasmuson

Dave, it's been going like clockwork. It's going to plan. It took us a little while to get the first one under way simply because [Anson] had brought the rig in from the yard and was more mechanical issues that drilled to plan, our geologists, our engineers are really, really excited about the well bore that we created and we are excited for getting the fifth one drilled here, through the rest of this month, finish the fourth one here over the next ten days, get the fifth one drilled and get them to completion, get in production. We have our tank battery built; we have a gas line in there already. So we will be able to go immediate production after completion.

William E. Scaff Jr.

We are right in the middle of the fourth well and as Craig said the first three wells have gone exactly according to plan and we are very pleased.

Edward Holloway

Right and we are planning on what 17 stage track on the first two and…

Craig Rasmuson

19, 18 and 19.

Edward Holloway

Okay we are planning on our first well 17 stage, which is a Niobrara, 18 stage on the Codell and 19 stage frac on the second Niobrara well going forward. That's all predicated and how it gets landed and how many we can put in once that final well that goes in. So we will be somewhere between 17 and 19 stage frac across the board on all wells.

William E. Scaff Jr.

So we will have all five wells drilled by the end of this month and we will immediately start completing in early August.

Edward Holloway

Right and we are using sliding sleeve and swell packer type of completion.

David Snow - Energy Equities

Okay. Sliding sleeve the -- that's been used over there in Wattenberg or are those using plug and perf or what?

William E. Scaff Jr.

It is the primary 95% are using sliding sleeve with swell packers.

David Snow - Energy Equities

I am wondering how close space do you put the perfs in those I mean those stages in the…

William E. Scaff Jr.

200 feet.

David Snow - Energy Equities

Okay. Is that pretty standard also or they…?

William E. Scaff Jr.

Well, it's somewhere between 200 and 250 is kind of the standard between the operators.

David Snow - Energy Equities

Okay. And I am wondering jumping back over to the Nebraska, is Apache, where is Apache standing in there? Last I heard it was slowing down little bit, what's going on there now?

Edward Holloway

We have no news from Apache at this point, all the activity right now and there is quite a bit of activity, more rigs are moving in but they are all vertical rigs with some known discoveries but we can't announce because we haven't had any official announcements from anybody but we are watching it on a daily basis.

David Snow - Energy Equities

Are those vertical rigs indicating just the early stage or is that look like it will be a vertical play from what you can tell from what's happened so far.

Edward Holloway

Well it's a vertical play right now, we just haven't had anybody test the horizontal element.

David Snow - Energy Equities

Okay. And so…

Edward Holloway

It is a very viable vertical play right now.

David Snow - Energy Equities

Okay. And so as far as Apache is their activity still strong or is it down?

Edward Holloway

I couldn't tell you.

David Snow - Energy Equities

Okay, all right. Thank you.

Operator

Thank you. Our next question is coming from the line of Steve Berman with Cannacord Genuity. Please proceed with your questions.

Stephen Berman - Cannacord Genuity

Thanks. Most of my questions have been asked and answered. Just one clarification you said you had two wells that had an average 30 day rate of 365 BOE, 80% oil, I missed what formations those two wells were in.

Edward Holloway

Both of those are in the Codell formation. And they are exhibiting exactly what PDC has been announcing, a very moderate decline curve compared to the Niobrara, and they are both standard length.

Stephen Berman - Cannacord Genuity

Thank you. That's it, thanks guys.

Edward Holloway

Thanks, Steve.

Operator

Thank you. The next question is coming from the line of Rob Young with William Smith. Please proceed with your question.

Robert Young - William Smith & Co.

Hey, good morning guys.

Edward Holloway

Good morning.

Robert Young - William Smith & Co.

Would it be reasonable to assume that production growth on a sequential will be hitting your mid to high 20 historical growth rate once we get into '14?

William E. Scaff Jr.

The fourth quarter will not, it's going to remain fairly flat with the third quarter, but as we go into 2014 we are going to see substantial growth because of these five Renfroe wells coming online and then moving immediately on to the Leffler pad. So with the real strong growth of horizontal program going into 2014 we see strong sequential growth in daily production.

Robert Young - William Smith & Co.

And with the horizontals coming online would you expect to be horizontal EBITDA margin relative to what your verticals are? You think that's going to be a little bit better you are talking about how the LOEs are possibly going to go down?

Edward Holloway

Yes, we do expect the EBITDA margin on those wells overtime to be better. The way on a horizontal it starts out a little high because of some start-up issues, but over time we do expect to get some economies of scale out of those horizontals.

Robert Young - William Smith & Co.

Okay. And you have talked about your CapEx plan for the next fiscal year. How should we look at it on a quarterly basis, did we talk about that at all?

Edward Holloway

Well, from the standpoint of, as you can see we are drilling these the first five wells throughout this third quarter, the next Leffler pad I think is six wells and that's going to really go into our first quarter throughout the first quarter, and at the very end of the first quarter we should be starting on our third pad. So our first 17 wells are really the third-fourth and first quarter and first quarter -- and second quarter of 2014.

William E. Scaff Jr.

Yeah, we expect a pretty steady continuous pace on the wells we operate. What we are never quite sure about of course is how much impact non-operators have on any given quarter.

Robert Young - William Smith & Co.

Okay. And then just lastly on the acquisition portion of your next CapEx plan. I mean you are looking to target the Wattenberg, the Colorado areas and expanding Nebraska.

William E. Scaff Jr.

We are really targeting the Wattenberg Field. There is a lot of smaller operators that we're continually talking to that are able to keep up with the capital demands that horizontal drilling brings to the table. So we're looking at all sorts of different combinations of things that we might be able to do with some operators. So that's just on-going daily business transaction and conversation.

Robert Young - William Smith & Co.

Okay, great. That's all I have. Thank you very much.

Operator

Thank you. The next question is coming from the line of Richard Dearnley with Longport Partners. Please proceed with your question.

Richard Dearnley - Longport Partners

Good morning. Is it likely that the options in warrants outstanding will get exercised by the end of '14 or would you anticipate extending those like you did yours?

Frank L. Jennings

No, we are not looking at extending those. With our stock price in excess of $6 we see those being exercised between now and exploration date that brings approximately 53 plus million to the company. So it's going to help with our 2015 CapEx.

Richard Dearnley - Longport Partners

Right. Okay, thank you.

Operator

Thank you. Our next question is coming from the line of Jack Aydin with KeyBanc. Please proceed with your question.

Jack Aydin - KeyBanc

Thanks. Hi, guys.

Edward Holloway

Hi, how are you doing Jack?

Jack Aydin - KeyBanc

Good. You mentioned that you have five net non-operating wells for 2014. Is that before or after what you got 56 notification?

William E. Scaff Jr.

Well, that's including the 56, that would be including those 56 horizontal indications, but we do not know that we are giving up a one year, basically a one year notice from most of all operators as to what their plans are. We just do not know how they are going to fall into our funky year-end. So that is just a clogged number best guess estimate at this point. It could be way more than that going forward but we are a capable credit facility to handle that.

Edward Holloway

And then Jack, our average working interest in those wells is right around 8%. I think the first 20 wells were right at 20%, remaining wells averaged around 8% working interest.

Jack Aydin - KeyBanc

If you were to break it down percentage wise, who those notifications are from? You know who you are participating with, percentage wise of those 56 wells?

Edward Holloway

I would say it breaks down to about 45% Noble, 20% PDC, 10% EnCana and the rest are various operators.

Jack Aydin - KeyBanc

Okay. And also comment on DD&A. Your DD&A gone up, I understand, but what basically going forward you think will those horizontals wells that is it is a number that we should use going forward or should we bring it down little bit or to move this up little bit, what do you think?

Edward Holloway

At this point, the basis for our depletion rate includes very little reserves from the horizontal wells. We do expect the reserve engineers to begin adding reserves to those horizontals. Significantly, next year we may get some of them in the reserve report for August. But I do think as we begin, as the industry begins to recognize the full value of these horizontals the reserve numbers will go up which will drive down the DD&A rate.

Jack Aydin - KeyBanc

Thanks a lot. That's all from me.

Operator

Thank you. And as a reminder, ladies and gentlemen (Operator Instructions). Our next question is coming from the line of Philip Wilson, a private investor. Please proceed with your question.

Unidentified Analyst

Thank you very much. I really appreciate the tremendous work that the team is doing for all the stockholders. Couple of questions, how long are the actual laterals, average wise of the horizontal wells that you are drilling?

William E. Scaff Jr.

I can give you an overview blush of all that between all our non-ops and what we are doing. And currently 85% of the laterals are what we classify regular lateral; that's a lateral under 1,000 feet in length. Mid laterals are from 5,000 foot I am sorry. Mid-laterals are from 5,000 to 7,000 fall in that range and then extended laterals are 7,000 to 9,000 foot. So 85% are falling in the regular. The other portion is falling in the mid-lateral and we have only been AFEd on one extended lateral well and that's out in the extended area by Carrizo. We are just not seeing a lot of extended lateral AFEs.

Unidentified Analyst

And then the last question, the wells, the laterals, the horizontals that you are drilling yourself what's the rough average costs into those wells, do you have a rough estimate?

Craig Rasmuson

We are somewhere right between 4 million and 4.5 million, especially on these first wells. But as we move forward we are looking at economies of scale and we hope to get them under $4 million as we move to our second and third pad, that is our goal.

Unidentified Analyst

And can you repeat for me how many fracs in our wells, on our horizontals?

William E. Scaff Jr.

They are going to be between 17 and 19. On our first three, the first well was set was 17 sliding sleeves. The second well, in the Codell was 18 and the last well in the B bench as we said 19. So it is going to be between those 17 to 19 on the last two.

Unidentified Analyst

Okay, I really appreciate again all the things that you guys are doing for all the stockholders.

Edward Holloway

Thank you, Phil.

Unidentified Analyst

Yes, have a great day.

Edward Holloway

You too.

Operator

Thank you. At this time this concludes our question-and-answer session. I would now like to turn the floor back over to Mr. Holloway for his closing remarks.

Edward Holloway

Thank you, Jessie. Synergy is positioned to develop its core assets within the Watternberg Field, and our long term leases across our remaining assets allows us to be patient and watch those areas become de-risked by other operators before we deploy significant capital. We look forward to keeping you apprised of our progress. Thanks to everyone for joining us today and for your interest in Synergy. Please don't hesitate to contact us if you have any further questions. Have a good day.

Operator

Thank you. Before we conclude today's presentation, I would like to take a moment to provide important cautions regarding forward-looking statements made during this call within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as believes, expects, anticipates, intends, plans, estimates, should, likely or similar expressions, indicates the forward-looking statements.

The identification in this presentation of factors that may affect the company's future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the success of the company's exploration and development efforts, the price of oil and gas, the worldwide economic situation, any change in interest rates or inflation, the willingness and ability of the third-parties to honor their contractual commitments, the company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the oil and gas industry for this capital, the company's capital costs, which may be affected by delays or cost overruns, the company's costs of production, the environmental and other regulations as the same presently exist or may later be amended, the ability to identify finance and integrate any future acquisitions; and the volatility of the company's stock price.

I would like to remind everyone that today's presentation will be available for replay through July 24, 2013 starting in approximately two hours. Please refer to this morning's press release for dialling instructions. A replay of the audio webcast will also be available via the company's Investor Relations section at www.syrginfo.com.

This ends our presentation. Thank you for joining us today. You may now disconnect.

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