U.S. Markets close in 5 hrs 28 mins

Apache's CEO Presents at 2013 Annual Shareholder Meeting Conference (Transcript)

Apache Corporation (APA)

2013 Annual Shareholder Meeting Conference Call

May 16, 2013 11:00 am ET


G. Steven Farris – Chairman and Chief Executive Officer

P. Anthony Lannie – Executive Vice President and General Counsel


G. Steven Farris

Good morning ladies and gentlemen. Welcome actually it’s now about 10:01 in the Annual Shareholders Meeting of Apache Corporation is called [the work]. Before proceeding to the business of the meeting, I’d like to introduce the directors and officers of Apache Corporation who are present.

First I will introduce the nominees for election to the Board of Directors today, Gene Fiedore; Chanso Joung; Bill Montgomery. Continuing to serve as a Directors are Randy Ferlic; A.D. Frazier; John Kocur; Jeff Lawrence; Rod Patton; Chuck Pitman; and myself Steve Farris. Also with us is Patricia Graham, who is retiring as a Director today night. We thank her very much for her 11 years of service. Thank you, Pat.

Officers with us today include those seated to my right, Roger Plank, President and Chief Corporate Officer; Rod Eichler, President, and Chief Operating Officer; Anthony Lannie, Executive Vice President and General Counsel, and Cheri Peper, Corporate Secretary.

I’d like to also introduce the officers and the audience and would you please stand as I introduce you. Mike Bahorich, Executive Vice President and Chief Technology Officer; Tom Chambers, Executive Vice President and Chief Financial Officer; Margie Harris, Executive Vice President, Human Resources, Jon Jeppesen, Executive Vice President of Gulf of Mexico Regions, Kregg Olson, Executive Vice President of Corporate Reservoir Engineering; Tom Voytovich, Executive Vice President of International Operations; Matt Dundrea, Senior Vice President, Treasury and Administration; Bob Dye, Senior Vice President, Global Communications and Corporate Affairs; Janine McArdle, Senior Vice President, Gas Monetization; Sarah Teslik, Senior Vice President, Policy and Governance; John Christmann, is John here, John Christmann, Regional Vice President, Permian; Rob Johnson, Regional Vice President, Central Region and I guess Rob didn’t make it, Cory Loegering, Regional Vice President Deepwater; Paul McKinney, Regional Vice President, Gulf Coast Onshore, Faron Thibodeaux, Regional Vice President, Australia.

I guess Faron didn’t make it either; Mark Bright, Vice President, North America marketing; Alex de Alvarez, Vice President of Security; David Gilbronson, Vice President, International marketing; Jon Graham, Vice President, Environmental, Health and Safety, Rod Gryder, Vice President, Audit, Becky Hoyt, Vice President, Chief Accounting Officer and Controller, Graham Lawton, Vice President, LNG projects, Aaron Merrick, Vice President, Information Technology, Obie O’Brien, Vice President, Governmental Affairs, Brady Parish, Vice President, International and Investor Relations, Nick Ricotta, Vice President and Associate General Counsel, Jon Sauer, Vice President of Tax.

We have a number of guest in the audience and it’s always a pleasure to have you here and we also – I understand have some shareholders, which we besides Apache employees and ourselves. So thank you very much for coming. We also have the group from Ernst & Young, Marcelo Donato, Brad – actually reads all with Ernst & Young and the company’s independent auditors for 2012 and 2013.

Now for the formal business of the meeting, our meeting this morning will be conducted in accordance with the agenda and the rules for the conduct of stockholders meeting. Copies of both were available when you enter the room. I appoint Ms. Peper as Secretary of the Meeting and Mr. Lannie as Parliamentarian; Mr. Lannie, for the notice of the meeting duly and properly mailed and our inspectors of elections process.

Unidentified Company Representative

Yes Mr. Chairman the proxy statement and notice of Annual Meeting will be mailed to stockholders on April 3, 2013. We have an affidavit to that effect of Wells Fargo bank and samples of the items mailed. Also available for inspection is a certified list of the stockholders of record as of the close of business on the record date March 18, 2013, which has been available in its company headquarters for the past 10 days.

As of March 18, 2013, there were 391,842,153 shares of common stock outstanding and eligible to vote at this meeting. Of these shares, 330,629,247 are represented today either in person or by proxy, which constitutes approximately 84% of all outstanding shares which is a very good turnout.

A quorum is present and the meeting may proceed with business. Robert Nowak, Rajesh Sharma and Jay Schultz have been appointed as Inspectors of Election to receive the proxies, judge the qualifications of voters, prescribed rules for voting, collect and count votes, report the results of the ballots and to perform any other duties that may be required.

The minutes of the last annual meeting of stockholders held at May 24, 2012 are available for inspection. Unless there is an objection, reading of these minutes will be waived. The company did not receive timely notice of any other director nominations by a stockholder as required by laws therefore the nominations are closed.

The polls are now open. If you have already returned your proxy, a ballot vote is not necessary. If you wish to vote by ballot, you may obtain one from the Inspectors of Election. Items of business, number one through three for this year’s meeting or the Election of Directors. The Directors elected at this meeting will serve for a period of three years, starting today and ending on the date of the Annual Meeting in 2016. I earlier introduce the nominees and I hereby declare then duly nominated.

The fourth item of business for this year’s meeting is Ratification of Ernst & Young as Apache’s independent auditors for fiscal year 2013. This matter was fully described in the proxy statement, provided to all stockholders. The fifth item of business for this meeting is an advisory non-binding vote to approve the compensation of the Named Executive Officer. This item was discussed in the proxy statement, provided to all stockholders.

The sixth item of business for this year’s meeting is approval of an amendment to Apache’s 2011 Omnibus Equity Compensation Plan to increase the number of shares of Apache’s common stock authorized for issuance under the plan. This matter was fully described in the proxy statement provided to all stockholders.

The seventh and final item of business of this meeting is the approval of the amendment to Apache’s Restated Certificate of Incorporation to eliminate the classified Board of Directors provide for annual election of all Directors. This matter was discussed in the proxy statement provided to all shareholders, the path at least forfeits 80% of the shares outstanding and eligible to vote, must be voted for the amendment. If any shareholders are voting in person, I suggest they complete their marketing of their ballots for the Inspector of Elections, please collect all ballots at this time.

The polls are now closed Mr. Anthony. Do you have the results?

P. Anthony Lannie

Yes. The Inspectors of Election have reported the following results. Each nominee for the Office of Director of the company has been elected by an average of approximately 94.36% of the shares present and voting. The ratification of Ernst & Young as Apache’s independent auditors for fiscal year 2013 has been approved by approximately 98.6% of the shares present in voting. The compensation of the named executive, officers as disclosed in the proxy statement has not been approved having received votes for – from 49.82% of the shares present in voting.

The amendment to the 2011 Omnibus Plan was approved by approximately 84% of the shares present in voting. The amendment to Apache’s Restated Certificate of Incorporation to eliminate the classified Board of Directors has failed having received votes for the amendment – in favor of the amendment from approximately 73.88% of the shares outstanding eligible to vote.

I hereby declare that the three nominees for Directors have been duly elected, the ratification of auditors have been approved, the compensation of the named executive officers have not been approved. The amendment to the 2011 Omnibus Plan has been approved. The amendment to Apache’s Restated Certificate of Incorporation to eliminate the classified Board of Directors has been approved – has not been approved less than 80%.

Now after no other business to come before the meeting, the formal meeting is adjourned and we will begin our presentations but before I do, do we have any shareholders that have any questions before I began the presentation.

We’re going to change gears here, well I’m sorry. Could you please come with mike?

Question-and-Answer Session

Unidentified Analyst

Good morning.

Unidentified Analyst

Good morning. My name is [Edward Casey] and I’m a shareholder. I wanted to ask couple of questions, but will you have a Q&A after your presentation, did you might answer to my question in the course of your presentation? Third one, will you have a question session after you make your presentation or do or I should I ask my question now. You might answer my question.

G. Steven Farris

You’re welcome to either ask it now or you can ask it after the presentation.

Unidentified Analyst

I’ll ask it afterwards. Thank you.

G. Steven Farris

Thank you. Well, now we’re going to switch gears a little bit and we have a tremendous number of Apache employees here and we also have some of our shareholders and very respected guests. And what I would like to do today is talk a little bit about what we talked on our first quarter earnings conference call.

But in order to do that, I think it’s important to go back in Apache’s history and see about where we are today. Really it fits into that evolution. And that’s a forward-looking statements, it say some of these things, I might say are forward-looking statements and taken effect.

This is an interesting slide. This is the last 20 years of Apache’s history and actually it brings back a lot of memories because if you went back about four more years, which was 1988, June 27 of this year, I’ve been with Apache, 25 years and we’ve had a tremendous growth over that number of years. In fact, when I got to Apache in 1988, we were producing 45,000 barrels of liquids, or oil and gas a day, that’s the size of our Argentina region today, which is 6% of Apache’s production. It looks like that slide goes up under the right and it’s all easy and everything makes a lot of sense.

But I would tell you, all those were tough years, not unlike what we’re going through today, and I’m going to try to give you some snapshots through those years as different life cycles and I totally believe that corporations have life cycles just like people have life cycle. And I think you’ll see different life cycle through that 20 year history and the life cycle that we’re in today.

Before I do that, I want to talk about 2012. We had record production, it was up 5.4%. Adjusted earnings were $3.8 billion. Cash flow was $10.2 billion. We replaced a 131% of our reserves. We had tremendous dividend growth. So why you might ask is our stock.

It’s really two things and I’ve had this conversation with all our employees over the last several months, several weeks. It’s really two things, one is we’ve got a great company, we do a great job, but we did in the last four, five quarters, we haven’t done we said we’re going to do.

We have missed estimates and we cannot make commitments to our shareholders that we don’t move. The other one is, is our position in Egypt. And although, we can talk about success, which I am of Egypt, it’s still a concern for our shareholders. We’re very aware of that concern, so I’ll talk about it when we go through the presentation. We did a lot of important things in 2012. We doubled our position in the Anadarko Basin and I’ll show you a little bit about where we transitioned this company over the last three years.

One of our tremendous growth there is in the Anadarko Basin and one of the things we did was buy Cordillera, which was a huge acreage position in that part of the world. We also expanded our Kitimat LNG Project; Chevron is our new strategic partner, one of the most renowned LNG players in the world. We did increase our equity interest in the downstream by 50% and probably most importantly we contributed one of the largest shale gas fields in North America (inaudible) through that partnership.

I often get the question, “Will that project go forward?” That project will go forward at this economic.

We repositioned our portfolio. North America Onshore liquids growth, I’ll show you that in a minute, it’s been fantastic. And we also expanded our North American drilling inventory. We’ve had very profitable growth over the last 10 years. This is the last decade, reserves per share, production per share, cash flow per share, adjusted earnings per share. Take that slide and put it up against many of our peers is very good result.

One of the biggest great cards for people in our industry is return on capital employed and return on equity, that’s how much money we give back to shareholder, how much we make on every dollar we invested. Over the last three years, over the last five years, over the last year, Apache Corporation is one of the head, one of the highest ROCEs and ROEs in the industry. We played very good credit card for performance.

Now, I want to talk a little bit about that slide, I talked about earlier. With all these going in right and every thing, we really have different life cycles. If you look back to 1993 to 1997, that was our first entry into international. The interesting thing about that time is that as I’ll show in a minute, we talk about just to grow. We also told about a third of the properties of Apache at that time. We were much smaller.

Then in from 1999 to 2003, we continued our international expansion and as you can see in the last part of that graph, where we are right now. We’re in the next life cycle of Apache. This is just a tabular form of that same information. We expanded our provisions in 1999 to 2003 we expanded our position in North Sea, Egypt and Canada. We did a little bit of step in the Gulf of Mexico. And in 2009 to 2013 you’ll see, we really increased our North American onshore liquids.

We get a lot of questions about Midland acquisition. If you look at relative size of the acquisitions we made in the last three or four years, actually it’s smaller than the acquisition to change this company back from 1993 to 1997 and 1999 to 2003. We double the company over those two periods of time. This is a difference between 1993 and 1997. You don’t have to read all the numbers from that chart. I think if you just look at the blue, the growth and the blue, because the blue is outside of the United States. We have tremendous growth internationally during that timeframe.

So talk about a little bit about the coming lifestyle. And the point I really want to make is, in 58 years, we’ve done this several times. We really embarked on that portfolio expansion about three years ago with the idea of strengthening our North American resource plays. We entered the Deepwater in Gulf of Mexico. We made a few tactical acquisitions along the way. But if you look at that chart in yellow, we’ve increased our production 198,000 barrels a day, of that 162,000 or 82% have been in North America.

Over the last several months, we have reviewed that portfolio not unlike we did in 1993 to 1997 or 1999 to 2003 and we come up with a list of assets that will probably be better off in someone else’s hands in our own. And right now, we are targeting selling $4 billion worth of properties this year either in asset monetizations for outright asset sales and we intend as I’ll show you in a minute, we intend to pay down debt, we also intend to buy – repurchase our shares.

This is 1999 to 2003 and the one thing I want to show you on there is the yellow. That what we have done is over time transform this company over the last 3.5 years. We were in the Anadarko Basin in 1954 when this company started.

It has grown more in the last three years than it grew from 1934 to 2009, tremendous growth. If you look at the liquids growth, it’s – or any of our peers are looking for liquids, if you look at selling price for natural gas in this country, if you look at selling price of oil, it’s pretty important to find oil. So we’ve increased our liquids barrel in just the Permian and the Central region by 3.3 times. We’ve increased our Boe per day over doubled it.

So where are we now? We’re growing through the drill bit for the second most active driller onshore U.S. We’re the number one driller in the Permian Basin. We’re the number two driller in the Anadarko Basin. We’re the number one independent operator in the UK, North Sea. We’re the number one gas supplier, domestic gas supplier in Western Australia; we will be by the end of this year.

We’re the number one acreage holder and producer in the Gulf of Mexico Shelf, which is 54% oil, which is very unusual for the shelf. We’re the number one oil producer in Egypt, and the last one is just kind of hang around, there is 50 Tcf of gas in (inaudible), we have the largest single shale gas well, I mean field in North America, something that a lot of people described where we have had a balanced portfolio for a number of years was 53% oil, 47% natural gas and if you look at that split, 83% of our revenues come from oil today.

If you can also look at the split between international gas and North American gas for years, we had a lot of criticism about being in North American, I mean in international natural gas. The fact of matter is last quarter international gas sold to a higher price than North America gas. This is our production portfolio. It shows our North American Onshore production, 44%, this was the first quarter of 2013 by the way.

More importantly, if you look at our resource potential, turns out what is our potential outside the reserves that we have booked. They really lay down in two primary areas, that’s the Permian Basin and the Anadarko Basin. Actually it’s over 88% of our resource potential going forward or now to reach.

This is a very busy time but what we’ve intended to show is the growth from first quarter 2012 to first quarter of 2013. And I think the important thing is you can see the regions that have declined but you can also see our North American onshore liquids grew 45%; our U.S. onshore gas grew almost 30%.

I’m going to digress a little bit talk about Egypt because in Egypt we get paid net of tax. But for general accounting principles, we have to gross that up, get gross revenue and then subtract that. No money transfers between (inaudible). But that squeeze our production coming out of Egypt with a quarter-to-quarter.

As you can see here with reported tax, the company reported 1.6% growth. If you were to taken out that tax, Apache would have grown 3.3%; we need to do a better job of educating our shareholders of these phenomena.

I’m going to talk a little bit about some of our regions and this is the Permian region. We have 3.5 million acres gross, 1.6 million net. We have a most active drill in the Permian Basin right now, we have 42 rigs right. We have a tremendous acreage position in all the major plays in the Permian Basin as you can look at them on there, the Yeso, the Delaware Basin, Midland Vertical Basin, Cline Shale, if you read daily that’s where everybody grown well.

This is ramping up our horizontal development because year-over-year, we grew 18% in the Permian Basin, our liquids growth was 25%, we have proved reserves of over 800 million barrels, that’s about 26% of our company’s reserve, tremendous acreage position.

This is that growth for 2013 in the first quarter, I mentioned we were up 18% in 2012; we should be like that number in 2013. We’re going to spend $2.4 billion, we’re going to grow about 700 total well and more and more is going to be horizontal.

There are couple of plays, one of the things that I get questions about is has Mariner acquisition worked out. It’s been a tremendous acquisition; this is one of the plays we got in the acquisition. This was called Deadwood. Deadwood, we grow on and just in the Permian Basin, we grow 757 wells on Mariner acreage since the acquisition.

It is Deadwood, it’s, when we made that acquisition, it was making less than 2,000 barrels a day. Today, it’s making 16,000 barrels a day and about 60 million cubic feet of gas. It’s one of our Top 10 fields of the company. This is a Wolfcamp Shale. The tremendous play, another horizontal play, you can look down there at the right if you can read this because its small and I apologize. Our IPs, 30 day averages for oil, tremendous economic, we have seven rigs running in this play and we have 450,000 gross acres.

Cline Shale another example, this is an area of its right on top of Deadwood, we’re drilling Cline Shale well horizontal in the Deadwood area, also we had 650,000 gross acres in this area.

We have 2,300 locations and we got four rigs. This is the central region and last year, we picked up a mirror image of the acreage that we already held in the Anadarko Basin. We now have about 2 million acres, about 1 million net. We are the second most active driller in the Anadarko Basin and we have tremendous opportunity. And some of the things that we are doing today was not what people thought we do, when we bought for the year. It is the best play in this area, it is the top of which is (inaudible).

Mike mentioned for those you don’t know, the Anadarko Basin is just a huge stand up. It goes up against the (inaudible) mountain. And it’s about a mile thick and our individual strength is that you can drill horizontal well from 12,000, 14,000 feet all the way up to 6000, 7000 feet.

Our horizontal activity is Central is all horizontal. We got one rig running vertical, which is out in Canyon Wash area. We have 79,000 barrels a day in the fourth quarter that’s a 10% quarter-over-quarter growth. Our liquids production were up 24%, our production replacement 341% and all of the wells, predominantly all the wells we drill are horizontal.

This is their growth position. You can see where we made for the year-end 2012. Our production liquids were up 46% in the first quarter, we grew almost 10% in the first quarter, have the tremendous running room.

Here are some of the plays, I mentioned to talk 650 barrels a day, 719 barrels a day. Cottage Grove was 2000 barrels a day. We’ve been in Anadarko Basin since 1954. We drilled a lot of these wells vertically. They have no potentials to be the kind of rates that they are today. The technology of horizontal drilling has really changed the world as part of it.

I couldn’t – not bring up the idea of driving cost down. But when you drill horizontal wells, you’re exchanging geologic risk or economic risk. And one of the things we have to do as the company and most of you out there are working on is driving our cost down either through reduced drilling days or reducing completion cost.

And you can see on the table down there at the bottom, Wolfcamp Shale, we decreased $1 million and we still have it, you can read the slide. We still have a lot of room to go. But the important thing is that there is – if it’s all economic risk, it’s all on the margins, so the further we can drive those cost down to better off we are.

This is the North Sea, tremendous cash generator for Apache. It’s interesting in 2003 we entered in North Sea and in 2013, which 10 years later BP was scheduled to decommissioning its field, making 50,000 barrels a day, tremendous, tremendous asset for us.

We also doubled our portfolio really at the end of 2011. We discussed one of the premier field, oil fields in the North Sea is Beryl was owned by Exxon. Our cash flow in 2012 was about $1.5 billion, $1.6 billion. We’re going to spend $900 million. So those numbers holdup for 2013, which I have repriced on forecast that was available, we’ll generate $700 million of excess cash out of the North Sea.

And by the way, we just put on a well made 10,346 barrels per day. This is Egypt; we have a tremendous position here. We’ve been here actually the 17 of this month. We will have signed our first concession in Egypt, which was 20 years ago. But we’ve been associated with Egypt for 20 years. They’ve gone through a lot of issues over the last three years, over the last several years. But they’ve always lived up to their contracts. They’ve always done what they said, they were going to do. We generate $2.7 billion worth of cash flow. We spend $1 billion which means we take out of Egypt, $1.5 billion, $1.6 billion that we can use other parts of our business. It’s a tremendous cash generator for us.

We’ve had 17 years of interrupted production growth. It’s been a great story. And there is no reason why we can’t continue, we’ve got 26 rigs running right now. I understand the concern. We are working on ways to value Egypt to our shareholders. But it certainly has tremendous asset value to Apache. These are some of the reasons that company discoveries and I’m not going to read the rates, these make shale wells looking in West Texas or Anadarko Basin for small 1,500 barrels a day, 2,000 barrels a day, 3,000 barrels a day, right rock, tremendous running room.

The other thing we’re doing that we’re spending 20% of our capital on this year, a project that don’t help production in 2013. And in our industry where growth is important, production growth is important, some shareholders don’t like that allocation that could benefit that we’re going to get going forward is tremendous. We have Australian oil developments that are going to bring on about 24,000, 23,000 barrels a day in 2014.

Gulf of Mexcio Deepwater that’s Lucius going to be about 5,000 barrels a day. LNG at Julimar/Wheetstone, Julimar/Wheetstone will come on through late 2016. When it comes on, it will be 30,000 barrels a day equivalent for 20 years at $1.1 billion of today’s prices of gross revenues is here for the next 20 years, tremendous assets. We’re also doing a few things International [Midstream].

This is the Australia brings about 61,000 barrels of equivalent a day in the fourth quarter. 44% oil but their oil is expensive at $111 at rent plus. We’ve got about 70,000 barrels a day expected to come on now that includes Wheatstone, late 2016 and early 2017.

This is the LNG development. We are in Wheatstone and we’re in the fledging project called Kitimat LNG. And I try to tell our shareholders what we’ve done is taking raw material and made it wholesale and we’re trying to make it retail, tremendous optionality value here.

This is our acreage position, if you look on that that might be as big as Houston, that’s 15 miles by 45 miles, huge acreage position, 424,000 acres. We grow wells in here and make 21 million a day with vertical aspects got tremendous swap.

This is the proposal for the Kitimat LNG project. As I mentioned Chevron is our partner. We have not gotten to [Egypt], we are currently marketing Chevron as our lead in the marketing side and we continue to push the project forward in terms of getting ready for FID. So our 2013 plans, we’ve told our investors, we’re going to make 3% to 5%, we have to make 3% to 5%. We’re going to grow our North American Liquids we’re going to spend $4.6 billion or by take $10.5 billion and take two of other, that’s $8 something. So, you’re going to spend almost 50% of our money in two regions.

We’re going to advance projects that we mentioned, some come on early in 2014, some come on later like LNG, we’re working on regrettably both internally within Apache and our contract, contractors, drive our cost down. We’re going to grow our dividend and we’re going to refocus our portfolio. We’re going to sell at least $4 billion of properties again, the reason, I put up that graph is close. This is not the first time we’ve been through this. We’re going to pay down $2 billion of debt to remain flexible and we’re going to repurchase $2 billion worth of shares.

So, where are we going? We got a portfolio that has tremendous growth potential and we’re going to maintain that balanced approach with oil and gas. We’re going to use the money since best and the highest rate of return projects we can, we’re going to grow our North American Liquids. We’re also going to invest in our world-class LNG facility, which really allows us to do what we do best and what we’ve done over the last 58 years. Net allocate capital to make the highest rate of returns, we have to have predictable production. One of the problems we had over the last 12 months is predictable production.

We’re going to continue to exploit our vast opportunities there and we want to continue to create long-term value for the shareholders. I think that’s my last point. I hope you got a flavor of that we have Apache and very excited about what we want. We are not excited about the stock price. We are going to do something about that. The Board and myself and management team are dedicated to doing this. We’re also going to be in Apache and that is we are going to be financially disciplined, we’re going to have a portfolio, and we’re going to go to work every day to make it better.

So thank you very much, I appreciate your attention. I think a gentlemen had a question.

Question-and-Answer Session

Unidentified Analyst

I’ll ask about the fracking of oil across not just for Apache but for all the industry. I don’t know who I should address this too. But on a big scale, oil production in the United States is increasing across the Board and therefore is that causing a revaluation of like stocks not only for Apache but for others because there is more production for all companies and as if the PE ratio is going to be readjusted perhaps because there is more production because of the fracking revolution across the U.S. Somebody have take on that one…

G. Steven Farris

Somebody – where somebody said about it.

P. Anthony Lannie

Were you asking about fracking and…

Unidentified Analyst


G. Steven Farris

The increased fracking and that might affect ground water?

P. Anthony Lannie

No. since there’s more oil being produced and if supply increases then values for stock may reflect that.

G. Steven Farris

The economic front.

Unidentified Analyst


G. Steven Farris


P. Anthony Lannie

The question is what are the economics of hydraulic fracturing and what is the benefit?

Unidentified Analyst

Yes, and is that going to have an impact on value for evaluating the company.

G. Steven Farris

Yeah, all right.

Unidentified Analyst

Increased supply right, what interest rates?

G. Steven Farris

It’s the United States hydraulic fracturing increases the, especially horizontal drilling hydraulic fracturing, some of those wells that we’re drilling in the Permian Basin would make the 100 barrels a day, end of the day they are making 600 barrels, because you opened and have a lot more block. Certainly, we have made a dent in our decline in this country. We’re higher than we have been since 1971 Ron, its something like that 1975.

The real issue with the growth of oil is the amount of, in my opinion, this is truly my opinion, is the amount of capital that it takes to the drill all these wells, because they have become exponential, once you get to eight million barrels a day which about where we are to get to the next million barrels, it takes a lot more capital and took because the eight million did, because you got a price that decline, so although I would like to dream that we’re going to be oil independent, I don’t think, I think that’s far off in the future and probably not proved through horizontal drilling and hydraulic fracturing.

Unidentified Analyst


G. Steven Farris

Well, if there is no other question. Thank you very much for attending the day, and all of you to trust as we’re going to make this company on. Have a good day.

More From Seeking Alpha