Ladies and gentlemen, thank you for standing by. Welcome to the SandRidge Third Quarter 2014 Operations Update Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct the Q&A session (Operator Instructions).

Please note, this call is being recorded, today, Wednesday, November 6, 2014 at 9 o'clock Eastern Standard Time. I would now like to turn the meeting over to your host for today’s call Mr. Duane Grubert, EVP of Investor Relations and Strategy. Sir, you may begin..

Thank you, Operator. Welcome everyone and thank you for joining us on our Third Quarter 2014 Operations Update Conference Call. This is Duane Grubert, EVP of IR and Strategy and with me today are James Bennett, President and Chief Executive Officer and Eddie LeBlanc, EVP and Chief Financial Officer.

We would like to remind you that in conjunction with our press release and conference call, we have posted slides on the Investor Relations part of our web site.

Keep in mind that today's call contains forward-looking statements and assumptions which are subject to risk and uncertainties, and actual results may differ materially from those projected in these forward-looking statements. Please note that this call is intended to discuss SandRidge Energy and not our public royalty trust.

Now let me turn the call over to CEO, James Bennett..

Thank you, Duane. The third quarter represented another solid operational quarter with strong growth, innovation progressing, improved liquidity and hedging and a quality project inventory even at these lower oil prices. First, we’re disappointed with not having financials to report.

As announced in our 8-K and press release, our 10-Q filing is delayed. Eddie will give you additional details, but this is a result of a comment by the SEC that relates to our booking of our annual CO2 under-delivery penalty.

While we don’t have a final resolution of this matter with the SEC, the issue under discussion relates to the timing and periods where we booked the under-delivery. And, let me stress that we don’t believe this impacts other areas of our business, other internal controls or accounting and is isolated to this one issue.

You will notice that our earnings release does not contain financials and is an operational update. While we don’t have filed financial results for the quarter, I do believe that our results were in line or exceeding expectations.

Turning to operations, a solid operational performance is one of the consistent themes you will see in our results this quarter. Production growth continues to be strong and on track with our expectations, driven by another group of good mid-continental wells and ongoing improvements in our base PDP performance.

Mid-continental production grew to 67,000 barrels of oil equivalent per day, a 19% increase over last quarter and a 39% increase from Q3 last year. Total company production grew to 80,000 barrels of oil equivalent per day representing the 14% increase from last quarter and 26% growth rate from pro forma third quarter 2013.

Notably and on a pro forma basis, total company liquids production was 3.8 million barrels, an increase of 37% from Q3 of last year. With all of our wells in the mid-continent now subject to a gas percent-of-proceeds processing agreement. Overall, 30 day IPs for 122 laterals averaged 368 BOE per day, 16% above type curve.

Also I am very happy with the improved consistency of IPs that we’re seeing around that range. Keep in mind; we’re very focused on returns and net credit value. So IP is around 350 a day with well cost of 2.9 million and LOE well under $10 per barrel generating very competitive returns even at a lower commodity price.

Due to strong production in the third quarter, we’re tightening our full year guidance production range and raising the midpoint by approximately 200,000 BOE to 28.7 million barrels of oil equivalent from 28.5 with the increase coming from NGLs and gas. This represents a 20% to 23% growth over 2013 production adjusted for asset sales.

In terms of new growth projects, we’ve realized continued success with new zones in both our Chester and Woodford programs. In the Chester, we delivered 10 laterals to sales in the third quarter and 27 total laterals since the program’s inception, with 10 additional laterals planned in Q4.

The third quarter Chester IPs are averaging 252 BOE per day with 67% oil, with this high percentage of oil and flatter initial decline our Chester well returns are on par with our Miss program and at a nice level of diversity to our Mid-Continent position. We’re also pleased with our second geologic test of the Woodford.

The second well came online during the third quarter with a 30 day IP of 382 BOE per day and 88% oil. This was comparable to our initial well announced last quarter. With these successes driven by our new geological model, we have a two rig Woodford program planned for the remainder of this year.

We’re focusing not only on growth projects also continuous improvements to our base operations. Per lateral program costs were $2.9 million in the third quarter in line with previous results. We expect this per lateral CapEx to move around a bit as the mix of Chester and multilateral drilling changes from quarter-to-quarter.

Additional cost savings efforts are underway such as expansion of produced water fracs and the increased use of ball drop completion technology.

As we expand these efforts, introduce new cost saving initiatives and having already achieved our 2014 cost goal of 2.9 million per lateral, we’re confident in our ability to continue to reduce costs and achieve our target of lowering cost by 100,000 per year for the next several years.

Capital efficiencies were the main drivers behind our multilateral program. For the quarter our multilateral well cost averaged 2.4 million per lateral versus 2.9 million on a single well. This program comprised 21% of our lateral spud in the quarter and 11% of laterals completed.

30 day IPs were 273 BOE per day for the quarter, even with the lower 30 day IP driven by the lower well costs and a shallower initial decline in a single well type curve early program results indicate that multilateral projects are generating 30% better return than Mississippian single lateral type curve predicts.

While still early in the program in determining the best prototype well configuration for given geological settings, we’re seeing the benefits of this capital, efficiency initiatives. Look for continued application of this design in our 2015 program.

In the last quarter we discussed some power outages and reliability issues that impacted our production.

Since then it seemed to work diligently and rolled out several modifications to improve power reliability including a new sub-station in Garfield County, Oklahoma planned in the fourth quarter and strong ESP auto restarts on new wells and retrofitting existing ESPs, upgrading main trunk lines and plans to add 30 megawatts of power in 2015.

We’ve start to see the benefits of these initiatives and we’ll continue to finish this program in 2015. Our other infrastructure asset is our water gathering business. We project to have invested over 120 million in this business in 2014 and at year-end expect to have accumulated of 600 million invested.

Recall that we own approximately 73% of the system. At the end of the third quarter with 201 disposal wells, 185 in the Mid-Continents, 16 in the Permian we had growth disposal capacity of 2.6 million barrels of produced water per day and our system disposed of 1.2 million per day.

As we’ve said in the past, this disposal system and our three phase electric power distribution network provides us the real competitive advantage in terms of being able to cost effectively operate and make on.

These systems which we have been investing in and developing for years coupled with the concentrated acreage position in our focus area allow us to effectively develop the play and generate very competitive returns.

We increased our CapEx slightly by 75 million to account for additional back half of the year seismic and land specking in areas where we’re seeing our best results. And final Permian trust drilling cost inflation and some closing cost related to our early 2014 Gulf of Mexico sales.

Importantly our core Mid-Continent drilling and completion CapEx remains unchanged at 1 million. Our stock buyback we repurchased 27.4 million or 5.6 of our outstanding shares, spending $111 million of our approved 200 million buyback.

We still have just under 90 million of buyback program and going forward we will continue to evaluate the best use of our capital taking into account our 2015 drilling program, net asset value, commodity prices, our hedge position and our leverage.

On our hedge, we are very well hedge with over 10 million barrels of oil at just over $90 a barrel and 15 Bcf of gas at 450. And in 2016, we have another 4 million barrels of oil hedged.

To put the 2015 hedge into the context, if you were to use 2015 [Indiscernible] consensus production guidance for SandRidge, that puts us about 70% of liquids production assuming a 3:1 for NGL and about 75% of oil production hedged, which is we believe one of the highest of the independent E&P companies.

In terms of our strategy and plans for 2015 and beyond we are a high growth company and our 39% year-over-year Mid-Continent production growth supports that. Our strategy to generate the best return for our shareholders is to turn our Mid-Continent asset base into cash flow and close and attain self-funded status.

Looking forward to 2015, I will say that we recognized the contraction of oil prices and given the effects we will be lowering our 2015 CapEx from the previously indicated 1.55 billion level. Once we get board approval in the next couple of months we will roll that budget out publicly.

With the lower level of spending anticipated in 2015 keep in mind these important data points. We are very well hedged for 2015 at attractive prices. Our industry leading well costs allow us to still generate a 40% return on our wells at $80 oil price.

We have $1.5 billion liquidity and no bond maturity in 2020 so look for us to protect our cash flows and balance sheet in 2015 while still providing meaningful growth and capital efficiency.

On October 24, we filed an S-1 registration statement with the Securities and Exchange Commission for Initial Public Offering at MidCon Midstream Partners LP, a master limited partnership designed to own part of our water gathering business. The SEC imposed significant restrictions on what we can say publicly about the proposed MLP IPO.

Accordingly, we encourage you to read our earlier press release and registration statement. I know people want to ask about it but I will be unable to answer any specific questions you might have about the proposed MLP on this call or otherwise.

I do believe that the value creation of this MLP is in the long-term best interest of SandRidge shareholders by highlighting the value about water gathering, midstream assets and providing a source of funding to continue to develop our business. At closing of the IPO, we would expect proceeds to SandRidge of between 200 million and 250 million.

The transaction is subject to SEC review and will require to receive a private letter ruling from the IRS. One thing to note on that front is that the IRS is the middle of a pause with respect to the issuance of PORs. And therefore, we don’t know the exact timing when we might receive the POR.

In closing, on the production side, we had a great 19% quarter-over-quarter growth and raised the midpoint of guidance. New initiatives Chester and Woodford programs are both advancing, our innovative multilateral program is working and we have one of the strongest oil hedge positions in the industry.

We remain very cognizant of the changes in the oil landscape and we’ll modify our plans as needed. So look for us to come out with the 2015 budget that is lower and more capital efficient.

However, with our high return projects base of existing production and cash flow, hedges and liquidity, we are very defensively positioned in this current environment. Finally and importantly, I want to thank our dedicated team of employees here in the headquarters, in the field in Oklahoma, Kansas and Texas.

It’s you’re working safely and diligently everyday to achieve our goals and develop this culture of continuous improvement that make SandRidge successful. Now let me turn the call over to our CFO Eddie Leblanc..

Thanks James. At this point of the call, I usually delve into the financial results with the quarter and the year-to-date discussing pro forma comparisons for quarter-over-quarter and year-over-year.

Unfortunately, this time we’re not able to discuss financial results due to not yet having concurrence with the SEC regarding the recording of the CO2 under-delivery penalty associated with the Century Plant contract.

In 2012, based on our review of accounting literature, we determined to book any annual under-delivery penalty in the fourth quarter of any year a penalty was there. This is an executory contract with annual volume requirements and delivery make up provisions. Any under-delivery penalty and associated invoicing is done annually.

Therefore we believe we correctly applied GAAP, specifically ASC 450 by booking the liability on an annual basis at the end of the year once we know the actual penalty. We have received unqualified opinions in 2012 and 2013 from our external auditors using this approach.

As explained in our 8-K filed November 4th our press release dated that same day and in our operational update released on November 5th the SEC as part of the routine review of our 2012 10-K has informed us they believe a different accrual period quarterly is more appropriate.

We are still working toward resolution with the SEC and don’t have a final answer. We believe that likely the IP outcome will move us reclassifying previously recorded liabilities into earlier quarterly periods and accruing an estimated penalty for 2014 oil.

We’re disappointed in this outcome but believe our team made a reasonable application of accounting principles. This is a complicated set of circumstances that we believe lend themselves to more than one reasonable accounting interpretation. And the SEC has a different interpretation of the applicable accounting period.

Until we have concurrence with this quarterly recording of the accrual of the probable annual liability we cannot publish financial statements or file our third quarter 10-Q. we cannot predict the time required for the SEC and the company to reach concurrence on this issue.

We will work diligently to get our restate Ks and Qs in the third quarter 2014Q filed as soon as possible. In October, we completed revisions to our bank credit facility. Borrowing base was increased from $775 million to a self-initiated facility limit of $900 million.

So when combined with our cash position at September 30th of $590 million our undrawn facility provides us with liquidity of $1.5 billion. Our reserves supported a borrowing base of $1.2 billion. So upon written request we can expand our liquidity by another $300 million.

In addition we lowered our margin rate by 25 basis points and extended the maturity to 2019. Based on the continuing high level of liquidity any capital expenditure program we developed for 2015 will be more than adequately fronted. Our senior notes total $3.2 billion at quarter end for a net debt position of $2.6 billion.

We have no note maturities before 2020. We have updated guidance for 2014 we have tighten the range of production to account for improved third quarter performance. To arrange between 28.3 million BOE and 29 million BOE and adjusted oil and natural gas differential is down for currently experienced realizations.

We lowered the production tax range to account for the decrease in all price and lowered the G&A range due to our current reduction and long-term incentive cost. Cost of our long-term incentive program fluctuates with our stock prices.

Additionally we increased guidance for capital expenditures but the increase coming primarily from expanding our current acreage opportunities in and around our focus areas and the acquisition of 3D seismic. That concludes my remarks and operator please open the call for questions..

(Operator Instructions) Your first question comes from the line of Neal Dingmann from SunTrust. Your line is open..

Hey guys good morning this is Will for Neal.

Couple of questions looking at your MidCon basically overall activity around the Woodford, how do you all think about that going forward I know you talked about increasing that obviously their initial results are pretty positive but how should we think about that for next year?.

Sure, Will this is our new geologic model that we came up with targeting thoroughly mature Woodford zones with frack barriers that does allow for more effective stimulations if you remember some of the initial Woodford wells we drill we believe we’re fracking out of the zone and stimulating non-productive and high water variant zones.

So this is our second successful well we have two rigs running remainder of the year for the Woodford program but look for us when we come out with our 2015 guidance to give more detail around the Woodford program. But I would expect it be a part of our capital plan for next year..

Yes thanks James and then also looking over on the multilaterals. You guys are 21% multilaterals for the quarter. How should we see that percentage should we expect that to increase pretty sizably next year.

How should we look at that?.

We said on our last call that we would average about 20% for the back half of the year and we’ll come in right around that I would expect us to roll it out in a little more detail when we come out with our 2015 guidance. But in terms of percentages I think it will go up from this 20% that we have in the back half of the year..

Your next question comes from the line of Charles Meade from Johnson Rice. Your line is open..

Good morning James and to the rest of team there.

I am not trying to sneak a question here but I was wondering is it possible to ask a question about how you and SandRidge decided how much of your midstream assets to put into MidCon?.

I understand the question but I can’t comment on the MLP or the assets that we’re going to put into it. I’ll need to direct you to the registration stage..

Going back to the questions of multilateral I want to understand how you are coming.

So when you say 21% are multilaterals are you counting each lateral is one or is that a CapEx percentage? What's the right way to think about that?.

Good question because you could think about in terms of CapEx or wells. But we do it on per laterals so for the lateral spud in the quarter, 134 was spud, 28 of those laterals were multilaterals 21% and in terms of the one that were completed and on flow back for the quarter as 13 laterals out of a 122 laterals or 11%..

Got it and if I could actually just go back to the earlier question to talk about you went through the Woodford, the new geologic now you said naturally factored with a frack barrier were those the two key pieces?.

I said thermally mature with natural frack barriers, yes..

Got it and I know that you’re pushing some of these questions off to when you come out with your guidance but do you have a sense of once you put those filters on your position.

How much acreage you have and how big that can be as part of your program?.

Sure on our acreage position we’ve got about 650,000 acres in our focus area. Almost 55% of that is held by production and so we think on the acreage we will maintain around that 650,000 acres. But importantly that percentage PP is going to go up every quarter and every year..

Right but how much it would be perspective for that Woodford what should put those filters on?.

Sorry I didn’t you were talking about Woodford. Yes Charles let us table that until we come out with 2015..

Your next question comes from the line of Shawn Needham from Oppenheimer. Your line is open..

James.

kind of on the funding environment just kind of give me the current commodity price environment, how do you weigh achieving your production growth goals along with maintaining your three and half times leverage targets as well as yourself funding status maybe just kind of on the high level of how are you approaching at this point?.

Sure. One of the reasons we mentioned on this call that we will be lowering our CapEx in 2015 is because of the declining commodity prices.

I will stress though that we are not that sensitive in the year 2015 to changing commodity prices, $10 change in oil we take our consensus estimates the $10 change in oil from $90 down to $80 given our hedge position is about 50 million movement in EBITDA.

So for 2015 we’re actually not that sensitive for the changing commodity prices but recognizing the strip has come down and it’s basically pretty flat at $80, we want to be cautious with our capital and protect our balance sheet and leverage and liquidity here a bit.

So we’re going to balance that, we want a capital efficient program next year, we’ll still be able to provide some meaningful growth but we’ll keep our leverage and liquidity in check. And again the hedge position next year gives us natural downside protection..

When you’re thinking about your liquidity position, are you baking in some amount of incremental liquidity from your proposed MLP, are you assuming that doesn’t happen?.

Great question. No, we’re assuming we’re not baking that into our calculation right now, if that happens we’ll make a decision at that point. But that’s not based in our liquidity model right now..

And then just lastly for me on your share buyback program, certainly appreciate your comments earlier but maybe just kind of given where we’re today. Could you comment on how you would approach or think about using some of your cash balances in buyback bonds? Since they’re all below par at this point..

Yes with our liquidity and cash we got to make decisions on how we allocate that, do we drill wells, do we return to shareholders, do we buyback securities. Obviously we’re still getting very good returns on our wells. But it’s really going to depend on what the market looks like at that time.

What is our liquidity, where the bond is trading, where’s the equity trading, where’s the forward strip on commodity prices? So you’re talking about an event, it’s in the first quarter next year. So really can’t comment on it now, we’ll just have to see what the world looks like then..

Your next question comes from the line of Jamaal Dardar from Tudor, Pickering, Holt & Co. Your line is open..

Just a few quick questions. Looking at NGLs this quarter seems like they were up substantially.

I was just wondering what led to that increase in NGL production and is that something we should see going forward?.

When we rolled out our initial 2014 guidance, you’ll notice a strong growth large growth in NGLs from about 1.5 million barrels last year to almost 4 million this year, lot of its due to growth in our gas volumes but a lot of it is also due to a new percent-of-proceeds contracts that we signed about year and a half years ago.

That contract all existing Mid-Continent wells flipped into that percent of proceeds contract in June of this year. So the third quarter was the first quarter where we saw the full contribution of all of our wells receiving the benefit of that percent-of-proceeds contract.

So something we’ve been forecasting for a while but this is the first quarter where it really showed up in the quarterly numbers..

And just looking at ‘15, I know you’re waiting to give more color when guidance comes out.

But do you have kind of a debt level that you’re going to feel comfortable with or that you want to stay at next year if commodity prices persist?.

On the debt level we have 3.2 billion of bonds and nothing drawn on our revolver as Eddie mentioned we just increased our borrowing base to 900.

So I won’t put an absolute debt number because it’s going to depend on a lot of things, the forward strip for commodity prices, our drilling program for next year but I think I was careful with our words on the prepared remarks, we’re defensively positioned for next year with a lot of hedges and no bond maturities and we’re going to balance our capital program with protecting our liquidity and leverage..

Your next question comes from the line of Adam Leight from RBC Capital. Your line is open..

You have a very good hedge position for your oil production in 2015 with the gas strip relatively flat there, I guess sort of underweight on your gas hedges.

How are you thinking about that at this point?.

Adam, we did earlier this year step in the market and hedge about 15 Bcf gas next year at 450. We focus on hedging oil little more than gas here, oil provides about 75% of our cash flows, even though it’s half of our production. So we get a lot more hedge value by hedging oil here.

We keep an eye on gas like I said we stepped in the market earlier this year and we’ve got an eye on the strip and should it to a point, we can see us locking in more gas hedges but again we’ve been more focused on oil hedges because that’s where the lion share of our revenue comes from..

But just given the volatility of the markets in general, I was just curious if you felt like it would be relatively easy to add some additional protection here.

And could you remind me you’re your restricted payments capacity is at this point?.

Let me research that number. Eddie just handed me, about $3 billion..

Okay. And then just lastly one more on the capital program thoughts for next year I don’t know how you’re thinking about this given you have lots of liquidity.

But if you’re thinking a bit more conservatively about how you spend versus what might be available in the capital markets versus your revolver next year closer towards cash flow neutral and you’re still working with your overall capacity?.

Sure. I said in my prepared remarks that recognizing the contraction of oil prices will be lowering our CapEx from that previously indicated 1.55 billion level we came with a three year plan we said we’d spend roughly 1.55 billion a year over three year that was obviously at a different commodity price environment.

I think the fourth strip was about $96 then. So I am not going to give you an exact number yet, Adam, we’ll come out with that after we get final approval for the plan but expected to be lower than that 1.55 billion..

Your next question comes from the line of Adam Duarte from Omega. Your line is open..

Good morning guys.

On the $75 millions of higher CapEx for this year, can you give a little more detail around what that’s for and what exactly you expect to accomplish with the higher spending?.

Sure.

About 45 million of that was related to the Permian and Gulf of Mexico as you know with the increased activity in the Permian Basin we’ve seen some cost pressures and cost inflation there that and we had to spend a little bit on some infrastructure to support the final piece of the Permian Royalty Trust drilling That drilling is wrapping up and is going to be completed in the next couple of weeks.

And the $10 million is a rollover from the Gulf of Mexico divestiture one last piece of CapEx coming in. So that was 45 million of it.

The biggest piece Adam is on the land and seismic we’ve elected to participate in some more 3D seismic shoots and have one additional proprietary shoot, some of this is covering our Woodford acreage, some is covering Chester so we’ve seen continued success in those two zones we’ve elected to shoot a little more 3D.

Also, in our Chester area and in our Garfield area we’ve seen continued opportunities to pick up some leases in the $200 to $400 an acre range. So we’ve guided to increase our land spend slightly in those areas. We think that’s going to set us up well for ’15 and ’16 the combination of that land and seismic..

Okay.

And on the new leases is that sort of additional, is that core stuff or is that step out acreage, or?.

It’s all within the focus area, but some of its perspective for Chester and some of it is in around very close proximity right in around our good wells in the Garfield area..

Your next question comes from the line of Gary Stromberg from Barclays. Your line is open..

I know you talked about keeping leverage and check in 2015.

What do you think your comfort level is on debt to EBITDA next year? And can you just remind us what the leverage covenant is in your revolver?.

Leverage covenant is 4.5 times I am not comfortable at 4.5 times. And when we come out with our 2015 capital plan we can give you a better feel for where we think the leverage will be. I think it will be in the kind of 3.75 range at end of this year give or take.

But the way I think about leverage always and even next year I want to take into account on my hedge book for the coming 18 to 24 months what are my bond maturities which we don’t have any until 2020 and what is my base level of cash flow doing. So, I am not comfortable at 4.5 times, I am comfortable where we are now.

But when we come out with our 2015 plan we will be able to give you a much better feel for where we’ll be in the calendar year 2015..

Okay, that’s helpful. Question on returns, I know you talked about 40% returns in the Miss $80 oil prices.

How do we think about breakevens in the Miss play on the WTI basis?.

Sure. We’ve got a page in our investor presentation where we show the returns at various prices. And coincidently on the far left we use $80 oil and 350 gas we put this together several months ago. So you can see where the lines cross there at the 2.9 million well cost, we’re right at that 40% return.

But you would need another kind of $15 drop in oil to where you’re not generating an acceptable return in this play. And to be a little over breakeven we look at more of a 20% return than just breakeven..

Okay.

And that’s all inclusive of all the infrastructure land that’s fully bakes full cycle?.

No Gary that’s not. So if you take the 40% return and put in our infrastructure dollars on top of that, that takes about 10 percentage points or 1,000 basis points off the return. So the 40 loaded for infrastructure is about 30..

Okay got it and then last one from me it sounds like 2015 spending will be lower but I think you said you’re still looking at meaningful production growth.

What do you think the minimums end level is to keep production flat from that fourth quarter level of around 84,000 barrels a day?.

So on an annual basis not talking about any one quarter; we can spend in the neighborhood of $500 million just on D&C spending. So that wouldn’t include land or associated infrastructure or any capitalized items. But we can spend about 500 million on D&C spending and keep our production flat year-over-year..

(Operator Instructions) Your next question comes from the line of Eric Ruff from Morgan Stanley. Your line is open..

Just wanted to verify your operating cost for barrel oil equivalent, looking at your slide on your guidance it comes $37 to $38 per barrel range, is that full cycle cost?.

Are you talking about just lifting cost?.

Well I was trying to get what would be of a total operating cost basis including all taxes and lifting and operating cost?.

Sure if I could you direct you to page 5 of the deck we put out this morning. It’s got our updated guidance range per barrel there.

So taken roughly the midpoint of that you would have about $12 of lifting, but a $1.15 of production taxes about 350 G&A cash, another $0.50 of G&A stock so it puts you in the $17 a barrel in terms of cash cost excluding DNA..

And then when industry participants are talking about the average cost of production for the sale driller is roughly $50 to $60 per barrel are they including interest total cash interest expense on top of that?.

Yes what they probably also including are the finding cost. So the costs to drill and find that some return on the capital maybe even some G&A burden. So I believe when people say $50 for breakeven they are including the cost to develop that not just the lifting cost.

Once you’ve drill the well, the lifting cost to get the molecules out of the ground is actually pretty low. The big capital dollars are up front to drill the well..

Could you give an estimate of what that would be for you?.

I believe it was Gary who asked a similar question on what’s the breakeven. I think for us to generate an acceptable return here are in the 60 plus range of oil price..

And also when we’ll be giving more specific CapEx guidance for next year?.

That will be in the next couple of months after we’ve finalized our budgeting process towards the end of this year and receive board approval..

Your last question comes from the line of Robert Alpaugh from Simmons & Company International. Your line is open..

I was reading the recent 8K and I get the impression that $0.70 balloon payment for undelivered CO2 volumes could be on the table for accrual.

Could you speak to this possibility or likelihood?.

Yes we don’t believe that’s part of the discussion here that under-delivery penalty is paid in 2042. And to estimate that, it needs to be -- to book it needs to be estimable and probable which is neither at this point in time. We have until 2042 to make up those volumes.

So that’s not part of the discussion to date so even focus on this annual $0.25 penalty..

There are no further questions at time Mr. Bennett I will turn the call back to you..

Thank you and thanks everyone for getting on the call. Just in wrapping up we had a strong quarter. We’re disappointed we don’t have financials but we’re working diligently to get those out. Production was up, our initiative program in Chester and Woodford are working.

We had some great opportunities to purchase some additional land in and around those areas and chose to take that.

The teams are doing an incredible job, executing the multilaterals and bringing our cost down and finally we have a very defensive position going into these commodity price headwinds with about 70% to 75% of our liquids or oil hedge next year and no warm maturities until 2020 and a program that can still generate 40% returns of these commodity prices.

So we look forward to speaking again in the future. Thank you..

This concludes today’s conference call. You may now disconnect..