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You will find that we like to look for operations where we can repeat what we are doing when we are successful. And often entails large acreage positions both to protect your flanks but also to continue in a repetitive fraction doing what you are successful at. Also, we love areas with multiple horizons. No matter we always try to drill a well in our business where you got two shops at one, whether it’s Lake Washington with 70 plus different producing horizons or even in South Texas where the Eagle Ford Shale is so prominent. We are also developing the Olmos low permeability sandstone which sits above Eagle Ford and that efficiency from having two horizons develop really the same way add some additional efficiencies and increases in productivity and lower cost.You also find a part of our strategy is to mitigate operating risk and mitigate financial risk. On the operating side, we think you need to do that particularly through maintaining a good reserve to production ratio, ours is about 15 to 1. We think that kind of 10 to 20 is a right place to be. If its much shorter than 10, how you get another ground quickly but you are on a very, very fast decline curve and pretty much on a spending wheel. It’s tough to keep up with, but its too long and you got long life reserves and that’s great but you are not maximizing present value of the asset. We also think it’s important to maintain operating control. We’ve seen I’m sure as you – where people are non-operate, they can’t control the timing, they cannot control the technology and often times things don’t work out as they had hope they would. We also think its important just as in your business to balance and diversify your assets. So you’ll see us balance diversified but at the same point in time we think its real important as in most things in life to remain focused.
The financial side is pretty simple, keep your debt down and keep your cash healthy, low leverage, high liquidity and that really helps from a financial strategy standpoint. We also think in today’s world, it’s important to have a price management strategy or hedging strategy. Ours this is generally implied to use the floors or participating callers, but with our improving production base on shore particularly in the Eagle Ford shale, with the volatility and prices particularly in the gas market, we think its going to be important to implement the use of long term slot as well as in that priceless management strategy.Moving to the operating side of the business, I mentioned that we have three core areas, South Texas being both the oldest and the largest one. It’s where the bulk of our activity is. We are spending 70% and 80% of our capital budget down there. Central Louisiana and East Texas principally focused on the Austin Chalk, principally through a joint venture with Anadarko. And then South Louisiana, where we have a couple of very old fields discover in the 30s and the 40s, but they are incredibly prolific, continue to be big producers and predominantly crude oil selling into the HLS market down there. Read the rest of this transcript for free on seekingalpha.com