Question-and-Answer Session
Operator
(Operator instructions). Your first question will come from the line of Jim Harmon with Lehman Brothers. Please proceed.
Jim Harmon - Lehman Brothers
Good morning. I have got three questions probably for Matt, and the first is if we could look at the Gulf of Mexico we've had a lot of focus on Appalachia. We’re seeing production growth out of that region, but we haven’t really seen reserve growth, so what's in your mind over the next 12 months to 18 months, are you going to be doing with that region is it more of a production or will we see reserve growth?
Matt Cabell
That’s a good question, I guess the way I would look at how we’re going to measure success, its going to be based on finding and development cost, and on the rate of return that we estimate for the wells that we drill over the course of the year. So, at the rate of capital spending versus the production we’re going to have this year it might not be any significant reserve adding activity, but yet it’ll be a value adding activity.
Jim Harmon - Lehman Brothers
Okay. Fair enough, second question on the rising gas environment and oil environment, you always get asking of this, it makes sense to hedge mines. And I know it took a while for you to get your ability to hedge oil, and I was wondering if triple digit prices doesn’t make sense to lot more than it, because I didn’t see any new hedges in last night's release.
Matt Cabell
I'm going to let Ron take that one.
Ron Tanski
Yeah we did have some new hedges from the last quarters release Jim, but as I mentioned on the call we have got 50% hedged right now and I think as you say.
Jim Harmon - Lehman Brothers
Oil?
Ron Tanski
Yes.
Jim Harmon - Lehman Brothers
Okay. My mistake.
Ron Tanski
Yeah that's on page 26 of the release I believe.
Phil Ackerman
We'll double check that.
Matt Cabell
Yeah, we’ve ran through those numbers and right now we are about 50% hedged overall. And as you said given the rising prices right now we're comfortable with that.
Jim Harmon - Lehman Brothers
Okay, oh it's possible; I miss something on a 30 page release. Okay. The last question is, assuming everything hits all cylinders in Appalachia can Matt or anyone talk about what the infrastructure is, like you handle the volumes and what would need to be done in order to make that operation as smooth as possible?
- To read the full transcript on Seeking Alpha, click here »
