Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from the line of Dave Kistler of Simmons & Company.
Dave Kistler – Simmons & Company
Good morning, guys.
Charlie Goodson
Good morning.
Todd Zehnder
Good morning.
Dave Kistler – Simmons & Company
Hey, real quickly, Charlie, last quarter, you’d mentioned about a 40% likely increase in reserves in this quarter, and that’s looking towards the end of this year. This quarter, you’re tempering that a little bit. I’m assuming that that is related to pricing-related reserve revisions, but I just want to get some more color on that if possible.
Charlie Goodson
Absolutely. I mean, I don’t think anybody right now has total clarity on what – where these prices are going to go the rest of this year. And so, we’re trying to be what I consider conservative on our outlook for the rest of the year. And basically, the bottom line is it’s obviously not performance when you see how things are improving in the Woodford and we have continued that good results everywhere else. It’s simply a pricing issue.
Dave Kistler – Simmons & Company
Okay. And then thinking about that a little bit and clearly, the issues really around the basis contraction that was taking place up in the Woodford – excuse me, in the Fayetteville, can you talk about what you guys are thinking about doing from a hedging perspective going forward to ensure that that doesn’t happen, or are you locked in based on your relationship as a non-operator?
Todd Zehnder
From the Fayetteville standpoint, we are pretty much locked in as a non-operator right now. We’re going to evaluate that. We’ve taken steps in the Woodford days to lock in our bases through firm transportation deals that are tied to the Henry Hub. The impact that we’re seeing on our reserve bases is a little contradictory to what we’re seeing real time, and we have our pricing at Henry Hub base with a differential based on that.
However, you can’t price your entire company's reserves throughout the rest of its life on that pricing. That contract only goes five years. So basically, even though day-to-day we’re operationally cash flowing, our majority of our Woodford gas has very good realization still, you have to take the reserve right off as a result of what could happen down the road.
Now, when it comes to the Fayetteville right now, we are relying on our third-party operators from the standpoint of the gathering. As we continue to build scale in those areas, it may become a deal where we end up start taking decline and start having our own transportation arrangements and bases arrangements. However, we found it to be beneficial and just let the operator do it right now.
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