Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Noel Parks – Ladenburg Thalmann & Co.
Noel Parks – Ladenburg Thalmann & Co.
I just had a few questions. You talked about renegotiating your service contracts. Please tell us a little more about what services in particular and what sort of improvement you're seeing.
Jeff Johnson
We've primarily, Noel, we have gone across the board and asked to take a look at all of our services, all of our providers and not just in the field. I mean, across the board from legal accounting and in the field. However, the primary driver, as you know, until we start to see a lift in our waterflood, there's just a lot of pulling unit expense, and that's our biggest expense. It runs about 32% I think. And we were able to go out and work with primarily that group.
They reduced their rates and have agreed to keep those rate reductions for at least two years. And if we continue to see a downturn in commodity price, obviously, what they have agreed to as well as to go back in and take a look at it and continue to do so. So the one thing that I am noticing though I think to a bigger point is, in this market, unlike what we saw in the late '90s with a downturn from my view we are starting to see a lot of service provider’s work with us.
They understand that we need to have them to maintain our production and operations and I'm pleasantly surprised. I see that we've been able to work with a number of them in this manner. But that's where they're all coming from. Across the board the biggest expense being pulling and we've been able to reduce that quite a bit.
Noel Parks – Ladenburg Thalmann & Co.
So I'm assuming that in the December quarter we didn't see a full quarter's impact of that yet. So, we would see that, I guess, extrapolated from the December number you gave for LOE, we should see that across all of the March quarter, right?
Jeff Johnson
That's right. I’ll let Pat talked to you about that, but at one point we saw a big chunk of it. We will continue to see more and we'll continue to look for other operational efficiencies. And to your point, another part of the model that obviously we don't talk about a lot that's important is we've pretty much got the fixed operational expenses right now throughout our fields.
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