Question-and-Answer Session
Operator
Thank you. (Operator Instructions) Your first question comes from Michael Jacobs - Tudor, Pickering, Holt & Co.
Michael Jacobs - Tudor, Pickering, Holt & Co.
Quick modeling question, I think investors were a little bit spooked with the increase in cost this quarter and I know you talked about a little bit in your commentary and the presentation about higher workover and production tax.
Can you peel back the onion a little bit more and discuss where you saw higher operating costs and what we should think about as recurring versus non-recurring in the context of maintenance versus servicing?
Timothy L. Dove
Yeah, 40% plus was severance taxes and 3% to 4% was just production declines coming of the last quarter. And so we really saw no pick at all in regard to – there's some workovers obviously in Spraberry, some other areas, but those were the major factors.
So with increased volumes going into 2010, we should definitely see production operating cost come back down.
Michael Jacobs - Tudor, Pickering, Holt & Co.
Tim I think you mentioned this earlier, but how much of your 2011 to 2012 Spraberry guidance comes from the waterflood program?
Timothy L. Dove
There is no waterflood volumes in there.
Michael Jacobs - Tudor, Pickering, Holt & Co.
On your JV commentary the Spraberry ramp is generating some pretty nice free cash in 2011 plus how do you think about using that cash to accelerate the Eagle Ford whether it would be in Live Oak or the Dewitt area?
Timothy L. Dove
I would look at it like a Spraberry it's going to build on itself in regard to just for ramping up Spraberry, it may or may not have a lot of free cash flows into ramping it up to a 1000, it will start generating significant free cash flow in 2012 and beyond.
And we will take some of our long life gas assets that will be having free cash flow and using some of that to accelerate the Eagle Ford play along with a possible JV, so.
Michael Jacobs - Tudor, Pickering, Holt & Co.
Did you guys take a look at the swift assets and so why didn't you get involved?
Timothy L. Dove
We have a policy Michael not to comment on what data rooms we go into. So obviously if you look at, Tim made a comment on this, but if you look at our acreage map, we have extended acreage buying into McMillan County, which is where the swift acreage is.
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