Q3 2019 Earnings Call
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I'll now turn the conference over to voice Sabina. Please go ahead.
Thank you Ben.
Good morning, everybody and thank you for joining us.
I would like to welcome you to today's earnings call.
Well start today's call with remarks from parallel path, Chairman and Chief Executive Officer.
Jack Stark president.
Scott Donnelley, Vice President of our Southern region production, and John Hart Chief Financial Officer.
Other members of management will be available for Q1 as needed.
Today's call will contain forward looking statements that address projections assumptions and guide.
Actual results may differ materially from does contain forward looking statements.
Please refer to the company's FTC filing for additional information concerning these statements and risk.
In addition, continental does not undertake any obligation to update forward looking statements made on this call.
Also this morning, we will refer to initial production levels for new wells, which unless otherwise stated our maximum 24 hour initial test rates.
Finally on the call we will refer to certain non-GAAP financial measures for a reconciliation of these measures to generally accepted accounting principles. Please refer to the updated investor presentation that has been posted on the company's website.
W. W. Dot seal, our dot com with that I will turn the call over to Mr. Han Harold.
Again, thank you.
Thank you for joining us on our third quarter earnings call.
It's all four exceptional what that that's an execution driving cash flow positive production growth and shareholder value.
Generate 158 million, a net income and third quarter alongside 20% oil production growth year over year free cash flow is tracking toward 500 million for the full year driven by continued capital that's fun.
Okay, then consistent results across the Bakken and outcome operations.
The market continues to be the Premier U.S., all <unk> shale play and we saw saying all day a record has to work production volumes and September despite some weather impacts earlier in a month.
This is true testament to the quality of our Dan's an appeal.
And the <unk> Gulf of worship could manufacturing mode.
Providing sustainable repeatable results across her Bath <unk> Bakken footprint.
This quarter, we want to focus on some exceptional all bad results out of Oklahoma.
Oil production South is up 62% year over year.
We haven't by the quality of our wealth and part of that springboard and the two new all units were brought online as back.
We also saw record date.
[noise] brothers Southern region.
As a company has shifted to your development our teams have been successful.
And execution I know exactly what to do were proud of their operational expertise and a patient say they are cheap achieving.
Remember if patients have gained a springboard has allowed us to relay seven rigs and Obama they can do more with less capital expense.
Well provide some more operational cover on lifestyle later in the call.
No I just want to have size, a differentiated and peer leading position ever scoop and stack assets.
Now, we'll continue to be capital discipline, and we're committed to or Capex target for the year [noise].
Were down after 18 rigs stacked rigs in the Bakken and well pair no problem like they'll never know, saying well counts, but that's it for Two Q2 019, with 10% peer rigs on average.
Our quarterly dividend is set to begin next month, but natural evolution for our company.
We've also executed 197 million and share repurchases fear to date as of October 29, 2019.
I now want to strongly aligned with shareholders were rightsized for the times and focused on positive cash flow.
Where are low cost later with investment grade debt.
The Dave opportunities.
I'll tell you said supported by strong drilling inventory will continue to focus on delivering value and return.
From macro standpoint, we believe we're approaching the tipping point on the world supply balance on all.
It has been estimated that do you need to be at about 800 land rig.
The balance our supply and demand that we're nearing that mark now we're <unk> aito seven.
As a rig count advocate for both oil and gas responsible operators.
David and capital that's been developed markets.
We see always CD crude inventories below the five year average and the industry is adjusting to market conditions.
Well go financial market volatility may now be going way Sun Continental is focused on what we can control.
We were executing at a high level, what I lost cost amongst our oil weighted peers and feel confident about our ability to generate sustainable cash flow positive growth.
Through 2019 and beyond.
I now would continue to deliver operational excellence and shareholder value.
In regard to 2020.
We're all looking ahead and I can appreciate that many of you would like more insight into what 2020 may look like.
I want you know at this time.
Were assessing our plan for 2020 looking at our normal scenarios and uses of capital.
We're going to refrain from speaking about 2020 until early next year.
They usually do one way submit or annual budget.
I understand you may have questions, but to be a patient whether talent to call well hold off on that discussion for now.
Now for further operational <unk> color off kind of follow Jack Stark.
Thank you Harold and good morning, everyone. We appreciate you being article.
As her pointed out our teams once again delivered exceptional results in both our north and South region to score.
Northern region, a we completed 57 gross operated Bakken wells with an average IP of 2313 here Weve per day.
These results should sounds familiar and today I want to highlight the consistent well performance who are getting from our Bakken assets.
Since we began harvesting our Bakken assets in 2017, we've completed.
440 gross operated wells with initial rates, averaging approximately 2300 via Weve per day, and 80% of the production was oil.
I mentioned is to point out the consistent performance, we're getting from ongoing multi zone unit development of our Bakken assets.
The consistency of or Bakken well performance is further reinforced on slide five in our deck, which shows the first year average cumulative production per well from our 2017, 18 and 19 Bakken drilling programs.
Looking at the slide you'll notice it's hard to discern one year from the next because of production curves track right on top of each other.
That's what I call repeatable performance.
Likewise, it returns from our 2017 and 18 drilling programs have been outstanding as both programs have paid out in approximately one year.
We expect our 2019 program will pay out in a similar timeframe as well looking at slide five you can also see that these results are not concentrated in one area, but come from units all across our leasehold.
These outstanding results explained why we consider the Bakken to be the premier plenty U.S. and are pleased to control the largest acreage position in the Bakken with over 806000 net acres.
We had approximately 3800 operated locations remaining in inventory.
No I will point out that our third quarter production from the Bakken was down sequentially by approximately 3000 via Weve per day.
This decline was driven by outside operated production. It was down approximately 6000 via we per day due to weather and other transitory issues [noise].
Our operated production on the other hand was approximately 3000 barrels equivalent per day, thanks to the great job by our Bakken team.
Our Bakken team also continues to focus on building and optimizing our acreage position and during the quarter added approximately 10000 net acres, there strategically using bolt on acquisitions and trade [noise].
Now, let's move to the southern region work teams have been doing an excellent job growing oil production in fact, approximately 50% of the company's third quarter oil production growth year over year has come from our Oklahoma assets to tell you more about this weekend, but it's got done they are vice president of Southern region production to join us on the call today Scott.
[noise]. Thank you Jack our southern teams were extremely busy during the quarter. We turned a total of 80 gross operated wells to production 63 of the wells were in Scoop and 17 were in stack production averaged a record 133266 Boe per day up.
11% year over year.
Oil production was up an impressive 62% year over year.
What are the key drivers for this magnitude of our oil growth was our springboard project in Scoop oil production in springboard averaged 23641 net barrels of oil per day, which exceeded our target of 18000 net barrels of oil per day by 31%.
This outperformance reflects the operational efficiency gains and exceptional performance from the reservoirs the big Springer Rose two or three came on strong as expected with initial rates, averaging approximately 1650 before we per day per well with approximately 80%.
Being oil.
I'm also pleased to report that the average performance up all 52 Springer producers are in line with a 1.3 million Bill we blended type curve that was announced during our January springboard conference call and shown on slide eight.
The teams projected performance for the Springer was spot on.
Springer also has 30 springboard also has 32 Woodford wells producing at the ended the third quarter slide eight shows that the average Woodford well is trending nicely with the legacy Woodford oil pipe curb early time.
To date, approximately 8.7 million barrels of oil has been produced from project springboard alone. We have approximately 39 wells that have been drilled and are awaiting completion with the bulk being completed in early 2020, and nine drilling rigs drilling ahead in springboard.
Given the outperformance in the third quarter, which was driven by operational efficiencies and that brought wells online ahead of schedule. We have increased our fourth quarter target. We're springboard from 22000 net barrels of oil per day to approximately 24000 barrels of oil per day.
[noise] to the north in stack, we brought on one of the most impressive unit development projects in the company's history. The rebid Joe when shelter units were developed within the stack Overpressured oil window and consist of 14 total wells in two separate benches within the Meramac reservoir combined.
The 14 wells delivered an impressive 38320 barrels of oil per day, and a 113.8 million cubic feet per day initial rate.
This equals 57292 between per day or on average 4092, before we per day per well with 67% of the production being oil.
The keys to success for our Continental stack development has been our team's ability to dial into the right densities for each target as well as properly stimulating the rock during completions. Our teams have been able to maximize value from our units. Thanks to our geologically superior acreage position and our team.
Operational expertise.
For example, and the Continental stack, we have also seen 16% lower completed well costs compared to the industry offsets in our most recent development projects our ships to unit development mode. In the South is driving improved returns inconsistent outcomes.
[noise] as Harold mentioned earlier, our drilling efficiencies have allowed us to reduce our rig count and Oklahoma from 19 to 12 rigs, while still achieving our corporate objectives.
Completion teams continue to outperform as they completed over 530000 lateral feet within a single quarter, all while averaging a 40% increase and stimulation stages per day.
Our production team turned on some of the biggest wells that are 52 year history, while continuing to expand our gathering infrastructure at the ended the third quarter I'm pleased to say that approximately 65% of our oil and water. In this out are currently being handled via pipe and growing.
I'm very proud of our performance of the third quarter and I want to say a big Thank you to all the members of the southern region.
And with that I will turn call back over to Jeff.
Thanks, Scott and great job by you and your team.
Now there is one thing I would like to add before handing the call over to John .
Our poor has been circulating that unfortunately cast some doubt on the performance of our springboard project.
Yes, ending results, we announced yesterday should put those debts to rest.
I wanted to emphasize that our Springer well results came in as guided Energen you were at conference call. In addition, oil production growth from a springboard as beat expectations every quarter since a project began approximately one year ago.
We cannot stop inaccurate reports like these from coming out so we encourage shareholders to rely on our guidance and our track record of delivering results.
With that I'll turn the call over to John .
Thank you Jay good morning, everyone.
2019 has been mark, but our ability to execute and deliver our net income production growth in our cost metrics are all driving strong double digit return on capital employed and increase shareholder value as.
As of October 29, we have repurchased 5.5 million shares for $187 million.
We plan to continue prioritizing our share buybacks with our excess cash we see tremendous value in the acquisition of our stock as our share price does not reflect our strong earnings cash flow and the deep or weighted inventory, we have for future growth.
Given our focus on share repurchases our debt has stayed relatively constant throughout the year with our net debt even dogs.
Holding at US all at 1.6 times at the end of the third quarter.
Our previously announced quarterly dividend of five cents per share will be paid on November 21st to shareholders of record as of November seven as Harold mentioned this is the natural evolution for the company something we have got it to expect over the last couple of years.
[noise] Continental is focused on generating shareholder value and maximizing returns not only are we delivering year over year oil weighted production growth dividends buybacks and corporate returns that compete against the broader market.
But we've also made strategic decisions to build our minerals portfolio.
Year to date, our minerals entity has spent approximately 120 million in acquisitions across scoop and stack.
80% of this 120 million has been reimbursed by Franco Nevada.
As we highlighted on slide 16, 90% of our minerals are under continental operated units year to date over 75% of continental well spud in the sale had underlying mineral ownership.
Volumes and revenue continued to grow and we expect our minerals entity to continue increasing and scale significantly over the next few years.
Ultimately, we believe the minerals entity could make an attractive IPO candidate we are pleased with the progress today.
We also want to highlight our capital discipline.
Third quarter non acquisition Capex came in slightly lower than the second quarter, and almost 10% lower than the first quarter.
As we look to the fourth quarter, we continue to expect capex to be significantly lower around 550 million each quarter has been lower throughout the year. This was by design as we expect to be roughly in line with capex expectations for the year.
At quarter end annual Capex include the incremental Capex incurred from the previously Unbudgeted bolt on acquisitions, an increase in mineral activity as we discussed last quarter.
Even after tightening our guidance for many of our cost metrics last quarter. We continue to see strong results NRL are we in DNA.
Oil differentials continue to trend in line with our expectations, while gas differentials continue to be impacted by weakened NGL processing.
We do see future relief as new projects come online.
For example, the Bakken crude pipeline fill.
We will start in November and the mid Con our buckled two pipeline will come online in the first quarter of 2020.
As we got it to last quarter third quarter production is relatively flat with second quarter. However.
In the late third quarter and early fourth quarter. We have additionally brought on approximately 50 highly productive gross operated wells. The production from these wells will be realized in the fourth quarter, where we expect production at approximately 350000 per day.
We feel good about our production profile and expect full year production to be at the mid to upper end of all of our annual production guidance 2019 has been a year of execution across all of our disciplines and we look forward to seeing this trend continue we will remain disciplined and focus.
Based on maximizing free cash flow and shareholder returns.
With that we're ready to begin the Kunaev section of our call I will turn the call back over to the operator. Thank you.
We will now begin the question and answer session to ask a question you made press Star then one on your telephone keypad, if you're using a speakerphone. Please pick up your handset before passing the keys.
At any time your question that's been addressed that he would like to withdraw. Your question. Please press Star then tool and the interest of time, we ask that you limit your questions to one question and one follow up we will now pause momentarily to assemble our roster.
[noise] I first question comes from Doug Leggate with Bank of America. Please go ahead.
Hi, good morning, everybody.
Thanks for taking my question.
Hi.
Guys. The I'll have to go back in my archives to dig out our stock prime or from a couple of years ago to remind myself that not all stock is created equal and I wanted to ask why why now to go but to the stock what's the running room left in the stock hopefully doesn't worry doesn't take this is multiple questions.
And this relative to those springboard.
What's the capital allocation going forward it didnt southern area, but great results and the stock obviously.
Yes, Doug This is Jack good question as far as the running room Weve got 55, 60 units out there in the oil and condensate window that we have.
Available to us in the future.
We would operate them so thats I guess, the a quick answer to that.
Bars, the pace at which were drilling right now we've got two rigs up there we're drilling.
The both drilling in any single unit right now and we've also got another well that's being completed so right now we're continuing our activity as far as looking forward ahead, no 2020, when we get our plans put together will go and give you some more clarity on how.
We allocate our capital on rigs into into in Oklahoma.
Okay. Thank you for that my follow up is really more of a housekeeping question that you guys are.
Very helpfully publisher tend to skew at the same time youve publisher numbers.
It seems that one of the stun does was the decline in non operated revenue in the quarter.
Im just wondering if you could offer any color as to what was going on there because it seems to was that your underlying operating performance was a lot better than perhaps even the headline results suggested on the things outside your control may have contributed to.
Not achieving the full potential, especially in the northern area and any color you can offer weather, but can be remediated.
You know on shoes from coffers.
Sure Doug that's one of the things that Jack head in the script that he was touching on that's.
There were some weather issues or one of our larger non op partners dealt with and then there is just the timing where they had some curtailment due to offsets and other things. The key part of that is all of that is transitory.
Good portion of that's come back on line here in October it's not all back on but it will be.
As we go forward so nothing.
I think really negative just more timing and just momentary impact.
I apologize my lighting drawl tough way through before I'll know no worries, though again I gave a little more colors oil.
Got it okay. Thanks, so much guys.
Our next question comes from Aaron Jerry M with JP Morgan. Please go ahead.
Good morning, Good afternoon, Gents I was wondering.
If he could maybe give us a little bit more detail.
Honestly what is driving.
You know the better performance that you're seeing in the south because you know what are your comments is that the wells are essentially performing in line with your type curve, but I was wondering you know what does contribute into the higher oil.
Oil out, but it springboard that you're seeing.
In a relative to the guidance [noise].
That's a great question a room and.
Springboards, just a tremendous assets for the company in oil asset and there's a lot of things at play into the obviously the outperformance in first thing comes down just the reservoirs themselves I mean, the Springer and Woodford as you can see on on slide eight are just performing right inline with expectations. The teams done a great job of identify.
Thank you know what the proper density isn't here and how they anticipate these wells reform and I mean, it couldn't ask for a really more as Scott said spot on projection of where we could be.
The next part of that really is just the production is exceeding our guidance and substantially here in the in the third quarter.
As a result of really just the efficiencies that have continued to build here from our road development and so.
And what does that translate to translate some more wells on sooner, we're still going to end up by year end, putting on the same number wells. We just got a lot more of them on in third quarter than originally planned in its again just comes down to that that operating efficiencies that.
Our still building you know this lusa, we're still continuing on.
And you know I can't help but mentioned just from an operating cost standpoint, when you think right now we've got 65% of our.
Water and oil on pipe I mean, it continues to just drive our our operating cost down and from an oil differential standpoint the.
You know, it's the lowest oil differential we haven't the company, it's really sub $2 in there for the barrels and so.
And on top all this this is was a.
Really great thing about springboard is that we own approximately 19% of the minerals underneath us asset. So when you put it all together it doesn't get a heck of a lot better than this and.
And we've got a lot of development sitting out in front of this weve got probably 40% of the units in the Springer still remain to be drilled and we've got about 80% of the the Woodford units in the in the project yet to be drilled so a lot a lot of the.
Headroom here to continue to grow it and just just.
Fantastic Bras project.
Yeah, and I guess my follow up Jack is based on your the five year outlook that you unveiled a.
I think it was maybe in January .
It calls for pretty ratable growth from both the northern and southern divisions.
I think is a 12.5% kinda CAGR.
So just wanted to know as beyond it sounds like you still have 40% of the activity at springboard, but what are the next phases.
Of of gross said or projects that you have in the south which will support that longer term growth objective.
Yeah well.
Quite frankly, we've we've drilled and are currently testing.
Some wells initial wells.
Weve drilled and our springboard to project.
And really are from competitive reasons as we've mentioned before really just not going to really get in any details right now.
And not really going to provide an outline but.
I guess just know that we have springboard to.
In the queue and we have springboard three.
And springboard for down in this in southern Oklahoma that we also are.
Currently really just continuing to build our positions through strategic leasing and acquisitions and so.
You know, we will come out with more color assays is we solidify our positions and but right now we're very pleased with were at and how this project in this based goes regions growing.
Great It sounds like for more meat on the bone in Oklahoma, Thanks again jets.
Yes, and I should add if you noticed 50% of the oil production year over year has come from Oklahoma.
I don't think a lot of people would've thought that.
Great.
Our next question comes from drew Venker with Morgan Stanley . Please go ahead.
Hi, everyone a.
A lot of green color already so I was just hoping you could talk a little bit more about fourth quarter, and and where that trajectory is heading fairly next year.
So on the on the Capex side, John I think you said for Capex around 550 million.
And then on production can you can you give us just trying to confirm that type Dan on production give a sense of the oil mix and for Q.
Yeah, the a roughly 550 on capex for the fourth quarters, where rejecting today around 350000.
On the overall mix or on production.
The mix.
Oil ratio I think this quarter was about 59%, we're kind of the 58% to 60% 50 58, 59% in fourth quarter. So it's really good it's really solid we're very.
I'm pleased with that and.
You know to curious into 2020.
Thanks, John and as far as the activity level and <unk> spend is down quite a bit and fourth quarter sequentially. It is that the current run rate for for drilling rigs and Frac crew is a good starting point for next year as that pick back up and willing.
But at this reset.
You know will come out with 2020 into February timeframe is the Carol commented on earlier look forward to doing that were in the midst did that we've got a lot of optionality. The thing about run rate you need to consider is how much more efficient. We are now they ended the year compared to the beginning of years, we talked about rig change.
Just throughout the year in a lot of that was just driven by efficiency were in line with where we expected to be dollar spend wise in the fourth quarter were in line.
Wells completed and productions, obviously was increased previously this year on the forecast and were so I talked about on the call, we're doing very well with that so.
18 is frankly is probably ahead of pace a little bit it sets us up nicely, but I think at grew that you're probably referred to some of that cost that.
We're seeing that result of the slowdown and.
You know rig activity.
Pat you might want to thank you ask if these were caught back then.
Now we're still seeing some.
Hello, Yes drew this pad that and so with respect to where we're at from an activity perspective. We're currently at that Tolbert capital. We've talked about we've got wants to improve in the south to in the North we may exit the year slightly higher but with those.
Activity levels, we see really preferential market pricing that we've been able to take advantage of work with our partners and so we've seen rig prices decrease in that 20% to 25% range we've seen.
Double digit percentage decreases in our stimulation pricing so across really all the service product lines.
Gauge and we've seen some preferential treatment there and would anticipate that.
Carrying on into.
2020.
And in fact were those price increases.
Was that relative to third quarter.
Are you, saying third quarter over second quarter.
Yes, second quite a drug that third and fourth quarter relative to second quarter.
Thanks, Harold down and Pat.
Sure.
Our next question comes from Janine away with Barclays. Please go ahead.
Hi, good afternoon, everyone.
Yes.
Well I think that you just touched on my cost savings questions about how sticky. They are so I'll move to my next one that was on buybacks and it's just a broader question. So in terms of the five year plan and the billion dollar repurchase program I know, we're only in year. One so there's plenty to go here, but are the by Baxter.
The opportunistic or is it meaning the free cash flow now a bigger part of the near term capital allocation process. So I'm I'm, assuming that you won't be done with buybacks. After hit the first billion. So I'm just talking more broadly.
Well you know we it is opportunistic.
According to what.
The market season or stock price that.
Certainly.
Andy.
We weighed in on and.
Well just have say of that continues.
Yes, the market.
Hasn't valued oil and gas.
As it should and and we very well my continue after the deferred begins gone.
Okay. So it's not as if you're trying to backstop of some kind of return in the near term it's just.
Free cash flow and it shows up.
Hi.
The indication of the available cash that we haven't that we're able to generate coupled with the.
Misalignment of the share valuation with what we think as are appropriate valuation, we think it's a tremendous investment opportunity.
Okay, great. Thank you for taking my question.
Thank you today.
Our next question comes from Brad Heffern with RBC capital markets.
Everyone just as a follow on to that question.
As it relates to the debt, obviously, you guys haven't really pay down this quarter or the prior quarter and that cash is kind of the repurchase should we think about the targets that you previously had the 5 billion EUR 4 billion as as just being moved out or as long as the stock is at current levels.
Are you effectively going to allocate all the free cash to the repurchase.
So it's probably a mixture of all those debt you know if you look at net debt. This quarter. It was down a little bit from last quarter, it's not huge it was 30 million or so but.
We did improve it we also called some bonds, which will reduce interest expense as we go forward and we'll continue to work Opportunistically to do things in those regards that we think there are above smart for the long term as we go forward. The 5 billion is a target that we retain and we want to achieve that target I think we've got to.
A number of ways that we can achieve that going forward and we'll continue to work on that today, where the share price is yeah, we're prioritizing share buybacks today, but we do.
I continue to retain that target continue to work board as we go forward. It may take a little longer it may not it depends on a number of variables.
Okay. Thanks for that and then another question on Oklahoma, Obviously, you guys have had better results and effectively all your peers and the scoop stack.
We've seen a lot of them moving away from the play I'm just curious if there's some potential that you might do a larger acquisition that build your footprint there given that you seem to be the best operator.
Well thanks.
That we we do have good operation there.
Lot of people up there that claim to be and stack warrant and attack.
Yes, so that that that was one of the big discrepancies out there. It is good play.
A lot of thereby saw that.
A lot of people tried to tag onto it.
Even though they were outside that area all together so.
Yes work on paper I open eyes open.
Two opportunity, we always do up there as well.
And if we find a bolt on networks.
And we'll be announcing that.
Okay. Thank you.
Our next question comes from Neal Dingmann with Suntrust.
Afternoon, guys.
Check the phone, which you said earlier you spoke of the oil in this I think you mentioned the scoop could you just maybe comment on how you see the future overall, maybe for Fourq you and then into 2020, just the overall oil cut trending this quarter and next year.
Well Neil you like we said we will touch on 21, we get to our announcement.
No around the first of the year, we'll give some perspectives there, but as John mentioned previously he was saying you know aro cuts going in the fourth quarter, probably looking in a 50, 59% range.
Okay.
Okay, and then Jack in the projects you had those slide that so showed the unit economic model slides showing the optimal well count I think one was in the overpressure Merrimack and the other over in the Scoop and I think I'm looking here at the Merrimack one showed around.
The best PV 10 was around eight wells, there and you know going to.
No in springboard my thinking that Scoop Springer it was around four to get there could you comment is that still in the ballpark of what you're seeing is sort of to maximize each of those.
Yeah, I mean in stack I mean, it's really pretty much spot on with what we're seeing out there. When we have two zones developed that are well developed and we feel we can put.
Well I can repeat Joe Schoell do we put four wells in the upper and three in over.
So we had seven wells total and.
There are units out there will only have one zone. So we may have two or three wells in those units so as I've said.
Past here you know on average, we're probably going to have two well two zones to target per unit and we could have up to four wells per zone.
So I really think that our teams really dialed in on the density in the dialed in on to into it very early and it really guided our outstanding performance that we show one say page nine when you look at that you take a look at those curves and look out we had a unit oil type curve that you're referring to there and look how the sheltie homes EG allude.
And rebid Joe's of all just extremely outperform that units so.
You know, we're very pleased with it.
We obviously feel we've got dialed in on on what is the appropriate density here done in Scoop is far spring is concerned.
When we're in the thicker areas. Obviously, we can have more wells infinera as you have fewer wells and so.
No but is a for good average yeah, I'd say three or four probably good average depending on where you're out in the units.
Very good thanks for the details yet.
Uh huh.
Do you.
Our next question comes from Bryan singer with Goldman Sachs.
Thank you good morning.
All right.
Here are very big picture I know, there's a lot of moving pieces and the broader will macro and yet you highlighted some improvement in on the on the supply side that you see coming I guess as it relates to continental what would you need to see in the broader oil macro environment too.
<unk> activity and how does the a priority of free cash flow in the level of buyback impact that activity level.
Ryan I think that when we get into balance situation, yes, we're going to say a significant in the that won't be five.
To $10 just on bit significant move in a commodity price. So we're already seeing the production, but a rolling over.
And I. Thank everybody is becoming aware that the earlier vast amounts were much too high.
This year, new U.S. and you also.
Well that's fun is working.
As it should be.
Frankly needed in both areas, we need it's not only just and all but also natural gas.
We're seeing that ROE as well, but yes, there's a couple of plays that obviously.
The rig count hasn't come down like it needed to.
Thats Haynesville and Marcellus.
Yes, it's a I'm sure by tracking those two plays.
They definitely need to back off there to say this market balance and so it detects both Mike make it all feel as we say.
And so that's going to have continued a little bit the wonder does that will be.
A big move you get into 2021, you don't say these long term projects coming on likely we say yet in 2020. So people tend to look at about a year ahead.
Once we get in 2020, the outlook will be a little bit das build out certain future.
As far supply goes.
And is that do you need to wait on the futures curve to move to move to make.
Continental to dedicate additional activity to benefit from that or is that something you can start planning on based on your macro outlook.
Well, obviously, Brian we have plenty of inventory that we could the move forward, but I think responsible operators want to say it happen.
Before they make move I don't think could be.
Good to make make those jasmine prior.
Thats not to.
The example that we need be setting out there for the industry. So.
What's the 11.
Great. Thanks Tonight.
Short follow up is on the Bakken you talked in your comments about some of the non op and weather related issues that.
That have come back and September production that was down it come back online do you anticipate beyond winter weather or any other kind of pick up there. So on the on the non operated side or the operated side in the Bakken.
Or should we expect more steady state sequential a sequential growth from you know.
Well, it's going be steady state the sequential growth in the future brands and this is more than just weather or if you have these outside operators.
Yes, one was the outbreak NGL line at had that had they put into place than.
That these gas plants, even though they're built they were depend on it before they start production.
So they've got about three of those coming online.
Yes around first year between now and the first year so.
Some of that was I hold up as well.
Great. Thank you.
Thank you.
Our next question comes from Derrick Whitfield with Stifel. Please go ahead.
Thanks, Good morning, all congrats on a strong ops update.
Thank you.
Well certainly not pressing for your 2020 plan could you comment on your estimated maintenance capital to hold Q4 production flat assuming current capital efficiency levels.
Yes, well through that up with the 2020 plan as well as we always do historically, we've said it for DNC only it would be one five to two I would say if you're looking at a multi year. It would still be in that range. If we're looking at holding flat for one year, which probably do it towards a tighter side or maybe a bit better than that but.
Kind of depends on that perspective also.
No no nothing materially different from what we've talked about before.
Got it great and then as a follow up picking up on a rins earlier question.
How should we think about the production level, where springboard one plateaus and the timing for the official introduction springboard to.
Well you know again, the springboard to at least some some view on on his performance will be part of our 20 program that will come out with but.
You can expect springboard production to continue to grow into 2020.
Very helpful. Thanks for your time.
You bet. Thank you Dave.
Our next question comes from Phillips Johnston with capital one. Please go ahead.
Hey, guys. Thanks, just a follow up on some of the questions about the cells looks like your oil mix increase pretty significantly it's about 34%.
28% in the second quarter is that improvement, mostly just a function of the flush production that you saw from the large.
Completion, there that you had in Q3 or are there other factors there to consider that sort of drove that and I guess, maybe also how should we think about that mix going forward over the next few quarters.
I think the a couple of things to consider their.
And then just.
The Springer production that everybody was anticipating.
Also the Woodford production and the blend of those two.
And so as not not just necessary flush production, we're saying to us.
Have a lot.
Lower rate of decline.
And then initially anticipated.
Yeah, if you look at those.
Thing it's on sure.
Hey, there you know our Woodford wells are averaging once we've grown so far averaging about 77% oil.
So I mean, there they're not going right on the door the 8% that we're got there in the Springer Sony was we're just very well rich reservoirs that we're targeting here and so.
It's going to definitely have an impact on our underperformance.
Okay.
Okay, Great and then just maybe for Harold or Sean just on the.
Share repurchase program looks like you guys have bought back about 5 million shares so far as an average price of around 34 and change the stock today is closer to 29 should be about $25 million you show underwater at this point obviously your plan for the long term here.
Rather than six months, but you do have a relatively small share flow to begin with some I guess my question has there been any serious consideration of the board level.
Okay variable dividend strategy, just on top of just fixed dividend that you've already established.
With an ultimate goal of paying out a targeted percentage of your.
Actual realized free cash flow to shareholders every quarter.
We we bought back five and a half million shares were little bit under 30, 433 and change on that we're going to realizing significant upside in that in the future. So maybe a little bit under now, but you're right. We'd look to the long term. When you look in a company that's made well over 500 million of net income and nine.
Months positive cash flow good production growth the right mix, great inventory, it's not a 28 or $29 stock. That's why I said earlier, we think it's a tremendous investment opportunity.
In regards to dividend and stuff I wouldn't speak for the board. That's we've got our first dividend coming out here in a couple weeks. We're extremely excited about that we think it's a momentous.
Milestone for the company and.
We'll go from there, but I appreciate the insight okay. Thanks John .
Our next question comes from Leo Mariani with Keybanc. Please go ahead.
Yes, Hey, guys. So just a question to follow up a little bit on the Bakken here I guess over the past you guys have done some pretty successful step outs in the Bakken just wanted to get a sense of what does that longer term well performance looked like on some of those step outs and have you guys kind of been continuing that programming.
The second half of this year.
Okay.
Well as far as a step outs concern we're pleased with the performance of those wells I don't have the numbers for those those projects right in front of me, but.
No as I remember seems like a in the first 90 days, our Baird well out some county produce like 65000 barrels.
Equivalent a I think our.
During down South was like 95000 barrels oil equivalent and then I think our mcclintock was probably about 120000 and these are all in the first 90 days. So that's all I can recall at the moment, but they're very very good wells for us and as far as I think part to your question is is how does all this fit into our plan.
Yes.
We're offsetting that.
Can't talk right now.
Yes.
And Harold doing it so yes. It is continuing yes, and so the activity is continuing with.
The unit also mcclintock drilling as Harold said and.
And again we.
There is we've got so much territory to cover out here.
These step outs were really designed to give us a good perspective on what we could expect in these areas. So we can put these into our Q and our plans in the coming years and so.
The bottom lines were please what was then.
Okay, that's great color and I guess I.
I think has been impacted at all by sort of the lack of gas processing there in the back in the obviously reference some plants coming online.
By the end of year has that curtailed any of your production in 19 in just trying to get a sense, whether or not we'll just see kind of a smoother runway next year with a lot more processing capacity in the basin.
It has its a you know we.
Ben.
Totally aware.
Processing.
Hey, Bill is that we've had up there and as the move rigs are around the field to appeal to offset.
That lack of.
Yeah.
Flat.
Facilities.
But certainly with what's coming in now.
It's going to set us up real well going into the future. So.
We're.
We're pleased with where we're at and.
Continental has led the way with more gas capture than anybody else and appeals. So we're proud of were but we've done where we're at.
Wow, that's a that's great color for sure and I guess just.
Lastly, with respect to a week gas and NGL prices would you guys probably touched on obviously as I've not been very good here in the last couple of quarters.
Does that kind of cause you to sort of think a little bit differently about capital allocation, we might kind of ship more activity to the north versus south given that higher percentage of oil up there or how do you sort of think about that.
Well Weve CFTR operations here in the south to more all the areas.
The thirdly and NAV.
We'll continue to do that.
That really aware.
Well positioned a where we're at in the north.
At that particular time.
Yeah, we've got plenty of oil inventory down in Oklahoma to continue to have comparable allocation of dollars going forward.
Okay. Thanks, guys.
Our next question comes from Carver with Heikkinen. Please go ahead.
Yes. Thank you want to make sure my my math right. So you're you talked about sticking to the original number wells to sales in Oklahoma.
And I have your original guide for the year was to have 100 net operating operated wells to sales.
And your 90 through the third quarter with 56 enough.
56 in the third quarter so.
We stick into 100 for the year would that be just 10 net wells to sales in Fourq you or do you think you go a little bit over that 100 target.
Well I mean at this time, we're just we're not really we're sticking with our guidance at this point always there's some timing issues and things that can change of little bit up or down, but but we're just saying with our guidance.
So a huge slowdown into fourq you.
It would be the way.
Sure Yeah, we've had a big slug of wells come on here late in the third quarter I don't know if I'd call. It a huge slowdown I'd say a lot as we talked about last quarter, we had a significant amount of completion activity in the third quarter in those wells came on late third third fourth quarter. So the.
Talked about production on the call to see strong production there in the fourth quarter.
Okay, well spins just not as high just the timing of these big projects.
Okay. Thank you.
Yes.
Our next question comes from C Bash.
Chandra with Guggenheim Partners. Please go ahead, yes, hi, guys back to springboard here.
Is this a fair way to think about it that the Springer locations, which I think your original presentation, you would be drilled out on next year.
Peaks you out on oil production in the play and then the Woodford puts you in maintenance mode beyond that point in time and any commentary on what the well costs are per foot.
Between the Springer and the whatever.
[noise] as far as well well production growth no I don't see as we transition knows we drilled bar say, our Springer inventory that Woodford, who will continue on.
And continue to grow our oil production there you take a look at those curves there on slide eight and you can see the Woodford production is very robust and actually has a.
That have a slow lower decline rate than than the springs as well to sustain the volumes very well.
And as far as cost I don't have any cost per foot.
Now that I have on time ahead Pat.
I think weve targeted for the Springer that on a on a two mile laterals somewhere around $8000 per completed lateral foot. So a $10 million well cost were not quite there yet, but we're working our way towards that.
And.
But the no set design, we have on a woodford that weve been successfully that has been successfully deployed.
Right in that range, maybe a little bit less as well.
Gotcha, Okay, and my follow up.
In the stack if you know I wrote the numbers down correctly, there was a sequential decline I think.
What was the reason beyond that is that again timing or non up.
Oh, I thought Scott Graham No right now I'd say timing is is a big part of it you know you get basically a just the Kate.
Got you okay.
Thanks, guys.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Royce you know for any closing remarks.
The our yes. Thank you very much for joining us today Im pleased that reach out to the IR team for any further questions. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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