Q3 2019 Earnings Call

October 31, 2019

I have the name of the conference you're calling to John Please.

Thank you and your name please.

First name David last name Brown.

Andrew Company name.

I era.

[Analyst] (Tuohy Brothers): Good morning. May I have the name of the conference you're calling to join, please?

Operator: Good morning. May I have the name of the conference you're calling to join, please?

AI era.

David Brown: I would like to join for Encana Corporation.

Yeah I'll join you.

[Analyst] (Tuohy Brothers): Thank you. Your name, please?

Operator: Thank you. Your name, please?

After royalties unless we state otherwise.

David Brown: First name David, last name Brown.

Following our prepared remarks today, we will all be available to take your specific questions.

[Analyst] (Tuohy Brothers): Your company name?

Operator: Your company name?

David Brown: Aiera. A-I-E-R-A.

Please limit your time to one question and one follow up this simply allows us to get to more of your questions.

[Analyst] (Tuohy Brothers): Thank you. I'll join you.

Operator: Thank you. I'll join you.

[Company Representative] (Ovintiv): After royalties unless we state otherwise. Following our prepared remarks today, we will all be available to take your specific questions. Please limit your time to one question and one follow-up. This simply allows us to get to more of your questions. I will now turn the call over to our CEO, Doug Suttles.

Stephen Campbell: After royalties unless we state otherwise. Following our prepared remarks today, we will all be available to take your specific questions. Please limit your time to one question and one follow-up. This simply allows us to get to more of your questions. I will now turn the call over to our CEO, Doug Suttles.

I'll now turn the call over to our CEO Doug Suttles.

Thanks, Steve Good morning, and thanks for joining us today recently I read a sell side note that was titled likely a boring quarter for Encana well from today's news you can see was anything but boring we generated a quarter of a billion dollars a free cash flow executed exceptionally well across the company entered.

Doug Suttles: Thanks, Steve. Good morning, and thanks for joining us today. Recently, I read a sell side note that was titled Likely a Boring Quarter for Encana. Well, from today's news, you can see it was anything but boring. We generated a quarter of a billion dollars of free cash flow, executed exceptionally well across the company, and announced a strategic move to establish corporate domicile in the United States that we believe will create long-term value as it ultimately better positions our company. Our recent actions are proof positive that we are committed to unlocking the significant value we see in our equity. We will leave no stone unturned to capture this value for the benefit of our shareholders. We have a lot to cover today on today's call, so we will organize it around these key topics.

Announced a strategic move to establish corporate domiciled in the United States that we believe will create long term value as it ultimately better positions our company.

Our recent actions are proof positive that we are committed to unlocking significant value we see in our equity we will leave no stone unturned to capture this value for the benefit of our shareholders.

We have a lot to cover today on todays call should we will organize it around these key topics first will cover our third quarter financial and operating performance as well as year to date highlights we're increasing the midpoint of our full year production guidance on the back of continued strong performance from the Anadarko and the integration of Newfield has gone.

Doug Suttles: First, we'll cover our third quarter financial and operating performance as well as year-to-date highlights. We are increasing the midpoint of our full year production guidance on the back of continued strong performance from the Anadarko, and the integration of Newfield has gone exceptionally well. In addition to our brief remarks today, there is supplemental information in our corporate presentation located on our website. Next, we'll discuss our recent and significant actions to increase shareholder value. We intend to establish a US domiciled company that will expose us to significantly larger and growing pools of investment. By looking at peer data, this will expose our company to almost three times the amount of index participation we see today as a Canadian company. It is very important to note that we do not anticipate any material cost to the company in executing this move.

Onyx exceptionally well in.

In addition to our brief remarks today, they're a supplement the supplemental information or corporate presentation located on our website.

Next we'll discuss our recent is significant actions to increase shareholder value, we intend to establish a U.S. domiciled company, though will expose us to significantly larger him growing pools of investment.

Doug Suttles: In recognition of this significant transformation, we have made to our company, we have also decided to change the name to Ovintiv. On more of an administrative note, we will also be consolidating our share count in a one-for-five exchange to enhance peer comparability and decrease volatility. Third, we will close today's call with some high-level thoughts on our outlook and how we are planning to approach 2020. As always, we'll take your questions after our prepared remarks. Let's get started. We continue to deliver outstanding financial results, reflecting the quality of our asset portfolio and our constant drive to innovate and find new efficiencies in our cost structure.

Third we will close todays call with some high level thoughts on our outlook in how we are planning to approach 2020.

As always we'll take your questions. After our prepared remarks, so let's get started.

We continue to deliver outstanding financial results, reflecting the quality of our asset portfolio and our constant drive to innovate and find new efficiencies in our cost structure.

In the third quarter, we posted net earnings of $149 billion or 11 cents per share and generated more than $250 million of free cash flow when combining the last two quarters, we have now generated $378 million of free cash flow.

Doug Suttles: In Q3, we posted net earnings of $149 million or $0.11 per share, and generated more than $250 million of free cash flow. When combining the last two quarters, we have now generated $378 million of free cash flow. We generated free cash in 2018, in 2019, and we intend to do this again in 2020. As we've said before, many in our industry are trying to navigate to where we are today. As our business matures and we transition to a more industrial business model, we are delivering against broader market competitive metrics, such as earnings per share, cash flow per share, and free cash yield. We have a growing list of highlights for 2019.

We generated free cash in 2018 in 2019, and when we intend to do this again in 2020.

As we've said before many in our industry are trying to navigate to where we are today.

We have a growing list of highlights for 2019, perhaps the most important of these is the successful integration of Newfield Tomorrow will mark the one year anniversary of the news Newfield acquisition announcement.

Since that time, we've exceeded the identified synergies and they are showing up in our bottom line results are people across the company are working as one team.

Doug Suttles: Perhaps the most important of these is the successful integration of Newfield. Tomorrow will mark the one-year anniversary of the Newfield acquisition announcement. Since that time, we have exceeded the identified synergies, and they are showing up in our bottom line results. Our people across the company are working as one team and delivering exceptional results. For the third time this year, we today raised our projection for annualized G&A synergies from this transaction, now set at $200 million. This compares to our original target of $125 million. More telling is the fact that we have now eliminated nearly 90% of Newfield's G&A. Our rapid reduction in STACK well costs from a legacy $7.9 million to an average of $6.5 million have moved returns higher and made this play very competitive within our portfolio and the industry.

And delivering exceptional results.

For the third time this year, we today raised our projection for annualized DNA synergies from this transaction now set at $200 million. This compares to our original target of $125 million more telling is the fact that we have now eliminated nearly 90% of new fields GE today.

Our rapid reduction in stack well costs from the legacy $7.9 million to an average of $6.5 million have moved returns higher and made this play very competitive within our portfolio and the industry.

Today, we present longer dated production data from all of our wells showing consistent performance from the play.

We have continued our track record of returning cash to shareholders. In fact, we are that we are at the top of the list of S&P companies for total cash return and we fulfilled our buyback plan in a timely fashion, we've repurchased $1.25 billion of our stock at what we believed to be a very compelling valuation in it.

Doug Suttles: Today, we present longer data production data from all of our wells, showing consistent performance from the play. We have continued our track record of returning cash to shareholders. In fact, we are at the top of the list of E&P companies for total cash returned. We fulfilled our buyback plan in a timely fashion. We've repurchased $1.25 billion of our stock at what we believe to be a very compelling valuation. In addition, we raised our dividend 25% this year. As our company and cash flow grows, we expect the dividend to grow as well. We see this as a sustainable practice and a requirement for healthy investor-focused E&P companies on the road ahead.

Addition, we raised our dividend 25% this year as our company in cash flow grows we expect that dividend to grow as well we see this as a sustainable practice and the requirement for our healthy investor focus DMP companies on the road ahead.

Setting aside the first quarter, which was noisy do that due to the timing of the Newfield closing, we've generated $378 million of free cash flow at current commodity prices and we estimate additional free cash in the fourth quarter as we've said before the first part of call for our free cash flow is the balance sheet and the reduction.

Doug Suttles: Setting aside the Q1, which was noisy due to the timing of the Newfield closing, we've generated $378 million of free cash flow at current commodity prices, and we estimate additional free cash in the Q4. As we have said before, the first port of call for our free cash flow is the balance sheet and the reduction of short-term debt. Consistent with prior practice, we continue to refine and high grade our asset portfolio. Earlier this year, we exited from China and sold a non-strategic dry gas asset in the Arkoma. The proceeds went to the balance sheet. In addition, we recently made a few key succession moves, with four internal promotions and other moves below them to build tomorrow's leaders and ensure continued execution at all levels in the organization.

In a short term debt.

And today the announcement of our intent to establish a corporate domiciling United States and our new brand are added to the list and reflect the significant transformation of our company.

We are excited about our future and our ability to compete and win in both the events piece space and the broader market.

Doug Suttles: Today, the announcement of our intent to establish a corporate domicile in the United States and our new brand are added to the list and reflect the significant transformation of our company. We are excited about our future and our ability to compete and win in both the E&P space and the broader market. I'd like to turn the call over to our president, Mike McAllister, for a brief operations update.

Now I'd like to turn the call over to our President Mike Mcallister for a brief operations update.

Thanks, Doug and good morning, everyone.

As you can see we posted another quarter of strong execution.

Michael McAllister: Thanks, Doug, and good morning, everyone. As you can see, we post another quarter of strong execution. Our approach to reservoir development, combined with solid operational and commercial execution, is what enables us to deliver quarter after quarter. We have a quality multi-basin portfolio. Our people have a proven ability to adapt, managing risks and continually shifting resources to generate desired corporate-level outcomes. Our three liquids-rich core growth assets continue to perform very well against our production and cost targets. Our capital efficiency metrics continue to improve through meaningful reductions in cycle times across all core assets. Our total production from the core growth assets averaged nearly 480,000 BOE per day, up about 10,000 BOE per day from the previous quarter. Our core assets remain on track to deliver 15% year-over-year liquids production growth.

Our people have a proven ability to adapt managing risks and continually shifting resources to generate desired corporate level outcomes.

Our capital efficiency metrics continue improve through meaningful reductions in cycle times across all core assets.

Our total production from the core growth assets averaged nearly 480000 Boe per day up about 10000 Boe per day from the previous quarter.

Core assets remain on track to deliver 15% year over year liquids production growth.

If you will notice today that we raised our expectations for full year production, primarily related to continued outperformance from the Anadarko basin.

Michael McAllister: You will notice today that we raised our expectations for full-year production, primarily related to continued outperformance from the Anadarko Basin. In the Permian, our Q3 volumes were up 13% over last year's Q3. Most of our activity has been focused in Midland, Martin, and Upton counties, we have been really encouraged by strong recent results in Howard County. In the Anadarko, we see strong year-over-year growth in oil and liquids, up 16% when compared to the same period in 2018. The story here is really pretty simple. Production results are consistent, and the team continues to find operational efficiencies to reduce costs and cycle times. More on this in just a minute. The Montney averaged 54,000 barrels per day of liquids during Q3, in line with expectations. This represents a 22% increase year-over-year.

The story here is really pretty simple.

Production results are consistent and the team continues to find operational efficiencies to reduce cost and cycle times.

The Montney averaged 54000 barrels per day of liquids during the third quarter inline with expectations.

Most impressively our cycle times, the montney have improved to the point.

Where we are delivering our stated objectives with just three rigs instead of the 40 rigs as we had planned.

It's always worth reminding folks that with $4 million well costs sub 80 day cycle times single digit royalty rates and a realized condensate prices at 90% of W. tie our investments here compete with anything in our portfolio.

Michael McAllister: Most impressively, our cycle times in the Montney have improved to the point where we are delivering our stated objectives with just three rigs instead of the four rigs as we had planned. It's always worth reminding folks that with $4 million well costs, sub 80-day cycle times, single-digit royalty rates, and a realized condensate prices at 90% of WTI, our investments here compete with anything in our portfolio. Our base assets are delivering significant free cash flow today and play a critical role in our corporate level performance. Collectively, our base assets produced just over 100,000 BOE per day in Q3, up nearly 8,500 BOE per day over Q2, with a growth driven by oil and condensate. Our Williston infill program is giving us confidence in a much larger inventory count than we originally estimated.

Our base assets are delivering delivering significant free cash flow today and play a critical role in our corporate level performance.

Collectively our based assets produced just over 100000 Boe per day in the third quarter up nearly 8500 Boe per day over the second quarter.

With the growth driven by oil and condensate.

Our Williston infill program is giving us confidence in a much larger inventory count than we originally estimated.

In the Eagle Ford consistent well performance and solid execution are continuing to produce free cash flow.

In the Duvernay strong outperformance from our recent pad led to a 40% quarter over quarter growth.

Let's move on with little more detail on our strong stock performance to date.

Michael McAllister: In the Eagle Ford, consistent well performance and solid execution are continuing to produce free cash flow. In the Duvernay, strong well performance from a recent pad led to a 40% quarter-over-quarter growth. Let's move on with a little more detail on our strong STACK performance to date. Our development of the STACK Meramec is focused on the black oil window in the heart of our, excuse me, our contiguous acreage position. This is a dominant acreage position that is early in its ultimate development. Our strong well performance in the area and focus on base production delivered 162,000 BOE per day through October. In addition to our consistent well results, the team continues to find operational efficiencies, deploying our cube development model, resulting in rapidly reduced well costs, cycle times, and improved returns. STACK well performance continues to be consistent.

Our strong outperformance in the area and focus on based production delivered 162000 Boe per day through October .

In addition to our consistent while results. The team continues to find operational efficiencies deploying our cubed development model, resulting in rapidly reduced well costs cycle times and improved returns.

Stacked well performance continues to be consistent the plots on this slide focus on a subset of wells in the black oil region.

To date to date, we have pump 40 high intensity Q style completions and as you can see oil production is outpacing our expected oil type curve at 180 days from initial production.

Michael McAllister: The plots on this slide focus on a subset of wells in the black oil window. To date, we have pumped 40 high-intensity cube-style completions, and as you can see, oil production is outpacing our expected oil type curve at 180 days from initial production. Please mark your calendars for a STACK Day event in late January. Since we acquired this asset, we continue to be encouraged by a significant value we're seeing and the competitive returns the play is generating today. By late January, we will have nearly a year of new data from the Anadarko, and we look forward to sharing a great story with you. I will now turn the call over to Corey.

Please mark your calendars for a stack day event in late January since we acquired this asset we continued to be encouraged by a significant value, we're seeing and the competitive returns to play is generating today.

By late January we will have nearly a year of new data from the Anadarko and we look forward to sharing a great story with you.

I'll now turn the call over to Corey.

Thanks, and good morning, everyone.

Let's discuss the list of wise regarding our decision to establish a corporate domiciled in the United States. Let me say upfront. This move does not represent to shift in strategy.

As simply about gaining access to deeper pools of investment capital.

David Brown: Thanks, and good morning, everyone. Let's discuss the list of whys regarding our decision to establish a corporate domicile in the United States. Let me say up front, this move does not represent a shift in strategy. It is simply about gaining access to deeper pools of investment capital. We believe the opportunity to enhance long-term value for shareholders will be greater as a US-domiciled company. Despite significantly and strategically repositioning our multi-basin portfolio in North America's top basins, while constantly innovating to improve our returns and corporate financial performance, we believe our valuation continues to be disconnected from our US peers. This is due in part to the inability to access certain pools of capital in the United States that are limited in investing in securities of foreign companies.

Corey Code: Thanks, and good morning, everyone. Let's discuss the list of whys regarding our decision to establish a corporate domicile in the United States. Let me say up front, this move does not represent a shift in strategy. It is simply about gaining access to deeper pools of investment capital. We believe the opportunity to enhance long-term value for shareholders will be greater as a US-domiciled company. Despite significantly and strategically repositioning our multi-basin portfolio in North America's top basins, while constantly innovating to improve our returns and corporate financial performance, we believe our valuation continues to be disconnected from our US peers. This is due in part to the inability to access certain pools of capital in the United States that are limited in investing in securities of foreign companies.

We believe the opportunity to enhance long term value for shareholders will be greater as a use domiciled company.

Capital in the United States that are limited and investing in securities of foreign companies.

As the US company, we maybe able to attract deeper and growing pools of passive investment capital in the United States, particularly particularly if our shares are included in us indices and other investment vehicles that only includes securities of us domiciled companies.

David Brown: As a US company, we may be able to attract deeper and growing pools of passive investment capital in the United States, particularly if our shares are included in US indices and other investment vehicles that only include securities of US-domiciled companies. We believe this change will level the playing field with our principal competitors, most of which are US-based companies. There will be a great deal more information in our preliminary proxy statement, which will be filed with regulators next week. Please take time to read this document to more fully understand our rationale and the mechanics behind this planned move. We estimate that we can make this domicile change without material cost to the company, allowing access to the larger pools of investment in the US capital markets.

Corey Code: As a US company, we may be able to attract deeper and growing pools of passive investment capital in the United States, particularly if our shares are included in US indices and other investment vehicles that only include securities of US-domiciled companies. We believe this change will level the playing field with our principal competitors, most of which are US-based companies. There will be a great deal more information in our preliminary proxy statement, which will be filed with regulators next week. Please take time to read this document to more fully understand our rationale and the mechanics behind this planned move. We estimate that we can make this domicile change without material cost to the company, allowing access to the larger pools of investment in the US capital markets.

There will be a great deal more information in our preliminary proxy statement, which will be filed with regulators next week. Please take time to read this document to more fully understand our rationale and the mechanics behind this plan move.

We estimate that we can make this domiciled change without material costs to the company, allowing access to the larger pools of investment in the us capital markets.

Theres no doubt that passively managed money and the importance of index funds and EPS is on the rise using public data, we estimate that today under 10% of our ownership is comprised of passive accounts far less than the 30% average for US peers. This is not a trend that is likely to reverse and we want to expire.

David Brown: To remain accessible to both our US and Canadian shareholders, we plan to remain dual-listed on the New York Stock Exchange and the TSX exchanges. There's no doubt that passively managed money and the importance of index funds and ETFs is on the rise. Using public data, we estimate that today under 10% of our ownership is comprised of passive accounts, far less than the 30% average for our US peers. This is not a trend that is likely to reverse. We want to expose our equity to new and rapidly growing pools of money in the US. We know that you might have some more specific questions as a shareholder regarding the change. We have included a frequently asked questions page on our website for you to reference now. Our preliminary proxy statement will be filed next week with more details.

Corey Code: To remain accessible to both our US and Canadian shareholders, we plan to remain dual-listed on the New York Stock Exchange and the TSX exchanges. There's no doubt that passively managed money and the importance of index funds and ETFs is on the rise. Using public data, we estimate that today under 10% of our ownership is comprised of passive accounts, far less than the 30% average for our US peers. This is not a trend that is likely to reverse. We want to expose our equity to new and rapidly growing pools of money in the US. We know that you might have some more specific questions as a shareholder regarding the change. We have included a frequently asked questions page on our website for you to reference now. Our preliminary proxy statement will be filed next week with more details.

Those are equity to new and rapidly growing pools of money in the U.S.

We know that you might have some more specific questions as a shareholder regarding the change. So we have included a frequently asked questions page on our website for you to reference now.

Our preliminary proxy statement will be filed next week with more details I'll now turn the call back to them.

Excuse me thanks Corey.

David Brown: I'll now turn the call back to Doug.

Corey Code: I'll now turn the call back to Doug.

Michael McAllister: Excuse me. Thanks, Corey. We are also using this opportunity to rebrand to better reflect who we are today and further break down perceptions that we believe are dilutive to our valuation. This move represents the significant and transformational changes we have delivered. We are an entirely different company today, and we are positioned to lead on the road ahead. We are one of the largest independent producers with approximately a quarter of a million barrels per day of oil and condensate production. We are often reminded that some folks still perceive us as a natural gas company.

Doug Suttles: Excuse me. Thanks, Corey. We are also using this opportunity to rebrand to better reflect who we are today and further break down perceptions that we believe are dilutive to our valuation. This move represents the significant and transformational changes we have delivered. We are an entirely different company today, and we are positioned to lead on the road ahead. We are one of the largest independent producers with approximately a quarter of a million barrels per day of oil and condensate production. We are often reminded that some folks still perceive us as a natural gas company.

This move represents the significant and transformational changes we have delivered we are an entirely different company today and we are positioned to lead on the road ahead.

We are one of the largest into independent producers with approximately a quarter of 1 million barrels per day of oil and condensate production.

We are often reminded that some folks still perceive us as a natural gas company. We are proud of our company's history.

Make no mistake, we have a long and proud history in Canada, and our assets here are world class and as Mike described with our cost and productivity. Our returns in Canada continue to be every bit as strong as the rest of our portfolio.

Doug Suttles: We are proud of our company's history, we have meaningfully transformed our business and created a company that is built for today's environment. It is important that our transformation is recognized in our valuation. Make no mistake, we have a long and proud history in Canada, our assets here are world-class. As Mike described, with our cost and productivity, our returns in Canada continue to be every bit as strong as the rest of our portfolio. We will continue to make profitable investments in the Montney and the Duvernay and manage these assets out of our Calgary office. We do not expect any impact on our Canadian workforce, either in the office or the field. We define the new E&P. We have a sustainable business model delivering today what many others are aspiring to do in the coming months and years ahead.

We define the new MP, we have a sustainable business model delivering today with many others are aspiring to do in the coming months in years ahead. This business model is generating leading results in our sector and compete head to head for capital and investments in the broader market.

We are leading the way in an industry at the customer with transformation, we have successfully positioned our company to achieve differentiated performance in this market.

Doug Suttles: This business model is generating leading results in our sector and competes head to head for capital and investments in the broader market. We are leading the way in an industry at the cusp of transformation. We have successfully positioned our company to achieve differentiated performance in this market. We are balancing industry competitive liquids growth, disciplined capital allocation to generate free cash flow, and a consistent return of cash to shareholders. These are the key ingredients that should lead to long-term shareholder value. Our strategy is to produce strong and sustainable corporate financial performance. Since 2013, we have taken great strides to reshape the company and deliver the corporate metrics you can see today. We have greatly increased our multi-basin scale, focusing on high-value oil and condensate production.

We have greatly increased our multi basin scale, focusing on high value oil and condensate production.

Our proved reserves are now 2 billion barrels equivalent, but more important they have moved from 15% liquids to 55% liquids or oil and condensate production is expanded seven fold over this time period, we have significant scale with almost a quarter removed barrels of oil and condensate production. That's sold this quarter from.

Doug Suttles: Our approved reserves are now 2 billion barrels equivalent. More important, they have moved from 15% liquids to 55% liquids. Our oil and condensate production has expanded sevenfold over this time period. We have significant scale with almost a quarter of a million barrels of oil and condensate production that sold this quarter for an average of 95% of NYMEX WTI pricing. When annualizing the Q2 and Q3, we generated $3.4 billion in cash flow. For an illustrative reference, we compare our 2013 results adjusted for the current oil and gas prices. You can see how dramatically our business has improved. Finally, we continue to focus on our strong balance sheet. We have investment grade rating, about $3.4 billion of liquidity and a clear path to further deleveraging.

Average of 95% of Nymex WT pricing.

When annualizing, the second and third quarters, we generated $3.4 billion in cash flow for an illustrative reference we compare our 2013 results adjusted for the current oil and gas prices and you can see how dramatically our businesses improved finally, we continue to focus on our on our strong back.

It's sheet, we have investment grade rating about $3.4 billion of liquidity and a clear path to further deleveraging.

We know that the market is growing increasingly more concerned with leverage and testing downside scenarios for lower prices as we execute our forward plan, we share our balance sheet balance sheet continuing to do you de lever.

It is this transformational execution that underpins the next chapter in our companies not life and Upto I'll now turn the call over to Brendan.

Doug Suttles: We know that the market is growing increasingly more concerned with leverage and testing downside scenarios for lower prices. As we execute our forward plan, we see our balance sheet continuing to delever. It is this transformational execution that underpins the next chapter in our company's life. I'll now turn the call over to Brendan.

Thanks, Doug.

The framework for our 2020 outlook is highlighted on this slide.

Our number one priority will be the generation of free cash flow delivering modest liquids growth of mid cycle prices.

[Company Representative] (Ovintiv): Thanks, Doug. The framework for our 2020 outlook is highlighted on this slide. Our number one priority will be the generation of free cash flow, delivering modest liquids growth at mid-cycle prices. We will do this by allocating capital to the high return liquids opportunities that we have in our portfolio. In a lower price environment, we have tremendous flexibility with no long-term rig contracts or HBP requirements. We would adjust our capital accordingly and prioritize free cash flow over production growth. If prices strengthen, this will lead to a higher free cash flow generation. In this scenario, free cash will go to the balance sheet. Thanks for your time today. We're now happy to take your questions. Operator?

Brendan McCracken: Thanks, Doug. The framework for our 2020 outlook is highlighted on this slide. Our number one priority will be the generation of free cash flow, delivering modest liquids growth at mid-cycle prices. We will do this by allocating capital to the high return liquids opportunities that we have in our portfolio. In a lower price environment, we have tremendous flexibility with no long-term rig contracts or HBP requirements. We would adjust our capital accordingly and prioritize free cash flow over production growth. If prices strengthen, this will lead to a higher free cash flow generation. In this scenario, free cash will go to the balance sheet. Thanks for your time today. We're now happy to take your` questions. Operator?

We will do this by allocating capital to the high return liquids opportunities that we have in our portfolio.

In a lower price environment, we have tremendous flexibility with no long term rig contracts or HBP requirements.

We would adjust our capital accordingly.

And prioritize free cash flow over production growth.

If prices strengthen this will lead to a higher free cash flow generation.

Thanks for your time today, we're now happy to take your questions operator.

Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one.

Operator: Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one. We will now begin the question and answer session and go to the first caller. Your first question comes from the line of Greg Pardy of RBC Capital Markets. Please go ahead. Your line is open.

Greg Pardy: Yeah, thanks. Good morning. Really just two questions, I guess. One is from everything you're saying around the change in where the company's domiciled, effectively, there's really no movement of people, the name changes, but that's about it. It's pretty much business as usual. Is that fair, Doug?

Accessing the capital market in the past the flows that are in at today, but how we operate the business and run the business will not change there will be no movement of roles and responsibilities no reduction in staff and actually no change to how we're allocating capital.

Doug Suttles: Yeah, Greg, you've got that exactly right. I mean, this move is the intent and purpose and what's driving this is quite simply accessing the capital market and the passive flows that are in it today. How we operate the business and run the business will not change. There'll be no movement of roles or responsibilities, no reduction in staff, and actually no change to how we're allocating capital.

Well, Greg it's really around appear comparability.

Greg Pardy: Okay. You also mentioned just on the share consolidation, the 5 to 1, and you mentioned volatility, but is there broader thinking around that?

Doug Suttles: Well, Greg, it's really around peer comparability. You know, we actually produce one of the largest annual cash flows in the sector. With our current share count on a per share basis, it looks considerably lower than peers. We think this just makes sense to do this at the same time as we do the do-domicile and name change. It feels like, for comparability and ease of understanding, we think it's a simplification move.

So we think this just makes sense to do this at the same time as we do the Doe Doma style in name change it feels like for comparability and ease of understanding we think it's a simplification move.

Okay, Great and then the second one is really just operation around the Montney, but can you just kind of lay it with the growth trajectory is coming is fair bit growth as we got coming in 2021 I believe.

Yes, Greg as you know, we've we've been working with care at a build to the gas plant NPR, a that's going very well that should start up in early 21 as were as we're finalizing details in budgets for 2020. The real question is how we ramp into that new facility and obviously, we want to maximize capital productivity.

Greg Pardy: Okay, great. The second one is really just operational around the Montney, but can you just kind of lay out what the growth trajectory is coming? There's a fair bit of growth as we've got coming in 2021, I believe.

Doug Suttles: Yeah, Greg, as you know, we've been working with Keyera to build the gas plant in PRA. That's going very well. That should start up in early 2021. As we're finalizing details and budgets for 2020, the real question is how we ramp into that new facility. Obviously, we wanna maximize capital productivity, so not spend capital too far in advance. I would say though that one operational detail here, which is advantageous to it, is that we have the ability to route existing production to that plant as well. Which means that as the timing gets closer, and it comes on, we don't have to actually drill wells to start the plant up. We could actually route existing production and then build production into the startup once it's occurred.

These are not spend capital too far in advance I would say, though that one one operational detail here, which is advantageous to it is that we have the ability to route existing production to that plan as well, which means as as the timing gift slows closer to comes on we don't have to actually drill wells.

To start the plant up we could actually route existing production and then build production.

End of the startup once its Kurt.

Got it thanks very much thanks, Greg.

Our next question comes from the line of Bryan singer of Goldman Sachs. Please go ahead. Your line is open.

Thank you good morning.

And Brian .

I wanted to see if you can discuss the oil production trajectory in the Anadarko basin.

Brian Singer: Got it. Thanks very much.

Doug Suttles: Thanks, Greg.

Operator: Our next question comes from the line of Brian Singer of Goldman Sachs. Please go ahead. Your line is open.

And oil specifically versus liquid broadly that the well performance that you've consistently reported and put in your slides is very strong it doesn't necessarily always maybe translate into what we see for a total basin quarter to quarter oil and I wanted to see if you could talk a little bit more about those moving pieces the base declines.

Brian Singer: Thank you. Good morning.

Doug Suttles: Morning, Brian.

Brian Singer: I wanted to see if you could discuss the oil production trajectory in the Anadarko Basin, and oil specifically versus liquids broadly. The well performance that you've consistently re-reported and put in your slides is very strong. It doesn't necessarily always maybe translate into what we see for a total basin quarter-to-quarter oil. I wanted to see if you could talk a little bit more about those moving pieces, the base declines, the timing of completions, and then ultimately what that trajectory looks like over the coming quarters.

Timing of completions, and then ultimately what that trajectory looks like over the coming quarters.

Yes, Brian I think I think the two factors I'd highlight into Bianna. Some of the rest of that we may just need to follow up with the afterwards, but the two things I'd highlight as you can see in the results Mike talk to the wells are performing quite well in fact with our our new high intensity completions.

Doug Suttles: Yeah, Brian, I think the two factors I'd highlight. To be honest, some of the rest of that we may just need to follow up with you afterwards. The two things I'd highlight, as you can see in the results Mike talked to, the wells are performing quite well. In fact, with our new high-intensity completions, BOEs are on track with the type curve, but oil is above type curve. Of course, that's the product that matters most there. So well performance is strong, the second effect is obviously entering the year at the time the transaction closed, I believe it was what, Mike, 13 rigs active?

But the second effect, so that so well performance is strong.

But the second effect is obviously entering the year at the time the transaction closed I believe it was what Mike 13 rigs.

Active, yes, thats right and and of course, we have ramp that down to more sustainable level, but you can see we actually basically had flat production from twoq to threeq to despite the drop in activity.

But other than that to be honest that will probably just need to follow up with you offline or the rest of your questions.

[Company Representative] (Ovintiv): Yeah, that's right.

Brian Singer: Yeah, that's right.

Doug Suttles: Of course, we've ramped that down to a more sustainable level. You can see, we actually basically had flat production from Q2 to Q3 despite the drop in activity. Other than that, to be honest, I would probably just need to follow up with you offline on the rest of your questions.

Great. Thanks, and then the follow up is a little bit more on the 2020 outlook, how you're thinking about.

More broadly to achieving your free cash flow objective and.

The sequential production trajectory that that would entail.

Brian Singer: Great. Thanks. The follow-up is a little bit more on the 2020 outlook, how you're thinking about, you know, more broadly achieving your free cash flow objectives and the sequential production trajectory that that would entail.

Yes, Brian I think to it.

By the way for for all of Us in the sector and people like yourself, who follow that.

I think obviously, the God's like to mess with the subsea ended the year by creating maximum volatility in the commodity price, while we try to do planning.

Doug Suttles: Yeah. Brian, I think that, by the way, for all of us in the E&P sector and people like yourself who follow it, I think, obviously, the gods like to mess with us at the end of the year by creating maximum volatility in the commodity price while we try to do planning. One of the things we're very clear on is that we're prioritizing free cash flow first as we look to the business in 2020. Under today's conditions, so at prices similar to what we see right now, we would anticipate modest liquids growth with free cash generation, but we're refining that model as we go into the year.

But one of things were very clear on is that we're per our prioritizing free cash flow first as we look to the business in 2020.

Under today's conditions, so at prices similar to what we see right now we would anticipate modest liquids growth with free cash generation, but we're refining will refining that model as.

As we go into the year and then of course.

If the world worsened from where it is today, we continue to prioritize free cash so would pull back on capital and if it turns out stronger the additional the additional cash flow will go to the balance sheet.

Doug Suttles: Of course, if the world worsened from where it is today, we would continue to prioritize free cash, so we'd pull back on capital. If it turns out stronger, the additional cash flow will go to the balance sheet.

Great. Thank you.

Our next question comes from the line of Gabe Daoud of Cowen. Please go ahead. Your line is open.

Great. Thanks, good morning, everyone.

Maybe just sticking with 2020 again.

Brian Singer: Great. Thank you.

So modest think the single digit liquids growth plus free cash flow on a mid cycle price I guess, Doug is that mid cycle price kind of what we're saying on the screen today, and then would plan b essentially represent.

Operator: Our next question comes from the line of Gabriel Daoud of Cowen. Please go ahead. Your line is open.

Brian Singer: Great. Thanks. Good morning, everyone. Maybe just sticking with 2020 again. Modest single-digit liquids growth plus free cash flow on a mid-cycle price. I guess, Doug, is that mid-cycle price kind of what we're seeing on the screen today? Would plan B essentially represent a kind of a maintenance-level program that holds volumes flat year-over-year?

Gabriel Daoud: Great. Thanks. Good morning, everyone. Maybe just sticking with 2020 again. Modest single-digit liquids growth plus free cash flow on a mid-cycle price. I guess, Doug, is that mid-cycle price kind of what we're seeing on the screen today? Would plan B essentially represent a kind of a maintenance-level program that holds volumes flat year-over-year?

Kind of a maintenance level program that hold volumes flat year over year.

Yes, I gave I would say that.

What we're really indicating at prices like today, because I would see if you think about the three pieces oil.

Gas and Ngls oils, probably around where we think mid cycle is gas is obviously, we can ngls are weak, but we still believe even in that environment, we would actually have liquids growth and free cash generation.

Doug Suttles: Yeah, Gabe, I would say that, you know, what we're really indicating at prices like today, because I would say if you think about the three pieces: oil, gas, and NGLs, oil's probably around where we think mid-cycle is. Gas is obviously weak, and NGLs are weak, but we still believe even in that environment, we would actually have liquids growth and free cash generation. Now, if, for instance, if we can further what we're indicating is, we would pull back capital and pull back some of the growth to make sure we still generated free cash flow.

Now if for instance, it weakened further what what we're indicating is we would pull back capital and pullback.

Some of the growth to make sure we still generated free cash flow.

We've talked before that the business, we built can even into the into the $40 Wi Fi range, we can hold production flat and be free cash flow neutral, which just shows the efficiency of the business.

Doug Suttles: I think we've talked before that the business we built can even into the $40s WTI range, we can hold production flat and be free cash flow neutral, which just shows the efficiency of the business.

Understood.

Thanks for that and just I.

I guess, Doug as a follow up thinking.

Or going back to the stack. It this year I think on average the rig program was about six to seven but then obviously you blow down a number of new.

Brian Singer: Understood. Thanks for that. Just, I guess, Doug, as a follow-up, sticking, or going back to the STACK, this year, I think on average, the rig program was about 6 to 7, obviously you blew down a number of Newfield DUCs, which led to on streams being significantly higher. I guess just trying to think about capital efficiency out of the STACK for next year. Do you have to add a lot of activity to achieve your goals there next year?

Gabriel Daoud: Understood. Thanks for that. Just, I guess, Doug, as a follow-up, sticking, or going back to the STACK, this year, I think on average, the rig program was about 6 to 7, obviously you blew down a number of Newfield DUCs, which led to on streams being significantly higher. I guess just trying to think about capital efficiency out of the STACK for next year. Do you have to add a lot of activity to achieve your goals there next year?

Newfield docs, which led to onstream being significantly higher so I guess, just trying to think about capital efficiency out of the stack for next year.

Do you have to add a lot of activity to achieve your goals. There next year and and just given that some of the well cost savings you guys have obviously seen just trying to try to figure out how that how that could potentially move all those moving pieces have I could move that can move the budget.

And the stack mentioned relative to the number this year, which I think was a 25 to 875.

Brian Singer: Just given some of the well cost savings you guys have obviously seen, just trying to figure out how that could potentially move all those moving pieces, how that could move the budget and the STACK next year relative to the number this year, which I think was $825 to $875.

Gabriel Daoud: Just given some of the well cost savings you guys have obviously seen, just trying to figure out how that could potentially move all those moving pieces, how that could move the budget and the STACK next year relative to the number this year, which I think was $825 to $875.

Yes, it's and gave I want to go too far here, because we haven't finalized plans for the year there yet on for 2020, and how we're going to allocate capital across portfolio.

But what we've been trying to do is level load the program like we've done in the Permian and you've seen the efficiency benefits that's delivered.

Doug Suttles: Yeah. It's, Gabe, I don't want to go too far here because we haven't finalized plans for the year yet on for 2020 and how we're gonna allocate capital across the portfolio. What we've been trying to do is level load the program like we've done in the Permian, and you've seen the efficiency benefits that's delivered. Obviously, we're not going back to 13 rigs, we're probably in and around where we are today or maybe just slightly higher. We'll see as we do the budget. We don't intend to go back to 13 rigs, which is where it started the year.

Obviously, we're not going back to 13 rigs, but where we're probably in and around where we are today or maybe maybe just slightly higher we'll see as we as we do the budget.

But we don't intend to go back to 13 rigs, which is where it started the year.

Okay understood. Thanks.

Thanks good.

Our next question comes from the line of asset from.

Bank of America Merrill Lynch. Please go ahead your line is open.

Thanks, Good morning.

One for Mike in one for Corey if I may have Mike on the Permian you talked about strong Howard County results thing you mentioned 28 gross wells online any more color as to what you're thinking and when you're thinking broadly Permian and you're thinking about 120.

Michael McAllister: Okay, understood. Thanks a lot, Doug.

Gabriel Daoud: Okay, understood. Thanks a lot, Doug.

Doug Suttles: Thanks, Gabe.

Operator: Our next question comes from the line of Asit Sen of Bank of America Merrill Lynch. Please go ahead. Your line is open.

Asit Sen: Thanks. Good morning. I have one for Mike and one for Corey, if I may. Mike, on the Permian, you talked about strong Howard County results. I think you mentioned 28 gross wells online. Any more color as to what you're thinking? When you're thinking broadly Permian, and you're thinking about 120 well till this year, how are we thinking about, again, very early next year and allocation towards Howard County?

Well till this year are we thinking about again very early next year and allocation towards Howard County.

Is that yes, yet Howard County represented about 25% of a program. This year would expect that not to changes are going go into next year, but again as Doug mentioned, we haven't we haven't finalized on lies the budget yet for 2020.

Michael McAllister: Hi, Asit. Yeah, it's Howard County represented about 25% of our program this year. Would expect that not to change as we go into next year. Again, as Doug mentioned, we haven't finalized the budget yet for 2020. The real surprise and really encouraging results that we're seeing is coming out of the Wolfcamp A in Howard. It's basically well above our type curve expectations. We're really feeling pretty good about those results.

The the real surprise and real.

Really encouraging results were seeing is coming out of the Wolfcamp, a and Howard and and it's basically well above our type curve expectation. So we're we're really feeling pretty pretty good about those results.

Okay, Great and then Cory on cash margin per BOE, you for the quarter was.

I think for $14.67 just wondering if in the current environment you could drank the four different assets Permian Anadarko money on these assets on.

Asit Sen: Okay, great. Then Corey, on cash margin per BOE for the quarter was, I think $14.67. Just wondering if in the current environment you could rank the four different assets, Permian, Anadarko, Montney, and the base assets on unit cash margins. Any drivers outside of pricing that could differentially affect margin outlook. Again, big picture over the next 12 to 18 months.

Cash margins and any drivers outside of pricing that could differentially affect margin outlook again big picture over the next 12 to 18 months.

Yes, Hey us in.

Sorry the.

If you look across all four of them that they'll get to very similar margin, albeit slightly different product mix and well cost. So they all compete really well in our portfolio and we tend to allocate capital to them and not basis.

Doug Suttles: Yeah. Hey, Asit. Sorry. The, if you look across all four of them, they all get to a very similar margin, albeit with slightly different product mix and well cost. They all compete really well in our portfolio, and we tend to allocate capital to them on that basis.

Corey Code: Yeah. Hey, Asit. Sorry. The, if you look across all four of them, they all get to a very similar margin, albeit with slightly different product mix and well cost. They all compete really well in our portfolio, and we tend to allocate capital to them on that basis.

Okay. Thank you.

Our next question comes from the line of Jeanine Wai of Barclays. Please go ahead. Your line is open.

Hi, good morning, everyone.

Good morning.

Hi.

Asit Sen: Okay. Thank you.

That that's my first question on the well cost you cited this same at 1.4 million savings of last quarter, although the pacesetter wells are under 6 million, which is great.

Operator: Our next question comes from the line of Jeanine Wai of Barclays. Please go ahead. Your line is open.

Jeanine Wai: Hi. Good morning, everyone.

Seems like things are continuing to progress well on the cost fried and your last update so are there any completion design changes and his staff that you've been testing that potentially are offsetting some of these continued cost reductions.

Doug Suttles: Good morning.

Jeanine Wai: Hi. On the STACK, that's my first question. On the well cost, you cited the same $1.4 million savings as last quarter, although the pacesetter wells are under $6 million, which is great. It seems like things are continuing to progress well on the cost front in your last update. Are there any completion design changes in the STACK that you've been testing that potentially are offsetting some of these continued cost reductions?

Yes.

As Doug I'll make a couple of comments and see if Mike wants to add in its a great question because some.

We have put more intense completions in the ground our high intensity completions, we've done elsewhere in the company with was really strong success and we do think Thats one of the things leading to the.

Doug Suttles: This is Doug, I'll make a couple of comments and see if Mike wants to add. It's a great question because we have put up more intense completions in the ground. Our high-intensity completions we've done elsewhere in the company with really strong success, we do think that's one of the things leading to the strong oil production performance there. They do add on a like-for-like basis, they do add costs compared to that 7.9 number. What we're doing is, before we put another new number out there, is looking at this balance of where we're going with the completion versus the cost savings.

The strong the oil production performance, there and they do add on a like for like basis. They do add cost compared to that 7.9 number. So what we're doing is before we put up another new number out there is looking at this balance of where we're going with the completion versus the cost savings, but as Mike indicated we've had wells.

Under $6 million now and this is one of the areas you should expect us to talk a lot more about at the stack day at.

At the end of January .

Like anything to add yen not a lot here Doug of and then we're working on additional opportunities to reduce costs.

Doug Suttles: As Mike indicated, we've had wells under $6 million now. This is one of the areas you should expect us to talk a lot more about at the STACK Day at the end of January. Mike, anything to add?

That that will help us continue to drive down to $6 million and below but offsetting that is we're testing higher intensity completions up to 3000 pounds per foot and looking at those results. So it's a bit of a balance of in more intense completions, but coming in with different ideas number of ideas that we're chasing to drive our.

Michael McAllister: Yeah. No, not a lot here, Doug, other than, you know, we're working on additional opportunities to reduce costs that will help us continue to drive down to, you know, $6 million and below. Offsetting that is we're testing high-intensity completions up to 3,000 pounds per foot and looking at those results. It's a bit of a balance of in more intense completions, but coming in with different number of ideas that we're chasing to drive our cost down per well.

To driver costs down per well.

And could any of these changes potentially by you towards the lower end of year six to eight wells per section keep configuration that would enhance returns and we're just trying to think about any incremental capital efficiencies knowing that there might be next year that market's RP heating.

Jeanine Wai: Could any of these changes potentially bias you towards the lower end of your 6 to 8 wells per section cube configuration that would enhance returns? We're just trying to think about any incremental capital efficiency tailwinds that there might be next year that the market's underappreciating.

Yes. Thanks.

On the on the spacing and stacking this sort of density question I think.

Of course that always moves around on where you're at in the play in how thick. The sections are in do you have the Osage underneath you all sorts of things.

Doug Suttles: Yeah. I think on the spacing and stacking, this sort of density question. Of course, that always moves around on where you're at in the play and how thick the sections are, and do you have the Osage underneath you, all sorts of things. The interaction between the completion design and the spacing, I'm not sure is gonna have a huge influence at this point. I think what we're looking to see, though, is if we spend a bit more money on the completion, does it make a better well and therefore generate better returns, which will improve capital efficiency at the same time.

The interaction between the completion design in the spacing I'm not sure is going to have a huge influence at this point.

I think what it is what we're looking to see though is.

If we spend a bit more money on the completion does it make a better well and therefore generate better returns.

Which will improve capital efficiency at the same time and as Mike mentioned.

Actually right across the business actually we just took our board on Monday of this week out to the Anadarko and they got to first hand see what we've been doing.

And our teams just continue to innovate all across the business and come up with new ways to execute which improve efficiency you.

Doug Suttles: As Mike mentioned, actually right across the business, actually, we just took our board on Monday of this week out to the Anadarko, and they got to firsthand see what we've been doing. Our teams just continue to innovate all across the business and come up with new ways to execute, which improve efficiency. You've probably seen our focus on cycle times. Well, one of the reasons we do that is a lot of the cost in this industry are paid for on a day basis. If you can actually do things more efficiently and quicker, it's less expensive. The other thing we get out of that is, of course, we get information back sooner, so therefore we can weave that information into our thinking.

You've probably seen our focus on cycle times and.

One of the reasons, we do that is a lot of the cost in this industry are paid for on a day basis. So if you can actually do things more efficiently and quicker it's less expensive. The other thing we get out of that is course, we get information back sooner. So therefore, we can we that information into our thinking but.

I don't I don't necessarily see the spacing and stacking being driven dramatically off. These completion designs is just can we make better wells get better recovery for the capital we're investing.

Great. Thank you for taking my question.

Doug Suttles: I don't, I don't necessarily see the spacing and stacking being driven dramatically off these completion designs. It's just can we make better wells, get better recovery for the capital we're investing.

Our next question comes from the line of Jeffrey Campbell of Tuohy Brothers. Please go ahead. Your line is open.

Good morning.

And congratulations for the quarter on.

Jeanine Wai: Okay. Great. Thank you for taking my questions.

The excitement that.

Operator: Our next question comes from the line of Jeffrey Campbell of Tuohy Brothers. Please go ahead. Your line is open.

Well, so I didn't see coming.

I wanted to ask about the the Anadarko decline right. I was just wondering is this just represent better than expected well performance are you doing something proactive.

[Analyst] (Tuohy Brothers): Good morning, and congratulations for the quarter and the excitement that Southside didn't see coming. I wanted to ask you about the Anadarko decline rate. I was just wondering, is this, does this represent better than expected well performance, or are you doing something proactive to influence the base?

Jeffrey Campbell: Good morning, and congratulations for the quarter and the excitement that Southside didn't see coming. I wanted to ask you about the Anadarko decline rate. I was just wondering, is this, does this represent better than expected well performance, or are you doing something proactive to influence the base?

Hi influenced the base.

Yes, Jeff.

Good question.

One of the things that team does and even if you think about accompany large size we produce about 600000.

Be Louise day about a quarter million barrels a day of crude and condensate.

Doug Suttles: Yeah, Jeff, good question. I, one of the things the team does, and, you know, if you think about a company of our size, we produce about 600,000 BOEs a day, about a quarter of a million barrels a day of crude and condensate. With a large base, you can imagine if you can optimize that base, even a 1% move is a big number. In the Anadarko, specifically, the team's been doing a very good job of optimizing the base, including things like artificial lift and managing line pressure in a number of things, which are having an impact. Of course, the other piece about that is these are usually at little to no cost, so the economic value is very strong.

And with a large base you can imagine if you can optimize that base, even a 1% move is a big number and in the Anadarko specifically the teams to do at a very good job of optimizing the base and Qt, including things like artificial lift and managing line pressure in a number of things.

Sure, which are having an impact.

And of course, the other piece about that is these are usually at little to no costs are the economic value is very strong, but we have had some very good results on the base here recently with optimization.

Thanks for that color on my other question was.

With regard to the Williston infill well outperformance you cited I was just wondering could you discuss maybe what the prior spacing assumptions were and what it might look like going forward based on.

Doug Suttles: We have had some very good results on the base here recently with optimization.

[Analyst] (Tuohy Brothers): Thanks for that color. My other question was with regard to the Williston infill well outperformance that you cited. I was just wondering, could you discuss maybe what the prior spacing assumptions were and what it might look like going forward based on these results?

Jeffrey Campbell: Thanks for that color. My other question was with regard to the Williston infill well outperformance that you cited. I was just wondering, could you discuss maybe what the prior spacing assumptions were and what it might look like going forward based on these results?

These results.

Hi, Jeffrey it's Mike here, yes prior.

We had 13 1300, 20 foot inner well spacing in refining putting a well in between so going down to 660 foot and actually even testing tighter than that we're seeing us and also you need to understand we're going with them.

Doug Suttles: Hi, Jeffrey, it's Mike here. Yeah, you know, we had 1,320 foot inner well spacing, and we're finally putting a well in between. Going down to 660 foot and actually even testing tighter than that. Also you need to understand we're going with larger completions going up to 700 pounds per foot. What we're seeing is significant improvement over the parent well performance. In fact, we're also seeing enhancement in the offset parent wells, basically improving production after they're fracked by the child well. Things are really encouraging in the Williston Basin, and we're pretty excited about some of the well results we're seeing.

Michael McAllister: Hi, Jeffrey, it's Mike here. Yeah, you know, we had 1,320 foot inner well spacing, and we're finally putting a well in between. Going down to 660 foot and actually even testing tighter than that. Also you need to understand we're going with larger completions going up to 700 pounds per foot. What we're seeing is significant improvement over the parent well performance. In fact, we're also seeing enhancement in the offset parent wells, basically improving production after they're fracked by the child well. Things are really encouraging in the Williston Basin, and we're pretty excited about some of the well results we're seeing.

Larger.

Completions going up to 700 pounds per foot and what we're seeing is significant improvement over the parent well performance and in fact, we're also seeing enhancement in the offset to apparent wells.

Basically improving production after their frac hit by the child, well, so things are really encouraging and in the Williston basin and we're pretty excited about some of the well results were seeing.

Okay, great. Thanks for the color I appreciate it.

Our next question comes from the line of Neal Dingmann of Suntrust. Please go ahead. Your line is open.

Good morning, Doug and Great color. This morning, Doug My question is what sooner.

[Analyst] (Tuohy Brothers): Okay, great. Thanks for the color. I appreciate it.

Jeffrey Campbell: Okay, great. Thanks for the color. I appreciate it.

I guess, if you go into 2020, maybe even 21 kind of a general leverage target and then how do you balances with any potential additional share buybacks.

Operator: Our next question comes from the line of Neal Dingman of SunTrust. Please go ahead, your line is open.

Neal Dingmann: Morning, Doug, and great color this morning. Doug, my question is, what's your, for, I guess, as you go into 2020 and maybe even 2021, kind of a general leverage target, and then how do you balance this with any potential additional share buybacks?

Yes, Neil it's a good question there the we said pretty consistently at mid cycle pricing that we'd like to be 1.5 times are less as I mentioned I think earlier in the previous question, we're probably a bit under midcycle pricing today, which would mean that the leverage looks a little.

Doug Suttles: Yeah, Neal, it's a good question there. You know, we said pretty consistently at mid-cycle pricing that we'd like to be 1.5 times or less. As I mentioned, I think earlier on a previous question, we're probably a bit under mid-cycle pricing today, which would mean that the leverage looks a little higher. Of course, the other things you have to consider in this is liquidity, and you also have to consider when our debt is due, our next debt is not due till, you know, 2021, end of 2021. When we look at that, what it means is we're comfortable where it's at. Obviously the business is generating free cash flow at the moment.

Higher but of course, the other things you have to consider in this is.

His liquidity and you also have to consider when our when our debt is due and we don't read on our next debt is not due till.

In 2021 end of into 21, so we look at that what it means is we're comfortable where it's at.

Obviously, the businesses generating free cash flow at the moment.

So we see it naturally de levering through time, and we're very comfortable with that so we don't think we have to do anything dramatic.

To get to that sooner. So we want to get to that one five or under in the business, we'll do that naturally and when we combine that with the liquidity into in the debt schedule. It feels very very doable to us.

Doug Suttles: We see it naturally de-levering through time, and we're very comfortable with that. We don't think we have to do anything dramatic to get to that sooner. We wanna get to that 1.5 or under, and the business will do that naturally. When we combine that with the liquidity and the debt schedule, it feels very doable to us.

Okay, and then once all up you've certainly seen some nice improvements for the acute development and Anadarko Im just wondering do you have an idea of what.

Ultimate spacing will be in key areas of this play is this becomes more mature.

Neal Dingmann: Okay. Last follow-up. You all have certainly seen some nice improvements with your cube development in Anadarko. I'm just wondering, do you have an idea of what the ultimate spacing will be in key areas of this play as, you know, this becomes more mature?

Yes, I think in it.

If you had if you had a typical it's probably the six to eight we're doing today.

It will vary a little bit based on the local geology and the sickness and other things that's true and every play Thats why we we always be a bit cautious about about putting a single number out there but.

Doug Suttles: Yeah, I think, and it, you know, if you had a typical, it's probably the 6 to 8 we're doing today. It will vary a little bit based on the local geology and the thickness and other things. That's true in every play. That's why we always be a bit cautious about putting a single number out there. The development pattern and spacing, the stacking and spacing piece that we're using today feels about right, and it may move a little bit, but this feels like the base case. Of course, this is something on our STACK Day at the end of January we'll talk a lot more about.

The development pattern in spacing the stacking in spacing piece that we're using today feels about right in it may move a little bit but does it feels like the base case.

And of course this is something.

On our stacked it into January will talk a lot more about but what we're seeing is very consistent results using that spacing in and then you. Some performance improvement which were actually believe is tied to the completion design reusing.

Very good thanks for the time.

Doug Suttles: What we're seeing is very consistent results, using that spacing and then just some performance improvement, which we're actually believe is tied to the completion design we're using.

Our next question comes from the line of Marshall Carver of Heikkinen Energy Advisors. Please go ahead. Your line is open.

Yes. Good morning, I saw the costs were coming down in the guidance a little bit of a downtick on cost per view, we which which costs that youre seeing improvements on just wondering if of color or whether thats.

Neal Dingmann: Very good. Thanks for the time.

Operator: Our next question comes from the line of Marshall Carver of Heikkinen Energy Advisors. Please go ahead. Your line is open.

Although we CNG DNA or what.

Marshall Carver: Yes. Good morning. I saw that the costs were coming down and the guidance a little bit of a downtick on cost per BOE. Which costs are you seeing improvements on? Just wanted to get some color on whether that's LOE, T&G&A, or what.

Yes, Marshall, it's actually in essentially every bucket we've had great progress here, obviously, you know the GE at Ace come down significantly, whereas we've raised the the synergy target from the original 125 million per year to now $200 million per year, youre seeing that flow through.

Doug Suttles: Yeah, Marshall, it's actually in essentially every bucket. We've had great progress here. Obviously, you know, the G&A has come down significantly as we've raised the synergy target from the original $125 million per year to now $200 million per year. You're seeing that flow through. You know, one of the things that may be overlooked in places is just how efficient this organization is. I mean, we produce 600,000 BOEs a day with 2,500 people. By the way, we essentially operate everything we do, which means that we don't get to that headcount through letting other people run the activities. We do that ourselves.

One of the things.

That may be overlooked in places just how efficient. This organization is I mean, we produced 600000 BOE is a day with 2500 people and by the way we essentially operate everything we do.

Which means that.

That were we don't get to that head count to letting other people run the activities, we do that ourselves.

The constant focus on efficiency improvements and innovation, it's actually had a direct impact on our elderly across the business and our team Pbteen, we're always trying to optimize the value of the product receipt that we receive and where we sell it with the cost to get it to those markets, there's a bit of given taken there.

Doug Suttles: The constant focus on efficiency improvements and innovation, it's actually had a direct impact on our LOE across the business. In our T&P team, we're always trying to optimize the value of the product that we receive and where we sell it with the cost to get it to those markets. There's a bit of give and take in there because in the end of the day, in that bucket, what we're really trying to do is the maximum realized price after cost. But we are seeing it right across the board in every bucket.

Because in the ended the day in that bucket, what we're really try to do is the maximum realized price after cost in but we are seeing it right across the board and every bucket.

Okay, Thank you and and when you're thinking about modest liquids growth.

Okay.

Given the extra color on what you think of modest as that.

High single digit low single digit or.

Any extra color there.

Marshall Carver: Okay, thank you. When you're thinking about modest liquids growth, do you wanna give any extra color on what you think of modest? Is that high single digit, low single digit, or any extra color there?

Ed It of course, the trickier isn't is not to guide before we guide but.

This will be kind of mid single digits is sort of the range exactly what that number is it's little too early to tell as we optimize we also need to see over the next couple of months, how the commodities shake out.

Doug Suttles: Yeah. Of course, you know, the trick here is not to guide before we guide, but, you know, this will be kind of mid-single digits is sort of the range. Exactly what that number is, it's a little too early to tell as we optimize. We also need to see over the next couple of months how the commodities shake out as well. Of course, we've updated our the status of our hedge program as well, which has some impact. I don't want to give you a precise number because I need to actually have some sense of where price and costs are.

As well and of course, we've updated our.

The status of our hedge program as well, which has some impact and so I don't want to give you a precise number because I need to actually have some sense of where price and costs are and then and then we're very clear we're going to generate free cash in in 2020.

And how we toggle growth against the commodity price to make sure. We get there is what we're finalizing on now.

Alright, Thank you very much.

Doug Suttles: We're very clear we're gonna generate free cash in 2020, and how we toggle growth against the commodity price to make sure we get there is what we're finalizing on now.

At this time, we have completed the question and answer session and we'll turn the call back over to Mr. Campbell.

Doug Suttles: We're very clear we're gonna generate free cash in 2020, and how we toggle growth against the commodity price to make sure we get there is what we're finalizing on now.

Thank you operator, and thank you everyone for joining us. This morning, we are truly excited about today's results and look forward to seeing on the road ahead. Thank you.

Marshall Carver: All right. Thank you very much.

Operator: At this time, we have completed the question-and-answer session, and we'll turn the call back over to Mr. Campbell.

Yes.

Doug Suttles: Thank you, operator, and thank you everyone for joining us this morning. We're clearly excited about today's results and look forward to seeing you on the road ahead. Thank you.

Stephen Campbell: Thank you, operator, and thank you everyone for joining us this morning. We're clearly excited about today's results and look forward to seeing you on the road ahead. Thank you.

Right.

Q3 2019 Earnings Call

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