Q3 2019 Earnings Call
<unk> well come to that Denbury resources third quarter 2019 results conference call.
This time, all participants Arnold listen only mode and question and answer session will follow the formal presentation. If he would like to ask a question at that time. Please press star one on your telephone keypad.
If anyone should require operator assistants during the conference. Please press start zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over your host John Mayer Director of Investor Relations. Thank you you may be in.
Good morning, everyone and thank you for joining us today.
With me on the call, our Chris Kendall, our President and Chief Executive Officer.
Mark Allen, our executive Vice President and Chief Financial Officer.
David Shepherd or senior Vice President of operations.
Matthew day hand, or senior Vice President of business development and technology.
Before we begin I want to point out that we have slides, which will accompany today's discussion.
Should you encounter any issues with slides advancing during the web cast portion of this presentation. Please refresh your browser.
For those of you that are not accessing the call via the web cast. These slides may be found on our home page at Denbury Dot com by clicking on the quarterly earnings Centre link under resources.
I would also like to remind you that today's call will include forward looking statements that are based on the best and most reasonable information we have today.
There are numerous factors that could cause actual results to defer materially from what is discussed on today's call.
You can read our full disclosure on forward looking statements and the risk factors associated with our business in the slides accompanying today's presentation are most recent F.C.C. filings and today's news release, all of which are posted on our website Denbury dot com.
Also please note that during the course of today's call, we will reference certain nongaap measures.
Reconciliation and disclosure relative to these measures are provided in today's news release as well as on our website.
With that I will turn the call over to Chris.
Thanks, John .
Good morning, everyone and thank you for joining us today.
And my comments this morning, I'll start with an overview of the quarter. They have the call over to David who will discuss our operations if I only to mark to walk through our financial results.
Denver is third quarter results once again demonstrate our commitment to execution cost efficiency and capital discipline.
Are key safety metrics or at all time record low levels are capital program is delivering strong results with our successful recent projects adult Creek in Heidelberg, highlighting both the technical quality of our teams as well as are consistent ability to execute capital projects on time and on budget.
We made steady progress on our key Greenfield Ear War project Cedar Creek Anticline and remain on schedule for the C.O. two pipeline installation next year and commencement of C. or two injection in early 2021.
As a result of this great execution, we're on track to meet the midpoint of our previously raise production guidance, even after incurring unexpected whether downtime in the third quarter from tropical storm and Delta.
We expect to complete the year at or below the midpoint of guidance for every costs category, including elderly capital M.G.N.A., highlighting our commitment to cost efficiency and capital allocation discipline.
We also continued to make great progress on the balance sheet. The reason exchanges Mark will tell you about later in the call helped us reduce our debt by nearly $90 million continuing a strikingly effective effort that has now reduced our total debt by $1.2 billion since the end of 2014.
And reaffirmed my great confidence in our ability to continue to reduce debt to our target levels.
Have you seen with recent industry natural gas an energy L. realizations.
There are vast differences in value in the components of there'd be a week.
Are 97% oil waiting once again contributed to a very strong operating margin.
Our second quarter revenue <unk> was over $56.
<unk> in an operating margin of nearly $28 per be a wee or roughly 50 per cent of revenue.
This high operating margin combined with our low capital spend supports the strong free cash flow that denbury consistently delivers.
Our ability to consistently generate free cash flow is one of Denver is most positive and distinguishing characteristics.
We generated $44 million, a free cash flow and the third quarter and we're on track to achieving 140 $250 million a free cash for the full year.
This is not unusual as over the past five years Denbury, we'll have generated over 600 million and free cash flow.
The nature of Denbury his assets and how we run our business make for a great fit in today's environment, where investors are demanding capital discipline and greater returns.
Before I had to call over to David I want to emphasize how fundamentally different denbury is from the rest of the industry.
Well beyond the ability to consistently generate free cash.
As the only U.S. public company of scale, where injecting C.O. two into the ground to produce oil was our primary business.
We are a key part of the solution to reducing atmospheric C or two emissions will let the same time, providing a vital energy source for the world's economy.
This is a solution that has broad appeal and I see great opportunities to expand our impact in the coming years.
As I've mentioned in the past and expect to continue to highlight in the future I believe that carbon capture transportation and secured geologic storage will become an essential business and Denver is assets and expertise position the company to be a leader as this market develops.
In summary, I'm very excited about where this unique company is headed we continue to perform safely to consistently deliver on our promises.
To deploy are differentiated C.O., two <unk> focused strategy.
And every day to make steady progress towards securing our long term success.
Now all pass the call over today, even for an update on den Breeze operations David.
Thank you, Chris and good morning, everyone.
Discipline capital spending during the third quarter has kept us right on track to deliver for your capital expenditure at or below the midpoint of our 2019 guidance was approximately 76% of our 20 not team capital budget deployed other clothes or the third quarter.
At Bell Creek are phase six development was completed during the quarter was production respond suspected in the first quarter of 2020.
In our Gulf Coast regions, the hotter Bird Christmas yellow and Brown redevelopment project was completed in the quarter and isn't responding in line with forecast.
Rolling encoding of the pie for the C.C.A.C.O. two pipeline has been completed.
And the pipe has been place and storage a wedding installation in 2020.
We recently drilled too successful wells as part of the mission Kingdom program at C.C.A. and continue to evaluate additional exploitation opportunities across opera polio, which I'll discuss in more detail shortly.
Earning as flawed 12, aside from the impact from tropical storm Imelda third quarter production was in line with our expectations.
Despite the impact from the tropical storm Imelda full your production continues on track close to the midpoint of our God is French.
As we mentioned in our second quarter call. We anticipated in extended period of plan maintenance said, our primary north region, C.O., two source, which significantly impacted quarterly production that <unk>.
The maintenance period was conducted over a period of about six weeks during which time no C.O. two volumes were provided to the field.
We estimate the resulting impact of <unk> production that belt Creek approach to 1000 barrels per day.
Following this maintenance period C.O. two purchase has resumed and we are pleased to see production coming back nicely with current rates, reaching the same levels of so seem prior to the C.O. two supply interruption.
Father, and as previously disclosed are producing fields around the Houston area predominantly washed her value on conrow experience power outages and flooding associated with the tropical storm Imelda during September .
The total impact of the storm on third quarter production was approximately 400 B.O.U. per day at the lower end of our previously got him range as power was restored more quickly than expected that the fields.
No significant damage the carded any of our fields and near full production was restored by the end of the third quarter.
We expect fourth quarter volumes to rebound from the third quarter levels, primarily driven by continue response from the Heidelberg redevelopment restoration of full belfry production. Following completion on the north Regency O. to supply maintenance and resuming the mission Canyon exploitation program.
Based on current expectations, we continue to forecast our full year 2019 production close to the midpoint of our previously increase goddess range.
These 7000 to 59500 b. or per day.
Yeah.
Lease operating expenses during the third quarter remain consistent with a prior quarter at $118 million with a slight increase on a per B.L.U. basis due to change and production volumes during the quarter.
C.O. two calls for down in the quarter due to the maintenance period at our primary north regions yield to source, but we're all set by minor increases and other categories.
Are ongoing cost management strategies continued to provide reliable predictable spin levels and we continue to expect it full year 2019, L., where you will fall on the lower half of the previously got an elderly range 20 $224 per year we.
As we begin to look towards 2020, we are focusing on sustainable improvements that will continue to drive cost out of our production operations I.
I will share more in the coming quarters, as we implement new technologies and systems that we expect to increase efficiency and reduced cost.
Turning your attention to slide 14 third quarter 2019, net tertiary production at Bell Creek field was around 4700 barrels per day down from the record levels and the second quarter, primarily due to the north Regency O. two sources maintenance I previously mentioned.
Since you go to purchase resumed adult Creek production has recovered to prior P. crates.
Production growth is expected to continue at a modest right through 2020 as phase six begins to respond in the first quarter of the year.
During the fourth quarter, we plan to drill a second well and Bell Creek targeting untapped accumulations in a previously <unk> completed by use of the development.
Well would be a follow onto the very successful well, we drilled and pays for earlier this year I've highlighted in the last quarter's call.
And the third quarter, we drilled two additional exploitation wells in the mission Canyon formation at Cedar Creek Anticline, wanting cabin Creek and the other in Coral Creek.
Both wells have been completed the first in late September in the latter coming on line mid October combine the wells have an estimated I.P. 1000 barrels per day.
Today, we have drilled a total of 12 or horizontal wells within the mission canyon, achieving greater than a 90% rate of return for the total program.
Program is a great example, the value that can be generated from within the gym barriers asset base, we're combining the expertise of our teams with today's great technology.
Continuing to progress our plans for Charles B. development, a full core although Charles Horizon was taken while drilling a previously mentioned cabin create mission Canyon well, we have also recompleted and tested three vertical wells and the Charles B. benches.
The core and all three vertical test provided valuable information that one that's our development plan improve.
And improve project economics.
During last quarter's call, we had discussed plans to drill a Charles B. dual lateral weld late in 2019, but decided to differ that project, while we incorporate the results from the core analysis and other test.
My final slot outlines are recent redevelopment of the Heidelberg field in the Christmas yellow and Brown horizons.
Similar to our previous free LBC project at Hastings field.
The redevelopment project in Heidelberg use field specific learnings to optimize recovery through a series of new wells and workovers of existing wells.
Although similar in some ways to the Hastings project. This redevelopment is different and then we utilize a top down injection approach versus the Hastings bottom to top process.
You project is expected to be highly economic even at 50 dollar oil prices.
The development work has been completed and we are seeing production response in line with our forecast current production rates from the project or around 800 net barrels per day, and we expect to see 1000 barrels per day by the year ends.
Next I'll turn it over to Mark for our financial update.
Thank you David My comments today, well highlights some of the financial items and I'll release, primarily focusing on the sequential changes from the second quarter of 2019 I will also provide some forward looking guidance for the fourth quarter in full year 2019 to help you and updating your financial models.
Starting on slide 18.
Third quarter 2019, adjusted net income was 41 million or eight cents per diluted share slightly better than analysts expectations.
This quarter's 35 million of non cash income from fair value changes in commodity derivatives, what's the largest difference between adjusted and gap net income.
Deluded earnings per share this quarter reflects the full impact of our convertible notes issued in June whereby the shares to be issued upon full conversion are added to the shares outstanding and the interest expense on the convertible notes native taxes is added back to net income.
More detail on this calculation is included in our press release.
Turning to slide 19 are non gap adjusted cash flow from operations, which excludes working capital changes was 126 million for the third quarter down 19 million from last quarter, driven primarily by lower realized oh prices in production.
We generated free cash flow 44 million and the third quarter. After considering 21 million interest that has included as repayment of debt and our financial statements and 60 million of combined development capital and capitalized interest.
With 109 million a free cash flow year today, we are well positioned to achieve our expected 140 to 150 million a free cash flow during 2019.
[noise], our third quarter average realize all price $59 per barrel.
After hedges was down 4% from I realized price in the second quarter as old prices in differentials weekend from last quarter.
Slide 20 provides a summary of our old price differentials, excluding any impact from hedges I realize all price average a dollar and 30 cents per barrel above nine makes prices this quarter, which is down a little more than a dollar per barrel from last quarter, but slightly higher than the guidance, we provided and expect.
<unk>, a week or differentials in both our Gulf Coast and Rockies production.
Looking ahead to the fourth quarter.
We expect that our overall oil differential will decline from the levels realized in the third quarter due to further weakening of the L.S. differential and moderately lower differentials and the Rockies region.
Currently estimate that our overall fourth quarter Nymex differential will be in the range of flat to 50 cents below Nymex prices.
Slide 21 provides a review of certain expense line items as David already addressed Elouise I will start with G.N.A.
R.G.N.A. expense was 18 million for the third quarter.
<unk> flat from the prior quarter in in line with our expectations on a year to day basis, or Gina expense was down 11% from a prior year period.
We expect Gina expense and the fourth quarter of 2019 to be similar to the third quarter in the upper teams with stock based compensation again, representing roughly 3 million of that amount.
<unk> interest expense was 23 million this quarter, a slight increase from last quarter do for merely to the amortization of noncash debt discount for the notes we issued in the June 2019 exchange transactions.
On the bottom portion of this side there is a detailed breakout of the components of interest expense and you will know cash interest remain consistent.
Capitalize interest was the price, we 9 million for the third quarter and we currently expect our capitalize interest to be in the seven to 9 million range for the fourth quarter of 2019.
[noise] are depletion and depreciation expense. This quarter was 55 million a decrease of 3 million from the prior quarter due primarily to the <unk> I've C.O. two production in the Rockies as a result of playing maintenance at the C.O. two source plant.
As this item only impacted the third quarter, we expect DDNA, we'll be back in the 60 million range for the fourth quarter of 2019.
The next slide provides occurrence summary of our old price hedges.
The second quarter call, we have added to our hedges and the fourth quarter of 2019, and I've continued to layer in hedges for 2020.
We plan to continue to layer in additional hedges as we see attractive pricing levels.
The weighted average floor price for our 2020, all hedges, it's currently above $59 per barrel similar to our average realize oh price you're the first nine months I've 2019 with more than three quarters of our contracts providing for upside exposure.
Turning to our next slide.
Between August in October of this year, we completed a series of open market transactions and privately negotiated exchange agreements that contributed to an 87 million reduction in our dad since June 30.
During this period repurchased 54 million or proxy, 15% of our previously outstanding senior subordinated notes in exchange for 11 million of cash in the issuance of 13.7 million shares of Denbury common stock.
These transactions together with the dead exchanges in June resulted in total debt principle reduction of 138 million sincere and 2018, bringing our total debt principle reduction to 1.2 billion sincere and 2014.
[noise] our bank boring base was recently reaffirmed as part of our semi annual Redetermination process and we ended the third quarter with 50 million drawn on our 615 million Bank line, giving US 510 million of liquidity after considering letters of credit.
Based on projections using recent all prices, we expect to generate sufficient free cash to pay down in the 50 million borrowed on our bank line by the end of 2019.
Do the third quarter are trailing 12 months leverage ratio was 4.1 times and is held relatively stable over the past year.
We are pleased with continued progress we've made with our leverage metrics over the last couple of years and reducing our leverage in improving our debt maturity profile remain top priorities.
We will continue to seek opera appropriate opportunities the further reduce leverage and extend maturities well in advance of our first maturities in mid 2021.
Yeah and supported this effort we are actively pursuing several initiatives one of which is the evaluation of J.V. options for R.C.C.A.C.O., two pipeline, which would mitigate all or a significant portion of our pipeline capital spend in 2020. In addition, we continued to progress noncore asset sales such as our noncore productive acres.
Positions, primarily around the Houston area, we completed 9 million and acreage transactions during the third quarter and close an additional 5 million in October resulting in a total of 20 million of closed acreage transactions to date.
We have an additional 32 million currently under contract and several more tracks in various stages of negotiation and we continue to expect significant value from the remaining acreage.
In addition, we are open to considering other J.V. transactions and noncore asset sales that could enhance liquidity in further our debt reduction efforts.
And now turn it back to John Force him closing comments.
Thank you Mark.
That concludes our prepared remarks, operator can you please open to call up for questions.
Thank you know if he would like to ask a question. Please press star one on your telephone keypad and confirmation tell Andi can't line isn't the question.
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Our first question as from Charles made with Johnson Rice. Please proceed.
I'm wondering Chris Mark the whole team there Mark I'd like having a a question. Thank you I would like X. question picking up on on the point you. Indeed, there about about about the J.V. What you guys are <unk> evaluating for the for the financing the C.C.A.C.O. two pipeline so.
You mentioned, a a J.B. and you mentioned that you're evaluating things that could take all or or or most of the your pipeline cat backs.
For 20, how your hands can you just give us an update on how long. This process has been going how your views have have evolved and in what you think what are the kind of the the leading candidates and and the timeline for resolution or.
Sure Charles just as Mark.
We you know as we kind of talked about before we kind of invasion or you know northern Rockies pipeline system there being.
You know contributing what we have in place and joining with a partner to help us a complete construction or pay for construction of.
Remaining portion up to a C.C.A. and then have joint ownership in in the pipeline infrastructure, they're going forward.
We are running a competitive process. So I have to be <unk>, probably can't say too much but we're you know we're actively involved in that we are I would say pleased with the level of interest that we've seen to this point I would expect over the next.
A couple of months here that will you know continued to you know work through that process and you know as we think about you know forming are 2020 capital plans.
You know, we'd like to have something in place there. So that we we know how much flex we have in terms of whether we're going to spend that on our own or if we're going to have a partner there and so I would say at this point, we're we're pleasantly surprised in or not necessary of surprise, but but very pleased with the.
With the amount of interest and will continue to evaluate that here over the next to a couple of months at least.
That's <unk>. Thank you and then if I keep turn in fact to to the asset base in ask a question about those those two most recent mission Canyon, well I I I recall that you had a you had an earlier I I guess you you you had to early success.
<unk> some of your follow blows you had I believe some some water or you you maybe you draw them a little too low on structure can you tell us with these two most recent wells and I get they were having treatment call Creek do you feel like you, but you can solve the remaining piece of the pulse rainy pieces of the puzzle to to.
Really make this mission Canyon zone work.
Yeah. Charles This is Matt day hand.
Yeah to answer your question last year, we drilled a couple wells that we're certainly disappointing as far as the oil production rates go and following that learned learn some lessons on where to position what else had a had a better drove them.
And that sets us up for success on the remaining a inventory.
Okay. So what we're seeing here is kind of is should be roughly a baseline.
For what we should should expect going forward.
Yeah, It certainly well within the range of what we've seen on the successful wealth.
Thank you <unk>.
Oh and next question asked from Fred how friend went to IVC capital markets. Please proceed.
Morning, everyone just to to follow on to that last question can you hear minus what the remaining inventory of mission Canyon location Huh.
Yeah, we believe that's a upwards of 12 wealth.
Okay. Thanks for that.
And then you mention 2020 cutbacks earlier in the call can you just give thoughts on what it looks like sort of the bayes <unk>, what the trajectory it's gonna be excluding the pipeline and then maybe a reminder of if you did find the pipeline, 100% how much that would add to that total.
Sure Rat and this is Chris just jumping into the the latter part of your question first what we see that pipeline spend in 2020 as being in the I'd say the hundred and 120 million range. So so that's the the the piece that we see you can flip in or out depending on on how the <unk>.
Mark mentioned proceeds.
What I'd say generally about 2020 as Mark said, we we don't plan to communicate our 2020 full plans until until we get into.
Fourth quarter earnings similar to what we've done in the past, but what I would share a few things sure our priorities and and how we use those the shape. Our plans for next year not a number one priority to to continue to protect the balance sheet. So you should see us continue to work towards the.
Cash neutral or positive position just as just as we did this year.
And and that that as our top priority then second we really having a great desire to push C.C.A. forward. We see this as a foundational project for the next phase of Denbury. His life. It's a huge resource base. It's just it's a great set of feels that we can.
Continue to develop over many years, so that's going to be a priority and that's why we.
Want to have that in front of even how we look at maintenance capital for example.
When we think about production honestly were thrilled about production. This year, just stepping back a little bit and looking year to date, how well we've done versus the prior year with honestly of a very limited capital maintenance capital budget.
If you take our mid pointed about 250 million or maintenance capital is probably in the low to hundreds considering the the pipeline spend we've had so far this year.
And our production the continuing production adjusted for sales adjusting for the the storm that that David mentioned and and the C.O. Two outage is down just under two per cent year on year with a a very low low capitol maintenance capital level. So we we feel good about that.
Feel great about what our teams have been able to do I'd expect to see more of that as we look at next year and a again that maintenance capital level's gone to be.
Flipping a bit depending on whether or not we we we put the C.O. two pipeline J.V. in into the mix there.
Okay. Thanks for all the detail.
You bet Rep.
Oh and next question, it's from 10, Tim <unk> Oppenheimer and company. Please proceed.
<unk> I had a couple of <unk> <unk> <unk>.
<unk>.
Quickly I I I on T.C. I think David had mentioned you know that I guess, you have the pipes and they're they're in storage now. So are we I sent barring like a catastrophic declining oil are is it kind of you guys are ready to go on that and 2020, JV or not that's going to move forward.
<unk>. This is David short answer is yes, we are ready to move forward without project. You know currently there's about 105 miles of 16 inch pipe this role and coated and stored as well as 18 miles at 12 inches role and coated in stored two as well our current plans are to deliver that pod.
The field them again installation in the third quarter of 2020.
Only gone out for pipeline construction builds those are in house now we're evaluating those there's a high level of interest in a in those builds. So so we've seen a girl response to that so yes. The project is on on full go.
Okay, and then just layer on top of that to him as a is from a permitting standpoint, we see a clear path as well.
Mhm.
Okay, and what it hard harm it permitting side.
That are still out there.
No I'll I'll apartment ordinary in hand.
Okay. Yeah, we we have what we need in hand.
Okay. Okay. Thank you and then on a different topic in in C.C.A.
Thirdquarter production declined sequentially.
It was seven per cent.
I don't know if you you you touch on that and I Miss typical you talk about what what happened on that.
Kind of bigger declining we typically seen.
Yeah. Good question tell them of course, there was natural decline in a in the mix. There. Obviously there are two other elements in that first of all his mission Canyon. No decline is involved there probably about 300 barrels and and so she had a directly with mission Canyon decline in the quarter and also there was some salt water disposal maintenance.
So that was ongoing throughout the quarter that has been cleared up and all his back online now.
Okay. Okay. So he didn't going forward is should we think about.
Yeah, the three q. being more of a runrate or back to this sort of second quarter level.
Yeah, I'd say, we're we're definitely seen production back above when Ah what the third quarter Runrate was so you should see something and those who moving back North of course, we have the two mission Canyon wells have come on line two as well so those will be contributing in the poor quarter. So it should be coming back up strongly.
Okay. Okay. Thank you and if I could just sneak one last one N.I.F. from Mark.
Yeah I appreciate the comments kind of on on the balance sheet at the end if there's a lot of focus from investors on that the second lien coming kind of do in 2021.
<unk> is it fair to say that you think he may be better served kind of.
Getting some of these other <unk> kinda over the finish line before you look to kind of refinance.
I'm just trying to send kind of what investors can expect <unk>, a big focus for people when they try to understand and come up with a value for the equity.
Sure Yeah, I think they.
The the sentiment.
And that we've seen here for the last while hasn't really changed much and and so I was he it's been to the negative side and and that's affected equity prices and bomb prices.
And and so we do think you know obviously, it's not a great environment. So you haven't seen a lot of of transactions getting done in in the capital markets.
But we just so we do believe what makes sense to continue to execute where we can and what makes sense you know for us to do we continue to believe you know our second lane, there's a very secure instrument and and you know we have a lot of optionality here in terms of of how we can address things going.
Forward.
And so we're going to keep that moving and the right ways and continue to work the balance sheet in the best ways a weekend. So yeah, hopefully along the way we see some improvement in in market sentiment as well, but yeah. We're going to continue working you, Tim and and we think we have a lot of things that we can.
Due to to progress to balance sheet here.
Okay. Okay. Thanks for the responses folks.
<unk>.
Oh and next question is from the casing wangler with Imperial capital. Please proceed.
Or the morning.
You you kind of walk through pretty nicely.
And having the pipe in the permit.
You know, there's a lot of moving parts there as far as if you wanted to move any faster or any.
Factors that are kind of.
It makes it a 2021 of them before you started.
Yeah drives and good morning. This is David once again, you know from a pipeline installation window no that is one of the throttles in a in the system here. Once again, we will start that in the third quarter.
There that pop line installed will be completed in December of 2022 as well, we'll after we go through commissioning you know about mom will start <unk> injection in that first quarter of 2021. So so that that is the main the main a milestone there that we need to achieve.
The permits or put there for environmental or other type reasons, I guess just to start third quarter I guess, what I was asking.
That is correct your spot on Okay, and then just maybe one more in Michigan.
Location, you know she had a couple of good results.
Think about.
<unk>.
Mm.
You know how many do you think you try and go after.
<unk>.
You know ultimately.
You want to try and do you get those 12 up and running in the next couple years.
<unk> and this is Chris just in in thinking about that you know map mentioned, we have about a dozen locations left and we've learned a lot as we've gone and we feel good about about the inventory there.
When we think about 2020, a lot of it's gonna come in and out depending on on how we are set up our capital program fundamentally I'd like to continue a program at a pace that lets us continue to to add these in the in the in a way that makes sense and is.
Probably proportionally similar to the 20 to 30 million that we spent this year looking at our capital budget here. So it it's something that will have to honestly really wait until we get to the point, where where finalizing the budget and we decide how many of those to t. up for next year.
I appreciate it thank you.
Thanks, Jason.
Our next question is from Terry Haddon, there with the T.P. My again. Please proceed.
Good morning is is John endorsement on for topic.
Good morning on.
Gosh.
Too often get a click refresher I know, we touched on it last call, but just.
To buy that God junior lean debt.
And you're dead in general if you just touch upon that.
[noise] sure. This mark we have your credit facility there is some basket there.
I guess, it's about 94 million, we have remaining for cash to to address that would would be the the short answer. We also have some you know baskets and recycling and things, but I think the the biggest governor right now is what we have under the the bank facility.
Okay now that's helpful and I believe a good chunk of that's related to leverage ratios.
Yeah. So it has to be a lesson four times or or delivered do you leveraging it is kind of what part of the basket is geared around.
Okay. Thank you and then I didn't notice and they're releasing you talked about it a little bit with this surface acreage.
I think you touched upon it said 32 million and contract and more negotiation could you just kinda provide us a little bit more on the timeline for those contracting hand kind of when you expect to complete those transactions and then kinda any any color on the magnitude of of what's left after that.
Yes, John This is David Sheppard, Yeah, some more color on that there's $32 million a contractor day courage largely it our Keystone our Comroe track. There you know right now and now we expect a that first traunch to close in 2021.
About $16 million worth the second traunch would be in 2022.
Equally $16 million the the balance of the acreage and that we do have remaining.
It is Webster some components still in Com road to as well, but the larger balance would be in the Webster in that area a lot of ongoing negotiations there a lot of high value properties still remaining.
To calm.
Okay, Great. That's that's extremely helpful. Thanks, So much guys. That's all for me.
Thanks, John .
Our next question is from Shawn Yeah, Let's go get Homesick Kennedy's. Please proceed.
Hi, good morning, and thank you, particularly questions.
Morning show.
<unk> you know.
Just on L.. We you know you mentioned it it kind of jumped up on the unit basis. You know there I think due to you know kind of lower volume from the quarter and some higher workover activities and yeah. I know plan is kind of.
You get back to kind of low twenties for the year and hopefully kind of cute for.
Is that generally a good runrate to think about for for 2020 I guess in particular, you know when you can't look at the individual line I'm showing you did see higher workover in in some higher labor numbers to those kind of normalized since you're going to going into next year or how should we kind of think about that.
The morning, Sean This David and then once again, yeah I <unk>.
Just directly door or a extreme focus on managing our costs. You know we have to do that and we're going to do that you know as I said in the prepare remarks were really implementing some systems and technology, you know they're going to Hell.
ER.
Perpetuates sustainable cost reductions there you know talking about a couple of those in a in a general general nature, but we expect largest been a bit yeah to be associated with a U.M. implementation and enterprise asset management system and enhancing some of our supply chain focus there.
Secondly, you know we're really in the midst of deploying a mobility application tool. This girl going to help reduce the amount of repetitive manual data entry than we have in our system plus make our work clothes and a more efficient now too we continually look at work overs things of that nature as well to deliver.
For the most effective work over for the lowest cost and the g. the objectives that we need to achieve.
So our focus is to maintain that unit bases sooner or even suppress it down overtime.
God It that that's helpful.
And then you know marking I think Tim it kind of asked a question about the second waiting for maybe just kind of follow up to that but you know you've been pretty successful about chipping away at the unsecured maturities and you're expected to pay off the RBL by your and.
I guess <unk> do you feel like cleaning up but the remaining portion of kind of the near dated unsecured maturities, it's kind of needed before you start to tackle but the rest of the second leans or how you guys kind of thinking about that as you enter next year.
Sure showing it good question and.
Like I said I think we continue to do where.
Activity is where we feel we can make the biggest benefit today and and continue to progressed the balance sheet forward. You know if you look at a slide 23.
And you really look at our maturities here over the next few years you know we've got the sub notes down to 50 million and 21 in 70 million in 22.
You know hopefully, we're reaching a point where people aren't seeing a a real challenge with with a it was but.
We have a lot of first plane capacity to address things and so you know, yes, we do have to a address the secondly maturities here well with that but like I said, we we see several different ways to to progress that and opportunities that we have our ultimate goal is to continue to.
Deliver the balance sheets and you know so like I said in the past that when people think about denbury. They they aren't concerned about our leverage we yeah, we our company what the lower decline asset base, where we can probably handle a bit more leverage then then other companies in in the space.
More shell based higher declined type assets, but that being said we want to take this to a different place and you know I think the thing is you look out here, we have time to do that and just as we've done since 2014.
We're going to continue to progress to balance sheet in a positive way so.
Yeah, I understand the concern, but I think.
I look at it I see many manageable opportunities in front of us.
Yeah.
That that makes sense and and thanks for that I can just sneak one more and you know Chris <unk>.
You know you're still going through the budgeting process, but you know I guess conceptually about you know 2020.
It's that kind of the bookends that you're kind of thinking about in terms of you know kind of free cash flow profile kind of being you you neutral to positive is that kind of you know the C.C.A. pipeline, whether it's funded internally or by external capital.
That's exactly how I'm thinking about it Sean is that we're going to.
When we get into the into your time frame look at what we expect prices to be next year of course, we have a nice hedge position belts that that will help us even if we trend a bit lower into the year, but we look at that look at.
Being cash flow neutral or positive and then and then whether that that pipeline cost like I mentioned hundred hundred 20 million blips in or out is going to <unk> to me that kind of put your bookends on it.
Perfect I appreciate all the collar guys. Thank you.
Thanks.
Oh and next question is from Richard Carelessness capital when Securities. Please proceed.
Yeah. Thanks, Good morning, everyone warning Richard sorry, if I missed is what are the other non core assets beyond the surface acreage that that denbury could look to his monetization candidate.
Sure Richard the the main one that I think about is the is the set of of mature assets that we that we had to work through last year and and those that that set of assets that are really not core into our future growth I I think about that as.
As as a key alternative as we as we look at.
Those other possible asset sales could be okay. Okay. Thanks, Chris.
You know your your comments in the opening remarks about the low carbon footprint were were interesting.
Excuse me at a high level, you know what low carbon business opportunities could be developed by Denbury say over the next several years.
Clothing, you know additional enhanced all recovery opportunities on your your current or or possibly new acreage.
Sure I I think that is one of the things Richard that really sets denbury. Apart here is number one we have the expertise and and you are and so our our teams both in the in the headquarters and out in the field are used to designing for in dealing with C.O., two and then and pipelines and facility.
Sending wells and and reservoirs. So just a great set of expertise there along with it all the assets that the that that go along with without expertise, especially the pipeline infrastructure that we have a along the Gulf coast industrial horrid or.
<unk> going to your question I think about where does this lead and there's a a strong push within a government policy U.S. government policy right now to provide tax credits to those who who capture and sequester C.O. two.
And and there's an aspect of that <unk> <unk> you can imagine as we've talked about but even beyond that when you look at the future.
There will be a great need one of the great solutions to to reducing carbon emissions in the atmosphere is through other forms a geologic sequestration that include putting C.O. two into sailing aquifers.
And what I think is is is where that we're that will go and with the incentives that are provided by the government policy. In these these the tax credits it'll be available can make that a very attractive business and one that matches exactly with wet denbury does in terms of the assets that we have and and the.
Parties that we have it's still it's still a a few years down the road I think in in in terms of.
Of where we.
Would be an intern in terms of turning that into a business, but I see that in in the future.
Very helpful. Chris. Thank you that's all for me.
Alright, well thanks for the question Richard.
We have no more questions at this time I would like to turn the conference back over to time My air for closing remarks.
Before you go for your calendars. We currently planned to report or fourth fourth quarter 2019 results on Thursday February 20th and hold our conference call that day at 10 am central.
Thanks again for joining us on today's call.
Yeah.
<unk> conference. She may disconnect reliant at this time and thank you for your participation.
Okay.