Q3 2019 Earnings Call

<unk> disenchantment and welcome to the P.D.C. energies third quarter to pass on 18 conference call. At this time, all participants I notice and alima would need a little bit contact a question and answer session and instructions will follow at that time, if anyone should require assistance tune into conference. These suppressed.

Zero on your attached downtown if I want it as a reminder is consensus called being recorded.

Oh, they like to to introduce your host for today's conference Mike add whites Senior director I'll think about this relation Sir P. speaking.

Thank you good morning, everyone in welcome.

Today, we apart Brooklyn President.

Oh.

Block Executive Vice President, Scott Reasoner, Chief Operating Officer, Scott Myers, Chief Financial Officer.

Yesterday afternoon, we should our press release and posted a slide presentation that accompanies remarks today.

They also file their 10 q.

The press release in presentation or available on the Investor Relations page of our website.

He dot com.

I'd like to call your attention dislike to have that presentation in her forward looking statements.

Well it to the non solicitation information.

These communications do not constitute and offered to sell or solicitation of and offered a by any securities or a solicitation of any vote or approval.

In connection with the proposed S.R.C. transaction.

Filed with the Securities Exchange Commission registration statements on form S. for.

That includes a preliminary joint proxy statement of P.D.C.N.S.R.C.

Also constitutes a preliminary prospectus of P.D.C.

Disjoint proxy statements last perspectives and other documents that will be filed by P.D.C.N.S.R.C. with the Securities Exchange Commission.

Maybe obtained free of charge at each company's website.

Or at the S.P.C.'s website, which is S.D.C.G.O.

We will present, some non U.S. get financial numbers today.

So I'd also like to call your attention to the panic slides of that presentation, where you'll find the reconciliation of those non U.S. get financial measures.

That we get started I'll turn the covered or C.E.O. Barbara.

Thank you might Hello, everyone.

On third quarter production.

Line with our expectations for P.D.C.B. error free cash flow generation has begun.

Today, we will provide several feet updates.

Our commitment to sustain free cash flow.

Proving capital efficiency and cost structure.

The balance sheets strength.

The successful ongoing integration process with this or C. energy.

Let me hit some third quarter highlights.

Become be generated free cash flow.

We $40 million. This is on a capital investment of 165 million.

The spend level is in line with our expectations.

2019 capital span is now targeting at or near the low end of our updated guidance range or $810 million.

Production for the quarter 12.7 million barrels of oil equivalent. This is in line with companies expectations and representatives at 26% improvement from the same quarter last year.

Production for 2019 is firmly on target for updated guidance range of 40 850 million barrels of oil equipment.

Operationally, we continue to make great strikes drilled times in both basins or improving particularly in the Delaware.

Lifting costs are in check completion efficiencies for the company or setting records.

<unk> 30 wells.

Turned in line 47.

Scott will cover later in the call we are making tremendous progress on her her well costs in both basins.

From a financial perspective, we reaffirmed or borrowing base at $1.6 billion.

Pro forma the S.R.C. merger at $2.1 billion, giving the combine company ample liquidity going forward.

Leverage ratio for the quarter and.

1.5, and lifting costs were $2.87 or B.O.

In line with our expectations overall.

<unk> financial position is very strong as we enter 2020.

Next let me reaffirm our commitment to generating free cash flow.

You know, we rolled out pro forma outlook for the S.R.C. merger with 55 dollar oil into dollar and 70 sent natural gas.

Based on this pricing in 2020, we are anticipating top tier financial metrics, including $275 million a free cash flow.

Slide six and the deck provides more clarity around the levers we can pull to ensure we meet our free cash flow goals.

Let's start on the left.

Some of our key accomplishments in 2019 will serve as building blocks for 2020.

Again cap axes, now targeting $810 million for the full year 2019. This is the second time, we've lowered our Capitol cutbacks outlook for this year.

Free cash flow for the second half of 2019 is anticipated to be $150 million.

During the second half of the year, we experienced per well cost improvements in both basins.

Then moving to the far right of the slide now pro forma S.R.C.

Recognizing the volatility in the commodity markets, we have provided free cash flow impacts due to fluctuating oil.

Gas and natural gas liquid prices.

During the last two quarters of 2019, we've seen the impacts of price volatility and we've demonstrated our ability to adjust our operating plan.

2020, we will maintain that same flexibility in our capital program.

The center of this slide demonstrates this optionality.

First and foremost next year, we can adjust the pace of our duck completions in the Wattenberg.

Just as a reminder.

We will enter 2020 with approximately 220 ducks in the Wattenberg base.

Secondarily, reducing our drilling pace.

May occur if a significant price correction.

Happens be assured as we contemplate these potential changes we remain focused on the strong sustainable free cash flow.

2021 and for the foreseeable future.

Last on the slide and very important since the roll out of the merger, we have experienced significant improvement in or per well cost structure, we anticipate a 5% to 10% improvement in our drilling and completion cost in 2020. This gives us even more confidence in our ability to.

Cheat meaningful free cash flow.

Again, Scott will cover this in more detail in a few moments.

Now an update on the S.R.C. merger burst I'd like to think when Peterson and his team for being such great partners through this process. We make we remain incredibly excited about the combination of P.D.C.N.S.R.C.. We believe the future company will be a premier operator with this.

Size scale and financial strength to deliver long term value to our shareholders.

While we originally anticipated this deal would close at the end of 2019.

Due to federal regulatory approvals, which are progressing well, we now expect January close.

Some t. integration highlights the integration team has been assembled.

A full planning processes in place.

We're executing a lengthy list of key action items, and our commitment to achieve $40 million of G.N.A. savings and 2020 is on target.

We're focused on integrating the top talent from both organizations and we've created committee focused on corporate synergies in productivity.

We have begun the process of our pro forma budget, which will be improved unannounced in February of next year.

We've also begun the optimization of our field operations with a continued focus on safety and competitive lifting costs.

Lastly, we maintain a strong focus on systems integration the blending of the I.T. components for both companies, including anticipated January go live date for P.D.C.'s, New E.R.P. system.

In summary, the integration process is progressing as planned.

That alternatives call over to Scott Myers for an update on the financials for the company.

Thanks bar before covering the third quarter I want to spend a moment thanking the team for all the hard work over the past couple of months, while recognizing the next few months are equally as important.

Between the upcoming launch of R.E.R.P. system in early 2020 initial work on the new consolidated budget integrating the systems and financials, our bank Redetermination and normal day to day task. This is going very important stretch for P.D.C. and your hard work is incredibly valued.

Jumping to the results for the quarter total sales were down 17% compared to 2018 due to a 34% decrease didn't realize pricing offsetting the 26% increase in production.

As is the case across the sector pricing on oil gas in N.G. else, we're all week across the board compared to the third quarter of last year.

P.D.C.'s realized price per <unk> of just over $24.

Consist of a year over year decreases of 20%, 43% and 65% for oil gas in <unk>.

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Net cash flow from opera activities, where approximately 235 million with the year over year increase driven primarily through changes and working capital as you'll see in a second are adjusted cash flows preached <unk>. The third quarter of 2019 in 2018 were relatively unchanged.

Moving the slide 10 will cover a few non U.S. gap metrics as a reminder, the reconciliation of these metrics can be found in the appendix.

I want to quickly call out beginning this quarter, we'd had a slight tweaked to where <unk> calculation and we now exclude gains and losses on sales a property and equipment.

A reconciliation other past five quarters is also in the appendix.

For the quarter adjust to eat it acts and adjusted cash flow were essentially flat compared to last year as decrease in pricing has been offset by increase the production increasing settlement up derivatives, lower G.N.A. and production costs.

I'll point out that are per share metrics have shown improvement as the benefit of our stock repurchases tend to take shape more on that in a moment.

In terms of operating cost and slide 11, I want to call your attention to the graph on the top right at the slide where you can see the nice downward trend over the past five quarters.

Operating costs $4.77 per B.O. eat for the third quarter represents an improvement of more than 25% compared to the third quarter of 2018.

Obviously much of this benefit is due to lower prices and the associated production tax, but our L.L., we M.T.G.N.P.R. down 12, and 4% as well.

As you'll see our Ella we buy base and at the bottom of the slide.

Scott will cover more in a few slides, but we're very pleased to meet our target corporate <unk> of less than $3 <unk> driven by Wattenberg, approximately 250, and Delaware less than $4 per <unk>.

Look for P.D.C. to continue emphasizing this as we believe a low cost operations are real differentiator in today's world, where margins continue to get squeezed.

[noise] shifting to another <unk> focus a P.D.C. slide 12 gives an overview of they continued improvements to our G.N.A. <unk>, which was $3.23 all in for the corridor.

Once again, we've tried to clearly show or run rate as well as are all in G.N.A., which includes a variety of nonrecurring Chargers associate with shareholder activism.

Asset Divestures.

P.D.C.'s reduction force and partnership settlements, if you recall, we load our annual G.N.A. range on the second quarter to $3 for $3.20 per <unk>, which includes all of these expenses that were occurred in the first half of the year.

Since that time, we've announced the merger with S.R.C., though obviously come with a variety of severance and transaction costs. If you exclude those anticipated cost in the second half the year, we fully expect to reach the midpoint of her updated 2019 guidance range.

Most important take away on the slide bar, one P.D.C. <unk> Maine's incredibly focus on the control costs, both now and moving forward as seen by the constant improvement in our Runrate G.N.A. shown on the Orange bar on the top chart.

And second we are committed to achieving our stated goals 40 million of G.N.A. synergies related to the S.R.C. merger and reaching a 2020 G.N.A. per <unk> of approximately $2, excluding any of the transaction related costs to the merger.

Finally, slide 13 shows are updated balance sheet and liquidity.

As Bart mentioned P.D.C. stand alone borrowing base was reaffirmed at 1.6 billion at or fall Redetermination.

Are commandment level will remain at 1.3 billion.

Pro forma for the expecting closing of S.R.C. The borrowing base has been approved at 2.1 billion with a commitment level approved opt to 1.9 billion.

We feel the combination of free cash flow focus and 2020, Apple liquidity and low leverage provides <unk> credibly shrunk balance sheet that serves as a true differentiate are given the macro backdrop and tightening financial markets.

Given all the talk around free cash flow and when companies expect to reach their inflection points I want to highlight that P.D.C. generated approximately 40 million of free cash flow and the third quarter and expects the back that up with a fourth quarter of free cash flow in excess of $100 million.

These figures combined with the returning of more than 150 million of cash to shareholders here today and capital investments <unk> at the low end of the four year guidance range highlights P.D.C.'s ability to execute.

Our strength as an operator.

Look for more to common 2020 with that I'll turn the Paul over to Scott Reserve to give an overview of our operations.

Thanks, Scott and I want to start by equity your appreciation for the team as pass quarter or team has done a tremendous job at delivering well costs in each basin below or 220, 19 budget and 2020 outlook assumption, while remaining focused on safely executing day to day job responsibilities.

That's all the noise that upending merger can bring.

And the terms of the quarter total production of 138000 barrels literally equivalent per day represents an increase of 26% compared to the third quarter last year, and a modest 1% compared to the second quarter of 2019.

In Wattenberg, we reduced our rig count from three to too late in the quarter.

26 wells, while turning in line 43 wells.

Wattenberg production decreased by approximately 1500 barrels of oil equivalent per day sequentially as we dealt with the delayed start up a plant 11 through July .

Some on plan downtime in parts of September .

All covered this in more detail in a couple of minutes.

In Delaware, we operated to rigs throughout the quarter and had forced bud's in for turning lines all of which were in early July or growing production, 10% from the second quarter to 34500 barrels <unk> per day.

From a well cost perspective, we average 1100 and $50 per lateral foot for drilling completion.

And facility costs in the third quarter.

Oh cover this in more detail in a moment as well, but this represents a significant improvement from our budget expectations with even more potential to improve heading heading into 2020.

Thinking a little deeper our production and only you can see the strong quarterly trends in each metric on slide 16.

In terms of production I've already covered the third quarter results, but I want to point your attention to our fourth quarter expectations.

And the Delaware, we expect our fourth quarter volumes can decline around five to 10 per cent compared to the third quarter. This will likely continue through the first quarter as <unk> incompletions in the new year.

In Wattenberg, we expect quarter or quarter grow to cover the declines in Delaware, leading to overall corporate production relatively flat to that of a third quarter.

In terms of where we were very happy to have the base in level, Scott alluded to earlier up $2.50 per <unk> and sub four dollar per be only in the Delaware.

On slide 17, and 18 I want to spend a little time, highlighting some of the accomplishments of our Delaware program and 2019 and looking forward to 2020.

From the efficiency standpoint, or team did a great job and improving our 2019 drill times by 20% compared to 2018.

You can see that this translates directly to improvements in drilling costs per lateral foot I shown on the grass at the bottom of the page.

And the third quarter or turn in line activity was limited toward buckskin pad in our north Central area. As you can see these are strong wells with average <unk> 30, D.I. piece of 225 barrels of oil equivalent per thousand feet and nearly 50 per cent oil.

Importantly, these wells came in at 1100 and $50 per lateral foot.

For the quarter, we're very proud that our average well costs have come in between 200000 and to $800000 below budget, depending on lateral links.

As we begin working with our service providers end determining are 2020 budget, we hope to not only maintain these efficiencies we'd game this year, but continue improving from both the time and cost perspective.

Early indications are showing potential for 10% to 15% improvements from 2019 budgeted D.N.C. it costs, which equates to one to one and a half million dollars per well.

As a reminder are 2020 outlook assumes <unk> well costs year over year with 25 to 30 spas and turning lawns focused entirely in our block for area.

Shifting gears to the Wattenberg on slide 19, I want to spend a few minutes discussing the operating environment, specifically high line pressures experienced in the third quarter and early parts of the fourth quarter and the result impact on our oil volumes.

As you can see on the chart at the bottom left of the page, there's a clear relationship to lower line pressures and improve productivity.

In the early part of the third quarter, which is shown in the Gray box you can see line pressure spike up and remain high until plan 11 comes on line.

In the same time period P.D.C.'s volumes.

In the Blue light or dark Blue line decrease in conjunction with a high line pressures before increasing as planned 11 comes on line.

You can see the same relationship again.

In the third quarter as D.C.P. underwent some unplanned downtime.

When it comes to oil production. This relationship is even more magnified as data on a pad bypass basis, clearly demonstrates increasing geo ours at periods of high line pressure spikes.

The good news is that recent performance, namely through October and thus far in November has seen line pressures decreased to levels below 300, P.S.I. in certain parts of the field.

Even on the grass you can see a very clear downward trend in line pressures since plant 11 came online assign from the unplanned downtime.

With continued improvements we would expect to see an uptick in our overall and oil performance in the fourth quarter.

On the right hand side of the slide is a reminder of the gas infrastructure improvements that are well underway. All of this work is necessary for D.C.P. to increase by mid your next year, there capacity to 1.7, B.C. or or by about 30% from current capacity.

Last I want to give you an overview on the current C.D.P.H.D. study and what is what it means for P.D.C.

Did you all are aware the C.D.P.H.D. use 2013 to 2016 air sampling data to model and predict the potential health impacts to hypothetical communities with 2000 feet.

In 2000 feet of an oil and gas well.

Study found no long term health risks associated with exposure to the development or production phases of our operations.

However, certain worst case, whether any emission scenarios did show potential for adverse short term health effects.

The C.D.P.H.G.N.C.O.G.C.C. agree the model has limitations and additional measurement with documentation of specific operating conditions is needed.

P.D.C. and the industry look forward to the opportunity of work together to gather site specific and current and update current best management that best management practices or B.M.P.s.

While the additional data is being gathered updated B.M.P.'s will be required and permits will be scrutinized, where there are building units within 2000 feet compared to the current distance 1500 feet.

Additionally, both P.D.C.N.S.R.C. have our 2020 drilling plan covered by already approved permits.

In terms of P.D.C., we expect to exit 2019 with approximately 150 ducks that number is closer to 220 on a pro forma bases combined with S.R.C.

The result of this is our activity for the next two years can be categorized as ducks and existing approved permits.

Although this will add work to our existing permitting process. We believe that we will be able to work with C.O.G.C.C. to obtain permits that will allow us to continue to operate in a safe manner.

With that I'd like to turn the call back over to the operator for Tonight.

Thank you at this time it than like ask questions hit depressed five and a number line and your telephone keypad.

I can't <unk>, if he would like to ask the question. These five aren't I get kind of funky bass.

Yes, I question I'm trying dying of AIDS College from calling him ask a question.

Hey, the morning, guys was hoping maybe we can just start with they need clarification on on four q.

And just maybe a sense of what do almost couldn't look like in the corner I know you're guiding via we flat sequentially and the four year Guy does remain unchanged <unk> I guess, what you think this means for corporate oil potentially growing in in four q.

That that is a a question that as a tremendous amount of that is dependent on obviously on the P.D.C. or I'm sorry, the D.C.P. a run time, we've got to make sure that they're equivalent run as well if if that happens. We you know we obviously see from.

Or or existing wells. The the idea that we should continue to see oil growth and with that.

Particularly we're hoping that the <unk> the line pressure comes down in the northwest part of the field, Yeah, where where are lowest your wells are and that's where we'll get the most benefit in terms of where we're headed we're still talking about that 40% range is really what we're looking at for for oil for the year.

On the on an overall based on a corporate base.

God <unk> and then I guess, just as a follow up.

How's it looking into 2020, obviously, some some great efficiencies realize them all cost lower in both nations and and you did kind of hit on those.

<unk> with the budget I guess, assuming flat well costs here, we are but but how do you think about the initial target. They are high level budget. You you laid out at the time the acquisition of 1.2 to 1.4, and then I I guess also you're thinking about growth at this point and if you think the program can be a bit more.

Back and waited overalls, you as we await more D.C.D. capacity I'm ashamed connector.

Coming in service I guess.

Let me start we rolled out a a a 1.2 to 1.4 with the midpoint of 1.3 billion on the.

On the pro forma outlook clearly, we're leaning towards the lower end of that right now based on the management of the Ducks that I talked about in the cost improvements that were c.

And I think we even have an opportunity.

I got to be careful you're because we're still right in the middle of or budgeting process, but I think we have an opportunity to even moved below the the lower end of that as we go through the budget.

Most importantly, I'd think recognized depending on where pricing is the levers I referred to in my opening we can pull those to move that number in in some cases move it substantially and again expecting February for us to roll all of this out in our final approve budget.

And it's not part.

Oh.

Yeah next question counts for nine of Apple Pan Pen back up America Merrill Lynch and we asked a question.

Thanks, Good morning, guys on on just following up on the oil.

And you have given up fairly precise guidance for 2020, given shifting Delaware inline pressure issues could you kind of broadly speak to the kid and stuff but.

As we move through 2020 and perhaps.

As we look beyond 2020, how should we think about it.

Yeah, I'll I'll I'll take a run it this and then you know maybe somebody else to jump in and and hit on some of the topics I don't yet when you look at where we're at right. Now. We're in this is all talk about P.D.C. alone and then talk a bit about adding N.S.R.C. were were you to where you don't have any frat cruise running right now.

So we're expecting production in in the first quarter to to dip and I think that's.

A fair look when you think about not having any turn in lines really on the fourth quarter. I think we had a few early but but basically through the fourth quarter would not turn many wells online.

And and won't through the rest of the year, we'll start cracking again in the first quarter and that should bring an uplift in a second quarter and the third quarter and then depending on how quickly those wells get completed that we're planning on completion and keeping a real solid I on our capital span will we may have to slow down.

Down at the end of the year again, depending on circumstances, such that we stay within our capital budget, but that could flatten out fourth quarter. I think we're still talking you know, 40% to 42% range in terms of oil overall for the year and and the the upside applied to that is the Delaware, where we look at.

The work that we're going to be doing there is on the east side of the walk for through the central part of it in terms of turn in lines.

And we expect that you are to be a bit lower.

And therefore, you know give us a little bit more oil relative to gas.

And then I'll add to that the S.R.C. side. They are running a frat crew right now and that will help us a little bit flatten out that first quarter and then and then the idea that they're a little bit earlier than us just in general in the Wattenberg also pushes that a wheel up just a little bit but still in that I think we're still comfortable enough for you to 42% range.

Appreciate the rundown, Scott and just following up on that.

Entering.

2020, with a duck on a 2020 220, they should be exit 22, you know next year given I appreciate your and in the midst up your budgeting process, but a wish I should we think about the <unk>.

Yeah, I mean, I I think we'll be working or adopt count throughout the down throughout the year. We're obviously haven't finished our final budget, but I think we gave a range of reducing that <unk> 75 to 100 throughout the year through 2020, as we managed through the completion process.

But we're still putting the budget together is barred the alluded to earlier, but I definitely think you'll see that dotcom come south.

[noise] appreciate the color. Thank you.

[noise] here next question come trying to line up <unk> Sanchez him asking a question.

Hey, good morning.

<unk>.

Can can you talk about the the 220, the the dots you'll have going going into 2020, I mean, what <unk>. What do you consider the the kind of normal run rate I mean, I, I guess, where would you envision that going to buy by year end 20, and I know, it's I know, it's in flux, but presumably those would be at the front of the line.

I'll I'll make a little run it there's I think when when we look at the the 220, that's that's more than we need and and as as Meyers is talking about we're gonna be using up some of those this year. When you talk about kind of a minimum that's gonna that's going to grow and shrink dependent on how many rigs you have running but with three rigs, we probably have somewhere in the new.

Neighborhood of 100 is probably a pretty close minimum and I see that you may drop down into the up or you know.

<unk> the 70 80 90 at one point.

In order to stay I headed with with the drilling rigs you don't want to get right up against those those were complete well that feels comfortable to me. It also depends on one of those rigs are running when they're when they're running and.

Separate areas, you, obviously need a little more room between each of those rigs and the and the completion cruise, but that's part of the that's part of the project that were figuring out, but but as far as a minimum something in that hundred range. So so we could pull it down another you know 40 or something it under ideal circumstances. If if you looked it'd be on 20 would be under 2020.

And going into 2021, we haven't decided whether we're going to do that wells I would make sure that's clear that still part of our budgeting process and in in looking at 2020 and wells I think I think our completion pace.

Right now and we're working through all this and we're considering D.C.B. line pressure startup of some of their key projects.

Ah bail ability of services, but right now <unk> correct me, if I messes up but.

I think we're looking at like one and three quarter equivalent <unk> to to Frack fleets to in the Wattenberg in the Wattenberg Yep to a reduced the duck count it'd be keep up with with the three drilling rigs. So you can expect that kind of Frank came says we go through the year ago, probably start both of them again without knowing for sure, but we'll probably start both of them up at the beginning of the.

Here and and one in Delaware as well.

Okay perfect now that's very helpful. And then on you guys mentioned in the presentation that that tracks and White class, where we're taking mine volumes have you seen as that led any in jail improvement pricing wise in the base in yet or too early.

Yeah, you know well is it slants say, yes, we do anticipate some string sitting in jail price thing because both those two times go to Mount Bellevue and they have a a premium prices they're versus that of Conway. So yes, beginning here in the fourth quarter, there will be some strengthening we believe in in jail price versus out of the third quarter.

Okay, Perfect and then just one last one if I could sneak it in you know it <unk> it seems like.

C.O.G.C.C. white paper that they put out I guess less than a week ago I mean, it seems pretty innocuous, maybe maybe even positive post a C.D.P.H.D. that it's just kind of what they they said they were going to do and I'm I'm not trying to lead the witness here I just wanted to get your thoughts on on that white paper, they put out and and you know kind of <unk>.

How how that shapes that versus Yalta expectations. Now this is Scott wells and that we we obviously have a team that's looking at that very carefully I've I've read I've read at one time through but there's a lot in there as as you probably recognized part of that is we feel some somewhat the same way, but won't know like say somewhat because we won't know till the <unk> the.

<unk> actually written a much of this we expected what again it comes down to the final when they put the final period at the end of those rules and they're they're they're fairly fairly substantial group rules that that that's <unk> when we're really know.

Our team is is is working tremendously hard though to understand what's in there, but more importantly, what we can do to work with the C.O.G.C.C. to make sure that it it ends up being something that we can work with in in in the <unk> and I I will tell you. It doesn't it's not just US alone obviously, it's the industry that we're working with as well.

That's great. Thank you guys for the time.

Thanks Wells.

Okay Disenchanted man if he had the question at this time feeds practiced tai and and and number one key I knew attached <unk> filing.

<unk> you can ask that question.

She noted on.

<unk> to one point I want me to one to one and a half million savings on the Delaware Wild and you captured about 100 200 200000 savings on the <unk> My math, one imply that at least have 60, 630 60 million of saving going you're 2020, just to be clear that D.C. efficiencies reasonable with baked.

Into the cafe Sky upside to the 2020 feet be casual guide Omar like the an offset to maybe a lower P.D.P. based going into 2020 some of the reason price realization at once.

No I think it goes back to help with bar alluded to earlier when we're looking right now we when we came out with our 2020 outlook of 1.2 to 1.4 that was based on the current price and that we're experiencing the time as Scott alluded to we're seeing some downward pressure on that pricing, which would lead to a pause.

Positive near that low into that range or maybe even below that range, that's not really anticipating any change in our activity level. Although as we go through this process. We are still looking at that as a team and will and will assess that as we go through that's why we have the range out there, but I would say when you're referring to those well costs those were not.

Checked in and that will move our range South we just have to finish the <unk> and the pace to determine what we think is the best to make sure we generate a free cash flow for next year 2020, that's our number one target that we're looking at when trying to determine older metrics.

And then I appreciate the price sensitivity stats on five six can you remind us what is roughly the baseline realizations you seem to be free cash will guide against the piggy back on Wilds question. How do you think about N.G. Allen gacha realization progression as new gas processing capacity take away capacity comes on mine.

I'll start with that and Lance I'll, let you try men I think for oil we are in the 90% to 95% realization.

Natural gas 40 to from 540 to 50 per cent realization and N.G. <unk>, 20% to 25% was the range. When we came up with 275 clearly in the third quarter. We had some pressure on those realizations I think right now and we're looking towards 2020, we anticipate something below or.

I think between what we experienced and the third quarter and when we had her Apple look at last in August .

Are seeing some relief coming and some and you can already see some of the Upticking. The price is right now Ah Lance any other comments on that when you look at 2020 right. Now you know just say on in jail side. When you look a third quarter. We we feel like this was kind of a low shoulder month pricing you know just kind of the supply and demand of in jails I think as we get.

Girls go on to to mom Bellevue that'll be helpful would get into the winter season here there'll be more utilization officer propanes across the country preheating. So those will be above pause and things for so as we look into next year, we see some strengthening clearly pass the 15% realization of in jails, we had in the third call.

Order, it's going to be a function again in the supply and demand and all the different utilizations. We we think weren't good spot for improvement clearly over the the third quarter of what we see presently as far as a gas side you know you've seen some strings and then the near term gas prices I mean, there's been a lot of continued you know utilization of gas.

Or you know some of the winter here just early some of the various areas of the country. So that spend the positive, but that's something we'll continue to monitor going forward and that's that's why we've got those adjustments on on one of the slides there will she can go back and see kind of what are the differences in calculations on free cash flow based upon sort of the different ranges of money prices.

That you know could be presented to us next year.

[laughter] tough car. Thank you.

I am is showing a fight a question at this time I would now like <unk>.

Thank you Sarah and thank you everyone for joining in just as closing we couldn't be more excited to how are ramping up. This year began think you know in Peterson news team the mergers progressing and we feel great about that and.

We're we're super excited about or I'll look for 2020.

Hey, disenchantment disk in good taste I'm fine. Thank you for being set and happier when they first day you May August kinetic.