Q3 2019 Earnings Call
Good morning, My name is Rocco and.
Your conference facilitator today.
Welcome everyone to Whiting Petroleum Corporation third quarter, 2019 financial and operating results conference call.
The codell well be limited to 45 minutes, including she went away.
Oh I was hoping placed on mute to prevent any background noise.
After the speaker's remarks.
<unk> period.
I'd like to ask a question somebody press Star then the number one under telephone keypad.
If you like to withdraw your question. Please press Star then number two on your telephone keypad.
Please limit your questions to one question and one follow up Oh, well now turn the call over to originate again, what is vice president of corporate Affairs.
Well, thank you Rocco.
Good morning, and welcome to Whiting Petroleum Corporation's third quarter 2019 earnings Conference call.
On the call with me today are Bret Holley, Chairman President and CEO .
Three leffler CFO chip Reimer, Joe well, Jim so certain so yeah, so Kevin Kelly or vice president of marketing in midstream.
During this call will review our results for the third quarter 2019.
The conference call is being recorded it will also be available on our website at www Dot Whiting Dot com under the Investor Relations section.
We also posted an updated corporate presentation to our web site earlier this morning.
Please note that our remarks and answers to questions include forward looking statements that are subject to risks that could cause actual results to differ materially from those are the forward looking statements.
Additional information concerning these risks set forth on slide number two of our corporate presentation ended our earnings release with that I'll turn the call over to our chairman President and CEO Bret Holley. Thank you Eric.
I'm pleased to report that our production came in above the midpoint of old guide up and capital expenditures were below the low end up the guidance range.
And the face of a challenging operating environment and the Williston basin, our team delivered solid results.
We're beginning to see the positive effects of our recently implemented strategic reorganization.
This was demonstrated by the coordination and positive results produced by our team and the field.
Well, we have a lot of work to do Whiting team is energized and its commitment to becoming a leading value based NP that can maximize cash flow.
During the quarter, we faced weather challenges, including significant rain and flooding.
As a result of our efforts to develop a more streamlined organization are filled employees were able to keep operations moving at our production goal.
This illustrated what is occurring all across our organization.
Simpler flatter corporate structure is driving better communication and teamwork.
New planning processes Backstopped by a better use of technology have also enhanced our capabilities our employees in the field and it headquarters have better access to real time data through new performance dashboards. These automated reporting tools allow for enhance surveillance and management of high value.
Well.
This gives us the ability to prioritize our time and energy to enhance profitability. It also gives us greater flexibility to course correct in the face of external challenges.
We have also gain greater insight into our cost structure to the expansion of real time data reporting, allowing us to advance our goal of driving down lease operating expenses by 10% to 15% and 2020.
The company has a number of initiatives underway to achieve these savings.
Most impactful of these include optimization of chemical and freshwater programs renegotiation of salt water disposal contracts more efficient distribution of produced water.
Improved focus on runtime and effective utilization of rental equipment.
Our north pole or aired provides a good example, how our cost saving initiatives in the field are bearing fruit.
We Institute a rigorous review of our salt water disposal program in the area.
We examine everything from our contracts to how we hold the water.
Rationalizing our vendors and optimizing our logistics, we were able to eliminate approximately two and a half million dollars of costs annually. This equates to a 40% drop in cost to transport and dispose per barrel.
We've also gained greater insight into our capital program through our performance dashboards, we can track spending on projects in greater detail, which allows us to optimize the development plan from the initial drilling of the well through our facility Bill.
We are expanding this to the corporate level very rigorous supply chain analysis that implements technology to better track and evaluate our vendors. We expect these initiatives to be important long term value drivers as we regularly review our options to strengthen our cost structure.
Whitings corporate optimization efforts are founded on creativity and innovation in the field. Our drilling department continues to lead the way in terms of drilling cycle times and the Williston basin as depicted on slide 10, and our third quarter slide that our drilling. It's there's also continued to be leaders and pioneering new technology.
They successfully implemented a Brian based drilling fluid system and the Sanish area that resulted in a 25% reduction in rig hours for the vertical section of the curve.
The team has also designed and implemented new best technology that is estimated to increase the rate of penetration by over 10%.
On the completion side, our engineers are also delivering industry leading results.
As depicted in our presentation on slide 11, Whiting is a leader in the basin and stages completed per crew and 2019. This achievement was driven by increased surface efficiency, the detailed planning and reduced downtime. During the completion process. This allows whiting to deliver wells to production faster.
And at a lower cost than our peers.
I would now like to highlight two major areas, where we have new results. This quarter that set up years, a profitable drilling for weide, Sanish and foreman Butte.
These core properties continue to deliver positive incremental results setting the stage for expanded future drilling and maximizing cash flow.
As depicted on slide six we have completed four infill pilots that span our sanish bill.
These were characterized by a significant uplift in child, well performance and a positive interaction between the parent and the child wells.
Our latest result, with significant production history. The pod nine project further built on our strong track record at Sanish.
Our new wells there are beginning to outperform the parent wells, which are producing above their prior trend. According to third party analysis, we are leading operator and generate the highest returns in the area because of experienced reservoir management.
Sanish as an attractive area to operate.
In addition to the strong recent drilling results, we have better infrastructure availability here that in the center of the basin.
When we sold our plant in the area, we retained from processing right.
We have been strategically we've been gathering lines to utilize this capacity and improved gas capture.
The other side of the basin that Foreman Butte. We're also experiencing strong results to date, we have drilled 17 wells that delineate the acreage. They have produced at two and a half times greater than the initial wells drilled in the unit.
These wells are 82% oil.
Our completion success stems from applying newer generation technology that incorporates hyatt higher proppant loads increase stages and additional perforation clusters.
Foreman Butte shows our ability to successfully execute on an attractive acquisition that we expect will provide multiple years of profitable drilling.
This demonstrates our core competency and infill development highlighting that our operations team as one of the best unlocking value and mature place.
Heading into 2020, we're shifting some activity to Sanish and foreman Butte.
This is to capitalize on the strong results, we generate there and because we have higher confidence and infrastructure availability in both areas again at Sanish, we spent money to maximize our access to firm capacity through line looping into the Robinson Lake plant.
And that Foreman Butte, we are coordinating with third party midstream providers to build out infrastructure that sets us up for full scale development.
I'd like to end by highlighting our growing E.S.G. program and discuss our thinking around 2020 plant.
We published our 2018 sustainability report on our website this morning.
This is our second annual formal report and represents significant progress we have systematically increased transparency well indexing to the primary E.S.G. frameworks.
Throughout 2019, we continued to improve and our reporting and selected for areas to focus our supply chain greenhouse gas emissions health and safety and diversity and inclusion.
We're very proud of our progress in this area and remain committed to achieving peer leading status on the SNG front.
Regarding the 2020 outlet, we don't intend to provide detailed guidance until our fourth quarter call, but wanted to give you a little color.
We remain focused on maximizing capital efficiency to enhance cash flow.
Production as an output of this equation.
Let's start with other operators at current commodity prices, we won't prioritize production growth.
Whiting shareholder value should be enhanced as we execute on our cost reduction initiatives and continue to drive capital efficiency by reducing our drilling and completion cycle times. This should lead to expanded margins lower capex trend and maximizing cash flow.
In addition, we have some cash flow tailwinds, helping us first we have $50 million of cost savings from our reorganization that takes full effect and 2020.
Second our Red tell all deficiencies roll off in April , which translates into about $20 million of additional cash flow each quarter.
Finally, as Green will detail, we have established a goal to achieve $35 million to $50 million of additional elouise savings in 2020.
I would now like to introduce you to our new CFO cream Leffler, who joined the Whiting team in August it has been a pleasure having her on board has a strong background and corporate finance and a keen understanding of the oil and gas industry that complements our management team very well.
Look forward to continuing our work of driving financial and operational improvements would that said Green will talk more about our quarterly results and provide an update on our initiatives to strengthen the balance sheet.
Thank you Brad good morning, everyone. It's my pleasure to be here speaking with you today as Brad mentioned, our goal is to become a leading value based producer focused on maximizing cash flow to do that we need a strong financial foundation I'm going to start by revealing the progress we have made to strengthen our balance.
Ill provide some additional detail on the quarter unfinished by providing further insight into the ongoing initiatives around optimizing widens cost structure.
In August and September we took the initial steps to address our near term maturities during that time, we've made progress in four areas first in September we secured an amendment to our credit facility, which allows us to use over $1.4 billion other facility to repurchase whitening senior notes.
Second.
We successfully tendered for $300 million of our 2020 convertible notes at a slight discount.
Third.
We repurchased $100 million of our 2021 senior note again, a slight discount.
Finally, we recently completed our fall borrowing base review, where we reaffirmed our commitment a $1.75 billion and only slightly decreased our borrowing base to just over $2 billion.
With these that we're positioning ourselves for a successful refinancing.
We are diligently evaluating multiple financing alternative.
Despite the challenging backdrop with the capital markets, we are confident and our ability to manage our near term maturities.
On the production front, we're maintaining our full year forecast.
I want my appreciation to the team in the field for their hard work and determination.
The kept the production flowing despite challenging conditions within the basin. That's really speaks to how the team has come together and it's focused on executing the program from.
[noise] heading into the fourth quarter, we expect production to remain relatively flat despite a seasonal drop in activity.
We're also tightening our full year guidance range for Capex.
The range implies we will spend approximately $134 million to $154 million in the fourth quarter.
Given the team's ability to track and monitor well costs in greater detail. The team is comfortable narrowing our capex range.
Going into the fourth quarter, we are running four rigs, but have dropped down to one frac crew. One crew is difficult, but this time of year as we reduce activity going into the winner.
During the quarter, we plan to put on production at backlog of wells that were completed and largely accrued for and the third quarter, which leaves us with roughly 50 ducks as we exit stay here.
Moving to the our cost structure Ela, we was slightly elevated due to several onetime expenses that added approximately 30 cents per BLE too early for the quarter. We expect these costs to normalize in the fourth quarter as our cost savings began to take hold.
Now turning to GSK for the quarter RJ included $8 million, a onetime charges related to the reorganization.
We expect DNA related expenses decreased to $1.95 or be away, which is the midpoint of our range in the fourth quarter as a savings from the reorganization take effect.
Looking at differential our oil differentials were higher than expected. This is because of a narrowing Brent Ti Brett every due to the value at the barrels on rail.
Additionally, the delay of the Enbridge line three pipeline is expected to weaken differentials into the fourth quarter. The latter increased the number of Canadian barrels flowing so that competes with our Williston basin barrels.
These factors are amplified by normal seasonal decline in demand, which is largely due to refining turnaround.
Therefore, we are moving up our oil differential guidance for the remainder of the here.
Moving on to natural gas natural gas and NGL pricing at a macro level gas and NGL and gas and NGL system is congested on both the processing side and pipeline capacity all the basin. This is leading to lower realized pricing.
Expansion of select gathering system.
Several new gas processing plant and the addition of the L. Creek NGL pipeline should provide flow assurance and improve our pricing.
I'd like to finish by elaborating on our call our cost structure initiative.
We are focused on improving our cash margins, which were significantly enhanced by streamlining our organization.
Just love to have the estimated $50 million of annual cost savings most of which will be realized NGL <unk> expense.
During the third quarter, we have focused on implementing a number of rigorous programs to further optimize our cost structure across the board.
As Brad mentioned earlier the team is targeting a goal of reducing our absolute elderly by 10% to 15% and 2020 when compared to 2019 levels.
This translates into approximately $35 million to $50 million of annual cost savings.
Further we believe there's more work to be done on the non payroll Gionee front.
Some of the larger Gionee initiatives include optimizing the size of our fleet program and maximizing the value of the dollars we spend on our IP software and subscription.
We expect these initiatives both the can begin to materialize in the fourth quarter, but we expect to see an even greater impact in 2020.
However, this is only the start we continued to continue driving these types of initiatives as we move forward on our plan of becoming a leading value base CMP producer.
Operator.
With that we'd like to open up the call for today.
Thank you everyone I'll begin the question answer session.
To ask a question your press Star then one on the telephone keypad.
And the speakerphone, please pick up for himself personally cheese.
Your question. Please press Star then too.
We also please let me first questions to one question single follow up.
Today's first question comes from Neal Dingmann of Suntrust. Please go ahead.
Wonderful thanks for the details Brad could you to one of the folks there I'm looking particularly that slide nine just talking maybe a little bit more on the infrastructure constraints could you maybe expand just you know I guess two fronts. There one it does look like you're shifting to what I'd call. It just as it says on that slide higher confidence areas maybe to.
Talk around that secondly, just your confidence I know, there's been obviously a couple of quarters with some constraints here just your confidence of between now and year end and as we get into 2020 or just the confidence of things coming online that will alleviate this.
Sure and ill take the first part of that question I'll turn it over to Kevin Kelly or to give you a little more detail, we do see infrastructure coming on it appears to be largely on time and so we're watching the startup of those.
Systems, what's that let us to do though in 2020 is in the first part of the are really move our activity to Sanish and foreman Butte as we've talked about because we have real confidence in flow assurance there as the systems become a operational and get the bugs worked out in 2020, I will have some development back into the.
Center of the center of our acreage position here.
Neil This is Kevin Kelly so on the processing are based on side of the equation. We are confident in the new processing additions, we've seen multiple plants coming up in this third quarter it into fourth quarter and on the NGL takeaway side, one oak reaffirmed or in their call last week that the they were already building.
Line capacity line fill into the new L. Creek pipeline. So from a basin standpoint are feeling more confident there and then as Brad elaborated on the shifting to Sanish Foreman Butte, what we addressed in our remarks wasn't more confidence our firm takeaway in those areas or building from capacity to control our destination, whether it be sanish performance.
Great details guys.
And then just one follow up just.
Brad you come to just on you know as you look at inventory going into 2020, you're obviously like what is your slide eight shows moving to the full field development in four reviewed some just want to could you just talked about the confidence in core inventory overall I know that seems to be an issue not for just you all but for a lot of the companies out there right.
I Wonder if you could talk around the confidence around that.
Sure in L.. Thanks for the question.
We talk about ours, a lot we probably were refer you to multiple sell side and vendor reports that show kind of seven to 10 years of inventory on our acreage I'll tell you that we kind of target at 30% IR on our projects and that's consistent with our current program.
Currently we have about 250 locations to drill in Sanish 75 of which of those our Bakken wells and we continue with the cost structure that we've talked about but taken significant dollars out of our cost structure.
And our excellent performance from our Capex teams on drilling and completions were working on moving stuff that might be mid twentys or teams up into what we would call you know that 30% IR kind of projects. So if you noticed the curve on foreman Butte, the the separation between the parent wells much.
Troubles us continuing to increase worried about 70 days now two and a half times better but watching that closely in every day that those wells perform we get more and more confident.
In the economics around Foreman Butte.
Great details thanks much.
Our next question comes from William Thompson The Barclays. Please go ahead.
Hey, good morning, So North Dakota as indicated gas recovery recapture rates in July and August were 81% below the.
Threshold.
No Whiting has made a point of being above that threshold and just curious how much that was weighed on year on your price realizations. This quarter and then given increases yours over time and continue basin production growth curious if you believe the gas processing capacity additions are sufficient to meet the November 2020 deadline increased the state threshold to 91.
Yeah, William Thanks, a lot for the question, we had a slight in our our deck recently that we presented at Barclays that really showed you know since 2015 Whiting has been totally committed to meeting the gas capture requirements in the state. We think that's what a prudent operator does and we think it's very important too to meet those standards. So you're correct.
We spent millions of dollars in processing capacity and committing our volumes to make sure that we can beat those standards. So we.
We are working toward the November 2020.
Increase in requirements and I feel confident that whiting will be able to deliver and achieve on that as Kevin mentioned earlier I think there's significant gas processing come into the basin and by our slide on page nine we're showing that we do think there'll be ample capacity in the short term you bring up a great point, though.
We have seen better well results in the Bakken we've seen more gas is specially in the center the basin and we'll continue to try to make better and better wells and make more gas, but right now we feel confident about the infrastructure is coming into place to handle that.
Thanks for that and then it sounds like the 10% to 15% reduction on our OE. It's on an absolute dollar value irrespective of sort of production volumes.
Where are you in terms of optimizing those cost and negotiating some of those contracts.
Yeah, Thanks way of that.
Appreciate the question chip rhyme or in our operations team is just a phenomenal job. It wasn't a new thing that we woke up and started and the third quarter. They actually started in the first quarter and as you can appreciate it probably it takes a lot of momentum because it has a lot of moving parts of the current team has over 75 individual initiatives that they're working on to drive those costs.
Style the system and we meet weekly to discuss the so every week, we hear of small wins, some some weeks bigger than others, but they are literally going through absolutely every dollar that we spend on the elderly front and how we can do that better and so we've got some momentum entirely it's exciting to watch week over week, what theyre doing and.
So it's in process, but as Korean mentioned, we'll plan to see part of it here in the fourth quarter, you'll start to see it and then we expect that to roll through 2020.
Thanks for taking my question.
Our next question comes from my Oh Stifel. Please go ahead.
Hi, good morning, and Buddy.
In your slides 10, and 11 shows some significant gains in capital efficiency of just wondering if you.
Okay.
Well costs that you can share that go along with those anything.
Terms of.
Year over year type.
For foot savings, you're seeing I know it varies by area, but anything.
The gives us a sense of what kind of.
Well costs, you have now and where do you see those trending.
Yeah. Thanks, Mike for the question I appreciate that and thanks for noticing.
This is really a this is are these slides are very very hard to actually achieve and it comes from real dedication inside the teams to work proactively with our partners and we actually listed our partners on slide 10, there that is year over year over year relationships with those drilling contractors as you can see there's three drilling comp.
Tractors producing those results. So it's not just one particular fleet. It is really listening to our partners trying new things, we have a culture, where we want them to a try new things that's the only way where I'll make significant innovation and process improvement. So they are not developing our wells from a defensive position.
We're we're scared to overspend there they are trying to implement new technology everyday and you're seeing big wins in that and that's the only way you get at 20% reduction from 2018, which was very good at 10 wells per day, and so we're right in the middle of.
RF fuse on all of our Capex for next year or so we are talking to absolutely all of our vendors from pipe to completion to the rigs right now and working on what we think the cap the costs will will come out in 2020. So we're seeing good progress on that.
We're seeing a the market softened and there is gonna be two components to the 2020 Capex program, it's going to be the innovative work of our team to drive those costs down as well as we think a softer market that will help that as well and so right in the middle that might give us a little bit more time to to lock that in and we will be out with.
Those costs.
Okay fair enough and.
And.
You are bit reluctant to talk on 2020 that given you haven't put the formal plan together, yet, but just trying to get a sense of you down to one completion crew now and related.
Like to go slower during the winter months.
Given the some of these constraints on the processing and the NGL takeaway or coming off.
How do you see see even like first quarter of 2020 would you.
Likely stay at that one crew or would you.
Take advantage of the constraints coming off and start to ramp back up.
Yeah, Mike sorry, Great question and exactly what we're debating internally I mean cost are higher in the winter, which impact our capital efficiency and so going to one completion crew is not abnormal.
We think it's the best use of really the capital efficiency metric right now we do not plan to stay at one crew long term will be ramping those backup and based on the factors that you said the winter conditions.
Capacity, that's available at the DUC inventory that our drilling organization builds for US we'll get back out those completions as early in the new year as practical and so I think what you've seen from US Mike as you haven't seen us deviate a lot on activity, we truly believe to be our core competency to be a great develop.
Her of assets, we've got to have a fairly stable program to be able to drive these efficiencies into the program. So when oil ran up in 2018, you Didnt see us run out that will add a lot of of rigs in fact, we dead zero and so in the last two years, we've been really stable kind of on our our drilling and completion front and I would expect to see something very similar.
Almost in the future.
Thanks, Brett.
Our next question comes from Leo Mariani.
The bank. Please go ahead.
Hey, guys just wanted to get a sense of whether or not you guys were still seeing.
A significant lost volumes are shut ins due to lack of processing capacity.
Yes. It here in Threeq you in do you see that persisting into Fourq, you and you think did that just improves dramatically as we get into one can you just trying to get a little more of a quantification around that the midstream benefits you guys might see.
Yeah. Thanks for the question Leo and we don't see a lot of production shut in I think on the second quarter, we slowed at completion activity and we changed our guidance to try to account for what we saw going forward. So I would say that our activity and our availability out of the basin was largely in line with.
How we saw a quarter ago, and we continue to work to build to fill that in the most cost effective way I would say that what was really amazing in the in September we had over eight inches of rain in the Williston area and the county roads in that area were shut for a third of the month.
And yet when the county roads are shut you can't run any oil or water trucks, any hauling and our team did an amazing job out and filled as you see in the slide deck to have a very short downtime and to get us ramp right back up on rate and a tremendous amount of work at effort that went into that but we were able to liver.
And we anticipate.
A full anticipation that we'll continue to be able to deliver going forward.
That's helpful. I guess I certainly appreciate the fact, you don't have 2020 guidance out yet, but just to follow up on a comment that you made you talked about how production growth would be an output next year. So just wanted to philosophically kind of getting understanding of what you are trying to prioritize and maximize here I really just trying to maximize.
Free cash flow yield in 2020 that.
Sort of the overarching theme or how would you sort of can characterize the parties.
Yeah. Thanks, Leo I think are we are.
We've got a real high priority on paying down debt and remaining capital discipline.
And that's how we're looking at it and so we really believe that through innovation and technology, we can drive better margins and so we're looking at internal rates of return that we can generate from our drilling program and really looking at driving cash margin into our business and so that is what we're focused on and driving and trying to maximize.
Okay. That's that's helpful color and I guess, obviously on oil differentials.
Certainly been disappointing as you know this kind of widen out here.
How many kind of fore sight.
As to when those might improve you think those can kind of get a lot better early next year, what are your thoughts on Bakken denser.
Let me turn that over to Kevin Kelly.
Yes, Hey live so yes on the oil guidance.
The widening out that we saw was a combination of couple of things we touched on in that in the prepared remarks won the Ti rent spread and then as wells reliance more on and that influenced the rail and then as wells the line three delay.
We do expect to continue to rely on rail into 2020.
We don't expect to see new pipeline capacity additions until late in 2020 or the beginning of 2021 at that point, we start to see some relief obviously your view of what plays into the production profile. The basin can influence it but those are the drivers that we've seen going into the widening into the fourth quarter and expect that to somewhat play out into the early parts of 2020.
Thank you.
Thanks, Leo our next question comes from Kashy Harrison of Simmons. Please go ahead.
Good morning, good morning, everyone and thanks for taking my question.
So building on an earlier question surrounding well cost I was wondering if you if you could just give us a sense of.
Where operated capex per rig what that looks like.
Just on your leading edge cost structure.
Well just looking at Capex in general, we do expect capex to be coming down from the current level, just given infrastructure spending that onetime infrastructure, saying that we are needing within 29 team and now we're also being able to say some of the efficiencies that we've talked about that will overall, whether it the fish.
And stays on the completion size drilling side or just overall cost that we are saying that I think going into next year, you're going to say just a lower level of capex, just but those in mine.
Okay and then.
Made a comment there there was a good segue into my next one on earlier I think Brad was talking about some infrastructure spend in the foreman Butte area.
Entering 2020 should we be thinking about that as similar to the rate gas point.
We've been thinking about the amount of spend it's similar to the rig gas plants spend or.
Or is that last just trying to get to trying to understand the evolution of infrastructure spend between 2019 in 2020.
Yeah, the infrastructure spend that we're currently looking like is very minimal amounts in 2020, we expect to be down from less than kind of the infrastructure stand with the re gas plant and a 29 team.
Okay Gotcha.
And then just one final one for me I think there was there was and there was some discussion last quarter on potentially monetizing non op.
Further reduce leverage.
Can you just give us an update on where that where you are today and what the path for the non op Monetizations look like.
Yeah Kashi. Thanks for the question, we're always active in the Divesture market.
We believe with price prudent not to provide specific details, but I'll tell you. We're active in that but I guess, our commitment that we will not divest assets that are credit dilutive.
And right now we have an executed on any of those but our non core.
Non op stuff certainly.
Certainly something we continue to look at and are willing to divest of those.
If we get a acceptable bits on us.
Sounds good thank you.
Our next question comes from Tim Rosemont Oppenheimer. Please go ahead.
Hi, good morning, folks I'm trying to understand the interest expense impact of moving the convert onto your revolver given it has a low low coupon right now can you quantify what the interest expense would be if that full 562 goes on the revolver next spring just trying to understand the delta between wanted to quarter.
Yeah, I don't have the exact numbers in front me, but you're absolutely right. The 2020 convert that one in the quarter. Our credit facility has a LIBOR or pricing grid based on that so call it somewhere around cost, 4.5%. So there's a slight uptick to overall interest expense.
We're comfortable going ahead, and then putting a portion of it underneath our credit facility, because we're really setting ourselves up for our refinance and the future we don't need to put all of it on the facility at the time given the fact that you highlighted it has a lower interest interest rate that credit facilities. So that's more about just getting ourselves prepared for that successful rate.
Financing and the commitment.
Okay. Okay. Thanks for that and then just to follow up on that same theme I. Appreciate the comments on the work that chip Reimer and his team are doing in the field, but you're talking to equity investors. The elephant in the room is that 1.3 billion a debt maturing by the spring of 2021 and I. Appreciate your you're confident comments crane on you think.
Your position for a successful refinancing can you give any more color details to kind of give some comfort to the equity investors out there do you feel confident that a second secured debt deal can get Don or what can you sat there to kind of maybe.
He is concerned.
Sure and I appreciate the question I understand the concern I mean, obviously, if you kind of schon within a short period of time, we have taken several initial steps to position ourselves for this refinancing yeah. We've shown that our willingness to use a portion of our credit facility to repurchase the outstanding Senior notes. In addition, as we kind of talked about we are.
We're continuing to evaluate several accretive noncore asset sales. Therefore, the told on Mount we're actually trying to refinance is much smaller and then for the refinancing we're continuing to evaluate a multiple alterras that have.
A broad range of structures with them.
Ultimately, we can't talk about specific deal, but we are focused on finding the best alternative to strengthen our balance sheet going forward in the coming month.
Okay. Thanks, I appreciate the detail.
Our next question comes from no no parks, Oklahoma Institutional. Please go ahead.
Good morning.
Good morning.
Just had a couple of questions.
Thinking about the.
The Spanish area are there any other.
Thinking in the region that have also.
Looking to increase their.
Their capital investment bearing the next year show or is it pretty much just you guys standing alone.
No. Thanks for the question I mean, there is slide seven shows some peers that had been active in the area. There's a small map on the left hand side that a little hard to read but it gives a lot of sticks on the map of Wellbores that and Ah operated in that direct immediate area.
And the.
Recent past.
Great and.
I was just wondering.
As you do this shift in focus towards Foreman Butte, and then and then back towards cash.
Does that have any implications for sort of managing the overall portfolio some.
Based upon going forward I'm not sure if heading into this year.
You were as.
You know you had a lot of visibility about you know how the the capital spend might be a might be changing from area to area.
Yeah, No. We have as you know we have a really large base out there of over 1500 wells, which puts our base decline and really the upper thirtys as a way we think about it it can vary based on how big your wedges from the private previous year and.
Now with that large of a base I mean, we're pretty we're pretty locked in on base decline. It doesn't change drastically moving forward. So we do have initiatives internally to shallow that decline.
We have a multitude of production engineers that are in the field working hand in hand, with our operators and though we constantly look at the base. That's the cheapest barrel that we can go after and so a lot of internal focus of initiative on putting the right artificial lift in place operating these wells at their maximum efficiency and really worked.
To get those barrels out of the ground and touch left shallower decline through the dashboards that we described earlier today with predictive analytics, we've been able to decrease our wellbore failure rate by over 30% in the field and that has two big advantage is one well doesn't go down and you're making zero production apps.
And money and so they keep the wells on longer which generates revenue and.
They run longer which is saving money on the Workover expense side, and so we think about that base decline of why.
At Whiting.
Great. Thanks, a lot.
Our next question comes from John Freeman with Raymond James. Please go ahead.
Thanks, you all did a good job of kind of outlining all the various initiatives that you've got to try to drive Halloween down and I.
I realize the complexities that I think Brad you mentioned there is like 75 different initiatives.
Our sort of being looked at but but I thought slide 12 sort of boil it down to combat the six main areas that you're focused on to kind of drive.
Our we reductions and I'm wondering if just a high level you can kind of say what is sort of already been achieved there will be achieved kind of by year end versus some of the areas that will maybe take a little bit more effort work or time to kind of a achieve.
Yeah. Thanks for the question John as you rightly outlined its eight ongoing process and it's a continual process and so we've started to see some roll wins like.
For instance, and our our fresh water and our produced water water winds up being one of our largest expenses and what we found is that across weddings portfolio, we were paying very different water rates and very in different places and so bringing that together under a combined single head of water. We have a waters, our we have a way.
Our team and we're working with our supply chain groups to leverage Whiting size and scope in the basin to get a common water.
Cost and what I'd tell you is that cost has come down significantly and anywhere within whitings portfolio. Now there is a very minor differences and what we pay for water and so we're seeing stuff like that our teams have done a wonderful job, especially in red tell of reducing rental equipment. We had a lot of rental compressors and they've been able to creatively per day.
Boost the wells better to save and so we continue to build these costs back.
But these are our larger.
These are larger categories and now we just had a very successful month of Workovers and so we prioritize our workovers instead of each office prioritizing workovers, we prioritize it over across the entire region and competed for capital stay to a budget and we did not see production decline from that program.
And but we save significantly on our Workovers and so we're talking millions of dollars coming off here John So each of these initiatives represent millions of dollars and and we're just we're working to have those come out of the system as quickly as possible.
Great and then my follow up with the the Red tail deficiencies rolling off in April and then you mentioned just send it theres been some other progress.
On some cost efforts at Redtail I'm, just curious if sort of the view on Redtail is changed at all sort of in a post deficiency payment environment or is there an asset that we should maybe think of is potentially being marketed again without the burden of the deficiencies.
Yeah, John Thanks for the question, what we're committed to at Whiting is an active portfolio management and so if the capex if the wells compete for capital in our program will get funded we have tons of confidence in our red till team they've done a phenomenal job and we are totally convinced.
That they can develop economic wells out there and we have capacity take away as you described it ductile go down significantly after April we have some water contracts that we can use to our advantage out there and so that's part of our 2020 plan. We're looking at everything in our portfolio and the active portfolio management will allow the cap.
Next to rise to the very best stuff that we have internal tire inventory. So I can tell you we've seen some positive results in our 2018 completions at Redtail. We've also seen offset operators to the south of us drill on different spacing with a different wellbore trajectory and have produced some really nice results. So.
As we always do we're studying rebtel intensely and.
It will it will be funded when it competes in our portfolio for capital.
Thanks, Brad I appreciate it.
Thanks, John .
There are no further questions I want to I'll turn the call over to Earthshaking.
Thank you Rocco.
Flooding will be presenting at the bank of America Global Energy Conference on November 14.
Anticipating the Goldman Sachs Global Energy Conference on January 7th and eighth.
We'll now turn the call over to Bret Holley for closing remarks, Thank you Eric and thanks for your questions. Today, we remain dedicated to our strategy of focusing on margins full cycle returns and generating free cash flow, we remain focused on hitting our targets and strengthening our balance sheet. The new whiting team is stronger than ever and committed to succeed.
Leading in this challenging environment. Thank you and we look forward to seeing you at the upcoming events.
Thank you today's conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.