Q3 2019 Earnings Call
You sent gentlemen, thank you for standing by and looking through the Comstock resources incorporated third quite a 2019 endings coffins call. At this time, all participants I know listen only mode. After the speaker presentation, there will be a question and answer session.
To ask a question day in the session you'll need to pass star one on your telephone pleased to be advised that there's confidence as being recorded.
If you acquire any further assistance piece Fest stars zero.
<unk> speak it today J. Alison Chief Executive Officer. Please go ahead Sir.
Oh, Thank you Joe well, it's it's a rainy day in Dallas. So that's a good day to happen earnings call start out like that.
You know 21 months ago.
Jerry Jones reached out to Comstock he saw something.
Over the last 21 much our goal is bad to be eight low cost pretty sure.
It had the highest margins.
At the same time right sizing the company yet to be competitive and the new here energy.
<unk>.
The corporate report we gave you today is a good marker.
<unk> <unk> 290 employees of Gods dog kept taking the cup.
Very short time frame.
We will report today on a copy that we bought for all star during the last quarter, which is a nice positive state more toward our consolidation goal of quality assets would know added leverage.
The energy sector needs. This topic fresh fish in a company that focuses on less corporate overhead is zeroes in on shareholders return an honors it those that have provided us financing.
I can assure you the Jerry Jones, who owns 75% of Comstock intends to use his time.
<unk> and money to continue to create the company you're compelled to own a piece of and support you know thank you for joining US today, we never take your time for granted.
Welcome to the Comstock resources third quarter 20, not tape a natural in operating results conference call. Today, We will review our third quarter 2019 earnings of drilling result, as well as update you on our acquisition of Covey, pork energy, which which closed it Oh July the 16.
You can view slide presentation during or after this call by going to our website. It W.W.W. dot com resources Dot com.
Downloading the quarterly results presentation.
You'll find a presentation titled third quarter 2019 results I have <unk>, Chief Executive Officer gone to talk of wouldn't be as Roland Barnes, our president and Chief Financial Officer, and Dan Harrison, Our Chief operating officer.
Please refer to slide to in our presentations denoted our discussions today will include forward looking statements within a meeting of securities laws. While we believe the expectations is such statements to be reasonable there can be no shirts, that's such expectations will proved to be correct.
If you go to slide three the 2019 third quarter summary, among fly three we cover.
Highlights of the third quarter.
For much of the third quarter, we were very focused on the transformative copy Park energy acquisitions, which we close on July the 16.
Combining <unk> database and later in the Hazel shell, which is the Premier natural gas station in North America was superior economics, given his geographical geographic proximity to the Gulf Coast.
The third quarter results included the operations of W. Park for 77 days.
Angel Bugs Richelle drilling program continues to deliver strong production growth gobs talking Catholic Parquet building completed I combined it 201 operated well since 2015, which had an average happy rate of 23 million cubic foot per day.
We can put it into the third quarter average 25 billion keep fit for day <unk>.
Combine pro forma Hazel shell production into third quarter was up.
<unk> from the third quarter of last year.
We have also been driving down our well costs to the Angel.
<unk> well cause for lateral foot or 90 per cent lower there, while we average into fourth quarter of 20 ate cane. The strong natural gas production growth was offset by a week or natural gas prices and the third quarter.
For the quarter, we reported oil and gas sales.
$251 billion.
Adjusted EBITDA acts of $189 million operating cash flow of $143 million or 60 cents per share and adjusted that income $34 million or 17 cents per share.
Slide for you feel flip there is a good summary of the Covey Park energy acquisition.
The combination created a company, we substantial scale and the Angel we per day, just over 1.2 billion cubic feet of natural gas grill per day in hub 5.4, T.C. yet they have S.C.C. proved reserves and at 309000 net papers and the <unk>.
<unk>.
We have more than 2000 net drilling locations, which gives us over 30 years of inventory and our plan 2020 activity level six upgraded rigs.
A third quarter perform a unit cost structure is only 66 cents for M.C. Epee, which is one of the lowest in the industry and a third quarter pro forma <unk> margins of 74% is one of the highest in the industry with the merger clothes, we materially changed our leadership team with half of our department.
Yeah, it's coming from each company, our department heads or selecting best practices from each company and have put together their teams where the focus on creating at efficient low overhead company.
With favorable proximity to the Gulf Coast, a mad and over 500 miles of own gas gathering infrastructure, we have higher natural gas Frost realizations. The cover park assets, a cheap higher gas frost realizations and cop stocks and we recently renegotiated new gathering contractor marketing arrangements to give a scroll.
Access to the premium Gulf Coast markets.
We will complete the consolidation of the Dallas area corporate offices later this month and I have implemented a 41% reduction in the combined corporate staff.
We are targeting go forward annual G.N.A. $30 million, which is about half of the combined Angel G.N.A. The two companies that $61 million in 2018.
With the merger we have added data sites.
The staffing implemented a tailored drawdown for every day, well, which we build with father it probably the economics of the Angel wells.
Actually we're very focused on the balance sheet as we should be our leverage metrics immediately improved gives results of the transaction as roller we'll go over later, we have read reduced our plan drilling activity to six operated rigs in 2020.
This will protect our balance sheet and liquidity any sure we can hit our target to generate free cash flow in 2020 of over $200 million <unk>.
We will also consider potential divest features on for an encore assets in order to pay down our debt and improve our current liquidity [noise].
If you go to slide five it's are both on acquisition.
On November 1st <unk> 31 billion dollar both on acquisition of a private painful shell company has shown on slide five.
We issued 4.5 million shares in and all stock acquisition. The properties were primarily into soda parish, Louisiana as shown on the map and include 3000 net acres is 75 brochure 20.1, net producing what else you can see how well the properties fit with our existing properties 36.
Oh sure 11.7, net wells are painful show wells 50, gross or <unk> sitting at wells either operated or will be operated by us. The properties are producing approximately 12 million cubic feet per day and have 89 B.C.F.B. at proved reserves with an S.C.C.P.V. 10 value $51 million.
We have identified 44 grocer 12.7, net future drilling locations on the properties. So now I'll have rolling cover the financial results in more detail rolling.
<unk>.
And slide six we show that combine Haynesville bows your production at both Comstock and Covey Park.
Third quarter combined production of 1.1 billion cubic feet per day is increased 34% from where the two companies where in the third quarter of 2018.
Production was relatively flat on a combined bases in the second.
Quarter rate.
That's the only turning 8.6 net wealth to sales during the third quarter.
After adding 14.2 net wealth in the second quarter.
18 point to net wells and the first quarter of this year.
However, in the fourth quarter.
We expect our hands for voucher production to increase.
Over 10% of the the third quarter rate as we currently expect to put 19 more net wealth on production before then this year.
Slideseven recaps the production we had shut in for the quarter and we're pleased to see that our third quarter shut in volumes decrease to three per sad as compared to the four per said we had in the second quarter of of this year.
<unk> all the shut ins were due to offset crack activity.
And slide eight we detail are producing costs per M.C.F.C. are operating costs for M.C.P.R.M.C.F. He fell to 15, guys pets and the third quarter as compared to the second quarter rate of 68 cents and that was all due to that they covey Park acquisition.
Are gathering cost average 23 sets production taxes average seven sets and the overall feel level operating costs were 29 cents per unit production.
We expect to continue to improve our gathering cost with the new contracts that we've either negotiated are currently.
Negotiating and we.
Also expect to see additional efficiencies in our field lever operating cost as we continue to integrate the heavy part operations and found stocks.
A slide down we detail corporate overhead per M.C.F.D.R.G.N.A. costs per M.C.F.. He felt that seven cents in the third quarter as compared to the second quarter at 14 sets and our first quarter rate at 19 sets. So what are the more significant benefits of the merger is the improvement.
Metric due to the reduction.
Personnel that we had in the few organizations enable it since we're both in the same basins and in the same city.
With this very low overhead we now have the lowest cost structure in the industry among the public companies and our merger I think is a great example of the benefit of combining the two past shell operators and the same base and and the value that can be created from such a combination.
And slide 10, we detail the the depreciation depletion and <unk> I, even though this is a non cash number. It's it's kind of it kinda points to an aggregate way of kind of what you're finding costs at that over a long period of time.
This noncash expats, Yeah decrease too 79 sets and the third quarter and this is compared to the dollar for we were in the second quarter.
This year and the 99 cents that we were in the first quarter.
[noise] Slide 11, we summarize the third quarter financial results that we reported today our production third quarter was 100.9 B.C.F.C. that includes 603000 barrels of oil.
This is 245% higher than the third quarter of 2018 in 124% higher than ours are second quarter.
<unk> that now includes thick heavy park operations for just 77 days a quarter.
Or I guess sales, including realize hedging gains were $250.5 million or 143% higher than the third quarter of last year.
We did.
You can see that that weaker oil and gas prices in the quarter did offset some of the impact of the significant production growth.
In this quarter or realized where prices $51 in 27 cents per barrel.
Realize gas price with just $2.26 per mcf and including the benefit of our of our realized hedging games.
But overall, our average night natural gas price realization was down 15% from the from the third quarter of last year.
Are adjusted even tax came in at $189 million for the quarter and this is 146% higher than that there were third quarter of 2018 operating cash flow with $143 million up 178% from 2018.
We did report a net loss at $1.3 million for the quarter or one set.
<unk> per share.
But this includes many a unusual items that are not part of ongoing operations and if you exclude those items are adjusted that income was $34.3 million or 17 cents per diluted chair.
These items and net of the income taxes would include at $28.7 billion merger related cost.
$3.2 million of their realized Covey park hedge gains that related to the period July 16th two.
July 31st that were settled before that merger clothes. So just not included in the realized gains that we included in the financial statements.
$2.9 billion and.
Discount amortization, resulting from adjusting the heavy part bonds to the market value. It close so that's the <unk> the interest relating to that and then we had a unrealized mark to market loss on our.
Yeah.
$8 million in the corridor.
A slide 12, we summarize our financial results for the first nine months of this year.
Or production for the first sound bites was 184 B.C.F.B. and that included 2.1 billion barrels of oil and this is about 148% higher than the same period in 2018.
Oh, well I guess sales, including realize hedge gains were 500 in $13 billion 100 in 14% higher than the same period and last year.
Or prices in this period average $49.44 per barrel and I realize gas price average $2.39 per Mcf.
Looting realize heads games.
And on a nine month bases are over all natural gas price realization was down 12%.
<unk> was $379 million, that's 117% higher than last year operating cash flow was $280 million, 140% higher than last year, and we reported a net income of $33.6 million for the first nine months of this year or 26 cents per delay.
Looted chair.
<unk> Dot net income for the items that we we talked about a lot of a relating to the merger are adjusted that income for this period.
Was $71.2 million or 51 sense for deleted fear.
And slide 13, we present or operating results and just pro forma for the copy Park acquisition for all for all of the third quarter and then all of 2019.
So pro forma production for the third quarter was 100, and 111.5, B.C.F.B. and oil and gas sales would have been $282 million.
Pro forma natural gas price for the third quarter had we had close the acquisition on July 1st instead of July 16th.
What event $2.33 per mcf, including realize hedge games.
In pro former production for the first nine months of this year.
As if we'd close the acquisition on January .
Was 329.7 D.C.F.B.
With oil and gas sales, including hedging gains of $904 million and the pro forma natural gas price for this nine month period would have averaged $2.55 per mcf.
Slide 14, we summarize the hedge positions we have in place for oil and gas production and obviously those hedges. We're we're we're very contributed yeah, two they're really get quarter, we had the third quarter, because we had very very low gas prices you know during that quarter.
For the remainder of 2019, we have about 702 million cubic feet cubic feet per day of our gas production hedged and about 3100 barrels of our oil hedged and then going into 2020, we have 488 may and cubic feet of our gas hedged in 3100.
Most of our all hedged yeah. This these numbers are all on a daily production base.
We recently added 100 million cubic feet of gas.
Swaps for 2020 [noise].
Which which had a weighted average strike price of $2 and 53 sets and we sell gash get gas natural gas swaptions totally 80 million.
Cubic feet of gas per day for 2021 at a weighted average strike price of $2.54.
In our plan as always is due to his to have 50 to 60 per cent of our production hedged for the upcoming 12, but period and we continue to roll that forward, you know and I 12 months pretty basis.
Slide 15, we <unk>, we highlight some of our mid stream into marketing initiatives, which has resulted in the the low gathering really that result that in the lowest gathering cost in the base and at 23 cents for M.C.F.A. and it's also helped us limit our basis.
As to the regional hubs by having a gas price directly off Henry hub or other premium Gulf coast indexes.
We also have access to an extensive gathering and transportation pipeline network, which helps us have lower gathering cost, including 500 miles of our own own gathering.
We recently have entered into an agreement with enterprise products partners to be a major shipper on its new one Bcf per day, Haynesville, Acadian extension, which will take our gas to the Gillis hub.
At the same time, we've also entered into medium term sales agreements for that gas price that gas based on the premium Gulf Coast indexes.
And you know another another aspect to our our our our strong price realizations and low gathering costs is that we have no on that.
Commitments.
We have very little exposure to out of the market are about market gathering contracts, which are very prevalent in our base and in many together natural gas stations.
Mmm.
On slide 16, we recap are spending and the first nine months on our drilling and development activity and then what we expect this band for all of for the rest of 2019 and and we're Gonna give you first look at our budget for 2020.
So so so far this year, we spent $356 million on development activities through the the end of the third quarter.
And of course, starting on July 16th when the merger close we were running nine operate rigs in Haynesville.
So 336 million of our total spending was in the Haynesville a shell program.
We dropped 41 or 28.8 net wells.
Operated wells and we also completed eight operated 11 not operated wells or 5.2, net wells that we had drilled back and and last year.
In addition to the Haynesville, we spent $16 million drilling for or 2.2, net eagleford oil wells, which we're producing during the quarter and we spent $3 million on our block and properties.
If for then for the entire year. This year, we're estimating now that will spend $500 million on Capitol activity.
And and we expect to reduce our recounted to six operated rings as J. mentioned earlier by early.
By early next year.
With this six Rec program that we are currently lining up for next year, we expect to spend $475 million drilling in development activities and almost all those dollars would go in the Haynesville and we estimate that <unk> <unk> 62, or 44.4 net operate it hangs will.
Wells next year.
With this lower rig count.
We expect to be able to generate significant free cash flow and.
Our goal is to have that in excess of $200 million for next year and that's we think that's achievable even with the current load natural gas prices that are that are.
Out there.
At this current time.
Mmm. So we're yeah, we're definitely we're gonna prioritize.
Yeah, the free cash flow over production growth, but we do expect given the the high level of activity that we've had you know in this year that we still have production growth of six date for set and 2020, yeah and that we're measuring that production growth from 2019 on a pro forma faces so production.
Growth of the combined companies have 6% to 8%.
<unk> included on this slide some additional guidance numbers for the analyst to follow the stock for both production cost estimates both for the fourth quarter and for what we see for next year.
On slide 17, we present a balance sheet at the end of the third quarter.
We had $53 million in cash and 2.7 day and the total that which was comprised step by the mouse outstanding that are a five year credit facility and 1.4 75 billion in senior nodes.
We we have no debt maturities until 2024 and no senior note maturities until 2025, and 2026 and our preferred stock has no maturity.
We ended this quarter with $288 million and Mcquitty and again with the <unk> with the <unk>.
<unk> free cash flow, we just we just don't say using that liquidity and continue to grow that liquidity as we as we achieve our goals.
For the combined company.
Looking at equity we had a we ended the quarter with with common equity at $1.1 billion in preferred equity of $385 million.
On the balance sheet, you'll see that we have $375 million I preferred equity booked and that it's not a typo the differences market valuation discount that we had to apply to the series I prefer that we issued in in the heavy park acquisition the face value of that preferred.
Of our total preferred outstanding as is $385 million.
So with all that I'll turn it over to dance it kind of report on that drilling results.
Thank you Roland.
If you flip over and slide 18, you'll see you'll see the new acres, my up which highlights or maybe 300 and bells and met acre position, which is a result of the coming park acquisition and our small recent bolt on acquisition closed on November .
Since free entering into the play and 2015, we including Coby Park now drilled a completed 201 operated wells.
With an average p. rate of 23 million cubic feet a day.
To date and 2019, we can drilled 41 gross operated well planned total of 65.
Operated wells by year end with an average lateral length of approximately 8000 feet.
These wells have been and they continue to be very successful.
[laughter] Slide 19. This is our locator map shouldn't where we have focused or activity since our last call.
That's the last update we have now turned an additional 23 well the sales.
You can see the majority of the activity has been concentrated mostly up in the northern portion of our average.
All but one of the 23 wells drilled as long levels.
<unk> with the completed leaks ranging from 5000.
450 feet up to 11361 feet.
With an average lateral linked does not thousand 343 feet.
Well, who are completed with San loadings, ranging from 3000 to 3800 pounds per foot and a cluster slicing ranging from 15 feet to 40 feet.
The average jobs us for all the wells was 3550 pounds per foot and 21 foot cluster space.
The initial production rates ranged from 19 million cubic feet per day up to 32 million cubic feet per day.
And with an average of 25 million cubic feet per day.
Mmm currently have T.N. additional wells that are in the process of being completed.
Over the next slide.
This illustrates the result of our own billing efforts to reduce are all in D. and C. calls.
From 2018 to 2019.
A year over year reduction of 12% and R.D. and C. calls.
Since the end of 2018, we've got our D. and C. call symbol for 1400 and $45 a foot down too.
$1176, which represents a reduction of $269 per level or the 19% savings.
The obvious factor driving or costs lore has been the soft rock market, including but the the downward pressure on local sample sizes.
And complimented by drilling or longer loud rules and our improve completion deficiencies.
In the near term, we do anticipate this trend will continue to go down slightly.
We were also evaluating testing some slightly smaller Frank designs in the near future.
That could reduce our world calls further and we feel very confident that we can execute these jobs, while maintaining our current level will perform.
[noise] Oh slide 21 this is the <unk>.
<unk> Redrilling inventory.
As of the end of the quarter.
Our total gross operated inventory now stands at 3396 locations.
Our average net interest is 76%, which one to 1817 net operate at locations.
But most operated in the Tory hasn't been split out between short laterals of less than 5000 feet medium laterals of of the 8000 feet and along loud or greater than 8000 C.
So within or Bros. Operated inventory would currently have 617 short levels.
918 medium levels [noise].
861 long levels.
[noise], 61% of our gross operated locations are in the hinesville and the remaining 39% or in the Bolger.
In addition to our operated immature and we have 1475 not operated locations with an average net answers to 13%, which represents another 193 net non operated locations.
This extensive inventory provides of the company was over 30 years of drilling locations based on our forecasted 2020 activity level.
Repeating what we've said on past calls we do continue to pursue additional language trades when possible to consolidate our <unk> position in enhance our lateral legs.
That summarizes operations with that I'm going to turn it back over to J. to wrap things up.
Oh, right, Dan and Robert Thank you you look at the 2020 outlook.
<unk> 22 will summarize our outlook for 2020.
And it was pretty exciting I made for the rest of this year. Our primary focus used to complete the integration of W. Park into Comstock.
Our goal is to have this substantially completed by year end and it is going now much like really well.
<unk>.
We're confident that will deliver all need substantial value, adding synergies at the combination of the two best changeable shell operators can offer.
You know are painful shell drilling program continues to generate economic returns Eva <unk> and the low natural gas Francia environment that we live in today.
<unk> Comstock now has the industry, leading locals structure and natural gas role economics. The drilling program is delivering is Dan said production growth. This year and we'll show continued growth in 2020, just bought a lower intentional activity level.
Gas production is expected to average 1.25 to 1.4 or five Bcf per day and 2020 on our oil production is expected to average between 5000 6000 barrels per day and 2020.
Conservative 2020 operating plan utilizing six operated Rachel the Hayes will that will <unk> free cash flow generation overproduction grow.
We'll be funded internally and will allow for significant free cash generation.
Spot there lower activity level, we still expect production <unk> to grow 6% to 8% of 2020 years <unk> earlier, and we will continue to maintain an active edging program targeting the next 12 much production it'd be on and lastly, we will protect our liquidity, which is currently 288.
Million dollars, and we'll look to enhance it with our <unk> potentially and free cash flow generation shall we can pay down our bank debt.
Now for the rest of call I'll I'll take the questions I'll turn back over to the operator will take question from analyst online and again I'd like to reiterate I know, there's three speakers on the call today, but there's 209 employees that but make up this company and the board and then you are backers, so aware that I'll turn it over with.
<unk>.
Thank you Yeah I saw my Dad's ask a question you'll need to pass style. One on your telephone till Italian question past the palm key he's 10 by probably compared to kind of Austin.
Ask that question comes from Don Mackintosh like Johnson Rice.
Yeah.
More than Jack for something like S., Congrats on the integration to Comstock no that was.
<unk> Hmm moving forward.
First question I guess comes with he looks like are still active without ball times and I was wondering what that environment looks like in the hands Hill or are there.
Pretty good.
Pretty good deal for out there on these smaller deals and then how how are you are thinking about maybe a larger acquisitions as.
Did you grow going for it.
I think on the on the acquisition that we <unk>.
We we we we've been in the <unk> <unk>, we've got a we've got a lot of goodwill trendy area. We've got some companies that had reached out to us.
And we're very cautious on making sure that it's a good but perhaps as you can see that's a perfect put bread for us that were involved in a wells so that we might be buying it and we do add some more creative locations and particularly if they're extended levels. We had at about 13 extended laterals. This particular acquisition something that.
Probably we have been looking at maybe for four or five years, even before the sector. You know got revive back in 15, 16 17 as far as a handful. So it's it was a it was it was a great check if you knew the company that we that we bought there there <unk>.
People in the Angel area to Shreveport area you'd be plays just they they gave us a big checkmark own stock.
They know that we're trying to reduce our our debt levels. You know we've committed to them to to look at other acquisitions like this I think there were some more after that are kind of of this size. Yeah, maybe we <unk>, we don't and then as far as a larger ones I mean.
In the opening statement, we we are trying to be.
Company in this new era of energy, which means that we do have to have such but at the same time, we have to continue to have our our our margins on our local show I would expect them to future that you can see us a continuing to take another step toward consolidating this base and which I think we're the later in and it'll all make economic.
Sense, whether you're bondholder, an equity owner or an employee. So I think if you go back to the Jerry Jones vision.
Now is Iraq, and I tough market.
To to have pure one assets, if they make sense or the existing base of the Gray company. We have so you you can expect us to be active and and then add add that in that we as we look at.
Positions large or small I mean, one of the criteria. We're really looking at is to continue improve the leverage it's a real important go for you.
You know it obviously harder to reach with low gas prices, but to get our leverage on her two times as a major goal of the company and so a transaction like like they got to be park. One for this one I mean, they're all contributing to it better leverage profile and we don't plan to use a lot of leverage to to make acquisitions.
We just want to make sure everybody's aware of that yeah. If you look at the last 21 much every every purchase we've made or consolidation we made.
Has reduced aren't leverage they've been transformed if we've become a base and later, but it is also given us our local structure and our well economics and you know we've had and we're giving you today I mean, we probably cut our budget for what 2020 would've looked like $100 million you know, we we plan on <unk>.
<unk> numbers, we can sort of operating plan so.
And it's really nice to be talking about free cash flow and a meaningful way.
So we're we're not going to disrupt that at all.
Right in that and that we tried into my next question Yeah.
Updated guys, Yeah, I don't have any trouble when we get into $200 million to free cash and so and assume that that you had majority that go straight to the balance sheet in debt reduction or you know and and I guess also on the tail off.
Like that our goal is to take them by down or debt I mean, we we need to pay down or dad. If you look at all the metrics that we needed to to be able to check the box on with <unk> incredibly well run notched up you know feedback company I mean, we check the box on all of this.
Except for our leverage we do need to have leverage our goal is to get our leverage you know when the two less than two range as soon as we can do that it's prudent lose we can do that.
Big strides on that.
And I'm, telling you were gonna make some more big strides on that.
Yeah, it's just going to play down or debt.
Okay, great. Thanks, and then maybe one more for Dan when you look at that you only have impressive cost reduction fourth you 18 to 14 19 down you know almost 20 per cent what have been some of the drivers Internet service costs I've come down quite a bit but what are some of the other levels leverage you all and pulled to further reduce your cost in the field.
I think the obviously the <unk> always and will be the big the biggest one you know the materials. Obviously, you know with that have come down we've as far as the completion deficiencies, we've kind of tweaked. Our design is a little bit. We're just trying to increase our cycle times less days on location.
The less hours at your pumping basically as a you achieve you know a lower cost structure, what your service companies.
And that's that's probably been really be able to make thing that we've done. It was just we you know we just don't know jobs faster same amount of sandals and less barrels.
Okay, Okay, well, that's it for me and congrats on agree quarter and the integration and can be park looking forward to do next quarter.
Thank you.
Thank you.
<unk>, Yeah mine is how often.
Good morning, and thanks for taking my questions. My question is on natural gas pricing. So you do this and it talked about your intention to sound more gas had between typing.
Could you just have data that's on the way you kindly stand on that front.
Yeah <unk> Yeah. The question Jane was like Yeah, one of our goals. It was to you have to to sell more in the it'd be bad week, or we call index pricing and I think we we t. that this quarter, yeah, moving yeah, almost 50 50 before.
To you know, we're we're really closer to.
75% or so and I think as the especially with as the.
The news six Reg program and a little bit less you know production growth it'll be easier to do that after I mean, what are the reasons for you know selling the daily market is you know you know not over selling your gas and bid week and and haven't flexibility if there's an lay and when new wells come on to sales.
Yeah, he'll be easier to get to the to a higher percentage you know with especially in 2020 as the production growth rate is you have comes down from the you know growing that 20.
30% that it has over the last nine months to more of you know that the 6% to 8% that we kind of see you know.
Later on.
Okay, that's very helpful.
L.A. to question. So you guys I signed up for the second expansion project. It seems like it's scheduled fun need the plane to plain Keyuan correct me if I'm wrong.
How should we be thinking about bases decent and sauce, Paul Comstock on to that project is online.
Should we be thinking like basic design shows being sent all that Ttseven 19, anyhow point being machine.
The other 2021 is a that's a good time frame for that for N. service that yeah. The <unk>.
<unk>, yeah, hopefully they'll beat that but yeah. That's that's kind of what our expectations are and where we already that we have we're already before they expansion have a lot of gas in the system and we have a lot of gas that we.
That's priced at a on a Henry hub basis versus a a regional hub basis. So that helps out a lot. So thick aboard that half. Our gas is is probably it's tough coast index is not the regional curry they'll or Carthage index.
And then we're also a undertaking some other measures to <unk> to to help to protect us from volatility and those in those hubs, including doing six months sales directly to to some of our purchasers where we're locking in that difference. So I think is.
As we look ahead.
Yeah, we're comfortable with our overall, new kind of weighted average differential be at around 20 sets and then as we get hopefully as we get more and more capacity to sell directly to the golf Cosio narrowing that you know in the future too you have more of you know 15 cents.
But I think actually looked just that.
For some of those options are open 20 cents to yeah, maybe I, maybe 23 sets you know, it's probably a good range you know for that differential.
Mm mm.
Thank you so much I I am I. The last question if I may so looking at slide plane T.
Are you on Disney made that huge progress on they union pile costs.
On that on that basis, I mean could you may be discussed.
How we should be thinking about well <unk>.
Definitely basis, as well and and it gave a benchmark before Dan answers you know we haven't budgeted we've budgeted the the numbers that you see at our presentation you know not at the the they're they're real attractive never see achieved in the fourth quarter, but more and about 12 25.
Per per foot just to give you have a framework or what so we have some cushion there you know.
As far as what we expect in the future, but but hopefully you know Dan could lead that <unk>. Because you don't know, we'll have one or 220, but we do have a bunch of wiggle room and the numbers Dan Yeah. So <unk>. We are we are going to continue to drain down slightly I do think that as far as any big major you know.
Cost reductions from the service companies is not very likely I mean, we're pretty much getting close to the bottom of the barrel with them. So you know you'll get a little bit there, but the rest of it will get from some proficiency games.
And you know we are going to look it pumping some smaller jobs that will.
We think we can basically match or same well performance. So hill the rig rights I think may inch down just a little bit more.
We are.
You know I think the the just the time on location basically some that speed up I think we'll continue to see that.
But I think I think it'd be a slight draw I mean, we're already you know it's seen several jobs that are lower than this 11 76 average.
You know, we just need to basically do it consistently and I think we could just we match some of the numbers. We recently done you know this trend will continue to come down.
Thanks, a lot this isn't anyhow phone, having nothing <unk>. Thank you.
<unk> and next question comes from Chafee <unk>.
How often.
Good morning J.
<unk>.
And congratulations on.
Thing that a merger put together you mentioned you you're <unk>, you're being approached by other Anchorage owners I was just wondering due to some of these guys have to your one acreage, but they realize that comes talks about or operator as part of a motivation to do a deal.
Well you know these cost her.
$11 million to drill a complete well and we've again, we reported that we grill 201 of days. So if you know if it is it's kind of a big Board game now and you got to have some silence and even 21. So that's why should it is a new era and I think if you can you can if you can can.
Nature ship with the Comstock like this other private company did and you could get to synergy and yet let you you can have their appreciation like Jerry Jones did and he owns.
Hundred 38 million cheer to stalk and the only way much money is at the stock goes up so he put his money wars mouth is and he's a big John equity all her so I think they've done that I think the jury Jones factors you got the key is totally do fresh outside money and he made his money.
To buy the Cowboys with a willing gas money. So I I think that synergy is very unusual it's a depressed market. It's tier one well results you can see that and we've got a machine go one per chip chip somebody that came in and recognize that an willed it.
And I think we've got a lot of eyes here. So rich no. We've known you forever and over and over you know we know.
To perform so yes, I think there's a lot of opportunities out there I think some we'll we'll capitalize on some will pass so they're like Roland <expletive> . It's all about the leverage game now it's not that we need you know more <unk>, we have over 2000 locations, but we are you know we all are leaning forward to see what we can do to become.
<unk>.
And yet at same time keep keep what we created.
Yeah, I think there's a lot of opportunities the the the base on is still a stress to face and as you know.
Right.
Looking at Slide 15, I was wondering can you discuss to what extent, the Acadian pipeline and slates Comstock from associated gas coming into the Gulf from the <unk>.
Yes, Rolling Hmm, well sure I've I I think you looking at slide 15, I think I you know our our major markets are probably.
No in Louisiana.
Side, you know in in an open bar as permanent past you know I think permit gas you know, it's gonna be hitting the Gulf coast, Yeah, mainly kind of a west of Houston East of Houston, you know, there's not a lot of.
Gulf Coast connectivity, you know to that Louisiana outside of that that the market and.
No I think I think the initiatives we've been taken as we are obviously ought to be first to market and direct to market, where the gas yellow type is where is the new popular.
For where that allergy golf L.J. Gulf of Mexico Bayes Tippers.
To be taken their gas and so locking up direct transportation to it.
Thing that at the Gulf Coast indexes being first to Marquette, having the lowest cost structure. That's that's how we think we insulate ourselves from the Permian producers, we think though that you know in the western side of the golf you know that that that's going to connect directly in more to the <unk>.
Okay, right and if I could sneak one last thing and it's kind of looking at the <unk>. The other way around the presentation noted that.
There's a potential for <unk> divestitures noncore assets don't produce the debt and enhance liquidity so.
That's what I'm kind of thing here first of all are we talking about.
Noncore anchorage within the haynesville or outside of the Haynesville and second of all.
Can you get cash can you make cash deals in this market you know bearing in mind that you're buying.
Good acreage was stock and it seems like.
Lemonade deals to generate cash or.
Between right now yeah, we have to agree with that I mean that we know that that you have <unk> market is very very soft in capital is very hard to come by which was driving that softness and we we don't view is that divestitures that encore properties is is a core part of our d.
<unk>, we're open to it.
Going away properties, and we're not counting on a good market there.
You know their their their properties that will never drill in our portfolio.
And there are people yeah, they're they're parties Chasenet and you know we if they can beat our price we'd exit.
But yeah, we we would we would not want you to focus on that as a major source because we think that.
Relying on the capital markets to them in a market you know you don't want to be relying on those you know in this environment, where we are not in our go forward plans. Yeah. There are several there are several.
Kind of.
Outreach and stuff, so two or three different properties that you know you give if if they were to hit the certain Ross or we're looking for that we would the best of that but there.
Are cool.
But all these were property call to keep your rank them core <unk>, two two or three within our portfolio.
It should be the two or three so we would get that value now.
And we wouldn't you know we use that to play down or bank. Yet. So you always had some divestures potentials, if you've got a company decides.
And all I appreciate your clarifying that again <unk> congratulations on the corner, yes. Thank you.
I think yeah I'm next question comes from <unk>.
Okay.
Hmm.
Yeah.
Yeah.
Sure. That's a good question and we wish we were finished with their redetermination, but guess because our deal with a late deal you know relatively speaking and put in place in July . We we are in in the middle of Redetermination were highly confident that we're going to keep the the barring base is going to be remain exactly like it is.
Now.
Maybe we'll have that wrapped up in at a couple of weeks.
And despite the fact that yeah. The bank price tags are lower than they were in July we added a lot of reserves. We we had a lot of P.D.P. reserves in and it also since the same time frame.
And we feel like you know that that the numbers are very comparable to what they looked at than using a lower price tag and and it and and combined with the get hedge but that we have so we were we'd like to have it totally finished or they do have the major bags signed off and we just have to finish that routine process, but we we.
You think you'll find that it it will be a device will remain exactly where it is.
We're not asked for an increase child or just you know so news Sheltie. We're just ask <unk>, we're not even electing to use all of it right now so, but we say even without not electing all of it we don't see we see it remaining exactly the same.
<unk>.
Yeah.
Thank you next question Kinda soundtrack cloudy, let's bank of America.
Okay.
The morning, guys, who writes on.
Oh, thank you.
<unk> just a couple of questions is coming back to the divestiture processes are you considering that I know you said, it's some noncore assets. What is now it's international number you're trying to target in terms of.
How much <unk> thank that.
And then you talked about smell <unk> is or anything else infrastructure wise.
Potentially be monetize.
Yeah as far as that other items that could be monetizeable weird I think one of the reasons why we have the best and base and.
Gathering cost and is because we you know have had tried that.
Monetizer, you know gathering assets at above market rate and create kind of off balance sheet dad, and we're certainly you know don't view that as I get source of liquidity and not interested in doing anything that would that would lower it that would jeopardize our our cost structure, because we think that's critical and low price.
Times has to be that very low.
Cost operator, and that's what's making that's what generates you know good profit results and very very low gas prices that we have so.
<unk>, we where they're located where we talked about that that's the chairs. It's really you know properties noncore properties. Some we got in the merger maybe some comstock had that yeah, we'll never ever see the drilling schedule, probably because there's so many things in front of it.
And you know groups you know that.
<unk>, mainly it's reverse inquiry is not as marketing, though so we're not targeting a number we're not at all and you know I think we recognize the week market in these companies that like to buy these assets.
Have a hard time getting a capital.
So we're not trying to say that's a major part of our plans at all but certainly got we have those assets. The kids that divest I've been we're not looking to give them away either because we don't take that that really helps in the long run so.
But yeah. The the magnitude like we said before and this is no different than what the snow a new announcement. There. We said this when we close the copy Park acquisition I mean, the magnitude of those is you know in that.
Hundred to 200 million dollar range, you know kind of batteries review, if we could get them. All died and we may get none of them died you know in this week and the name or in several days or carry overs from when you know covet consolidated would comstock there's.
Several properties that others wanted to buy that cover hit been talking too. So we which we put that on the shelf until the consolidation and so those are.
Yeah. Those parties are still looking at those assets, that's not something we started that would kinda inherited that that's a good thing.
And then as some of our property chip matured we've had you know.
Parties reach out to see if I was like consolidate some of what we have with what they have which would make them better.
So that that's the top things we're looking at and it is you know on her to to let her but again, it's it's you cannot count on up any of it and we won't give away any of it if the price is not right. So.
I appreciate you can be patient there.
And then just you you give that up in the shut in production you know went up this corner <unk> Your parent company now <unk>.
What's the right way to think about that and number of going forward is too.
Was the.
But in this quarter ton of a good run right or is that high or low relative to what I think yeah Oh yeah.
And you find the sound that percentage rarely because obviously.
As long as you're active you're going to have something chat in you can't and and that we think that that we wait I think three per se that is a pretty good average round rate yeah.
We obviously like we always look to optimize that you know and and.
<unk> I don't know if we could get it to to pursue that that'd be a goal, but 3% you know we typically model three to four per sad when we kind of yeah look at our future. So we thought three was a great number you know where I've already places yeah. We're very plays or they just down the reason why that qualities or beggars, because you're discounting covey now you know.
[noise] they weren't into numbers before.
I appreciate that very much. Thank you for the <unk> and the time.
Thank you.
Thank you yeah.
Chang any further questions that just have a now like to tend to call back off at the chaos and for any further Max.
Sure again, you know Ah, we're always appreciative that that you take the time to listen to the complete call. We were really working hard to deliver.
The Comstock that you want that we've got a chance to deliver to you and we do realize.
The new air of energy, we do realize we gotta get our costs down to keep a band like we have we do realize you have to have these high margins and we do realize that there's some opportunities out there.
We've incredible back or which is Jerry Jones to back us so.
It's it's a pretty fortunate <unk> and we're thankful for that then we're thankful for all of you who rather you know shareholders are bondholders or you provide our bank facility or an analyst support whatever.
We're working hard so thank you.
[noise], ladies and gentlemen, discuss it stays constant thank you same participating.