Q4 2019 Earnings Call

Dead dead dead.

Dead dead dead dead.

Good morning. Welcome to fourth quarter 2019 Continental resources learning conference call. All participants will be in listen-only mode. Should you need assistance, please press conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions. Please note this event is being recorded. I would not like to turn the conference over to Roy Savino vice president of investor relations. Go ahead.

Other members of our management will be available for Q&A as needed. Today's call will contain forward-looking statements that address projections Choice options and guidance actual results May differ materially from those contained in forward-looking statements. Please refer to the company's SEC filings for additional information concerning these statements and wrists. In addition Continental does not undertake any obligation to update forward-looking statements made on this call. Finally took the call. We will refer to certain non-gaap Financial measures for a Reconciliation of these measures to generally accepted accounting principles. Please refer to the updated investor presentation that has been posted on the company's website at ww.w with that. I will turn the

Call over to mister Hamm.

Harold good morning, and thank you for joining our fourth quarter earnings call operational a 2019 was exceptional year for Continental. Let me give you some of the highlights month we met or exceeded all of our guidance war production grew 18% group. We generated excess cash flow of approximately 600 million month. We returned 190 million in stock BuyBacks. We reduced net debt by approximately 200 million window shade or quarterly dividends cause we consummated Prestige appraise both on Acquisitions and Leasing and Continental dominated core areas for approximately 165 million months this added up to 370 additional growth software location tour extensive oil-rich inventory.

All this was achieved while maintaining Capital span expectations in 2020. We plan to take the stewardship of our shareholders assets to the next level to continue Capital discipline and operational excellence.

and this current

price environment

We are moderating our near-term growth and and keeping Capital stand flat year-over-year. We see the on gas market is fundamentally oversupplied wage demand even further impacted by the coronavirus by preserving our high-quality asset for a more structurally sound Market. We're further enhancing future of value for shareholders.

I want to highlight on those continued commitment to ESG as one of the leaders of the horizontal American Energy Renaissance and a major contributor to us energy in a Spanish. We are proud to be a part of the approximately fifteen percent rollback in CO2. Emission has occurred since 2006. Thanks to the affordability and a an availability of clean-burning natural gas and light sweet crude oil produced as a result of horizontal drilling.

We've always been strong steward.

For the environment our resource and the communities in which we operate benefit from it. We have one of the best in the industry when it comes to gas capture with a 98% overnight gas capture in sales rate are ongoing objective is to have best-in-class DSG. You can find her ESG philosophy post on a website. Yeah, we do have you seen alarm.com and a 2019 sustainability report will be available in the second quarter of 2020. We're going to take a major step in his long-term succession plan with the appointment and Flawless execution of bilberry the chief executive officer as I stepped up off the executive chairman position.

I'm excited to introduce bill. When his first earnings called with the company bills done a tremendous job in his role here or CEO. He is already driving or operating excellent strategic direction as well as the other members are executive team and look forward to another year strong execution 2020 with them return the call over to Mister Bill very like to Harold and good morning. Everyone is Harold mentioned 2019 was an exceptional operating are for contact with our teams providing consistent and repeatable results across all our assets.

this performance is

Line with Continentals track record of delivering shareholder value in a sustainable cash flow positive and returns focused manner.

Over the past three years Continental is generated approximately 1.4 billion of cumulative free cash flow of which nearly 90% was returned to shareholders in the form of a billion dollars in debt reduction over two hundred million and share repurchases to date and the initiations of the company's quarterly dividend.

Looking to 20/20 we expect this track record to continue our 2020 program is expected to generate free cash flow of 352 $400 at $55 a month. We will prioritize maximizing shareholder value of capital returns in the form of share repurchases debt reduction and dividends as long as our Equity is significantly undervalued. We will prioritize share repurchases over debt reduction and dividends.

We would expect to return to shareholders 100% of cash flow in excess of the 350 to $400 range. So even in the event of commodity price Improvement will continue to prioritize shareholder returns.

as part

Of our strategy we are committed to Capital of discipline. We're targeting flat Capital spending combine with 46% production growth year-over-year. We believe this reduction is in our projected growth life is appropriate given current market conditions and last year's outperformance.

Production for 2019 and 2020 will still deliver a combine two year category of approximately 10% at the midpoint of our 2020 guidance.

Combined choose the volumes are expected to be on track with our original five year Vision estimate for 2019 and 2020.

Before I turn the call over to jack for more details around our twenty-twenty operational Outlet also want to highlight the Innovative ability of our teams to enhance the value of our assets beyond the drill bit off.

Are expanding mental position concentrated on our top-tier acreage position in Oklahoma continues to grow in 2019 over 75% of continental's operated. Well as in dog, hit our minerals and ninety percent of our minerals Anchorage is under Continental operated in units as we have highlighted in the past Continental will earn fifty percent of wage for twenty percent of the costs and twenty20 further accelerating shareholder returned.

2019

Was a strong get up for our mendl's at the state and we continue to see a million a multi-billion-dollar IPO potential in the future.

In addition to the minerals. We are maximizing value by pursuing strategic opportunities for our water infrastructure assets last year. We divested a water Gathering recycling system now for $85 million dollars, we estimate the value of our remaining water infrastructure assets across the block and in Oklahoma to be an excess of one and half billion dollars wage currently evaluating the monetization of a portion of these assets.

Like our strategy with minerals. We are capitalizing on the unique nature of our water sourcing Gathering and Disposal and recycling assets, which have been built ahead of the drill bit misalignment with Continental development thousands across our place and leading operations provides line of sight for future shareholder value.

Continental is position for success in the evolving US Energy business with Grassroots exploration combined with low cost operations at the heart of our DNA.

We are the

Lowest cost operator amongst our oil waited peers. Thanks to the quality of our assets our operations and our people we have a well-established track record of exploration success reserve and continuous Improvement and capital efficiency as we look out into twenty-twenty and Beyond Continental will continue to deliver this performance in the most efficient and profitable manner wage teams delivering the right Rock the right density at the right cost with our strong portfolio and disciplined approach to Value creation. We will continue to deliver strong Capital office returns for our shareholders with that and I'll turn the call over to Jack.

Thank you, Bill and good morning everyone. I appreciate you joining us a call. Let me provide a few more details run our 2020 capital budget. Our total capex is flat bed at two point six five billion are Drilling and completion cat facts is also flat year-over-year at approximately 2.2 billion approximately 60% of the drilling and completion capex is going to be talking and 40% is going to Oklahoma are average rig count for the air will be down 15% from 2019 with approximately nine rigs allocated to the Bakken and 10 and 1/2 Riggs dead allocated to Oklahoma production is expected to grow 46% year-over-year while our net completed well count for the air will be down 5% with approximately 245000 is completed by your end.

approximately 200

42 wells will be in price that you're in up 12% year-over-year or over your end 2019 approximately $700 billion our 2018 Capital spend is associated with these Wells that will have first production in 2021. These 2021 Wells are part of longer-term projects that are projected to drive production growth in 2021 an increase fourth quarter 2021 production by low double-digits over our full year 2020 average production rate.

Our inventory remains robust as we indicated from our growing writer Scott evaluated reserves over the last four years are proved reserves have grown 32% while production increased 57% this equates to a reserve replacement ratio one hundred ninety-eight percent and highlights. How are underlying organic growth continues to build inventory over the past year our step out drilling program expanded the economic footprint of the Bakken to the southern and western extent of our acreage. We also added 18,000 acres to our body composition during the year and in Oklahoma, we added to our proven or Rich scoop inventory combined we headed up to 370 gross operated locations to our inventory is Harold pointed out a year end 2019. Our reserves were up 6% year-over-year in spite of an approximate $10 drop in oil price.

a reserves production

It was thirteen years, which is one of the highest among our peers clearly our inventory quality efficiencies technology and organic growth of all contributed to our growing reserves. Do you exercise the quality of our assets only provide a few operational highlights from 2019 are back and oil production grew and impressive 14% year-over-year and continued along exceptionally consistent result is shown on slide 11:00 on the slide. You can see that the average well performance for 2019 Trax right on top of well as completed in 2017/2018. This includes 465 gross operated Wells located throughout our Acres position that we're completed over the 3-year. The 2017 and 2018 programs have already paid out in the 2019 program is currently about 75% paid out. We expect our 2020 back and program will perform similar to these previous three years.

such outstanding

Explain why we consider the back end to be the best oil reservoir in the country.

Are Oklahoma assets were responsible for for 43% of the company's 2019 oil growth project springboard and scooped played a key role as its production group to an average of twenty five thousand barrels of oil per day in the fourth quarter this exceeded the initial guidance we gave for sprinkler back and third quarter 2018 by 50% The outperformance was driven by shorter cycle times improved. Well designs growing infrastructure and Reservoir performance our oil differentials and springboard were also the best in the company running below $2 per barrel during the year drilling cycle times or reduced 25% and completed. Well costs were reduced by 10% and nearly one hundred percent of our oil gas and water volumes and springboard are on pipe off.

Springboard was approximately 35% completed at your end 2019 with around 60% of the Springer units and 20% of Woodford Unix developed Springwood is an outstanding of project and a great example of the quality and value. We create from our Oklahoma assets and our own backyard.

outside

Springboard we completed 34 Wells from our proven Woodford Springer and Sycamore reservoirs and scoop many of these Wells were located in springboard to work early development is underway springboard time is approximately 62 contiguous square miles in which Continental loans 64% average working interest and approximately 14% of the minerals underlying Connells leasehold position.

I want to thank our teams for their continued commitment to Excellence and our exceptional performance in 2019. And I will turn the call over to John. Thank you Jack. Hello, everyone. I would like to begin with an overview of our 2019 financial performance Continental generated $775 billion of net income and Free Cash Flow came in right above our end of our guidance at $608 billion capex was in line with our expectations at two point six billion return on Capital employed was strong and non-targeted at 11 plus for the year Continental continues to be the lowest-cost operator amongst our oil weight appears with an average l o e per Boe of $3.58 for 2019. We also generated a pier leading dollar fifty Seven GNA per Boe and so our DNA per Boe continued to decline reflects off.

strong Capital efficiency

2020 is projected to generate approximately 350 to 400 million of free cash flow at $55 per barrel WTI and $2.58 per mcf in rehab based on production growth of 46% A $5 change per barrel WTI is estimated to impact annual Cash Flow by approximately three hundred million our Drilling and completion maintenance capex to hold production flat is estimated to be below two billion reflecting the quality of our assets and continuing Capital efficiency for 2020. We have got it are all differentials to the range of $4.50 to $5.50 since you're in 2019. We have seen a significant expansion of Bakken pipeline as well as continue to infrastructure directed towards Coastal markets, which will benefit are differentials.

We've got it our gas differentials to arrange and fifty cents negative fifty cents to a negative dollar. Our guidance ranges are consistent with 2019.

Of the total 2020 budget company is allocating approximately $125 million to our previously announced minerals agreement with franco-nevada for mineral royalty Acquisitions off with the carry structure in place one hundred million of the $125 million Capital cost will be in reimbursed by franco-nevada to Continental Continental war and 50% of total revenues and 20/20 based on already achieving certain predetermined production targets Continental will include the $125 billion in our Consolidated capex, but will be reimbursed monthly by Franco further 100 million share.

Capital discipline is a central tenet in our Capital program for 2020 and Beyond we maintain a strong degree of flexibility going forward. Thanks to our strong performance as today's macro-environment has inserted a higher level of price volatility and to current markets. We believe a prudent and responsible response is to moderate our five-year birth to a growth kegger 8 to 10% versus a range of 12% before this encompasses, 2019 and 2026 and targeted growth respectively in moderating our growth. We have reduced our our five year estimated capex for 2019 to 2023 by approximately 1.5 billion roughly half of which is from 20 20 in a 55 and 60 dollar environment with 250 gas our five year vision is estimated to generate wage.

approximately 3.5

The four billion of free cash flow over the five years return on Capital employed in 2020 is expected to be strong as well at approximately 8% at $55 off and tend to 11% at $60 at $60. We see low-to-mid Teen Returns on Capital employed from 2021 to 2023.

With that we're ready to begin the Q&A section of our call will turn the call back over to the operator. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you using a speaker phone, please pick up your handset before pressing the key to withdraw your question, please press star eight thousand two. Please ask one question with one follow-up. Our first question is from Doug legate from Bank of America. Go ahead. Good morning. This is John Abbott on for dog. He's actually on a plane right now. He should be listening to the webcast and we just had a few questions here bill. You know, how would you define a large investment case now, the market clearly has no appetite for growth and is deliberately unhealthy and TV embedded volatility vs. Looks increasingly difficult to defend.

Yeah, if you look at where we are.

Right now with the capital investment we start on a track last year when you know organizational capacity wise we had ability to keep on drilling some well spend some more money and we'd deliberately chose to lay down some rigs, you know, put the capital discipline in that we talked about in order to make sure we delivered free cash flow the level that we wanted to and that's a little bit of what you're seeing continuing on in 2020 is a very deliberate effort taking the considerations the market the return that we want to deliver to the shareholders transcribing into a capital program that then generates production growth that we're looking at.

Okay, and then for our follow-up question, we just saw the you just talked about the updated kegger. I think sustaining capex. This year is about 1.8 billion. How does that suggest capex just evolved over time over 5 year. Your maintenance Capital stayed pretty consistent over the last few years and that 1522 range. It's you know, obviously beneath that is both indicated there. That's a reflection of a couple of things one The increased productivity of the wells that we've seen God with our newer era completions over the last few years and just the continued Capital efficiency. So it's a reflection of strong inventory and strong operations. You know, we we have modeled that out and we see the ability to maintain in that range for a number of years into the future life on an increasing production based. Yeah. One thing this is Bill one thing you could look to is the DNA and we're continuing to see a continued Improvement in t DNA every year and that's a reflection of the capital efficiency dead.

Yeah, I remember a few that.

Go back to the 16th. For instance. We were above $20. We're low $16 on a DNA rate today. So that's a good ad on Bill.

Hey, thank you for taking our questions. Appreciate it. Thank you.

Our next question is from Erin from JPMorgan. Go ahead.

Yeah, good morning, Arun. Jayaram, JPMorgan a couple questions thinking about you know, twenty twenty perhaps for John John in a guidance, you know, if we take the upper end of the guidance range, it implies around 3,000 barrels a little bit more than 3,000 barrels of oil growth in the slides. You indicated that you expect the Springer to grow by six point eight thousand barrels a day. And so just wondering if you could help us understand what's going on with with the bokken the stack and you do have some other assets but just trying to understand the pieces which which kind of get us to that 3,000 barrels a day of growth in 20.

You've got a number of variables when you're looking at overall production one is inside operated and outside operated or part of it. Also inside operated. We're showing our production growing across the company the outside operated some of the timing of their projects is a little longer dated on a couple of our are keen on Partners. So their production is up for twenty is, you know off a percent or two months and then Rising is a nicely as they go into Twenty-One, but for the year just based on their timing it comes off a little bit organically within Continental. We're showing relatively flat production in some of them and then as you referenced on I think it was Springer you referencing it's up up a little bit.

Fair enough and just my follow-up is you mentioned on the water side that you you believe that you have called a billion five years of called asset value on the water side and and perhaps would look to maybe monetize some water in Investments. Could you give us a some some sense on time? And what would be a potential use of proceeds if you did sell incremental water assets? Yeah, this is Bill and yeah, probably referring back to my opening comments, you know, we have a process that's underway on it. So it's probably an appropriate for us to to further comment on it, but look into you know any cash flow that we're seeing coming in beyond that through the 400 range. That's one of the things you can see is plowing 100% back to the shareholders.

Great. Thanks.

but

our next question is from Brad had a friend from RBC. Go ahead.

Hey, good morning. Everyone. I guess on the the maintenance Capital, you know historically we've talked about one point five to two I guess on this call. You said just under to you know with oil really not growing very much. It looks almost like a maintenance Capital type of program this year and so is it really just sort of the non productive Capital that you've called out that that reconciles the difference between the higher budget this year and the month of December that you're giving are any other color you can get there. I wouldn't call this year maintenance cap because of the 700 million that we've got going into our DNC. It's just the timing of that Long Creek in the parking lot of an example of that big long term massive project. You'll see production coming on in in 21, frankly, you know, I think we're comfortable with the timing of that just based on where the current commodity markets are. We see better value bringing that production on next year and we look forward to you know, a strong Twenty-One. So twenty is not what I would call a maintenance. It's just the the

timing in the nature of the projects of

When that Productions delivered okay got it. And then on the mineral side, you know, you guys have talked about since Inception the the franco-nevada JV being an IPO candidate at some point, you know, what's the timeline on that? And you know, are we getting close to the end of you sort of leasing up all the minerals that you're looking to achieve?

Yeah, it's still an active program. And so it's not not anything that we're ready to Telegraph as to the timing on it, but we're still actively increasing the the lease all that we have in that office is nice production on it's growing nicely as well. So it's something we're very excited about.

Okay, thank you. Thank you.

Our next question is from Janine wife from Barclays. Go ahead. Hi. Good morning afternoon. Everyone. Hello. Hi. My first question is follow up on some of the growth questions last year. You grew oil by really healthy clip, excuse me, twenty twenty guidance for Less guidance calls for less than 1% growth of 5% total production growth. So I guess we just kind of roll forward to The Five-Year Plan. I think the math implies about a 9% year-over-year total production growth on average through 21-23. So can you comment on them? You know what the oil trajectory looks like in twenty one and twenty three and do you anticipate that oil growth will kind of get back to outpacing Total production growth after this year. Absolutely. If you talk to our five year Vision or listen to us, I guess cuz since you don't have the numbers, but we've been indicated a target of eight to 10% for a five-year Horizon. That's a Boe percentage.

All percentage is higher than the Boe.

So we're growing old faster than absolute volumes during that five-year. We see the older gas ratio for Continental improving by several percentage points relative to 6:20 versus, you know, twenty twenty-three and twenty two and twenty one. So we see good growth throughout it a lot of that growth in the oil starts in twenty one with the timing of those projects and then continues into those those outer years as well. So we are very focused on the oil. We see that as the predominant value driver going forward. It's just the timing of when the projects are delivered and it's you know, coming off a much higher wage based in 20 than where we originally got it do we exceeded those expectations? So the percentage growth this year is not as much but the absolute production volumes are right on line with where I expect it. We just delivered some of it earlier and you'll continue to see old growth outpacing Boe as we go forward.

Hey great, that's really helpful commentary. My second question is on just cash flow sensitivity and activity plans. So if if we do the back of the envelope math and your cash or sensitivity for the 5G move an oil to get from the 55 planning deck price down to 50 and then we take another haircut for natural gas trading below two bucks right now this implies that kind of money spending extra pricing which we all know moves around. But when do you actually start re-evaluating the twenty-twenty plan activity?

We're do I think?

Do that. Continually we do that now we do that immediately. So we we always do that. We don't Mark the market on a daily basis. We take a a view towards Market but some we we have been a slow positive and significant numbers is Bill indicated earlier since 2016 and we'll make further adjustments. If we need to our break even today is below fifty to three hundred millions of rounded number and his bill spoke with water assets and others. We have the capability to generate significant cash flow from a other assets as well. So we're on track so far out in 2020. We reduced our debt by fifty million dollars in January and we've been buying shares here today as well. So we we produced that while buying shares and will you know Justice going forward regardless of where the price is we intend to be cash flow positive. It's only been a few years since we had a break-even plan and in the mid thirties, so we're on top of it will suck.

Very helpful. Thank you.

Thank you.

Our next question is from Jos silver Stein from Wolf research. Go ahead.

Yeah, thanks. Good morning guys. Just thinking with some of the Strategic moves. What what you guys do all of the the water business sale right now as opposed to just the trunk of life, you know, the the public float is obviously, you know around the 1 and 1/2 billion. If not a little bit less today. What's the holdup in in wanting to do that?

There's really no hold up. We're looking at, you know the assets we have and you know packaging it and the the approach that's most advantageous to us and and most marketable to the the purpose out there. But you'll you'll say that you know later on in the year as we go through the process that will be able to tell you a little bit more details on this. But as I said, it's a process underway on that and it's really premature birth to go into a description of how much of it we're doing at this point in time. It's also an asset that's going to grow significantly over the next few years. So if we hold a portion of it it it's got a lot greater value in the future.

Just a just a bill.

On that we have seen pretty strong demand for these resources in our discussions. And so, you know, we we think that we have a a pretty good path to certainly on this.

Got it. Okay, and and I guess just along the the same lines. I mean this question was asked to think if you conference calls to go but what's the what's the reason for staying public these days is I mean is it just to have a flow to potentially do some sort of transaction or or you know if you guys still have this bullish view of $55 and then $60 oil coming back why not just just accelerate the process of being able to capture most of that that value and doing it in-house.

We've always operated for the best interests of shareholders and that will keep all that in mind as we go forward. But you know, we we do have a view of stronger prices in a future as you as you mentioned there. And so anyway, that's well, no and can see the, you know, the problems with public market today and it off balance, but you know, we'll we'll watch it closely as we go forward.

Thanks guys. Thank you. Our next question is from Bryan Singer from Goldman Sachs. Go ahead. Thank you. Good morning. I wanted to ask a little bit on Oklahoma. If we look over all the producing reserves had a little bit of a gas heater mix in terms of what we have booked relative for the past couple of years the cost to add the reserve a little bit higher and and and maybe essentially that's because of the Oklahoma impact and I wondered if you could talk to how you see the underlying Capital cost structure in Oklahoma and the competitiveness in the portfolio page and to what degree or increases in activity. They're needed to hit the five year plan or or if need be in the macro-environment the warranted could you could The Five-Year Plan driven by The Bakken?

Yeah Brian, this is Jack. You know, you know in 2019. We actually did Focus bit more dollars in Oklahoma than we had previously. You know, we're young little had about a 40% going to Oklahoma 60% of the biking but last year we had about a 50/50 mix and this year you'll see us rotating, you know to the back in more heavily as you do see in our budget and we've got about 60% of our Capital going to blocking and 40% to Oklahoma. So the see the the gas here mix you see that you're pointing out there Thursday. Just we had a little bit more Oklahoma in our mix but you know our Oklahoma assets. I mean think about the oil production growth that we've seen in springboard last year. I mean Oklahoma representative almost 50% of our production growth oil production growth in the company and and we are continuing that program on this year. So we we are are well as in dog.

in in Oklahoma are very

And we're going to this year we've got I'd say 75% of our total capital is actually going to be in springboard one and and portions of spring water too. So we're going to continue to see that that in Oklahoma and it's growing very nicely. If you look on the slide, I think we've got it in there and slide 12, you can see that you know, our oil production in in Oklahoma's is going to be about 35 even 40% this year. So and as far as it's it's contributions long-term, it is an integral part of our five year olds five year vision and and Beyond and and it is and I'd say probably I'm going to say that the mix is probably in that $64 range looking at it. Just kind of Across The Five-Year Plan. So it's a very important part of our program and and and we're very pleased with the outcomes. We're getting

Great. Thanks. And my follow-up goes to the earlier discussions and your comments with regards to some of the potential divestitures IPOs, whether it be the minerals business wage Business Etcetera, if at today's stock price Market environment, how would you think about the capital allocation of how much do you think of of proceeds or what percentage is very broadly would you suck towards debt pay-down or reserving for debt paydown versus deploying to share a purchase and where if at all would keeping capital for potential inorganic opportunities to be available? Where would that lie? Yeah. I think this bill you probably heard of my earlier comments that we at today's stock price have a strong preference toward wage. Well repurchasing shares. And so I think it'll see that driven in large part by the by the share price.

Great. Thank you.

Our next question is from Neil Dyckman from SunTrust. Go ahead.

Morning Herald and team. My first question is just on come around with you been talking about on activity and capital of discipline. And I want to focus on here is why I definitely see the need and the off the continue to talk about spending around free cash flow. I'm curious how you think about balancing this sort of near-term and the potential especially, you know in the release when you talk about the outperformance specifically in the scoop off the one year or less pay back in the Bakken so, you know given how good those returns are I'm just wondering how you you sort of decide, you know, think about activity.

Well, as I as I mentioned we have rotated back heavily from a capital investment standpoint into the Block in this year, you know, the infrastructure in the basement has grown over the last year. We're in Nashville take away and processing and and and so we're rotated back into where we can continue to grow and maintain, you know, are are basically industry-leading gas caps off right now, we're capturing probably ninety ninety-four ninety-five percent of the gas in in the basement right now or in our in our activity up there. So so I mean, I think that pretty well States I am doing is that we we have looked at the opportunities here and we're kind of back to our our prior I'd say cadence or Pace we can 60% black and 40% Oklahoma, I think as far as activity, you know, there's you know, our view is that we should not be overly supplying at a market that wage.

This is over.

Right now so that's that's part of the reason if you don't level of activity, that was my follow-up Harold just overall. She taught just a little on edge your thoughts for remainder of the year. If if I'm just kind of curious if you think that we're going to be continued oversupply and obviously prices are going to impact like they are because of that do you see, you know, any any reason to you know build ducks or do anything like is such that you all have in the past? Yeah. We don't see any reason to build X, you know, we can answer that quickly. That's that's back up just a little bit before this coronavirus payment balance. We saw that the market correction, you know, very very quickly as far as balance is fine demand. Obviously, this is going to take something away from Dammam.

What I have to see how broad that is.

I'll give it a few weeks here. But you know, it just means, you know cut back a little bit and and waiting to see how that plays out. Hopefully it won't get any worse than anybody expects. But who knows that this point? So overall we see the market strengthening certainly. This is a reaction to what we're saying around the world right now.

Very good. Thanks Harold. Thanks Jack.

Our next question is from Derek Whitfield from Steve. Go ahead.

Hello.

Good. Good morning. Good afternoon. Sorry about that. No worries with my first question. I'd like to touch on your five year Vision. We continue to be amazed by the degree at which the factor in your stock has the rated despite the strength of your financials as shown on page four and five of your presentation with a five year vision is their evaluation scenario where manageable considered going to age Beyond 2020 and plow on the free cash flow into elevated share BuyBacks and debt reduction.

We we've certainly talked about we're going to prioritize share Buybacks in this environment. I think if you look back over nineteen and into the first part of this year, we've done a good job of balancing that repayment or share BuyBacks. But you know when we're looking at the price that we're looking at now, which we do not believe is indicative of the company that made eight hundred million of net income and that will continue to make significant. Net income in 2020. We're going to we're going to put more emphasis and priority towards us share BuyBacks. As you know, we have an authorized program for a billion. We spend about two hundred thousand of that. So they're still eight hundred million of out there for additional and share repurchase.

Great, and then it's my follow-up regarding your minerals position. Could you broadly speak to the size of your net Realty acre position today in the amount of net production that's being produced.

Yeah in the past we've never disclosed the total mineral Lakers. We've acquired to date it's ongoing process and we're very active. We're very successful and it's going to continue age. It's all opportunity based and it really helps that we have all the title and and and nowhere a drill bits going to go and and we're continuing to purchase be successful Steve's politely saying it's nice to this situation that we're looking to grow that now I'll give you one indicator the production on its North that $35 a day and we've been pleased with what we're seeing them.

That's great. Thanks for the detail. Thank you. Thank you. Our next question is from Paul Chang from Scotiabank. Go ahead. Hi. Good morning guys wage, maybe that first one. You spell John John in 2018-19. What's the average time that is related to the production not being on stream in a year. It was lower by several hundred million compared to twenty twenty. So we were, you know, five hundred or below 500 up, you know? Okay. Yep, and that maybe this is fulfill, um for springboard to I think in Springfield one you does it provide some indication that what is the size of the month? So what's the number of inventory and all that? Is that number that you set of number that you can provide for a springboard to in terms of your recoverable resource estimate birth?

Pause bag inventory that you have in mind. And also with that. What is the the type curve is? It's very similar to what we've seen in this.

things on one

Yeah. Yes Paul. This is Jack and springboard to is as I said, it was about 62 square miles of size are average working. There is about 64% off ultimately will be about two hundred thirty-five Wells drilled near and it's just you know, approximate number there. But we're targeting the exact same proven reservoirs that we know in Spring very very well. And that is the Woodford Sycamore and Springer and as far as performance is concerned the performance we've already seen from Wells that have been proven it is very much in line with what we're seeing, you know and springboard one. And so we're very pleased with the outcomes that were seen and you know, it's it's in the queue and and part of our vision for further developments and will mention that there we have other areas where we also have dominant positions like this but a springboard three four and five and birth.

of comparable to a smaller size and

We will right now we're Drilling and testing some wells in those areas looking at some some interesting opportunities there as well that could ads even two of the inventory we have today and so we haven't been very transparent. I guess I would say with the the exit because when we came out with springboard 1 and we're very specific about it. I found we brought a lot of competition especially from a mineral side. And so I can we have details this is inventory that's on the shelf and you know over time results will come out but what we're seeing here is we have a very competitive situation still in here. And so just know that we're very pleased with the results in the direction. We see the the whole play going home, or maybe let me ask another way. I think in Springfield one study in mid 2018 and I think by the end of this year that you pretty much will be done or majority of the well-being drill and Ed.

springboard to what's the

Pace of that development that so we assumed that sometime by a 2022 you will be largely done.

No, I mean springboard one is about 35% complete at this time. I'd say about sixty percent of the Springer wells in the project have been drilled. But only in the range of I think twenty 6% 25% of the Woodford and we also so in in as far as if you look down at springboard to I'd say we're probably also in a very similar range. Maybe it's maybe about thirty percent developed down there and you know, so there's a lot of running room in here. And so these are projects are going to be multiple years go well beyond 5022 and and as you can see on the plot, I think we have and mm on page twelve you springboard to all starting to to bring on but you can just see how it's written see as far as new production ratting there. And as far as overall on The Five-Year Plan our inventory that we're using to to essentially dead.

provides that included in the

Your plan really is, you know on a 30% or less of our inventory right now company-wide. So it gives you a perspective on just how much

Okay, thank you. See if I can just make a one request. I think in the middle of the running season yet in the Press we need if you can also include the actual oil and gas production by Basin for back and scoop and stack that will help out a lot of people. Thank you. Thank you. Thank you looking to place a takeout in there. That'll be helpful to you. Also write a I forgot what quarter we don't like. Our next question is from from Beckham pH. Go ahead.

Good morning, all I'm at the first question relates to the capital allocation, which you guys have touched on a bit if stripped holes around forty six or forty seven dollars a pack. It looks like the current capital program is slightly free cash flow of negative or or effectively neutral if that's directionally, correct. Should we expect it commensurate capex cut off coming quarters to potentially mirror something more analogous to the maintenance program. We talked about and just one point of clarification on the kind of two billion dollar maintenance number. Does that include facilities and other costs associated with development?

I saw the two billion.

I think somebody indicated earlier. It's below two billion, but it's it does include some production facilities. It doesn't include everything but it you know, the non Beyond Thursday. It's not a big number for those other items for deliver that production. So I think we're good in that range on twenty-twenty. Remember there's seven hundred million that doesn't deliver production this you she delivers it in the future. So the pace of that if we wanted to adjust that there's also several hundred million dollars that is outside of d and c and our our budget for this year and we were just there as well. So there are members that we can pull to continue adjusting our 2020 Capital spin that do not impact the 2020 production as the key message of delivering they're dead. Yeah, Matt to your point. Yeah. We are focused on delivering free cash flow. Yeah, we will be cash flow positive regardless, but their target

And then just a second question. You've laid out a couple of different scenarios for your 5-year View at a $55 and a $60 case and the path was curious. If you could give us a little bit of context power around how that budget might look in a $50 case, which is fairly close to where strip is today and how we should think about free cash flow and Roc and growth in that scenario.

Well, our our budget is we're still cash flow positive but $50 slightly. It's not a lot but the break-even is below $50. So, you know, we've got flexibility there. I don't think you know, we'll adjust as we go forward and what levers and stuff we pull our maintenance capital for instance that's designed to keep us flat for multiple years into the future. If we wanted to do one year, it would be even lower than what we've indicated in our 2020 budget that we've got. Like I said earlier there's a lot of other levers that we can pull that do not impact the production. You might be my missing part of your question there or no. I think that's helpful. Just just trying to understand if if we were at 50 given that you're prioritizing free-cash-flow you'd like to really return Capital shareholders by in stock Etc. How long should we expect a $50 case to look more? Analogous Over The Five-Year Plan to kind of the maintenance Capital program?

Are you talking about the full 5-year or you just talking about 20 correct? The full five years. So just taking a kind of five-year View at a $50 case and prioritizing free cash flow and shareholder returns. You know, I would say it would be below fifty at a $50 for five year. We can still deliver growth obviously cost and efficiencies would would change and a number of old things would change but we haven't run it just at fifty with all of the scenarios. We packed it in a lot. So, you know, I think you'd still be showing growth. Probably we probably wouldn't Target wage is what we're targeting now, but you know, we we expect the markets to improve there's a lot of noise right now. There's a lot of volatility but it's Harold spoke of earlier once getting the coronavirus back behind us and getting a number of other things. We were seeing, you know, the Market's continuing to improve and tightness in the physical market, so

judge that as we moved

Thank you. That's helpful. Our next question is from Gail Nicholson from Stevens. Go ahead.

Good afternoon. I think the market assumed that the Woodford is not as good of a Zone in spring board as the Springer and I was just curious. How are the current what's the wells in a springboard wage holding up and then with the very nice girl that you're having and 20 vs 19 in the springboard what percentage of activity is allocated to the woodfords?

Okay.

You know as far as the first part of your question, what was that with regards to Springer, but as far as the quality of the performance package, I mean, uh, you know, we said the Woodford is about 70% oil versus a springer and it's the biggest contrast but they are really excellent performers and what you'll see is a Springer's have a higher IP initially than the woodfords but the woodfords ultimately catch up and actually have a lower decline rate and so the woodfords and spring. To make a really nice mix cuz you have a little bit lower decline rate on the would Purge relative the Springer but the sprinklers themselves are really from a performance standpoint. You are standpoint wage very much in line of Springer just a bit a little bit lower on gas are on oil.

that's

And we're you know, it tends to the overall mix, you know would prefer versus Springer. I I'll take a wild guess but I think we're about sixty percent of what word and sent it maybe this year this year, you know, we've moved into the Springer and actually started we took care of about sixty percent of the units there. And so we're 20% of the woodfords of the Woodford be more dominant piece this year. And so the Woodford I'm going to say is maybe in the range of maybe about 80% of our activity there this year and so but off and and so really what would be doing is will be adding a higher percentage wouldn't this year for sure.

Great. I really appreciate that Clarity cuz I think that really shows the strength of that done with the growth that you guys are forecasting on a year-over-year basis.

Yes.

This concludes our question-and-answer session. I would now like to turn the conference back over to worry Sabina for closing remarks.

Great. Thank you very much for joining us today on today's our earnings call. Please dress any further questions to the IRT great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.