Q4 2019 Earnings Call
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Testing for additional profit that is expected to enhance productivity. The absolute well cost is down 6% slide 9 to fix the continuous Improvement. The teams have captured in well since 2018 through Innovative and efficiency improvements as outlined on slide 13. We are using new drilled bet technology to reduce drill Times by approximately 20% Which saves over $100,000 per well as shown we continue to lead the Basin and drilling with four of the top ten rigs in terms of footage drill team per quarter. We are also continuously improving our cycle times as shown on slide 14, we have reduced the time from when we begin drilling a well to putting it on production by 11% since 2018. This means we are more efficient with our investment dollars and have less Capital tied up and drilled uncompleted Wells.
I'd like to finish my review of the twenty-twenty plan and operations by thinking our field teams for their excellent safety record post our mid year 2019 reorganization. Our safety issues were outstanding in the second half of the Year. Our total recordable incident rate declined to a level well below the industry average and our spilled metrics were some of the lowest in our peer group home now. I'd like to address our inventory for you can add inventory in a value a creative manner. It is critical to maximize the value of existing assets as you can see from our work-at-home informant Butte. We believe we have a strong and inventive team that can deliver top-tier results. We add it over 300 locations at sanish and Foreman Butte through Innovation through Innovative new completion approaches and driving down. Well cost sanish build is a good example of finding more locations on existing acreage. We led the industry in Montrose.
Through our Redevelopment of this field are pilots.
Several Concepts to include high-density infill drilling extended lateral links and section line Wells. I'd like to highlight a few of the projects. We recently added in San Jose. We are pleased with our prior results at Saanich, but now newer projects are even more productive on our call last quarter. We highlighted our pod nine project. It demonstrated the viability of longer three-mile laterals and section line. Wells results have remained strong with 120-day cumulative production for the child Wells coming in 29% better off than the parents slide ten shows our progress in Saanich subsequent on nine the team Incorporated completion learning from pod nine to further optimize profit volume and the installation and sizing of artificial lift has shown on slide. 11:10. Our most recent project is our best performer.
These latest results support our confidence in future Spanish development on the acquisition side are forming bolt-on is a strong example of adding value by understanding the rack and unlock this potential through new completion approaches. We purchased the asset in the second half of 2018 at an attractive price on the premise that new technology could uplift results with this has been substantiated by performance today. We have drilled and completed 17 Wells that bracket the field the majority of the wells now have over 90 days of production history as depicted on slide twelve results remained strong and we continue to improve performance as we optimize artificial lift. We are working with third-party operators to construct infrastructure in the same area and have a robust drilling program planned there for the next several years.
I'd like to end.
Emphasizing our dedication to running a disciplined value-driven e&p company our fourth-quarter and full-year capital results show our disciplined approach to Capital spending our improved in G&A and Ella we demonstrate our progress at our headquarters. And in the field, we have remained discipline on both the acquisition and divestiture fronts and enhance the value of our existing asset base wage. We delivered on our goals and have adopted an efficient twenty-twenty plan to maximise the long-term value of our asset base. I'll now hand it over to our CFO green lessler will prompt further details on the quarter and our outlook for 2020.
Thank you, Brad. Good morning, everyone. We are a company focused on generating value with continuous cost improvements strengthening our balance sheet and optimizing our asset base off last fall. We took proactive steps and managing our near-term maturities the more importantly we worked hard to pay down debt through the generation of free cash flow and off non-core credited creative assets sells during the quarter. We generated eighty six million dollars of free cash flow, which was used to pay down debt in addition. We divested of $25 million non-core non-operated assets at the beginning of this year. These proceeds were used for additional debt reduction.
moving on to the quarter
Our oil production was in line with our second-half forecast capex came in forty-two million dollars lower than our full-year guidance based on improved in our cycle time as well as further. Well cost reductions in addition and G&A came in at the midpoint when the judge sorry cake below the midpoint when adjusted for one-time items the Ella we beat was driven by the initiatives. We outlined last quarter including cost of optimization of chemicals decrease salt water disposal rates reduced rental equipment in the field in our enhanced work over program.
The GNA be reflected savings. We continue to realize from our mid-year reorganization.
On oil and gas natural gas differentials also came in at or below the midpoint of our guidance while we also saw seasonal improvements in natural gas prices. The net result was the generation of significant free cash flow for the quarter.
The seasonal decline in production in the first quarter of 2020 we expect production to grow in the second half of the Year harsher than normal weather conditions impact the operations wage a result. We lost approximately $5,000 billion per day. Also. Our first quarter Wells are primarily located in our lower working interest area of Spanish. These factors combined will contribute to our first quarter production run rate in subsequent quarters. We as we plan to bring on significantly more Wells with higher interest. We expect exit 20 20 at or slightly above our 2019 exit rate for the entire year. We expect at Capital to range between 565 and 620 million dollars the details of the capital plan can be found on slide six.
Similar to our 2019 Capital plan. We will incur higher levels of sin in the first and second quarters, which are expected to be approximately 160 million per course, which will support the plan growth and production in the second half of the year.
Maybe no.
To the cost structure for 2020 for the entire year. We are targeting 10 to 20 million dollar decrease in absolute Eloise compared to the second half 2019 run weight off the pictures on flight eight. The majority of the projected savings are driven by optimization of our work of a programs and the renegotiation of are saltwater disposal rates. These are a couple of examples of the initiatives we have underway, there are focus on further reducing our Eloise spins for GNA. We expect to continue to realize the savings from our 2019 mid-year reorganization.
In addition, we have implemented multiple non-payroll cost savings initiatives which are expected to further reduce G&A for the year compared second half of 2019. GNA is projected to decrease by over thirty million dollars on an annualized basis.
I'd like to begin my discussion on differential by pointing out some of the accounting differences between our peers that make comparisons challenging. Our realized prices tend to be lower than something appears that recognized in base and transportation costs and they're Gathering and transportation line items are g&t per Boe is under a dollar when you factor this in Iraq are all enclosed structure between price differential and GMT costs. You will see that we have a similar cost structure to our peers.
We see relatively stable.
Williston Basin oil differentials Israel continues to set the price on the margin why is oil differentials are forecasted to improve with the expiration of our redtail contract ending in 2021 with the Liberty Pipeline and double expansion. We could see considerable Improvement in the marginal Barrel willing on pipe in that environment differentials could revert to what the Basin experience when devil came into service in 2017.
Now moving onto natural gas and NGL pricing We Believe with the startup of the Elk Creek pipeline. There should be adequate takeaway capacity and an improvement in in jail prices that we saw last fall.
On the natural gas side the basis basis processing capacity looks efficient are differentials will vary seasonally relative to him to Henry Hub. Overall. She remains similar to Twenty Ninth level. We'd like to thank our team in the field and highlight their excellent work and capturing natural gas as highlighted on slide sixteen being at sustainable company and a great corporate citizen is fundamental to whiting's belief systems widen continues to be an industry leader in the working for solutions to minimize flaring and the Williston Basin Brad without altering to call back over to you thank screen. I'd like to finish by reiterating our commitment to cost control and risk management office. We intend to build on our cost structure achievements and 20/20. We're drilling a productive High rate of return program. We have partially protected this by executing on a proactive hedging program.
With attractive price floors in a very volatile Market, we believe this should help us to achieve our goals moving forward. We look forward to realizing incremental.
Savings maximizing cash flow and further strengthening our balance sheet in 2020.
Operator. Please open the conference call for Q&A. Thank you. Once again, ladies and gentlemen. If you'd like to ask a question, please press star than one on your telephone keypad if your question is already been addressed and like to read you a question from you, please press start them, too.
Today's first question comes from Neil Diamond at SunTrust, please go ahead morning. My first question you guys obviously the markets wondering on the financing options. I'm just wondering how long as you could put the remaining twenty twenty converts and 21 Bonds on the current revolver. I'm just wondering your thoughts about what would happen around if the next redetermination changes things and you know, if so, I you know thoughts about the financing options post that point given the current commodity price and the current state of the Capital Market. We thought it felt it was best offer. I reserve to assist in exploring all Alternatives. However, we feel is best not to comment on these Alternatives at this time. We are early in the redetermination seeds and haven't came that process off that will be coming in the coming months.
Okay, and then just second question bread, maybe stick with that red on the Alternatives. I know you can't speak.
Too much on this but I know could you just read give a little more color what you said about. I know part of that suggests potentially looking at additional high-quality acreage, but you suggested, you know, you really have to get your life, which you have. I'm just wondering could you talk about you know your inventory now and you know how that might come into play If you're looking at the potential alternatives
sure nail and thanks for the question. I think what we've think what we'd like to highlight is just a track record at Whiting we've gone into a Santa billed for really a third time and Redevelopment off and have been able to successfully redevelop that field that can be very challenging in the unconventional space to go in and and to redevelop but what we've seen is we've been able to drill very economic child Wells that have been better than the existing parents. We've also been able to positively stimulate the parent will we see more opportunities like that and think that the Whiting team had the capability and skill set to do that kind of work. We also see opportunities to move out to the West like form of Butte where the latest completion Technologies haven't been deployed and to be able to take stuff off the marginally economic and make those very attractive economics moving forward. And so the team has experienced doing that kind of work and we feel like that there's more opportunities that exist.
that to be able to
to execute on
I don't know question today comes from David our next question comes from David McCallen, please go ahead.
Morning, Brad and everyone. Thanks for taking my questions.
Just wanted to ask, you know, first the decision around using more than 2020 highlighted the incremental. Well cost there. I guess. Can you break out that that incremental benefit either one or return basis or a productivity basis that you know is making you go in this direction particularly in light of the fact that obviously trying to be, you know, kind of miserly in this environment you talked about allocating capital and setting up for the most Capital it efficient program. Are you noticing a near-term step change between you know Wells that you've drilled in 2009 with lesser profit low things that you'd like to either a verse in 20 or is this an expansion upon what you were doing?
Yes, David.
Thanks for the question. It's primarily informa Butte and what we saw with the 17 Wells that we blanketed across that area. We pumped different modes in our team is always innovating and so I thought we had cases where we pumped significantly more profit and the incremental return on that is very very attractive. And so because that area maybe was off the undeveloped and hadn't been developed in. You know, at least the last five to eight years the larger jobs in that area of the field have performed significantly better. And so it's simply just better well economics and so we're adding about $300,000 per well which brings it down 6% over 2019, but that extra $300,000 is is we're seeing we have 90 days of queing production on most of the wells the ones that we pump the larger job. We seen substantially better performance and that justified the change that we made on the completion birth.
I understood and I know you all didn't have a chance to release your reserve report yet, but it was curious. If you could give us some high-level color at all. Just directionally where things shook out and if you guys offer, you know, we should expect any performance improvements or if you got credit for bookings in Spanish from the some of the infill activity and the benefits that you're seeing to those parent Wells.
Yeah, you're in reserves told eight $485 million Bae which is approximately 75 proved developed page. We produce roughly forty six million BOS and we added about $34 million Boe through extensions and discoveries. We had a small amount that we sold which was about five the you know, the net revision at the end of the day was about $18 million and this is really driven more by pricing changes at the end of the year.
Thanks for that.
Oh next question today comes from Cassie Harrison energy, please go ahead.
Good morning, and thank you for taking my questions.
Good morning, apologize if I missed this in the prepared remarks, but how much free cash flow does the program generate in 2020 at $50 a month and then can you help us think through what it would take for you to revisit the capital program what you would need to see on the Ford strip, you know, just giving how just given out challenging it is off today.
Yeah, we don't typically put out kind of a free cash-flow forecasts. But you know to kind of look at a slightly different we do think fifty-five is about our break even this is also reflecting kind of the deficiency payment that we have to cover with red tail as those payments decrease and as we get the additional savings through just the Costco we're working that number down.
Got it. And then I guess my my follow-up question is actually following up on the earlier question surrounding reserves. What's the what's the pv-10 associate with the numbers you quoted and and what would be the PDP V10 as well?
So the PDP pv-10 is, you know, just over three billion on all end total. It's closer to 3.8 billion.
Got it. That's it for me. Thank you.
The next question today comes from Michael and Steve holds its go ahead. Good morning. Thank you for taking my question. This is actually here much depending for Mike was wondering if you could comment off the infrastructure constraints for 2020 in the back end a little bit more.
This is Kevin Kelly. We feel good about the infrastructure relative the 2019 as you've probably seen gas processing additions have been pretty adequate 2019 over a b c f a day. We also see headlines of additional processing additions coming through in 2020 and 2021 that gives us good running room as an overall Basin. We've also selectively shifted our program to finish and form of you. We have better control over our gas Gathering and oil infrastructure networks, which gives us high confidence in our ability to capture on Pipeline.
Royal takeaway
And gas take away from the basement were also sufficient and within GL pipeline Elk Creek now in service. We also feel good about that. Take away at home.
Thanks on. My follow-up would be would you consider a quadratic sales with user absolute level of debt at any point?
Yes, as we mentioned before we we actually have done some non-core credited creative as it sells we will continue to evaluate that they must be at least credit. They have to at least bring it in neutral to credit a creative for us to consider.
And is the be that spreader to White in order for that to happen?
I'm sorry, can you repeat?
Sorry, I said that the task spread between what a possible buyer might be willing to pay versus what it might be creative on on average basis for you. Is that took quite as of today?
I would just say right now in general we've seen that the Indie Market has been extremely challenged. We will continue to look at Alternatives as they come available home. That's it for me. Thank you guys. Next question today, please. Go ahead.
I guess that's taking the question just on the the refinancing options you have with the 2020 and the 2021 bonds is a you know, different size different type of bonds understand that may need to be conservative with regard to the borrowing base getting pinched a bit. But with their still probably being sufficient room for the 2020s. Would you take a different approach to the 20s versus the 21s or or you were you suggesting that you know, you're looking for a more fulsome solution, you know wholesale solution.
I really appreciate the question. However, this is a near-term upcoming maturity. We don't believe it's prudent to provide any specific commentary on the call at this time regarding the 2028. Okay, got you. And then just with regard to those 20 21 bonds not being that far out now and then there's some spring and maturity language on the revolver tied to the back ones. Is there a specific time at which you you need to address those to avoid putting adverse language in your filings like a greased or from one of the piers where they kind of drove some concern in the market. Just trying to trying to figure out how much time you have to act in. This is pretty tough macro tape.
We're concerned.
All factors, but as we said we were working with advisors to explore all our all our all of our Alternatives. However, we really just cannot comment at this time. Okay. Got you. Thanks very much.
Next question today comes from JP Morgan, please. Go ahead.
Good morning, trying to get different tax Committee. Just talk a little bit about kind of how you think about the long-term balance sheet, you know targets of the business sort of what do you think of right off of debt to sort of Target on the back end of this process is
We are continuously evaluating to answers those specific questions, but given the conversations and the advisers that we have at this time. We don't feel it's prudent for us to comment.
I appreciate that and then just on the business itself as you think about the you know, the slight increase in the gas mix in 20 vs. 19 month you sort of have an idea of what portion of that is just do to lower flaring versus any sort of shift in in the actual gas mix of the wells. We're Drilling.
No, thanks for the question, and it really is more gas capture. And so we are working hard to have the infrastructure in place to capture our gas and so the increase in gas volumes are seeing is a director often reflect of Wells. We're drilling are very similar to our program. We're just able to capture more of the gas. Got it. That's helpful. I'll get back in the queue. Thank you.
Isn't this includes a question-and-answer session? I'd like to turn the call back over to Brad Holly for any closing remarks.
Thank you, Rocco. I want to thank our dedicated employees and committed shareholders and the second half of 2019 Whiting delivered on its goals of expanding margins generating free cash flow paying down debt. We have remained discipline in our Capital spending our 2020 program maximizes the value of our asset base and positions us to address our balance sheet. We look forward to seeing you at upcoming events.
Thank you. This includes today's conference call. Thank you for attending today's presentation. You may not have met your lines and have a wonderful day.