Q4 2019 Earnings Call

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All right, that's the contango oil and gas company.

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Ladies and gentlemen.

Contango fourth quarter hearing results conference call at this time.

<unk> pension should begin in a couple of minutes. We appreciate your patience.

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Ladies and gentlemen, and welcome to the Contango fourth quarter results conference call. At this time, we are giving additional participants in should begin in a couple of minutes. We appreciate your patience.

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Ladies and gentlemen, what kind of contango fourth quarter results conference call. At this time, we are getting additional participants and should begin in a couple of minutes. We appreciate your patience.

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Ladies and gentlemen, what can the contango fourth quarter results conference call. At this time I will begin in just a couple of minutes expansion little Tech technical difficulties.

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Ladies and gentlemen, and what kind of contango fourth quarter.

The conference call today's conference is being recorded at this time really 'cause it converts over to Wilkie Collier. Please go ahead.

Thank you.

Good morning, and welcome to comparing fourth quarter 29.

My name is lucky call here and I'm confident.

Okay.

I'm joined by acquiring.

The company's head of corporate development.

Great companies.

Sure.

I hope everyone has had time to read through Yesterdays press release.

The cautionary statements regarding forward looking information.

Non-GAAP measures.

On the school.

As noted in our press release last night fourth quarter was a very busy one for comparison.

Early in the quarter, we closed on the wind solar and wind energy acquisition.

Expanded our bank group and facility size and enhanced our management.

Patrick clothing for Workstar, just under $96 million.

Never forget only less than a headline number $432.5 million as projected due to customer cost effective date, Jeff.

Integration effort.

Business is still ongoing.

We are deeply appreciative of contango employees across all disciplines and working together to get the job.

Late in the quarter, we announced a joint development agreement in the Gulf of Mexico.

Oil and gas along with our first exploration.

Correct.

Located in the Grand 45 area.

During the quarter, we raised over $78 million from equity capital.

He challenging market to help fund our acquisition.

Also brought on line three wells in our northeast Bulls eye area and a fourth in January better performing at or above our expectations in the aggregate.

Subsequent to quarter in.

The Coke 19 outbreak is unprecedented pressure on business [laughter] businesses in general.

Oil and gas business the outbreak coupled with the Saudi Russia price War.

[laughter] downward pressure on commodity prices, especially what.

And the speed at which fundamentals have changed somewhat [laughter].

Fortunately.

We're better positioned than most of our peers to weather the storm.

First we are manageable debt levels low leverage in a simple capital structure comprised of only think at an equity.

Okay.

Yeah, the seller hedge book again, 20 screens were 70% of our total forecasted.

Oil production hedged at an average price of $55 in 13 cents a barrel.

68% of turtle forecasted PDP gas production.

Extend an average price of $2.57 per Mcf.

In 2021.

We have 67% maternal forecasted GDP well production.

[noise] X $51.71 apparel.

57% total forecasted.

Due to gas production at an average price of $2.49 per Mcf.

We also added hedges for 75% total forecasted.

Yes production.

In the first quarter 2022, and $2.54 per Mcf.

The mark to market value of our hedge book as on Fridays close with approximately $42 million, which excluded 3.6 million of net realized hedge settlements, thus far and 2020.

While we believe current commodity prices are unsustainable and short term in nature waiting for rebound isn't a strategy.

So what's contango is 2020 strategy in response to the change in commodity prices.

Let's start with what hasn't changed.

Number one focus is free cash flow generation, which we expect even at current prices to pay down debt.

Operating in a safe and responsible manner.

Number two is shareholder alignment.

Insiders continues to be largest holders contangos common stock and we will continue to have a goal maximizing value for our stockholders.

Number three Halloween reductions.

We don't continue to look for ways to operate in a more efficient manner in a recent drop in prices and activity should give us more opportunity to renegotiate these rates.

Number four is our commitment to the aren't Felicia. This is in our opinion one of a few exploration projects at works at current commodity prices and we plan to spot that well on time and corn budget around may 1st.

We are unaware of anything in the U.S. that produces a better return in front of success case than the aren't fully infrastructure low relative risk when they turn key dry hole cost of 6.3 million net to our answers.

Importantly.

We believe we partner with a best in class group in share now to generate attractive rate of return projects on the Gulf of Mexico show starting with yarn.

What has changed.

First workover capital spending.

Okay, Workover rigs and central Oklahoma from three rigs to one.

Production should be impacted by his decision to some degree.

And also increases the percentage of oil production hedged at prices well above current true.

The contribution margin dollars of unhedged production is less critical to perhaps without the burden of unsecured debt or preferred interest payments.

Second we need to get created.

Really.

On the asset class Skinny oil and gas industry, which has increased in value within the last month is lengthening storage capacity, which we have in Spain.

We estimate that we have roughly three quarters of 1 million barrels of crude capacity between our Cushing and field storage and central Oklahoma.

Given the Super Contango exit.

Hi, guys futures curve currently.

One can potentially generate a 20% one month return in a 75% one year return like storing up barrels of crude versus selling it on the spot market.

We are evaluating options to store and then sell what on the hedge barrels we have in the futures market.

Backer pricing immediate cash flow.

Her of higher cash flow six to 12 months.

This will also increase our percentage of production that is hedged at well above market prices.

Wow.

How we play offense will change.

We believe that while bankruptcies will increase as a result at the declining commodity and asset prices.

Transactions will decrease as a high paid at current strip, maybe untenable for creditors to transact.

We will aim to be more creative and coming up for solutions for non natural owners of assets and our intently focused on opportunities to grow inorganically.

Good luck in my prepared remarks by thanking all the employees and contango for their hard work and dedication during a pivotal time in the company's transformation.

We've been able to deepen our cancer talent and expertise via the aforementioned acquisitions, we have a phenomenal.

From the Pumpers all the way out.

And they are critical to our company success, particularly in light of the recent headwinds facing our industry.

Thanks for your time this morning and for your interest in contango.

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Thanks again for Everybodys time, this morning, and please be shapes out there with everything that's going on if you have any follow up questions, you know where to find us and otherwise we look forward to update you at our next quarterly earnings update Thanks, again and have a good day.

Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.

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