Q1 2020 Earnings Call

[music].

Welcome to Gulfport, Energys first quarter Twentytwenty conference call.

At this time, all participants are in listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host.

The Antal director of Investor Relations.

Thank you and good morning, welcome to Gulfport Energy Corporation's first quarter 2020 earnings Conference call I am Jessica It's all the director of Investor Relations.

Speakers on today's call include David would Chief Executive Officer, President in quite yet executive Vice President and Chief Financial Officer. In addition, with me today available for the question and answer portion of the call. It Johnnie Walker Executive Vice President and Chief operating Officer I.

I would like to remind everybody that during this conference call to participants may make certain forward looking statements relating to the Companys financial condition results of operations plans objectives future performance and business.

We caution you that the actual results could differ materially from those that are indicated any forward looking statements due to a variety of factors.

Information concerning these factors can be found in the company's filings with the S. E. C. In addition, we may make reference to non-GAAP measures reconciliations to the comparable GAAP measures will be posted on our website.

I would also like to note that the company intends to file a proxy statement and certain additional proxy materials in connection with a solicitation of proxies for its 2020 annual meeting shareholders are strongly encouraged to read the company's proxy statement and all other documents filed with the FTC carefully when they become available because they will contain important information.

We will not comment on matters related to the 2020 annual meeting on this call.

An updated corporate presentation was posted yesterday evening to our website in conjunction with parties now.

Please review at your leisure.

At this time I would like to turn the call over to David what email Gulfport energy.

Thank you Jessica welcome everyone and thank you all for joining US this morning I.

I hope all of you your families and your friends are staying safe and healthy during this challenging time.

Before I get into our quarterly results I wanted to touch on the steps we've taken that Gulfport in response to the cobot 19 pandemic.

Protect the health and safety of our staff service providers in the continuity about business. That's part of our business continuity plan all office employees have transition to remote work remaining fully committed as they work from home and continue being engaged in our day to day business field operation staff have done it to.

Terrific job, ensuring that our operations a continued without significant disruption while most importantly, maintaining safe operations. We have formed an internal returned to work task force to develop a detailed plan up how when we will return to work at all physical offices.

Specific date has been set at this time.

Our top priority is and always will be the safety and health of our employees contractors and communities in which we operate.

Overall I'm tremendously proud of how we've responded as an organization and I want to recognize and thank all our teams for their focus dedication and perseverance through this extraordinary Todd.

The cobot 19 pandemic is causing a slowdown in both the global and domestic economy, which has resulted in severe demand decline all fossil fuels heavily weighted to the oil natural gas liquid markets oil prices have traded at 20 year lows and a dramatic reduction in capital spending from <unk>.

Oil weighted peers has resulted in expectations for associated gas production to decline in the coming months and possibly through 2021.

This expected decline in associated gas from oil weighted peers. In addition to reduce capital spending from the U.S. gas weighted producers has led to a recent increase in natural gas prices, especially as we look at the scrip in late 2020 and 2021.

With approximately 90% of our production being natural gas, we are well positioned to benefit from a gas price right.

We expect that U.S. gas production will decline over the next several quarters and believe this decline could lead to what tightening up the gas supply demand balance, especially if the domestic economy returns to a more normalized state in the near term.

However, we remain cautious as there are still many unknowns surrounding the short term and long term impacts of cobot 19 on domestic demand for gosh. We're also cognizant of the potential supply response as prices approach $3.

Concerning all of these factors we continue to believe medium term natural gas prices will remain range bound and consistent with previous $2 and $62 a 90 per M N b to your projections.

As we reach these levels in the forward strip, we will take advantage by hedging on future production currently targeting the upper end up that range for 2021, and I will let quit and provide more detail on what we have a secure it today during the recent uptick in price.

During these unprecedented times, we continued to execute on off 2020 capital budget, we laid out in February and remain committed to maximizing cash flow generation, reducing costs and ensuring strong liquidity through the remainder of 20 Twond.

Well the first quarter, we reported approximately $16.6 million of adjusted net income generated $128.3 million of adjusted EBIT, though.

Golf course operating cash flow before the changes in working capital in inclusive of capitalized expenses totaled $86.7 billion and due to our front end weighted capital program resulted in an outspend roughly $50 million for the quarter.

That's planned in our original 2020 budget as we reduce activity throughout the year and capital expenditures decline, we expect to begin generating free cash flow during the second half of the.

During the first quarter of 2020 as expected our average daily production decline all of them you did level of activity during the fourth quarter of 2019.

Production was lower than expected by about 5%, primarily because of delays in placing several new Utica wells online during the quarter. These delays would due to a combination of third party midstream constraints inclement weather in our operational schedule shifting.

Our incurred capital expenditures for the first quarter came in well below expectations, partially because of the same operational scheduled shifting as well as continued drilling and completion efficiency gains and lower service costs.

We reiterate our original budget to invest approximately $285 million to $310 million across our asset base. During 2020, and currently expect to come in at or below the low end of this right.

Due to very low oil and natural gas prices, we plan to shut in a portion of operated production in the next few months, including a large number vertical producing wells in the scoop.

We forecast these shut ins to impact on near term production.

Less than 20 million cubic feet of gas equivalent per day, and we'll continue to monitor pricing daily potentially extending shut ins should prices work.

As mentioned earlier these are unprecedented times and we continue to evaluate only our spots, but also that other producers there was much uncertainty around associated gas volumes and the overall impact of what we might potentially see from shut ins during 2020 on both our operated assets and those.

Our non operated partners.

As we sit here with one quarter of the year in the books and a marked improvement in natural gas prices I have for us.

Well later in 2020, an early 21, we are exploring opportunities to take advantage of this and maximize returns for our business.

Notwithstanding the uncertainties that cope at 19 impacts spring being able to reshape our production ramp towards better pricing.

At meaningful value, we are looking closely at what that means to both the production guidance for the year and the timing of overall capital spend in Twentytwenty.

Considering all of these factors Gulfports previously provided production guidance for the full year 2020 should no longer be relied upon.

On the cost front, we continue to focus on increasing efficiencies and improving our cost structure as expected our individual expense line item settled at the high end of our budgeted range due to the lower production volumes during the quarter, we expect our per unit cost to decline through 2020 as our volumes increase.

We realize economies of scale.

In addition, we havent number of ongoing initiatives to place true to reduce our cost structure across the business and Quinn will provide more details just call.

Lastly, we improved our balance sheet during the quarter through discounted bond repurchases and we reduced total long term debt by approximately $79.6 million as of March 31st Twentytwenty when compared to year end 29 team.

Quitting will touch more on off on repurchases to date, but I'm very pleased with our efforts to improve our balance sheet in this environment.

Turning to our operations, we had an exceptional quarter on the efficiency front in the field.

First quarter of 2020, Mark the best quarter to date in both our core operating areas with respect to drilling days, achieving the lowest average spud to rig release metrics since entering both the Utica shale and the scoop.

We were also very active on the completion front and as of March 31st we had completed over 70% of all planned frac schedule in the Utica and all of our planned 2020 frac activity in the school.

It is important to note. These results following a muted level of activity during late 2019 with the majority of our equipment and crews restarting both safely and effectively during the quarter.

Great credit to Donnie and his operational teams in making this will happen.

In the Utica, we spud seven gross wells during the quarter and currently have one rig drilling ahead in the play.

Well as released had an average drilled lateral length of 10200 feet and when normalizing 28000 foot lateral we averaged just spud to rig release of just 17.7 days down 10.6% over full year 2019 results our 2020 pro.

Graham is focused on maximizing lateral lengths to allow us to deliver more with less I am proud of the team for this record quarter drill but.

Turning to completions in the Utica shale, we began the your active uncompleted 15 wells during the quarter with three additional wells in progress at the end of March Wells completed had an average stimulated lateral length of 11500 feet, which includes for the longest laterals completed to date by Gulfport in the play.

Ranging from 16000 to nearly 18000 feet.

Incorporating both the drilling and completion activities during the first quarter of 2020, we estimate that gulfports Utica well cost averaged $980 per foot lateral approximately 10% below our budget of $1100 per foot and $830 per foot lateral when it.

Polluting B and C only.

This improvement in our well cost is significant for our future development and highlights our drive to deliver a leading cost structure in the base.

Switching over to the scoop during the first quarter. We spent five gross wells and currently have one rig drilling in the play the wells released had an average lateral length of 9500 feet and when normalized to a 7500 foot lateral the wells averaged a spud to rig release of 37.4 days.

During the first quarter.

Decrease of 32% when compared to about 2019 program average and that's I mentioned, the best quarter to date since entering the play.

When comparing first quarter results to past activity Gulfport delivered one well with a spud to rig release of less than 40 days during 2019 zero in 2018 and 72.

To date, three or four wells drilled I've been so 40 days. These improvements were achieved <unk>, adding a new rig increasing measured depths and increasing lateral lengths.

First quarter performance exemplifies how focused on identifying areas of improvements and we look to carry forward. This momentum throughout the year, we established to Gulf <unk> Records during the first quarter, releasing a well where they spud to rig release of 39.8 days and subsequently breaking this with a new record of just.

32.5 days, both occurring in the same quarter.

On the completion front during the first quarter, we completed and turned to sales for gross wells with an average stimulated lateral length of 6500 feet.

Due to efficiencies on the pad and the current service cost environment in the basin. This activity came in roughly 30% lower forecasted 2020 scoop completion budget our activity in the first quarter completes all planned frac on turned in line program for the Scoop during 20 Twond.

Incorporating both drilling and completion activities during the first quarter of 2020, we estimate that go port Scoop, well cost averaged approximately 1000 that $80 per foot lateral approximately 30% below our budget of $1500 per foot.

And $1065 per foot lateral when including B and C. Only.

We are determined to deliver consistent repeatable results in the Scoop <unk> first quarter progress highlights our continued emphasis on identifying implementing realizing efficiencies in this plot.

In summary, while the macro environment was extremely volatile in uncertain. Our continued focus on increasing efficiencies and reducing costs led to solid progress during the first quarter of 2020.

We have a highly talented team at Gulf <unk>, who continue to aggressively manage costs to enhance margins and increase free cash flow.

We continue to execute on our 2020 capital budget provided in February and remain committed to exercising capital discipline, maintaining strong liquidity and evaluating all opportunities to enhance value for all stakeholders with that I will turn the call over the Clinton.

His comments.

Thank you, Dave and good morning, everyone.

As Dave indicated we reaffirm our full year 2020, capex in cost guidance and are making every effort to improve our capital performance and per unit operating cost as we move through the year.

During the first quarter Gulfport incurred 127 million in operated DNC capital and $3 million or non operated DNC capital. In addition land expenditures incurred totaled approximately $5 million in the first quarter 2020.

We currently expect roughly 75% to 85% of our capital budget to be incurred during the first half a 2020 and as a result, our position to generate free cash flow during the second half a 2020.

During the first quarter production averaged 1.05 billion cubic feet of gas equivalent per day composer, 90% gas, 7% NAC natural gas liquids in 3% oil.

During the first quarter, our realized natural gas price before the effective hedges and including transportation costs settled at approximately 69 cents per mcf be below Nymex prices better than our guidance range of 70 to 80 cents per Mcf.

As previously discussed our 2020 guidance includes expected firm transport fees incurred during periods when our production falls below our firm transportation commitments, primarily in the scoop beginning in the second quarter.

We continue to work to improve these realization through mid stream optimization efforts, but are not reflecting these opportunities in our current guidance. We reaffirm our four year basis differential guidance is 70 to 80 cents per Mcf Inc. and continue to work hard to drive results toward the low end of this range.

During the first quarter before the effective hedges are realized oil price came in at $2 at 55 cents below WT I and the scoop during the first half a 2020, we have a large portion of our oil volumes under more seasonal contracts versus month to month agreements, which improved our realizations in the first quarter.

It's also provides flow assurance and today, we have not had any significant issues transporting our oil Paul volumes.

We continue to work with purchases in the basin to optimize our oil gathering contracts are still guiding toward a four year for dollar 50 cent. The five dollar discount to Debbie T.I., but we hope we can do better.

Turning to Ngls before the effect of hedges are realized NGL price came in at approximately 33% of WT I.

We reaffirm our guidance to be 30% to 35% of Debbie T.I. for the full year 2020.

Our realized prices continue to be supported by our strong hedge position and during the first quarter 2020, we realized the hedge settlement gain a 74 cents per Mcf D or $70 million.

We currently have 774 million cubic feet per day of gas hedged with swaps at a price of $2 in 91 cents per M. B to you in the second quarter, which represents the majority of our production for the quarter.

Given the increase in natural gas strip pricing, we have seen in the second half a 2020, we recently added additional natural gas swaps in the second half the year. We currently have approximately 357 million cubic feet per day hedge at an average swap price of $2.86 per MND to you.

We also recently started to build our hedge bit book for 2021, we currently have 250 million cubic feet per day hedge and 2021 at an average floor $2.46 in a ceiling price of $2.81 per MNB to you.

Although these callers or slightly below our medium term price expectations of $2 in 60 cents to $2, a 90 cents per mcf they allow us to achieve at the midpoint of that range and we're also instrumental and getting our borrowing base successfully approved at the 700 million dollar level.

We also recently chose to unwind R 2020 oil hedges ahead of the repo borrowing base redetermination, representing roughly 5000 barrels per day for over $40 million and cash proceeds. These proceeds allowed us to repay a portion of our outstanding borrowings on the revolver and we subsidies subsequently took the prudent steps a real.

Stabbed we're seeing a floor for oil production during the third and fourth quarter 2020 at $35.60 per barrel.

Maintaining a strong strategic hedging program is an important element just to supporting the long term <unk> economic development of our assets and we continue to look for ways to add hedges for downside protection and to support our cash flows.

In terms of cash expenses, our per unit operating expense, which includes L., we production tax and midstream gathering and processing totaled 82 cents per mcf. He during the first quarter.

These expenses were in line with their 2020 full year guidance and were slightly below the first quarter 2019 levels.

First quarter Eloise totaled approximately 17 cents per Mcf he a penny above the high end of our guidance range due the absolute volumes being lower during the quarter.

We forecast Delaware to be to trend lower as our production increases.

And expect to be within the previously provided guidance range for the full year.

Production taxes for the quarter totaled five cents per Mcf. He at the low end of the expected range due to low pricing due to the low pricing environment during the quarter.

Midstream gathering and processing expenses totaled approximately 60 cents per mcf fee in the first quarter at the high end of the range and similar to L.. We we expect our per unit midstream expense declined throughout the years, we bring online incremental production.

Recurring DNA, including both cash and capitalize portions totaled $17.6 million during the first quarter.

On an annualized basis, the first quarter DNA spend is inline with our full year guidance range, the 69 million to $74 million.

As we move through the year, we continue our relentless focus on cost improvements and as I mentioned in February we are turning over every stone working to improve our cost structure.

We have set we have several financial initiatives in place to reduce costs and are asking every employee throughout the organization did to do their part to enhance margins.

During the first quarter, we began reaching out to all of our vendors in service providers across all aspects of our business in an effort to reduce costs.

We continue to look for opportunities to further improve our midstream expenses and are working aggressively at mitigating our excess firm transport costs.

We have active ongoing constructive discussions with many of our midstream provider surrounding optimization and cost reduction efforts and our cautiously optimistic we will improve our midstream cost structure through the remainder of the year.

In the field echoing Dave's comments, our well cost per lateral foot reported in the first quarter. Our test are a testament to these ongoing initiatives and the focus across the company to increase increase efficiencies reduce costs and enhance margins.

Moving to the balance sheet, we recently completed our spring borrowing base Redetermination and while we've seen an uptick in 2021 gas strip prices. Unfortunately, the bank price decks were not reflective of this upward momentum.

Overall, the banks remain very cautious and conservative and that is reflected in our 700 million dollar borrowing base.

As we look toward the second half a 2020, we will need to renew revolving credit agreement as it matures in December 2021.

Given the banks current risk off sentiment, we are focused on improving our balance sheet and cost structure as much as possible prior to the renewal this facility.

The concern this conservatism and risk off sentiment demonstrated by the banks permeated through all aspects of our business over the last several months, including surety providers, who have increased the required low levels of credit support which has resulted in current letters of credit outstanding of approximately $327 million.

We do not expect any significant further letters of credit postings and are actively working to reduce the current letter of credit postings over the next several months.

Our ability to move postings to surety bond bonds becomes more promising as gas prices, improving our balance sheet quality improved.

Reflecting the previously mentioned letters of credit in the current revolver draw of 108 million curtain current liquidity totals approximately 269 million, which provides us adequate liquidity to fund our 2020 plan at current strip pricing.

We continued our discounted bond repurchase program through the first four months of the year.

Year to date, we have retired approximately 73 million of senior notes for $23 million in cash spend reducing our net debt by $50 million.

In total since middle of 2019, we've reduced our unsecured notes outstanding by $263 million, capturing roughly $102 million than discount and reducing our annual interest burden by $11 million.

We continue to look for opportunities to reduce our leverage fruit profile and with our bonds continuing to trade around 50 cents on the dollar. We think there are opportunities to capture this discount and reduce our leverage while improving our cash flow.

Our board views liability management in the context of risk management.

Reducing our downside risk to ensure we benefit as gas prices rebound to more rational levels in the future.

We recently engaged Tudor Pickering, Holt, Perella, Weinberg, and Kirkland and Ellis to help us more formally explore these options and will provide an update on these efforts when appropriate.

Our goal is to improve our balance sheet in a way that unlocks value for all of our stakeholders.

Before I turn the call back over to Dave I want to address the recent tax benefit preservation plan, which was put in place by Gulfports Board of directors last week.

As of December 30, Onest 2019, Gulfport had approximately $1.3 billion a federal net operating losses also known as I know wells.

These and other wells are a valuable asset to the company as they can be carried forward to future years and used to offset future taxable income and save a significant amount of future cash tax expense.

Under IRS rules the ability to utilize these you know wells in the future could be significantly impaired if a so called ownership change were to occur within within the meaning of section 382 of the internal revenue code.

Generally and ownership change under this definition occurs if the percentage of the company stock owned by one or more of its 5% holders increases by more than 50% over a three year rolling period.

In light of the recent trading volumes in the company stock and midst of the current market disruption the board determined it was appropriate.

The tax benefit preservation plan to Britain to prevent a significant limitation on our ability to utilize in a wells in the future.

With that I'll turn the call back over to Dave for closing remarks.

Thank you quit.

Closing, while it is constructive to see the increase in the 2021 natural gas strip.

Near term price dynamics in 2020 remain uncertain.

Given this we remain focused on executing at returns focused business plan with a strategy aimed at reducing costs operating safely maintaining liquidity and positioning the company for long term value creation, our 2020 outlook in financial plan to substantially reduce capital spend and preserve our quality inventory.

Sure as Gulfport is well positioned to manage and enjoy the benefits of a commodity rebound as it occurs which may be just ahead of us.

As we've said before size and scale matter and the management team continues to explore opportunities to increase scale and bring further efficiencies to maximize returns we remain committed to our vision of transforming gulfport into a sizeable natural gas weighted produce a with a strong balance sheet and leading structure.

That allows us to generate sustainable returns within our medium term price range of $2 and 60 to $2 a 90 for MPT.

This concludes our prepared remarks, thank you again for joining us for our call today, and we look forward to answering your questions.

Operator, please open the phone lines for questions from the participants.

Thank you at this time will be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question kill.

You May press Star too if you would like to remove your question from the Q.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we pull for questions.

Our first question today comes from Jason Wangler of Imperial Capital. Please proceed with your question.

Hi, Good morning, guys. One wanted to ask you kind of mentioned did I think quit on the hedges that you added specifically for 2021 as you think about you know.

Hopefully building that hedge book up is there a preference in swaps first collars or perhaps there was a reason there just kind of curious what your thoughts Sars you kind of build that.

Yeah, Jason Good morning. This is Dave I hope, you're doing well your family's doing well I hope everybody else. It's on the call. This.

Managing through this very difficult time that we're in a.

I think our overall goal in 21 is the end up with us hedge position as strong as we can as close to $3 as we can.

I think at the time, we place those [noise].

Carlos and we were really trying as Quintin mentioned in his opening remarks.

To address the spring Redetermination process I think we've added subsequent carlos better than that I'm still within our price range. So I'm I'm pleased with where we are today. It represents about a quarter of our projected production today.

For 2021, and we hope to be able to build upon that as far as the specifics of of why that particular mechanism. We don't have a particular bias. It's really just trying to accomplish the overall goal, which is to build a hedge book as complete as possible and as close to $3 as possible and auto pilot.

When you add anything or anything to that.

Yeah. The only thing I'd add is you know we kind of have this expectation of $2 and 60 to $2 a 90 cents a price in and we wanted the banks were used in a price deck and are in the redetermination that had somewhere around a $2 10 said are too darn fifteens and on average price for 2021.

So, adding collars with the floor $2.46 really added value to from the banks perspective, and allowed us to get to that $700 million borrowing base and it also allowed us to achieve.

The midpoint of that to 60 to 90 range up to 75, because it call arrange again was to 46 by.

To 80 or to 81, so that was the reason for that going forward, we'll look at collars and swaps are targeting probably the higher end to that to 60 to 90 range.

Okay. That's helpful. Thank you and then.

As you mentioned I think you have mentioned in the past thinking that gas prices are going to kind of hopefully do better here as we go throughout the year you know there's still some wells. Obviously you guys are bringing online is there a way to you know I guess kind of bring those on in a pattern that you guys sees fit or is that schedule kind of next based on what you guys had already set up.

Thanks, and I think that's that's really gets to the key issue that we're trying to manage for this year clearly over the last few weeks the outlook for natural gas has changed and it's become more positive going forward and we want to take advantage of that.

We see the second half of the year being stronger who we also see 21 being a better year, which follows on from the comments that Quintin just made regarding wanting to get our hedge book belt as best we can for next year because the potential is that 21 could be very good year for this company.

Because anytime gas prices get close to $3 I think we do pretty well.

So what we're looking to do now is through a program of choke management and also delaying some wells coming on and managing our production profile looks for the rest of the year is moved some molecule was from this low price part of the year into the higher price part of the year and when we set our budgeting.

Plan together and published in February really off peak production was into Q clearly not the best time to have your peak production.

And so what we're doing now.

Is working across our business too to move those molecules. So that we can maximize the returns and what I think will happen here is once we get our plan for the remainder of this year and also get our hedge book and our plan insight for next year is we'll come back out with a published guidance.

In terms of production for this year and with the look into 21.

People, we'll see that that that move on top of the way the gas prices as change actually increases the value truck company. So that's the overall clan, Jason as well.

[music].

I appreciate the color. Thank you.

The next question is from Welles Fitzpatrick of Suntrust. Please proceed with your question.

Hey, good morning.

On wells.

I know it might be difficult to quantify but can you talk at all to the expected impact of non op shut ins and and if those happen and accelerate does present, an opportunity where maybe there could be some trading some blocking up of the position.

Yeah Wells I think that's a good question actually the vast majority of our production is operated.

So really the non <unk> component is relatively small.

Donnie I I'd I'd, let you kind of provide extra color around that but certainly optimizing our footprint as you Oh aim that question Wells I think is a good thing and it's part of what we look out so.

Donnie provide some color on that.

Yeah, Hey, good morning Wells. This Donny Oh, yeah, but I think that is something that we're always are continuing to try to do spores. The non out volumes. They are pretty small as Dave alluded to.

Especially here in the Scoop small interest and a lot of different wells. So.

Really not not that impactful that I can see right now, but yes, we'll we'll continue to try to work with others and see if we could block. This acreage is what was up in the Utica spectrum.

Perfect. Thank you have so much.

Thanks, well.

The next question is from Steve Decker of Keybanc. Please proceed with your question.

Hey, guys I'm, just want to get a better sense of the production cadence for 2020 is TQ down quite a bit from one key 20 went threeq and Fourq you up a lot or is it more or less CQ is just down a little bit. Thanks.

Yes, Steve Good morning, yes, so the way I'd look at it is we want the second half the year with a higher prices to have more production so moving to peek into Q as I mentioned to.

To the right or into the third, particularly in the fourth quarter. So I would look at one Q2, Q as being pretty similar it's the way I would model it out with hopefully a better exit rate and high production in Fourq you that's roughly.

Okay, great. Thanks.

The next question is from Jane tried to Senko of Stifel. Please proceed with your question.

Good morning, and thanks for taking my questions. Yeah. The first question is regarding but then so a couple months say in Utica, especially into Q in terms, how would you raised I know there, but that's all shut ins is there like certain natural gas price.

But he would like to see before being in the volumes back on line or is it just a matter of getting through the QQ.

Jay and that's a good question the production that we curtailed here is about 20 million cubic feet equivalent.

It's about 95 wells. So that tells you that theyre very small producers given that volume.

It's about 80% gas the remainder is liquids, it's the liquids piece on those very low producing vertical stripper wells. If you will that really creates an economic value and as we've seen the fall off and oil prices. The economics at those wells have changed negatively and I.

Step for US was just to say hey, let's shut those wells then as oil prices increase which is gonna be the important driver we would look to bring those wells on so as we currently look let's call. It two or three months and then we'll hopefully see some price improvement to the point, where some of those wells, we'll come back on but it's not a big.

<unk>.

But I think it's an appropriate thing for us to do the one thing that we did spend time looking at as because those are old vertical wells for the most part they do a hold some of the lease footprint for us and we wanted to make sure that we want in any lease jeopardy by shutting those wells and so so that was the the thought around all that.

I see I think [noise].

The second question is on scope and a I saw that you guys or anyone that or you can scoop and obviously completing and are being wells online, what's the plan or for that take for the remainder of the year.

Yeah, I'll, let Donnie you fill in the he's operations teams done a great job. So I'll, let Danny my comments on the right.

Hi, good morning, Jamie.

Yeah, but now we've we've actually finished all of our completion work into school I plan to budgets for the year right now what kind of watch that as we go along the rig should be and that's always been planned to be here all year. So it'll continue drilling.

And we'll also have the one rig up in the Utica. So we have one of each asset.

Okay. Okay last question, if if I may on Mitchell project, if you could provide some color or such as for example, how much is slowing on that pipeline and how the volumes are going to ramp up overtime.

Yeah, Yeah, I'll, let donnie again touched on that.

Yeah Jake.

As I think we've mentioned before it's just getting started up this week. So just just starting to move some volumes through it as that gets condition about no. We'll continue to ramp up Oh over the next coming weeks really.

Awesome. Thank you.

Thanks Jay.

[noise]. Our last question comes from a done Macintosh of Johnson Rice and company. Please proceed with your question.

[noise] when do.

One other quick question on kind of capital gains over the remainder of the year I know that previously and you may have mentioned the prepared remarks as mr., but the plan still for kind of 85% of Capex in the first half a year and then I guess the thought is that you go ahead and complete those wells and then just wait to tournament in line in the back half of your and then taken.

Got a step further with capex being so in the second half and volumes ramping and hopefully into a higher price you should be in a position to throw off some pretty good cash in the second half of year. So how do you think of allocating that towards the revolver versus additional repurchases of your bonds.

Yeah done I think I think that gets to really some of the key things up we're trying to accomplish so I think it's a very good question.

Clinton in his prepared remarks said that we spend between 75 an 85%.

Our planned capital in the first half of the year with this re look at how we want the production.

So a shape for the remainder of the year I think we can generate a as you said better returns and a more free cash than we originally we were going to generate we need to get at all planned out I think having the wells both behind choke and ready to come on production actually.

De risks that production profile, it's a lot easier given covert 19 issues et cetera, et cetera to actually have things behind the choke to just bring them on when you need so really I see that as being one of the the benefits.

As we hope the year is going to materialize and we do see that generation a free cash above where we had originally thought.

Then we can start to look at what 21 looks like and as I mentioned in one of the earlier questions. I really think 21 can be a very good year for this company takes a couple of things for us to do that.

It takes us being able to hedge at somewhere closer to $3, which I think we've made a good start and I think the strip is going to allow us to to accomplish some of that.

And then also with means getting ready in the second half the year to health right wells ready to come on.

And so when we reach a.

Publish our guidance for the year in a in a few months. So whenever we get it done I think everyone. We gotta much closer view of what the second half activity would look like and I'm not opposed to being a little bit more active if all of the good things have happened.

And that 21 looks as a as promising that is so that's another reason for us taking little pause here and taking a look at the business.

So we could see some growth next year, if gas is at $3 I'm hopeful that.

And I think we want us one ourselves to be planned that way.

Alright, great. Thanks, and then maybe just kind of more of a macro question that.

Based on specific and Appalachian at what point do you think that people start to kind of add rigs back and pickup activity, maybe not go for specifically, but.

Some of your peers and do you think that there's a little bit of a risk baked in there with you know just.

This is the pressure that's been on this space and kind of juergens and relief with fall off in associated gas production.

Or volumes get shut in but.

On the other side of that obviously, there's a lot of people that they want to are gonna be looking to take advantage of a higher price. So how do you kind of way the risk or think about that thinking about the gas market as if it gets to a point where people start putting rigs back to work and.

Yeah, the along the durability of price under scenario like that.

Yeah, Dan I think that gets to the real core issues as we look at gas game and as we mentioned in our.

Remarks, I think to 60 to 90 has been arm what I call mid term price for you. It was that way last year, it's that white now so I don't see any reason to change that I think the dynamics as to why that range makes sense of change certainly in light of.

The oversupply and oil and coal that 19, I think that when we start to see gas prices at the $3 range I think that's going to be close to where it's going to get too I see some people, saying, it's going to be 350 or $384.

I think if it does do that it'll be very very brief and so I think more towards the $3 game I think the big question for this year is gonna be where storage ends up.

Which is where it is now we could see some support around that but people are going to drill into it as you quite rightly say or open up wells that <unk> produces that have associated gas into that so all of those factors suggests to me that this to 93 dollar range is probably the upper upper part in general with occasional spikes above that and.

Just needs to be in a position to take advantage of it which which we are.

Alright, thank you.

Done. Thank you appreciate it.

This conclude since it's conference you may disconnect. Your lines at this time. Thank you for your participation.

[noise].