Q1 2020 Earnings Call
Good day, ladies and gentlemen, and welcome to the first quarter 2020 Continental Resources incorporated earnings Conference call. At this time, all participants are in listen only mode.
Later, we will conduct a question answer session and instructions will follow that.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by <unk>.
A reminder, this conference call is being recorded I.
Now, let's turn the conference calls over two quarter seems to be.
<unk> Vice President of Investor Relations. Please go ahead Sir.
Good morning, Thank you for joining us.
I would like to welcome you to today's earnings call.
For today's call with remarks from Harold Hamm, Executive Chairman and build Barry Chief Executive Officer. Other members of management will be available for culinary, including Jack Stark, President and Chief operating Officer, and John Hart Chief Financial Officer.
Today's call will contain forward looking statements that address projections assumption thank god.
Actual results may differ materially from those contain forward looking statements.
Please refer to the company's FCC filing for additional information concerning these statements ambrish.
Addition, continental does not undertake any obligation to update forward looking statements made in this call.
Finally on the call, we'll refer to certain non-GAAP financial measures.
A reconciliation of these measures to generally accepted accounting principles. Please refer to be updated investor presentation that has been posted in the company's website at www Dot Steele, our dot com with that I'll turn the call over to Mr. huh.
Good morning, Thank you for during our first quarter earnings call.
In response to the unprecedented times, where pricing continental has taken consistent and proactive stepped in her we're preserving value over volume.
We are using this town current even further refine our operational efficiency.
When we provide original budget in February.
We were already forecasting I fundamentally oversupplied market at a perfect half the year. So we reduced our pace a world to deliver a disciplined approach to value creation.
In March we were hit by demand destruction incredible to cope with my team as well as the dumping actions in Saudi Arabia in Russia.
Thanks for high school operation Tame, the Optionality were portfolio.
Her predominantly held by production acreage position gone now quickly responded as the first mover and adjusting our plans.
Thousand 20.
They're spending by 55% versus our original budget.
In response to the unprecedentedly low prices.
We began voluntarily.
Curtailing upgraded all production.
Across the Bakken and Oklahoma and her Kirk totaling up to 70% and May.
Our internal supply and demand model, it's consistent with the extra model.
So yes, there's significant reduction in production due to decreased.
Capital expenditures and worldwide.
Elements.
They have data from recent Peyronies reporting commentary the U.S. all gas industry, coupled with his block that.
Coming out of Opex, plus they're starting to curb production at two not overwhelms George capacity.
We're also seeing raising of stay at home ordered across the globe as economies get back to work as we have here in Oklahoma, which we believe will lead to increased demand for petroleum products.
The Saudis in spite of recent efforts and having taken steps into right direction have needed.
To do more with recent demand that was down more than 30% and their announcement. This morning, validate this and as demand slot.
It's important that do you have to oil and gas industry as well as other global producer continue exerting capital discipline to not overproduce Santen oversupplied market. During these times there one needs to continue to cut back can participate at the slump continues.
Yes.
Yeah, they usually in Kuwait are examples of this.
Our models show that the market began balancing by mid year and predicts 2021 will be strong in 2022 will be even stronger.
We're already beginning to say the consequences find a bad rebalance manifest <unk>.
<unk> current and future prices.
I know that you would prefer that warm.
Oh from our model at the how we ramp up production over the next few months. We believe it's best for the company to remain flexible as a market recovers.
We also know makes parents, we can quickly bring this deferred production back online.
Market conditions improve I will not the degradation in red more performance as well they brought online.
We're doing our part to responsibly preserve our high quality assets and shareholder capital as a later in this industry.
So bill will provide more details about the fiber on the call [noise].
Finally, I'm thankful for President <unk> leadership, and the Mets today's volatile market conditions.
Well it is unlikely as hot as well flooded the market like this again anytime soon.
I believe this recent down kind of highlighted to the federal government.
Good how important U.S. shale producers and the preservation of the American Energy Ryan's art art to U.S. economy jobs and to our National security.
I would now like turn the call over to Bill who will provide more details regarding our priorities and I look in its current environment.
Thank you Harold and good morning, everyone.
2020 Continental has continued to demonstrate its commitment to the responsible stewardship of our assets and shareholder capital as Harold mentioned, we are proactively preserving shareholder value over volume.
Referring to slide three our priorities include protecting our balance sheet preserving cash flow concerning our world class assets for improved market conditions and delivering capital efficient operations.
The strong portfolio Optionality and liquidity, we plan to be well position for when market conditions improve.
Continental has a strong track record of preserving shareholder value nice to the strength of our assets and the capital and operating efficiency of our teams.
Here are the lowest cost producer amongst our old weighted bears.
Turning to slide four drill bit FMT College, operating W.G.I. breakeven price and cash calls are consistently highlighted as peer leading by the investment community.
We delivered another solid operational quarter as our assets continued to deliver strong <unk> performance.
First quarter production exceeded both our internal and analysts expectations, averaging over 360000 Boe per day and over 200000 barrels oil per day.
Referring to slide five and six our teams delivered consistent capital efficient results from our deep inventory set in the Bakken and Oklahoma.
Production expenses Burby, Yeah, we have $3.61 and BDNA Orbio E F $16 and 35, so we're both well within our previously issued guidance range for the year.
All told you had a lot of 31.
Cash DNA at 81 cents or materially better.
Obviously issued guidance.
We spent $650 million a non acquisition capex in the first quarter. This is over half of the previously was our revised capex budget of $1.2 billion, which is 55% reduction from our original guidance.
The remaining $550 million in Capex will be spent over the next three quarters, and where you're already seeing the potential for cost to trend even lower.
At current strip, we're targeting to be cash flow positive in the second half a year.
We continue to demonstrate a strong commitment to our balance sheet, having reduced our net debt over 1.7 billion over the last four years, including this amount is 130 my man million dollars of principle that we repurchased and retired from late March to early April.
These bonds were repurchased at a steep weighted average discount to par.
Oh, 53%.
With no eminent maturities and borrowing base redetermination as well as an unsecured credit facility, where they have a strong liquidity position.
Harold mentioned, what your minimizing volumes by curtailing, 70% of operate at all production bison might.
Or about 60% of October, but you always nice.
I want to make it clear that all of this production that's cash flow positive at today's prices.
I like to further highlight the depth of continental flexibility and optionality to preserve value.
And anticipation of the possibility of a continuation of an oversupplied market. We have today refrain from entering any at all sales agreements here.
And your we intend to continued curtailing all production selectively targeting sales that maximize our natural gas production to take advantage of the momentum and natural gas prices.
This enables us to have the flexibility consistent with our plans to defer our production for a more stabilized constructive.
At higher price markets that we perceive is eminent.
Referring to slide seven well highlighted.
Oh, I, 55% reduction to capital spend from our original guidance.
We will also reduce our rig count by over 80% from the beginning other here, we have dropped our expectations for Red Utilizations from about 20 rigs to four rigs by year end 2020.
Zero stem crews running in Bakken and expect to average once them here in the south for the remainder of 2020 <unk>.
<unk> suspended our quarterly dividend and are prioritizing liquidity and debt reduction.
While we were repurchased 1.1 million shares in the first quarter at an average price of $15, a 60 cents per share.
This represents more than 2% of our shares outstanding.
We have now suspended our share repurchase program.
We have minimal long term service commitments and the majority of our acreage is held by production.
As the current price environment remains dynamic given market uncertainty caused by Cobot 19. The company has decided to withdraw its previously issued guidance were 2020 and suspend further guidance.
We will reassess issuing their guidance as market conditions conditions continue to evolve.
In closing I want to take a few moments take knowledge and like all of our employees and team members.
Let's see those in the field for their continued commitment to safety and operational excellence.
In these.
Hi.
Our teams have demonstrated exceptional nimbleness and responding to changes in capital and production targets.
Turning to deliver exceptional capital efficiency and cost savings across all operations.
I've covered 19 related risk restrictions and limitation placed on each of our team members and their family.
Put a great deal of stress on each and every one of them did the team continued to deliver outstanding performance across every part of their organization.
Hi, My sincere complements and the Baton Rouge and go to each and every one.
Can't imagine a more committed and capable team and the continental resources pain.
Crowds and the partner.
With that we're ready to begin the cure a nice section of our call I will turn the call back over the offer.
Thank you we will now begin the question answer session.
Ask a question you May press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before passing the keys.
To withdraw your question. Please press Star then too.
In the interest of time and to make sure we are able to hear from as many questioners. That's possible. We ask that you limit yourself to one question and one follow.
Our first questions, Dave will come from a room Jr. Please go ahead.
Yeah. Good morning, I wanted to get your views, perhaps for John on on what sustaining capital it looks like today.
From a didn't see total perspective.
For the Oh It was wonder if you give some color on the Bakken versus the south.
Yes got about maintenance capital.
That's correct.
Okay. So you know the fourth quarter, we pretty much talked about maintenance capital just about every quarter, it's very fair.
Question. So if you look fourth quarter two first quarter.
Those are the production levels the ratner out there now so they're pretty consistent you know we've talked in the past about a maintenance capital per day and see being in the one five to 2 billion range. We've always been very much straight down the middle of the fairway I've seen a lot of questions off from a lot of companies on some of them look at it.
Differently some of them factor in a lot of Ducs some of them factor in lower levels of production I think it the but just being consistent not applying the benefit of ducs not applying some of the other things that some others. They just the normal course, we could hold in that one five to 2 billion for several years and hold flat.
The fourth quarter. The first quarter you know in those numbers. If we weren't applied ducks are we were to do some of the other things we could reduce that number lower.
For year, one certainly and additionally, as we're going forward, we're continuing to repeat fishing season additional cost benefits and Oh, I can see that Doug going even further down with those types of things factored in but just to be right down the middle Fairway I'd say, one five to two.
Great and just as my follow up John.
The cash balances did rise in the quarters I was wondering if you get broadly talk to you know the balance sheet management in the downturn.
And it looks like you did touch on the.
Facility, but it just wanted to get your thoughts on just managing the balance sheet.
On a conversation was it.
Certainly thank you are right, obviously, we've done a lot of things from a cost savings perspective, you've seen reductions in DNA from what was already a remarkably low gionee 81 cents on cash DNA in the first quarter. So were very strong in those categories going into the current in our banks are very strong our credit facilities.
We don't have covenants are really in their debt to capital covenants only one we have an were well so below that and.
We're not there's not any realm of even approaching that our debt would have to go up by $8 billion. The to hit that covenant levels. I told you. We've got a lot of cushion, but going into the bars with everyone moving to remote work with banks moving to remote work just with concerns that you know how would this work because none of.
Yes, I have ever dealt with these types of things before the virus I'm speaking to we decided to go ahead and have a little bit of cash on hand, just.
Go ahead of time, just to make sure that if there were a hiccup in the systems and drawing cash with debt payments and other things interest payments coming due that we would have that cash in hand, so yes, we were probably.
Maybe overly cautious, but we wanted to make sure the morning hiccups in the system. So we did access a bit.
Okay, that's very large from the revolver with a lot of liquidity.
Great makes a lot of said thanks a lot.
Thanks, Ryan and talking to you.
Our next question will come from Brad Heffern with RBC capital markets. Please go ahead.
Hey, good morning, everyone I'm a question on the shot and Hey.
So you talked in the prepared comments about how all the wells that are shut in or are still <unk> cash flow positive and so I'm curious if the shut in or really just supply demand related or if there's some sort of price component you know where you're looking for certain price to sell the oil out and so is there a chance that weekend.
He is the shut in linger or even if we do see a recovery and create more than we have already.
Yeah. Thanks by the good question.
Well we.
And doing internally as a a lot of analysis based on optimizing accommodation of cash flow present value and that debt repayment and everything we've been doing as orchestrated and that effort and if you look at the way we view the world has been a clearly destabilize world. The supply side has been destabilize, we're saying that starting to correct.
Lastly, with Cobra at night paying the demand side with significantly they stabilize we're starting to see that come out and on top of that we're saying the market pricing mechanism with the the Mart going negative also Andy stabilize world. So those three destabilizing factors you know, we've kind of taking the position that will.
What kind of manage this in a very deliberate approach taken a look at when we want to put our volumes back on.
Clearly from a contango point of view and from a fun fundamental point of view can do analysis on this and say, yes, you should look to at some point in time, bringing production back on just probably look at doing that eminently as I said in my my comments.
At the same time as you see that contango start a the shift a little bit ULE socs and doing that from the fundamental.
You'll start to see us probably looking back end of the bringing production back on.
Okay. Thank you for that and then I guess as far as cadence for the rest of the year goes you talked about the one stimulation current Oklahoma you said there are no backend Chris currently should we assume that that's the case for the rest of the year or is there a chance that potentially Bakken completions come back at some point. Thanks.
Yeah, we're we're not going to provide that level of guidance at this point in time, Brad, but you know the spend right, which is the cadence you're looking at though it's a little bit.
Faster in the second quarter, then third in the fourth but they will not a whole lot of difference between the quarters and then well we're going to make a judgment call him month by month take a look at what the the fundamentals are looking at doing and then make it that determination was to when we start bringing the stem crews back down.
Recall, Brad <unk>, possibly below a one to budget also so.
Responsibility.
Okay. Thank you.
The next question will come from Doug Leggate with Bank of America. Please go ahead.
Thanks, Good morning, everybody joined I hate to beat on the maintenance capital question, but I Wonder if I could just ask you to clarify.
[music].
When you talk about sustaining capital I guess, you were talking about fourth quarter 19 first quarter 20, what do you think the exit rate looks like in.
[noise] exit exiting 20, if you like and.
I'm really curious what dot maintenance capital looks like and I guess, if I could just clarify a little further.
Do you preserves the production capacity by shutting in the production. So essentially the same number I guess I'm looking for the exit rate on the sustaining capital goes along with <unk>.
You've got you've got a lot in there Doug.
So obviously, we retracted guidance for the year I rent, we recognize that you need would like more color on that let us get back to the markets that we talked about in bringing production back on and we'll give you additional clarity on the balance of the year here as we go forward for the year, obviously, if you're not completing.
Can you got normal declines when you're producing your production would come off a little bit with the efficiencies and cost savings that we talked about that capital that maintenance capital number I would expect to go down a sum it might still be within the range. We've given towards the lower end it might be below that and if we factored things such as Doug.
So in other things in it could be remarkably lower than that so there's a lot of a lot of flexibility. There we feel good about where we're at will give you more color on exit rates in fourth quarter production as we see the cadence of burnt brain production back on from a reservoir perspective, I think that was the last part of your question look.
We've dealt with weather and other things in the Bakken for well over a decade our experience in our history in the plays. We're in shows is there is no impact of shutting in production, so where we don't expect to have any impact whatsoever. So yes, we're preserving the production capacity into what we believe will be a yen.
Imminently better commodity for us.
So to be clear then exiting 20, we should still think about one half to 2 billion as the sustaining capital number.
No I would say I think it could be lower but let me see where the yeah, let's see where the exit rate is when we guide you on that will guide you on that we'll update that maintenance capital for you as well.
No I know is not we're not pretending that any precision years. Appreciate the answers my follow up I mean, we've always tried to be transparent there and opened but obviously, we need to see how this plays out a little bit to make.
Sure, we're giving you good guidance.
Understand completely my follow up if I mean is probably four Harald the join you might want to chime in here as well on its really about the go forward business model for for Continental and how it if I could just we previewed this a little bit I mean, you've told us you've been very vocal lots is a little people about so these dumping.
Pumping oil and all the rest of it but but if we take a step but you guys might help some of the lowest cost us as an industry without any shot of adopt but not everybody does.
You asked as a whole increased by 50%.
From when September 2017, when Saudi started supporting the price. So you could argue that enough free market never really just basically saying, we're not going to subsidize the U.S. she'll model anymore. So I really liked your responses to weather.
You see this is a dumping issue or not.
I guess overenthusiastic on the words into Texas Railroad Commission wasteful production given the goofy pots in September 2017 coming out the other side of this will this continental strategy looked like I'll leave it there. Thanks.
Certainly a third it wasn't dumping issue they.
Picks them atrocious time to try to do that.
When they made their announcement.
Have discounting all end to market.
You know from Friday to go Monday that price was down 30%.
Yeah on May May night so.
To the 10th.
So it.
Was a dumping issue.
Yeah, I don't think they'll do this again, but.
You never know that I have a dose there were down and that that this doesn't work and.
You know they they increase your production.
All together by about 3 million barrels and and you see result of that with swaps floating on water.
So.
Lot of it out there but.
They're scared lot of reasons they can't do this.
And the future and one of them they protecting them.
Militarily and and.
Having them try to take his industry down heard national security in future.
So.
A follow up on your strategy going forward really good question I think what you're going to see as the the whole industry United States starting to take a different approach and I think you've seen that with lot of the comments that have been out in this quarter's report.
It's all this last quarter go out and say, yes, we're not going oversupply overproducer that oversupplied market.
And we took a very strong position for that effect. We continue that position I think what we're seeing in the industry as a future business model is market share, it's going to be an important issue and the market share capture right that the U.S. was pursuing in the past was probably not sustainable I think thats, what what happened here recently, so I would expect to see those growth rates.
Anyway in the U.S. over the next few years.
Any person what that means for continental.
Well, we just we established what though what we thought we could do a would there. This year and then you saw the the resource base, we have as capacity to deliver a lot more but we're not going to be provided guidance at this point in time as to those growth rates.
Thank you.
Yes.
I think to build point.
Yes, everybody you know count though.
I don't know if they were shocked the little bit tied down.
The percentage of growth and low percentage of growth that we put forth at beginning of year, but everybody. All the other operators out there have basically come back around to those numbers.
So.
Yeah, we weren't far off in well, what we what we did.
Does officially on the answer is no I hope you guys holding well up there. Thank you.
Thanks, Doug.
I will.
Our next question will come from Derrick Whitfield with Stifel. Please go ahead.
Thanks, Good morning all.
Good morning.
Regarding your voluntary curtailments for April and they wanted to see if you could speak to your curtailment strategy more broadly in terms of approach in most selection regarding approach I'm really focused on whether you're pursuing full shut ins or simply pension back on wells.
Yeah, we we've got I and internal model that we used to help guide us unless it's a well by well pretty granular analysis looking at everything from operating costs to yours to the differentials and that's what we're using to determine what we'd end up either curtailing or shutting in <unk>.
Most of the time it was a and a full shut down just because that's managing your operating cost in the most efficient matter, but not always.
Jack I want to what do you have anything else you want to add to that.
Uh huh.
And as a follow on question could you comment on your views on the economic conditions required to return wells to production I imagine, it's a function of the future curve, but there's also some differentials at play as well.
Yeah. It would it's more to the fundamentals and the the three things that then I mentioned earlier.
Clearly had that they stabilize supply market and we're seeing those fundamentals changing we clearly had a destabilize the demand side and we're saying that change.
On the destabilization that they that was caused by the Merck, allowing the deputy either go negative has put a pretty big shadow over all of us as to how we go forward with the nominations and the commitments of volumes.
And you got probably understand it and I'm sure everybody is run the numbers, but for each and every producer in the United States that sold on WT I. The April price impact of the average price of April was probably two to $3 reduction for every barrel sold in April as a result of the no.
Negative number that we saw on deputy eye and what we're saying now yeah, there's 5 million barrels more and storage.
In Cushing than there were then.
And so there's even tighter storage market and so I think we continue to watch it closely as to see if that does stabilize the market pricing mechanism containers or not.
[noise], Thanks, guys very helpful.
Thanks dirt.
Our next question will come from Gen Y with Barclays. Please go ahead.
Hi, good morning or afternoon, everyone. This just anyway.
Hello.
Hi, Good morning. Thanks for taking my question. My first question is on capital efficiency in the presentation. It looks like there's a meaningful increase and capital efficiency. The springboard anticipated for this year and a slight improvement in the Bakken. So you're just wondering can you provide a little bit more color on this and how much of this improvement.
I guess sustainable if we see your price recovery.
Oh, thanks for the questions in the Middle Jakone, Yeah, you're referring to slides five and six in the deck here and I'll start with five Bakken there and I'll start off with the chart right on the top there to begin with just to emphasize just the strong repeatable results. We continue to get from the Bakken I think thats just an amazing.
Are you see basically three.
Years, plus another quarter, our first quarter here and 20 and you can see how these wells are performing basically right in line with each other over that period of time and so it's just a just a remarkable repeatability and that's we love about the Bakken is it's it's dependable performance.
So to try to put some perspective on how these cost efficiencies are contributing also to the caught capital efficiency of the play we've come up with this metric that you see on a bottom right hand chart that basically shows you.
The barrels produced in the first 12 months for every thousand dollar spent.
And you can see it's about a 12% increase over that three year period of time.
And so.
You know a lot of people are thinking as time goes on your capital efficiencies are going to decrease in are back they continue to increase.
So it's up to me, it's pretty impressive considering that you know we're middle innings in the Bakken as opposed to early innings now to go to page six you look at say springboard here in your early innings and again on the top right chart, you see springboard completed well cost reductions of Bob.
24%, but we're also seeing drilling cost efficiencies and facilities are so many things going into this but when you get down to the bottom. Your chart you can see that's about a 76% increase you're exactly right as much more significant increase in springboard.
And that's just a result of the efficiency gains were making operationally across the play combined with the excellent performance of the rock.
You know it's it you got to have good rock for starters and then these these reflect the capital efficiencies coming from our operations.
And so.
I just think again it just shows the strength of the up the assets themselves in the and the excellence of our operating teams on how they are bringing these barrels to do market.
Okay, great. Thank you for that comprehensive answer this tragedy really helpful. Oh, So my.
Question, maybe following up on on Doug's question, but plenty out a little bit more towards the dividend I'm, assuming that we do see a price recovery does the dividends suspension lend itself to just a more conservative approach to capital spending going forward. So that you can accelerate maybe reinstating that dividend.
Yes, the dividend was suspended along with other reductions we made in DNA and other things to preserve cash in this low rate environment and liquidity and cash are the most important thing. So that was was a component of that we didn't eliminate it we suspended it so that is something the board can review in the the.
Future, but ultimately that's a board decision and I would be getting ahead of them to speculate one way or the other so I'll defer on that but we have a lot of optionality obviously.
Okay. Thank you for taking my question.
Anytime thank you.
No. Our next question will come from Neal Dingmann with Suntrust. Please go ahead.
Well My first question for John or Jack I'm, just wondered if this is kind of been asked some of that.
Michael It's a different way wondering how you all view feature priorities of your free cash flow, including potential stock buybacks debt repayment.
Reinstated dividend or organic or external growth because I side recall, not so long ago, you would place towards the top of the list repurchase stock and it looked like you had done that throughout first quarters I'm just wondering how you view the potters now.
Yeah, We did that January February early early February we haven't done so weve.
We're not there now I would say today its debt reduction you saw that we bought bonds or the discounting 53 cents on a dollar.
They are trading a lot lower than that but in doing that we eliminated in essence, we eliminated 65 million of total debt since we bought them at a discount if that opportunity presents itself again I would say, we'll we'll evaluate that al right now liquidity preservation and reducing debt would be.
The forefront of all those items.
Thanks, John and myself because for Jack I was just wondering Jack I touched on this also little bit earlier could you talk a little bit about I'm, just kind of curious from a broader standpoint would the minute more minimal activity at least potentially for the rest of year. How you would go about attacking the larger springboard and long Creek projects would would just having the minute.
Well activity potential in age.
Right.
Well.
Both those places so I mean, there there.
There are just the assets aren't going anywhere and with a reduced rig count of course will see these developing a little bit slower pace, but when you take a look they for instance, a long Creek.
We've got about 20% of the 56 wells, we plan to drilling there have been drilled and with facilities in place in and they're really basically ready to begin production once we get a.
Once we decide go ahead and stimulate the well so ill long Creek is in good shape and these wells are particular area that the of the of the unit where they can you know we don't have to develop this whole unit all at one time and so this is I guess you can say maybe phase one of long Cree given the lower pace of drilling now.
And then springboard Oh gosh development of course will perceive more slowly as result of rig count reduction, but again. These assets are going anywhere there is strong as ever and we'll bring them on is it makes sense.
No. It makes sense thanks, guys.
Thanks Neil.
And our next question will come from Bryan singer with Goldman Sachs. Please go ahead.
Thank you and good morning.
The original Capex plan that you talked about in the last call I believe had a lot of wells that were coming on later in 2020 or in 2021 and I believe the budget. The original budget had something like $700 million for wells that wouldn't come online until 2021.
In your current revised plan can you talk about how we should think about the lag between when investment does start to ramp up and when we would see the impact either on growth there on mitigating declined.
Three to six months after that you know you've seen that you can look back at historically over us once we start applying capital because we're on larger pads and we're doing big developments. It doesn't come on immediately but once we start bringing those on you're bringing on large volume. So I would say, it's a it's a fair.
A quick and robust ability to adapt tenant and bring that on but its.
Three to six probably towards the longer end of that cycle, just depending on the size of pad, where we're at the stage of it whether we have to drill or whether it's already drilled but all of those types things or something is already drilled its completing its real quicker in there.
But I think that fits well into a contango market and it fits well into our views of the market and obviously, we don't just fixate on spot for us as we're looking at longer term values and the ability to to enhance shareholder value.
Great. Thanks, and then my follow up is.
I'm going to take a shot at it but I don't know whether it will be successful any any ability to comment on what you see or ducks.
Yearend based on your current plan and then of the cost inefficiencies.
That you're seeing can you try to maybe quantify that and what could be cyclical versus what is that what is secular.
Yes.
Brian I'd say that you know.
We're probably going to be in about 150 wells and progress at year end in that range.
Last year, we're probably about 202 15, I think was a number.
So for comparison there there you go and.
Your second part of the question was cost efficient cost efficiencies they go and how much of that.
Would be forever gains versus temporary again, yeah, yeah cost efficiencies, we've talked about this even before the call just to verify but we're looking at cost efficiencies that.
Our dominantly structural at this point.
And that were that we're referring to here and so I'd say probably in a range of.
90% Pat would you say 80, 90% are going to be a sustainable and structural going forward.
Yeah, Jack and this is Pat Bad I think that is correct I think 90% plus.
Our structural in nature, we've done a really good job in terms of our pricing and.
Contracting new pricing that touched close to bottom, but the vast majority of will be.
Our structural in nature, so technical advancements operational bad Spence reduction nonproductive time, so so again, 90% structurals good enough at the yes, Brian in these times. Our teams are just they are leaving any stone unturned looking for ways that they can continue to improve efficiencies in the field in it.
Things, we've been going through with them here in the last few weeks is really quite impressive.
And where I mean, we're drilling some wells you know we do have some rigs in the area and we were setting records right now with some of the wells, we're drilling and just because of the infers deficiencies and and downtime elimination what have you that the teams have been able to do.
So it.
Isn't as the last time, we are going to come out of this downturn stronger and more efficient and we will.
Thank you.
Yeah, I am overpaid jacks last comment for emphasis.
It is significant the amount of benefit that we're gaining from this pause in activity so to speak to actually go back and look at our engineering and looked at the activities were doing both from geoscience and from the let's technical engineering side and Reconfiguring a lot of by activities and we're seeing that already manifest itself.
Often savings that Jack's talking about so we saw a stimulation that a Wi Fi cut 30% out of their cost him is it similar right stimulation just by redesign.
And the benefit came from haven't timed actually pause take a look at it because we're running so fast with all the activities. We had going on this gave us a chance to kind of sit and look at some of the data and other understand a little bit better.
Thank you very much.
Our next question will come from Noel Parks with Coker and Palmer. Please go ahead.
Good morning.
Good morning.
I was hoping you could catch us up on your gas marketing arrangement I was wondering if you you had anything.
Heading out into the future that you were working on earlier in the year before everything here.
Oil prices.
And.
Hi, Jeff.
Also just refresh is kind of where you stand on some of those I'm probably arrangements.
That were.
Put in place in anticipation of LNG.
Yeah, we don't have any any gas that's going specifically to an LNG contract, we're selling into the Mark were about 800 million. A day is what we're flowing right now on gas so quite a bit of Oh gas a lot of it from the south obviously with the.
Transportation benefit that we have here in the south.
Oh, great anything just with.
If you look ahead to two when you start ramping up activity again.
Just based on to the varying product mix across the different areas at the mid con.
Are there any particular areas that would be heading up higher and the priority list. If we are if we assume that ER.
The improvement we see it in gas actually does gets distinct.
No I don't think Theres any area in particular areas in stack and Scoop in particular are really a you know there meaning in Oklahoma. You know you have midship coming on and I'm, just speaking to a dynamic that could influence prices and actually improved.
Prices is just with Mitchell going on there's going be a lot of gas being taken out of the mid Con region and.
Good so could actually provide an uplift in the enterprise based is it possible for us here.
No.
Because we're not on midship itself so.
Hopefully.
Other than that we're pretty much business as usual.
Okay, great and just to sort of.
A follow up.
Hi, Virtu on from what's going on.
As far as the service cost component.
I'll be your air fees.
We have heard a lot about vendors looking even.
In this environment, where there's not a lot of activity looking to.
Continued to cut prices more I, just wondering do you have a sense.
Whether the drilling costs and the completion consequent vendor side.
Our kind of heading down proportionately.
Okay.
And you have a rebound you think those would also kind of go up. Unfortunately, it do you think you.
Could sustain better saving bond or.
Rig side, maybe as opposed to the Frac side.
No I think we mentioned a little bit earlier, when you look at the cost savings that we're able to generate currently 90% of that is structural which would lead to weather, 10% plus minus.
Subject pricing and so there's that small variability associated with the price now aspect of it whether moves down <unk> percent or to our up <unk> percent or to really the key is that the savings that we've been able to generate our structural in nature through our technical team.
Great. Thanks oil.
Our next question will come from Eastern RMR with Wells Fargo.
Please go ahead.
Good afternoon gentlemen, Thank you were taking my question I guess my first question I know this has been addressed a little bit, but I'm going to slide four you show some really strong cost efficiencies compared to peers you.
We've also taken probably what does the biggest curtailment that'd be cleared off so far this sorting season.
Just do you got it costs allow you to come back to work a little bit earlier I mean.
I'm just trying to understand what are your gating factor shipping back is working.
Yes, so clearly when you see the cost structure like that that suggests that anyone else that all most other companies that are producing they're producing at higher costs and so they're producing a cash flow positive at those calls we clearly would be producing cash flow positive at these costs and so it gets back to the earlier comment that made.
We just see that the there were three fundamental pieces that were they stabilized and we took our production off of that if you go back to to the production we had an April.
We would have actually prefer to reduce that production even further.
We had the nominations and commitments to the buyers that.
We ended up in delivering too and so what we're looking for is that fundamental strength thing and then we're starting to see signs of it and that's why we're seeing the but pricing, we think's going to eminently guest on strengthening here as a result for the fundamentals on the supply the demand side coming back and then the third one is the one I mentioned that we're still.
Looking at the market pricing pricing mechanism, that's the one that needs to get a little bit more stability and how it's going to be done in.
If I can get a clarification I think I heard you say that you were not taking any nominations right now does that mean for June or is that for me.
Bridger network, where we are already committed the with nominations in May.
And our next question will come from Paul Chang with Scotia. Please go ahead.
Thank you good morning Jen.
Well I think that the first one hi, I can you hear me.
Yeah. Thanks Joel.
Hi.
Good morning Bill.
Just curious that when at some point about the that <unk> a impact yet is going to though to be higher and if we see a multiple in moments when you're going to spend money first yes in Bakken or again scoop and also that if we do you see a 50 thought out quite tight at that.
And is there typically level going to go back into.
Ill or region, but you got typically level or at that optical but you're going to happen at the local great. Although activity that's all.
Let's start with the last one Paul and that a you know we.
We highlighted earlier in this year that we were going to see a growth rate. This year attenuation of the growth rate that we had over the five year plan.
And so we we were expecting that though this market share issue was going to be are coming to fruition. It as the realization that were off.
Right now so so we already headed attenuated that and the slides that [noise].
Jack was referring to show on the the inventory in the strength of inventory. So it's not a function of inventory. There is a function of just like we all do more measured pace.
And as far as the the Bakken versus the Scoop.
Like what you'll see there as a word on like that determination on the fly as to whether and we're seeing the the strengthening of the fundamentals on the gas or the fundamentals of the oil driving that the good news is we've got full flexibility to do that we've got a.
Range of assets in the in the South that go everywhere from load Youre, the hydro along the Gulf assets up in the north at a really strong strong old focus and so with the portfolio. We have we have that optionality.
And our next question will come from Gail Nicholson with Stephens. Please go ahead.
Good morning.
Can you talk about your thoughts on the Workover and Recompletions and the current price environment and has your philosophy on that program changed at all.
[noise] level work.
On the Workover and Recompletion is that your question.
Yes.
Are you guys are thinking about that in the current price environment and at that philosophy on that program has changed at all going forward.
Well, we currently don't have a recompletion program, but active and had.
We had a few.
In Europe that that in this environment, we've discontinued that.
Our perspective.
I will now workover rigs active in the Bakken.
We felt like where necessary for the critical well activity that we have there, but have reduced that that cap pretty dramatically as well.
Some of our non ops have done a fair amount of.
Recompletions, they've still got to view in their system. So we get quite a bit of data and that's something that we'll be evaluating that data further as we go forward. So there's still some progress there yeah. Most of that falls into what we described as discretionary spending and weve pretty much eliminated all discretionary spending.
Okay, great. Thank you.
This will conclude today's question answer session I would like to turn the conference back over to roars to be know for any closing remarks.
Thank you very much for joining us today. Please I'm addressing further questions to the IR team and have a great.
Thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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