Q1 2020 Earnings Call
Good morning, welcome to Earthstone introduced conference call at this time off distance or in listen only mode. Brief question answer session will follow the formal presentation.
If anyone takes your car operate assistance during the conference. Please press Star Zero on your telephone keypad as a reminder, this conference call is being recorded.
Joining us today from Archstone or Robert Anderson, Chief Executive Officer, The President Mark Lumpkin, Executive Vice President and Chief Financial Officer, That's got cylinder Vice President Finance.
Mr. Founder you May now begin.
Thank you and welcome to our first quarter conference call before we get started I would like to remind you that today's call will contain forward looking statements within the meaning of section 27 day of the Securities Act of 1933 as amended and section 21 of the Securities Exchange Act 1930.
For as amended.
Although management believes these statements are based on reasonable expectations. They can give no assurance that they will prove to be correct.
These statements are subject to certain risks uncertainties and assumptions as described in the earnings announcement in quarterly report on form 10-Q that we released yesterday and in our annual report on form 10-K for 2019.
These documents can be found in the Investor section of our website www dot or stone energy Dot com.
Should one or more these risks materialize or should underlying assumptions prove incorrect actual results may vary materially.
This conference call also includes references to certain non-GAAP financial measures.
Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings announcement released yesterday.
Also please note information recorded on this call speaks only as of today may seven 2020.
Any time sensitive information may no longer be accurate at the time of any replay a replay of today's call will be available via webcast like go onto the investor section or stones website and also by telephone replay you.
You can find information about how to access those on our earnings announcement released yesterday.
Today's call will begin with comments from Robert Anderson, our CEO regarding near term strategy and operations.
All by remarks from our CFO, Mark Lumpkin regarding financial matters and performance and then some closing comments from Robert I'll now turn the call over to Robert.
Thank you Scott and good morning, everyone. We appreciate your joining us for our first quarter conference call like many of you. We're working remotely from our homes. This morning or with very limited staff in our offices as we follow the guidelines of health experts and regulatory agencies.
The safety of our employees its top priority and we are pleased that we've been able to managing conduct both field and non field functions effectively thus far.
On field personnel had been working remotely since middle of March using information technology. We previously invested in our field personnel that must go to a work location or following the safety protocols that we put in place and are performing their job responsibilities with no issue so far.
We appreciate the diligence of our team and service provider partners. These are challenging times and I. Thank our staff for their continued focus on achieving our goals and objectives and for doing their part to keep themselves in the community safe.
We had a good first quarter and hit on our internal targets for production adjusted EBITDAX and cash costs, which mark will discuss in more detail shortly but I'd like to highlight that our low cost business practices and our prudent balance sheet management have continued to serve us well, especially in the current environment.
With the energy industry facing unprecedented challenges due to the covert 19 pandemic and resulting historic low oil prices. We're fortunate to have a very strong hedge position consisting of fixed price swaps that afford the maximum downside protection and low leverage with.
Entity.
We also have no long term service contracts no minimum volume commitments and earlier in the year, we negotiated extensions on all our 2020 drilling obligations, which gives us the flexibility to actively adjust our capital program and curtailed production as we see fit we expect to focus on cash.
Cash flow generation and reducing debt for the remainder of 2020.
With the deterioration if oil prices, we began shutting in low volume high cost producers in mid April as prices declined further in late April to what looked like single digit net oil prices for May we decided to voluntarily reduce a significant portion of production from our operated wells for the.
Near term.
We currently expect to curtail or shut in 70% to 80% of our net operated may production.
Where we are a non operated partner the shut ins appear to be a little lower and therefore, we estimate that shut ins for may could range from 55% to 70% of total net company production volumes.
We made this decision inspite of the fact that our direct operating costs across all our assets averaged $6.50 per BOE, we in the first quarter and with production taxes.
Get approximately $8.60 per be a we have operating costs.
As you can appreciate this has been a moving target over the past week or two and is subject to further change.
Well it seems to us as though a significant volume of voluntary curtailments is occurring across the industry and that for shut in seem less likely in the near term we cannot guarantee such will be the case for all of may or in future months, its storage potentially fills up and demand recovery remains uncertain.
Our actions for June shut ins will be determined based on prices later this month as well as how these other factors look to be playing out.
Accordingly, we have withdrawn our 2020 production guidance as well as our per unit cost guidance and will we will revisit. This later in the year as we gain further clarity on production volumes in oil prices.
As a brief operational update in March we announced that we reduced our capital program to a range of $50 million to $60 million for 2020, and we're not making changes to that guidance in the first quarter, we reported capital expenditures of 41.8 million. So the annual spend as large largely complete.
In late May we expect to release, our one operated rig which is in the Permian basin drilling on our six well pad.
In our Ratliff project in Upton County, Texas.
Obviously, we are quite disappointed that this crisis is causing us to lose the strong momentum we had worked hard to create in the Permian basin.
As an example of our continued focus on capital efficiency during the first quarter, we completed and brought on line three gross and net operated wells that were drilled in late 2019 on our Wttg project in Reagan County.
These three wells achieved an all in drilling completion and equipment cost per lateral foot of about $760 about a 10% reduction over the 2019 average cost per foot.
We also had 15 gross.
Or 3.1 net non operated wells brought online in Martin County during the quarter.
Also during the first quarter, we finished drilling a five well project on our Hammond 30 unit that was in process at year end.
And as I mentioned, we plan to finish drilling the six well ratliff pad, which is in progress now, but we will delay the completions of all 11 wells and the drilling a future wells until there is an improvement in oil prices. So our adjusted capital budget results in bringing online three operated wells and the 3.1 net.
Non operated wells at this point, we expect no additional new wells coming online in 2020.
With that I'll turn it over to Mark to review the financials.
Thank you Robert.
As we did in the fourth quarter call, we're going to start today with a recap of our balance sheet liquidity, particularly given the current market conditions.
On March 27, 2020, our borrowing based on our senior secured revolving credit facility was set at $275 million. Despite much lower price decks assumed by the banks in the recent termination.
Borrowing base was only released by 15% from our previous borrowing base, which we think is reflection of the quality of our assets and financial profile.
March 31st our outstanding borrowings under the credit facility were $152 million, a reduction of 11% compared to $170 million an outstanding borrowings as of December 31.
And I'll remind you got the debt we have the credit facility is our only outstanding debt.
As of March 31st we had approximately $5.1 million in cash and approximately $123 million and unused borrowing capacity for a total of approximately $128.1 million funds available.
And responding dramatic decline in oil prices in March we hedged our 2020 excuse me in March we reduced our 2020 capital plan by 67% to a range of $50 million to $60 million, while heavily hedged for 2020 before the company might think prices impacting oil prices. We have continued to build our hedge book, including having added incremental.
Oil hedge volumes in March for 2000 purpose for the second quarter and the third quarter. Some more closely match our PBC profile.
Given up nearly all of our PDP oil production is hedged Wi Fi price $57 per barrel for Twoq through Fourq, you and that we have initiated actions to reduce our 2020 caps DNA by targeted 25% previous plant, we do expect to generate significant cash flow beginning in the second quarter 2020. So this.
Listen this puts us in a strong financial position to improve our working capital position and further reduce our borrowings in our credit facility to provide additional financial cushion and flexibility.
As an aside on use of expected free cash flow in the near term I would expect that during the second quarter, we will work down our working capital deficit now considering heads assets and liabilities quite a bit and I would expect to have a bit higher debt balance at quarter end twoq versus at quarter end, one too on that basis.
Now looking there 2021st quarter financial metrics and starting with the topline revenues for the first quarter were $45.1 billion with oil contributing about 91% revenues.
Total production standpoint, our first quarter sales volumes averaged 15767 barrels of oil equivalent per day and were comprised of approximately 61% oil with 19% natural gas and 19% natural gas networks.
Now let me thank you Mick, especially our hesitation in more detail as of quarter and we had approximately 8000 barrels of oil based walk in the remainder of the year at an average price of $57. This is a bit sculpted starting at 9000 barrels per day in Twoq, you stepping down to 8000 barrels per day in Threeq, you had been down to 7000 barrels.
They in Fourq you.
We have 4000 barrels per day of oil swaps in 421 above $55 WGS pricing.
We also largely have the underlying basis differential swaps and on the natural gas side, we continue to benefit from strong hedges spaces welcome back.
Just to provide some context on the financial benefit of our hedge but as of March 30, Onest the mark to market. It hedge book was approximately $93 million.
In terms of commodity pricing during the first quarter, our oil prices averaged 46 are.
Per barrel, which was right around 100% of buybacks natural gas prices were 65 cents per mcf or about 33% buybacks and natural gas liquids prices were $11.01 per barrel.
This resulted in an unhedged average realized price of $31 from 46 cents per barrel oil during the quarter.
Our hedging program significantly improved our price realizations to $52 and 62 to $52.62 per barrel for oil $1.19 cents per Mcf for gas West NGL, which is not hedged remaining at $11 in one sense and this resulted in an average realized price, including the hedge settlements of $38.
As in 25 minutes per barrel of oil equivalent during the quarter.
On the expense side, we again achieved our targeted said $10 per barrel of LNG E and cash DNA without slowly coming in at six bars, and 51 cents per Boe and cash DNA coming in at $3, a nine cents from the four $9.60 per BLE in aggregate.
We have targeted 25% reduction in cash DNA on absolute basis versus our prior guidance, which is around the low end of the updated 15.5 to 60.5 million our guidance for the year.
We aim to achieve this primarily through a reduction in executive compensation, but also through some further cost saving initiatives that are initiatives that are in progress. We do really highly valued our employee base and remain very fair because it's a management team on doing everything in our control to keep our employees fully utilized we're making investment in our people and his team effort and we will continue.
Do you have employees in that light.
We also introduced our interest expense by about 5% from the fourth quarter and our production AD valorem taxes were 22% lower sequentially from an income standpoint, we reported GAAP net income in the first quarter of $36.7 million or 57 cents per diluted share what's reflected the pre tax gain of 99.8 million dollar.
What are the road the contracts the 2021st quarter results also included a 60.4 million our impairment expense of which 42.8 million was related to oil and gas property impairment driven by low commodity prices and $17.6 million with a goodwill impairment.
Adjusted net income a non-GAAP measure was $8.2 million or 13 cents per adjusted diluted share for the first quarter.
We recorded adjusted EBITDAX also non-GAAP measure up $38.2 million in the first quarter. Please see our earnings release for explanations and reconciliations of non-GAAP measures with that I'll turn it back over to Robert.
Thanks, Mark again, I'll reiterate we had a really good first quarter.
While the severely depressed commodity prices persist, we will be even more diligent about cost control and efficient management practices, while we continuing while continuing to focus on health and safety, our employees and contractors as well as the protection of the environment and the communities, where we work as I said earlier, we continue to manage and produce our.
Properties, as we wind down drilling and completion activities experiencing no complications arising from our cobot 19 mitigation efforts. We're also focused on maintaining our strong balance sheet position throughout the year and continue to target being below one times levered at year end 2020, our strategy has not changed.
Despite the current challenging industry conditions, we continued focus on low cost efficient operations and on building scale through value enhancing.
You plentiful in this distressed environment, we expect to be a part of the consolidation that will occur as a result before we take your questions. We would like to say thank you again to our to our dedicated personnel who are working smart and adapting to this new challenges we have.
Our hearts go out to those being affected by this pandemic and our deepest thanks to those working tirelessly to help us persevere through it we will continue to focus on making the best long term decisions for our company and key stakeholders and believe our experience and resilience will make earthstone stronger in the days in years ahead with that off.
Operator, well turn it over to questions.
Thank you will now be conducting a question and answer session. If you wanted to ask a question. Please press star one on your telephone keypad and the confirmation total indicate your line is and the question Q.
Let me first started to if you'd like to move your questions from the Q.
Just consider using speaker equipment, it may be necessary to pick after handset before pursuing starkey.
One moment, please so we pull for questions.
Thank you.
First question comes from the line of Brad Heffern with RBC capital markets. Please proceed with your question.
Hey, good morning, everyone.
I've a couple of questions on the shut in so.
First of all.
What was the rationale behind the shut ends because obviously it's not.
Ill close to the op costs. So was there some component of difficulty marketing the barrels or was it purely based on sort of the forward curve and outlook for oil.
It was really Brad based on.
Not wanting to sell or oil at.
567, $8 is what it was appearing to look like in.
In late April so we made that decision.
And it's a game time decision to adjust that as we as we move through the month.
Okay Fair enough and I guess can you talk about the confidence that you have but the wells we'll come back to.
Something like the rates if they were at and then also does this have any implications for the lease agreements.
Sure one thing is it from the lease agreements standpoint, we're not shutting in wells very long.
And where rotating wells throughout our different leases.
So in general a wells will produce at some point a little bit during the month, so that satisfies that issue.
You know we have confidence that our wells, we'll come back to where they were based on wells that were frac hit in the past coming back to the line the forecast.
And again, we're not shutting wells in for very long time, and the majority of our wells.
Other than a few new wells have been on long enough that we don't think theres any detrimental effects. The other thing is we're not sitting in old waterflood, where you've got momentum built up in energy and things like that that create issues.
From a reservoir dynamic standpoint, so we just felt like the reservoir risk was pretty darn well.
Okay got it.
And then at the end of your comments Robert you mentioned.
You might be part of the resulting consolidation from this I guess, how do you think about.
You know.
Contrast between they're likely being distressed assets out there, but also the uncertainty if the situation and you know probably that desired also just hunker down thanks.
Yes, I think it both of those things are our true theres going to be distressed assets and therefore sales of properties.
Will participate in those.
Properties that makes sense and then you're going to have the asset market.
Shutdown until there's a little bit more stability in prices with the movement in prices here recently that should help.
Sellers, who for whatever reason need to sell or want to sell.
Maybe again foregoing stress in the fall something like that just.
These times create opportunities and.
We're going to try and take advantage of.
Gaining some more scale through this.
Okay. Appreciate the comments thanks.
Yes.
Our next question is from the line of Neal Dingmann with Suntrust. Please proceed with your questions.
Let me all but rather but first question just on your future activity I'm. Just wondering are you able to address the prospects efficiently going forward would the with the one rig or would you occasionally.
Again, I know that makes a lot of sense, now and especially given the pristine balance sheet, you'll continue to keep that I'm. Just wondering is there a point to.
Either because HBP or just whatever would this acreage going forward, where it would make sense from either because of that reason or just efficiency that it would make sense to combat you'd have to come back with more than one rig two or three rigs or anything like that.
Oh, that's sort of a mouthful Neal so we.
You know at some price, we're going to be comfortable to come back and what is that exact price.
I don't know what it is but definitely a four handle gets us a little more excited about coming back with the rigs, especially if we can.
See reduced.
Costs.
I think we're going to have to build up the efficiency when we come back.
Because we will you put a new team back on the field, it's going to take a little bit time.
From an HBP status and obligation status, we pushed everything out a year. So we've got lots of time to evaluate and if prices remained at some.
Low level to where the economics Didnt justify then we would go back to those same groups and ask for another annual extension or in some cases, we may depending on the size of the acreage position just let does go by the wayside it depends what the environment looks like but where.
We're.
Optimistic that oil prices are going to recover and we're going to get back to work.
And we think sometime in 2021, whether its january or maybe it takes all year, but we think that thats the case.
And then just lastly on the non up what's any any thoughts I guess I had heard I don't care to offset on just like what crowd question.
In any thoughts or forecast for what's your thinking there for the remainder of the year.
Speaking to all of our parties, who operate in areas for us they have all put our particular acreage and any new activity on hold.
We had some plans in Midland County, with one of our parties to drill a couple wells and then when when prices started deteriorating rapidly in March we put that on hold as a group. So right now there is no. There's no discussion of having any capital plans for the rest of this year.
Very good thanks, guys great financial.
Thanks Neil.
Our next question comes from the line of then Mackintosh with Johnson Rice. Please proceed with your question.
One Robert Mark.
Yes, most my questions were asked but a quick question on the revolver. You know you got yogurt out early in just a 15% wondering if you get any sense from the banks as we look to the fall Redetermination and if prices do materialize that do you think that kind of the level year. After year, you feel pretty comfortable into 275.
Thinking about the banks exposure to the industry.
Hey, Mark do you have Charlotte.
Yeah, I'll pick out not done. Thanks, Thanks, that's a great question.
You know, we obviously when prices fell pretty sharply in March we made some pretty decisive decisions even before oil got to.
A worst spot and to US we're looking at the economic decisions and that's true as it relates to the Capex. It's also true as it relates to the the shut in.
Our number one job is to be good stewards of our resources for our shareholders and then secondly for employees.
That's what we're going to do every cycle the way, whether it's making decisions on while do want to sell barrel of oil for eight bucks or 10 Bucks or do we want to not so it realized hedges and saw that barrel later for a higher price or the capex.
How we spend our DNA et cetera.
And in terms of the borrowing base. We did go early because we saw some signs certainly not to the extent.
Realistically because we.
Set the rig down.
Bringing on the new wells and the borrowing base is just going to go down play now fall because you're really looking at an actual PDP decline for the most part now can you get into some math about if you shut in next barrels for extra time does it actually push some of the PDP further out yes, but were honestly not doing that we've got enough liquidity that we sold.
Very comfortable at the rate that we'll be paying down debt.
And what the PDP roll off is that even with index, the banks or use and now we're going to have plenty of liquidity.
That does go into our thinking of.
Capex and acquisitions and.
Maybe to ask a little bit of Brad's question on the M&A. There are lot of distressed situation out there, we're not going to become one it does whether its organically or doing some acquisition.
And as it relates to the borrowing base, we're looking at that and we've done our forecast in gold comfortable with where things are headed frankly, not just later this year, but even next year, if you weren't drilling.
And what the hedges, we could not produce barrels can pay down pretty significant.
Cost of debt between now and ended this year, especially but also next year.
Alright, great thing.
Well I follow up I was wondering if you could provide a little color on your marketing arrangements I know that.
One of the things, it's kind of been brought to light as as prices of class has been the role factor in these marketing agreements and I think it's gotten a little better is contained goes flattened out some but what do you see it on that front and kind of what role does that play and your decision to start opening in opening up the chips on some of those wells.
Back right now.
Maybe I'll pick up a fair for that question, then turn it over to Robert in terms of the roll on its typically plus or minus 25, 50 cents and with what happened with prices collapsing, especially in the near months you ended up in a situation where they roll is calculated on basically the month before so.
By late April we knew the role is going to be minus six or seven or $8.
We also knew that we're going to gain a pretty good negative differential on basis, both in Permian Eagle Ford as as Cushing over that time was trading at a premium so those two basins.
That absolutely was a critical piece of our decision on shut ins for May it looks a lot better looking forward to how that will apply to June probably by if you take the role plus the depth and.
It's probably about $10 better and that's a different economic decision.
And then certainly stretch risen since late April So you do think about different from an economic decision.
In terms of your marketing.
Maybe I'll kick it over to Robert to pick up.
What is going on there and certainly that pumping everybody's had to be a lot more focus on given the destruction. We're currently seeing.
Shut ins and.
Talking curtailment, no curtailment et cetera.
Yes, I would just say that on the marketing front, we are dealing daily with our purchasers both relative to May and what June.
Volumes were thinking about and we have a multiple.
A multitude of purchasers that we're dealing with and it gets complicated.
We have some entre we had some on pipe.
And so its nominations are in progress or thinking about and all that so you know as we looked at June June might look like.
I am getting more comfortable that we're going to turn more volume on in June.
However, you know as shut ins come back on we may be our worst enemy and prices may.
Take a turn for the other direction, we're going to have to just play that out as we get closer to the beginning of the month.
Alright, thank Joe and a congressional strong quarter and look forward to following along.
Thanks, Don.
Our next question comes from the line of Jeff Grampp with Northland Capital. Please proceed with your question.
Hey, guys.
I thought it was interesting it looks like you guys added on slide 10.
Kind of a future pad size expectation of four to five wells per pad, obviously, a big step up from where you've been historically should we think about that as being basically happening irrespective of the overall.
Rig count that you guys have and I guess, where I'm headed with that as you.
You guys, it seemingly or maybe more comfortable even in a one rig scenario with the extended cycle times and that maybe the efficiencies.
More than offset the extension there am I thinking about that right.
Ah Theres a couple of things you picked up on efficiency and Thats definitely true. The other thing is reservoir dynamics, Jeff So stacked benches, making sure you.
Develop them in the best way possible and you know kind of capture as much as a resource economically as possible.
That seems to be.
Another benefit so those two combined give us the pad size. So right now we're drilling a six well finish it up on the six well pad.
And our going forward or in that range now for four or five on average wells per pad.
So.
We hope that we can pick up where we are leaving off on the efficiency side.
And also gain that on the reservoir side.
Got it got it understood and more kind of a modeling question. This is more for for Mark, but any expectations for where we should think about oil mix kind of heading the next few quarters understanding that there are some.
Implications with kind of going to PDP blowdown mode, you give a sense of when that maybe kind of stabilizes I don't know what level.
Well I honestly, that's all I'm drastically different to US yes, you took down the oil content just the little bit.
Is that probably wouldn't be a bad thing, but it's not like we think it's 55% we think it so it pretty close to 60, 62%.
That being said, obviously, because we've got sort of an indefinite volume is shut ins for an indefinite time.
As the technical guys I'll remind you certainly it's not as you just spoken to light switch everything back what exactly was but generally speaking.
We're not expecting a to the degradation in the oil content.
All right I appreciate the time thank you.
Our next question comes from the line of John White with Roth Capital. Please proceed with your question.
Good morning.
I don't have a question I just wanted to say a Robert with all the experience you've gained with all the crashes you've been through it.
Really paying off now you've got the company in my opinion positioned as well as you possibly could so congratulations.
Hey, we send that note to Frank Thanks, John I appreciate it I have a Greg mentor so.
And a great team around us it's not it's not all me.
All getting tighter pricing.
Yeah.
Thanks.
Our next questions from the line of Jason Wangler with Imperial let's see if your question.
Hey, good morning, guys.
It may kind of dovetail with the last question there as you Robert you mentioned kind of rotating the production things can you talk about the operating or even capital costs that that entails as you kind of shut in wells and bring it back on things and then also as you think about getting it back into full production what would that kind of cost you and I assume that's kind of bunch.
You did in the the budget this year.
Sure Jason good questions and part of it is a little bit unknown, but I'll tell you that.
The ability to cycle from one well to the next in a unit.
Makes us confident it will bring these wells back on with very little mechanical issues, because we're putting chemicals around each wellbore and treating the rods in that kind of thing or and we did a good job before we shut in gas lift wells by.
Enhancing the amount of chemicals, we treated those wells with and gave them a big squeeze before we shut them in so that gives us some confidence than we turn these wells back on we're not going to have a whole lot of remedial capital that needs to be spent two to fix them now that said.
Theres going to be some cases, I suspect, where we're going to learn something and go whoops. We you know we would do it maybe a little bit differently in a particular area because each area is a little different chemical programs are a little different definitely between the Eagle Ford in the Midland Basin.
But in general we don't think.
Theres going to be any.
Material capital to bring all the wells back online.
Okay, and then you obviously you have the ducks kind of built up are you will hear pretty shortly.
As you think about again, bringing all the wells back on and all that stuff whenever it's appropriate wouldn't would it make sense that you'd probably complete some wells before bringing a rig back on or where you think that would be done kind of in tandem when appropriate.
I think there are two different decisions you know we get to the ended the year and oil is hovering where it is today.
Maybe we go ahead and complete those wells, but we're not bring in a rig back if oil 40 ish at the ended the year.
We're bringing a rig back end were and we're completing those wells and it's a balance between liquidity you know cash flow and all that so it.
It is gonna be sort of something we continue to watch throughout the year, we're not in a big hurry to bring those to complete those 11 wells.
It's somewhat price dependent I don't really have a price at where we're willing to do it it's more of what the future it looks like.
Okay I appreciate it thank you.
Thanks, Jason.
Our next question is from the line of Northparkes with core Coker and Palmer. Please proceed with your question.
Good morning.
I know.
Hey, just a couple of questions you mentioned.
Earlier about having extended.
The lease terms.
And some of your acreage and.
I'd, if I'm reading that right that's not reflected in the 10-K right expiration schedule there.
That's probably correct because in the K.
By the time, when we filed it and that's as of 12 31, our obligation drilling was set for the year.
And so we did negotiate in a couple instances, where those obligatory wells were pushed out a year.
Okay, Great I I was just wondering because I took a quick look at the but 2019 year end compared to the 18.
Number seemed like it gone up I mean, not a huge amount. So we got that would make sense. It was on was after that so thank you and.
As far as the.
One quick thing can sort of housekeeping can you.
Give me a rough idea of where the effective interest rate is is headed for second quarter on the and the credit line I I noticed a note about some interest rate swaps are going to be taking effect. This month.
Sure No it's mark I'll pick that went up.
Well it seems happen here in the pass through or for monsoons, LIBOR has tightened quite a bit which really.
Was why.
Caused us to look into doing some interest rate swaps.
Yeah, we've effectively got our underlying lager component swapped at a little under 30 basis points.
And Ray four year period, with some step downs, that's not on all of their debt, but it's probably 75%.
Or something like that.
In terms of the underlying rate right now are kind of.
Regular interest rate is about 3%.
I spent a little below 3% the last few trunk shows, but if you use kind of a 3% number for Twoq you that's probably.
Right.
Relative to where we're LIBOR is and what the margin in bulk LIBOR or in our credit you're going to us.
Great. Thanks, a lot and.
You know you talked about consolidation and that's.
And the topic, that's been up quite a bit over the quarters, just with the strength of your balance sheet and I was wondering seem to be you're you're hearing about or in touch with some of those.
Properties that that might be available.
Are you seeing any greater appetite for accepting equity of consideration. It sure seems to me people should want to accept equity, but it doesn't mean, it's necessarily happening.
[laughter].
You said the right thing it sure seems like people should be wanting to do but it isn't happening I think we're just in sort of up a frozen state at the moment and until things all out a little bit.
You know what does demand look like what therefore, what do prices look like then I think there'll be a little bit more.
Appetite by sellers to look at opportunities, where they can take equity and grow whether that's a private or public for that matter. So we are as their track record has proven out we're always willing to use our equity.
And bring in a party and and grow together.
Great and just.
Any thoughts on the it strikes me. This is clearly probably a terrible time for people to be trying to unload noncore stuff, it's probably hard enough to get a bid for further really high quality stuff and I just wonder as far as what you're seeing available have you seen any.
Maybe just some of the lower tier stuff dropping out the overall quality of what you're seeing kind of along the increase or or is that Jeff as you said pretty much everything is frozen.
A few things I've seen that sort of.
Would peak our interest our frozen and then the things that are I am seeing and that we're seeing as the team are probably areas that have assets that are that were probably distressed coming into the beginning of the year and aren't in areas, where we're really focused.
You know, we're really focused in the Eagle Ford and then in the Permian.
Yeah, we.
That's our main areas and we're not going to deviate from that materially.
Great. Thanks, a lot.
Thanks Bill.
Thank you at this time of reached into a question answer session and I'll hand, the floor back over to Robert Anderson for closing remarks.
Yes, thanks, everybody for listening in today and as always we're open to calls and emails and ER and look forward to getting through the second quarter. Thanks.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.