Q2 2020 HighPoint Resources Corp Earnings Call
Employees have adapted to the new Norm which is evident by our strong second-quarter result and demonstrates our ability to execute as we exceeded our operational and financial objectives despite. The many challenges that our industry is facing the quarter was highlighted by continued positive. Well results from both Northeast wattenberg and Hereford as high fluid intensity completions continue to expect the previous well result highlighting our ability to positively impact well performance this contributed to Total production volume, exceeding the high end of our guidance range by 12% and am seeing the high end of our guidance by 11% and fortunately this was accomplished with a capital expenditure that was 38% lower than our guidance highlighting our commitment to Capital discipline consistent with our updated plans for 2020 as provided in March. We've suspended new activity do to lower oil prices.
given the
Drop in oil prices, we quickly decisively took immediate action to align our cost structure to the expected future operating environment this resulted in immediate tangible benefits and a material reduction in second-quarter reoccurring controllable operating costs of 12% compared to the first quarter of this year. We continue to look for opportunities to reduce costs further. We're currently monitoring a oil prices along with the taste of the broader macro economic recovery determine the appropriate time to resume activity. We have an inventory of over 20 ducks that will be that will allow them to quickly resumed complete inactivity if prices warrant lastly, we are committed to preserving our balance sheet and anticipate generating positive free cash flow in the second half of the year that positions of improving that dent in pretty further from current levels. We also continue to pursue opportunities to improve our capital structure of the equipment will now turn the call over to bill for his comment.
Thank you, Scott and good morning to all I'll briefly touch on some of the financial highlights for the quarter. We recorded the $54 million which was well ahead of time and highlights are strong operational execution for the quarter. I would know that G&A expenses included employees that written some other cost-reduction that totaled approximately four million, which were primarily associated with work force reduction that's completed in May excluding. These non-recurring costs reported E to death would have been about $58 million 14% higher than that oil price differential to The Benchmark pricing with WTI less $5.30 per barrel of oil. This was slightly higher than previous quarters do the CMA role which primarily impacted made pricing. The CMA role has normalized dead.
Recently and we expect our oil differentials to return closer to historical levels going forward about 20% of our oil volumes are subject to their role and we have hedged a portion of those protect against feature price dislocations. We ended the second quarter with a hundred and seventy-five million dollars outstanding on our credit facility. This was an increase from the first quarter as expected as working capital decreases, including the payment of regularly scheduled interest related to our senior notes and an ad valorem tax payment to Weld County additionally, we experienced an increase in our joint interest accounts receivable balance of about twenty million dollars, which was primarily off to one of our working interest Partners not paying their joint interest billing and is subject to current litigation subsequent to the end of the quarter dead.
We reduced Bank.
By Twenty million dollars and have liquidity of $74 million which includes the recent twenty million dollar rb-lb payment and letter of credit balances even reduce Capital expenditures and high confidence operating cash flows. We expect to be cash flow positive for the second half of the year, which positions us to further improve liquidity given our activities planned activity levels. We expect third quarter Cafe to Total approximately ten million dollars and production volumes to be in the range of 2.5 to 2.6. Mmboe up which about 56% is expected to be oil. This is down slightly from the second month and it only contemplate the incremental contribution from two new wells in Northeast Watford that replaced on flow back in July.
From a marketing perspective. We do not anticipate any physical pipeliner takeaway issues.
Lastly are hedge position continues to provide significant near-term protection from low oil prices. We have nearly all of our anticipated 2020 production for the remainder of WTI price of $57 per barrel and a significant portion of our 2021 production hedged at about $55 WT. I bought a full summary of our hedge position is in the press release or tank you this provides us with Revenue insurance and predictability of cash flows in the current price environment. I will turn the call over to Paul.
Good morning, everyone for the update. I would like to come in to our field and office Personnel for safely delivering another strong quarter of performance our second quarter operational execution and Thursdays and are all the more impressive with the backdrop of a precipitous drop in oil price a pandemic and the resulting remote operations.
Update Northeast wattenberg and Hartford for generating very impressive results which are exceeding the performance of all previous offset development with the continued strong performance of our high food intensity completions program is further augmented for 2020 with high rate completions both. These Technologies are positively impacting and maybe our twenty-twenty development. We'll our highest-performing wells for these areas to take
Turning to our results are most recent activity includes nine oil wells placed on flow back in May and June within d s u 16045 in Northeast wattenberg. These walls are completed with our proven. Hi food intensity completions, and we're very pleased with the early performance.
Five days online the average per well cumin oil production was approximately 35,000 barrels of oil to additional Wells were placed online at this DS you in early July.
A further example of the strong performance from high food intensity completions. Is that our Riverside Federal unit Development Area within DSU 461.5 this deal with you in the Civil transition portion of Northeast. Whatever is also redefining type curves for this area of the field. It includes six Wells brought online in February, which continued illustrate the strong performance uplift with hybrid intensity completions.
As shown on slide six in the deck. These Wells continued to Trend favorably as compared to previous simple transition area Wells demonstrating the success of our high fluid intensity completions off.
He focused on the Fox Creek area with the Slovak initiated on three Wells at DSU 1263 34 and two Wells at DSU 1263 also a month. You can see the sustained improvement in our Hartford to health and wealth performance included including the two Wells that began flow back in March at DSU AP 63-27. You can see that the average per well cumulative oil at the 7th. Foxcreek. Terri Welles is trending greater than the offsetting section 16 Wells after 60 days off during these Wells the best-performing development program Wells to dated her as a reminder the section 16 Wells our economic base line for the perfect development and the type.
We were pleased with these results and the demonstration of continuously improving well performance as we incorporate recent optimizations into the vast and predictive data set. We have across the Improvement or Progressive. We also deliver cost improvements in both asset areas as average $3.16 per Boe in the second quarter, which was a 17% sequential movements to the first quarter of this year. This sustainable Improvement is driven by the completion of a pipe water system, which combined with a new water contract and the associated reduction Trucking eliminated more than $1 a barrel our water handling costs.
In summary, we're pleased with our operational performance this year are racing development. Well as our highest-performing wells today driven by higher rate completions and Flomax than previous development way. We reacted quickly and decisively to the lower crude price environment by preferring new Drilling and completion activity into oil prices improved. This demonstrates. Not only are prudent and economical decision making process but also the nipple nature of our Enterprise having no long-term activity commitments driving our business. We actually the second quarter with over 20,000 completed. Well opportunities allows us to return to work quickly when all prices more and more activity. We're well hedged and hold no long-term drilling pipeline commitments, which allows them to continue to make economically focused business decisions operator. We know reading the questions
Thank you. Ladies and gentlemen. If you have a question or comment at this time, please press star then one on your telephone keypad.
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Hey, good morning.
So, you know crossing crossing over 40 at what point. Do you guys start to rethink restarting your completion operations? And can you also remind us, uh what your account is looking like these days?
Sure. Well actually well, you know, the economics of those ducks start to look more and more favorable when you look at the results that tall just described, you know, a low-cost in that Northeast Whataburger like four point three million dollars. So you think about that even compared to other basins of the $130 a foot, you know for these ten thousand foot battles. I mean that's just the outstanding job and then coupled with you are performance. He just described and literally results, you know, make the duck start looking pretty attractive in that $40 range so long, I think it will definitely be a topic of discussion as we kind of head into our upcoming normally regular schedule Q3 board meeting to talk about the various timing of that, you know, currently we have working models of starting kind of makes you three to four first-quarter. How may I think we're pretty flexible all the way around and so that'll definitely be a Thursday.
The topic, you know later this month.
And then then what is it 45? Is it 50? When do you guys get when you guys start thinking about adding a rig? And and if you have that one rig, you know, where where do you think you'd park it they exist?
You know, you're probably right. Well, it's probably in that forty-five to fifty dollar type of a range, you know, the it's probably still a balance between North East weisenberg and Hereford the results in Northeast weidler are discontinued looks so compelling and with the infrastructure that we have there which enables us to offer, you know, get those well costs down to that four point three million dollars. It's also the place that we have the lowest. We just kind of based on the infrastructure. So when you think about probably the highest capital city place right now in the portfolio is probably Northeast wattenberg kind of based on that infrastructure. And so I would suspect that it would most likely start there.
Okay, perfect. And then you know as always I'd be neglectful. I know it's going down. But but I know I know also have plugged in you are up there and in Denver, perhaps love to get any updated thoughts on on the politics and then that's all I've got. Thanks. Sure I think is even if you I think you written, you know, there's kind of been a stand down on all these ballot proposal and so, you know that wires out this year it wiped out twenty Twenty-One. So it looks like both sides have at least agreed to a couple of years a stand down. So really probably one of the more favorable places are times in Colorado from a political standpoint. We still have work to do and implementing the s p 181 and and the professionalizing off the cogcc but we're optimistic that we can work through those issues and seem to have you know, some governor's support here to not continue to introduce new things dead.
To hamstring the industry. So it looks like it could be a pretty clean.
He's next couple of years.
That's good to hear. Thank you.
Thank you our next question or comment on the line of Napleton Volkswagen from Steve your line is open.
Good morning all and congrats on a strong core.
Regarding the 7th gen for completion that box free. Could you speak to the well designed for those welds more broadly and how those compared to your gen 3 designs.
This is Paul. Those those Wells as we moved up into two Fox Creek. We were looking at both codell and niobrara in in that area and stepping off the completions there to take advantage of the the greater oil in place. Then then we see in Northeast Watford we continue to push those up and so as far as to the specific completion size on those those were between 50 and 60 barrels of put a tight completions in that area.
Perfect. Thanks for my follow-up regarding the outperformance from the 46015 wells in the central transition area. Would you expect similar performance across the Northeast Wattsburg going forward given that gen 3 design?
When we really do and you know as we look at that that area we've got this we've got to type.
The acid and so not only were those Wills outperforming the type for their area. Then there's one greater type curvy you are wise in the area as you move to the north wage in our efforts that we've been called the central time for and those Wells are outperforming the the RSU Wells. You mentioned are outperforming not only their own type curve, but the type for the the improved area to the north west. And so that's a very very strong performance. And we see that as a strong reaction to the higher fluid volume higher rate completions that wage on those Wells and we see that upside as applying to all of the types of areas, but very specifically the central transition area that it's in and the central the central area that comprise the bulk of the asset.
Great. Thanks for your time.
Thank you. Again. Ladies and gentlemen. If you have a question or comment at this time, please press star then one on your telephone keypad. Our next question or comment comes from the line of normal parts from Coca and Palmer your life open.
Good morning.
Just curious. I know it's a little early to be putting this issue on the on the table. But as who does improve looking into a strip in in the forties and in next year looking at like about 43 bucks. Do you have a sense of life from from talks with your Banks of how price tax might improve in for your next bowering base redetermination?
Yeah, this is Bill. I've seen some of the summer price tax and they're definitely up from you know, the spring, you know, redetermination. Generally, I think the banks will want to be least the next three to five years strip. 95 ninety to ninety-five percent of strip. So, you know, we're paying attention to that as we go into the fall rain determination. Okay, great. Thanks. And you know, you you talk to a good bit about our progress on the completions front and I just wondering as this most recent set of Wells you brought on is continued to to match or or beat your life your best. Well so far, it looks Nazis wattenberg and and Hereford I just curious. Where are you still seeing the upside operationally or yep?
Is it really just entirely maybe targeting better rock or are you still seeing improvements from you know tweaks in like you're making on the completion sidewalk? Yeah. No, this is Paul across the across the app that there's there's several places that we kind of see that upside is one is continuing to push on on the compact design as we have and you've seen that over the last several years of increasing the intensity that that we're stimulating That Rock with and growing the the simulated Reservoir life. So that's the the big one and then applying that to not only the areas where we thin but if you look at for example that says base there's a good one purpose of life activity slide that shows the acreage position in that Northern Anchorage position. We haven't been as active up there in the last couple of years as we've been in some of the other areas and so getting back into that area wage.
Applying the the more aggressive completion techniques as a pretty exciting opportunity for us as well as in you know across the SS going in and out and taking a look at where there might be bypass pay. If you've got five years of continuous Improvement where the current Wills are are are more than twice as good as the original. Well, it indicates that there might be opportunity back in some of that originally developed position to put these pieces more aggressive completions on
Oh great. And so just cuz I mean, I know it's a a situation of being real careful with capital for the near-term. But do you do you have a rough sense of when you might be able to to put together some results from either attacking the Northern wattenberg or or looking at some of these choices of I have to pay?
Yeah, I think as you think about the the comments that Scott had on the restart left kind of the the pricing trigger it is then we look forward into a 2021 S-Type budgeting scenario is when we would go off and take a look at some of those areas with the upgraded completions to to demonstrate results in those.
Okay, great. Thanks very much. Thank you. I'm sure no additional questions in the comment at this time. I will check the turn the conference back over to. Mr. Larry for any closing remarks.
All right. Thanks again for joining us today, and we're available. If you have any additional questions, please feel free to feel free to reach out.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect everyone. Have a wonderful day.
Thursday