Q3 2020 Cimarex Energy Co Earnings Call
[music].
Good morning, and welcome to the summer acts third quarter 2020 earnings Conference call. All participants will be in listen only that should you need assistance. Please signal conference specialist by personal Sarki followed by zero.
After todays presentation, there will be an opportunity to ask questions Safi.
Well that's the question May Press Star then one on your telephone keypad.
So with charter a question. Please press Star then too.
Please note. This event is being recorded I'll now turn the conference over to Karen Turner. Please go ahead.
Good morning, everyone and welcome to our third quarter 2020 earnings Conference call.
An updated presentation was posted to our website yesterday afternoon, we may reference that presentation on our call today.
Just a reminder, our discussion will contain forward looking statements a number of actions could cause actual results to differ materially from what we discuss you should read our disclosures on forward looking statements in our news release and in our latest 10-Q, which was filed yesterday and the risk factors associated with our business.
So our prepared remarks today will begin with an overview from our CEO, Tom Jorden, followed by a few comments from seven rigs SVP and CFO Mark Burford Lake Shore Gold VP of operations will then provide a brief operational update.
As always and so that we can accommodate more of your questions. During the hour we have allotted for the call we'd like to ask that you limit yourself to one question and one follow up feel free to get back in the queue. If you like so with that I'll turn the call over to Tom.
Thank you Karen and thank you to all who are joining us this morning.
I'll briefly discuss our financial and operating results for Q3, our go forward outlook and update you on the ongoing progress, we're making on E.S.G. issues Oh.
I'll finish with our perspective on the changing landscape of mergers and acquisitions and their impact on Cimarex is future.
First or.
Recap of our financial and operational results.
We had a very good third quarter in the midst of the most challenging macro environment in our company's history.
Our oil production averaged 71600 barrels per day, which was in line with our guidance. Our total production averaged 249000 barrel of oil equivalent per day at the high end of our guidance.
We generated $139 million or free cash after our dividend and finished the quarter with $273 million cash on hand.
We are on track to finish the year, having generated well over $200 million of free cash flow after our dividend with an excess of $300 million cash on hand at year end.
Given the year. We faced this is an extraordinary achievement and reflects the adaptability determination and grit of our organization.
We expect our total 2020 capex to be within our revised guidance of 600 million.
As if any of US needed a reminder of how the year is change let me remind you that our initial capital guidance for 2020 was $1.25 billion to $1.35 billion.
The word volatilities seems inadequate to describe the market conditions, we faced in 2020.
We are looking forward to new year's Eve, and putting 2020 behind us.
We continue to achieve meaningful cost reductions in all categories, including Capex Lowi NGL today.
Blake and Mark will comment on our cost reductions as well as the operational and organizational improvements that will allow us to sustain many of these cost reductions we.
We are a better company owing to the challenges we faced in 2020.
As we look ahead into 2021 and beyond we are highly confident that we can sustain our top tier financial and organizational results.
With our fourth quarter completion cadence, we will have significant momentum as we enter Q1 2021.
Although we have not finalized 2021 full year guidance, we do look into the first quarter and expect high single digit oil volume growth over Q4 2020.
We will enter 2021 very well position.
Financial performance has minimal meaning if it's not sustainable the sustainability of our financial performance is underpinned by our asset quality and ability to continuously improve our cost structure margins and capital efficiency slide six illustrates the ongoing progress we are making in lowering our cash.
Census per BOE, we Mark will cover this in more detail.
Slides 10, and 11 speaks to our asset quality and the steps we have recently taken to improve our capital efficiency.
We have a deep inventory of high quality locations that will drive our performance over time.
At a $40 oil price, we have more than a 20 year inventory of locations that generate greater than 1.5 PV 10.
We guide our investment decisions through a dual lens that considers both rate of return and PV 10.
This 20 year inventory does not fully capture the new landing zones that were testing and delineating.
These results will further backstop, our ability to sustain and potentially improve our financial performance.
We look forward to discussing these exciting results with you in the future.
Now a few comments on the tremendous progress we have made on the environmental front.
This year, we adopted aggressive corporate goals to reduce our methane intensity and reduce flaring.
Thus far our organization has crashed these goals.
Our target for methane intensity defined as volume of fugitive methane divided by gross operated gas production was an intensity rate target of point to four or 5%.
We are on track to achieve a 2020 methane intensity rate of 0.200%.
Now onto the flaring.
In 2019, we flared 1.9% of our Permian gas production, our stretch goal for 2000, 21.9 picks 0.96% a Permian flaring a 50% reduction from 2019, we are on track to achieve a 2020.
The Permian flatter rate of <unk>, 0.95%.
How have we done this the answer is simple organizational focus and commitment creative engineering smart use of data analytics and adoption of emerging innovative technology.
Slide 13 highlights some of the technology, we have deployed which includes ongoing aerial surveillance on amazingly effective ground based radar technology and the adoption of true Tankless facility design.
We have also adopted an aggressive optical gas imaging inspection regimen that far exceeds federal and state requirements.
Regardless of the outcome of the presidential contest, our industry will face increasing challenges in winning back our investors through consistent financial results and delivering our products with a low carbon production footprint.
Going forward, we may face a more difficult regulatory framework and we will certainly face more stringent reporting requirements Cervarix is ready for the challenge and we look forward to continuing our momentum into 2021 and beyond.
Finally, let me comment on the recent rash of mergers and acquisitions within our sector.
Each of the announced deals is unique in its own right and stands alone on its perspective merits, we do not offer an opinion on any particular transaction.
I would however, like to comment on the viewpoint that scale is essential for success and that consolidation is inevitable.
As we grade similar axis performance, whether it be financial operational or environmental we grade CIRM racks, and our ability to be excellent on all fronts. We are committed to be top tier on every meaningful metric and we will not use size as an excuse for subpar subpar performance period.
We will compete with all companies in our sector Big and small we will be measured by the excellence of our results not our scale.
Cimarex has consistently delivered top tier financial results. We are an organization that has demonstrated operational excellence has a history and a passion for continuous improvement and we have assets that can support our aggressive goals over time.
We can and will be an industry leader on DSG issues, we have a terrific balance sheet and the wherewithal and discipline to preserve it and improvement.
We offer the investors significant exposure to upside in oil gas and natural gas liquid prices.
With a few of our peers now gone Cimarex is uniquely positioned within our market cap range to offer quality repeatability and sustainability any.
Any suggestion that we are not investable is simply nonsense.
To be fair there are parts of our business where scale is important lower.
Lowering operating costs through proper management of midstream infrastructure is one significant continuity of acreage for long lateral development not from project sizes. Another.
The flexibility to deal with an uncertain future until then we will show up each and every day and compete.
With that I'll turn the call over to Mark for a rundown on our financial progress.
Thank you Tom.
Good morning, everyone.
I'll provide some details on our third quarter financial results in outlook.
Our total cash operating costs comprised of Allah, we transportation production taxes and G&A.
And the third quarter totaled $7.26 per bow.
We protect our total cash operating cost per unit to decrease approximately 13% in 2020 as.
As compared to the 2018 and 2019 average.
Year to date totaled 2020, G&A expense included severance costs of $31 million from staff reductions to align the organization to the prevailing macro environment and expected lower activity levels.
On a per unit basis severance in 2020 is adding approximately 34 cents per bow.
To our cost on a go forward basis sees adjustments result, in reducing future cash overhead expenditures by $40 million to $50 million.
Just a casual from operations for the first nine months of 2020 totaled $688 million <unk>.
<unk> January to $182 million, a free cash flow after the dividend.
And the third quarter, we had $139 million a free cash flow after dividend.
Of which we received cash settlements of 14 million this quarter from our hedges and year to date, we received 121 million.
We actually the third quarter of $273 million of cash on hand, and no borrowings on our $125 billion revolving credit facility.
This quarter, we also added a fitch raiding at a corporate family reading, a triple b minus and a stable outlook.
SMP retained their Tripoli minus reading and now had us at a stable outlook and Moody remains at <unk> three with a stable outlook.
Are projected 2020 capital remains unchanged at $600 million. We now expect to have 15, five net wells brought on in the fourth quarter.
This is up five five wells from our previous forecast as a result of operational efficiencies, which brought wealth poured from January 2021, I wanted two weeks, which are now predicted to come on at the very end of 2020.
Fourth quarter of 2020 Prussian volumes are expected to average 215 235000 barrels equivalent per day with oil volumes expected to average $62 five to 68 5000 barrels of oil per day.
We are strong momentum heading into 21 with assumptions drilling and completion activity with our strong underlying asset base in cost structure. We are in a great position to generate free cash flow and access of our growing dividend at $35 Wty oil and $2 50 hanging you have gas the flat the modesty increasing production.
At higher prices would be expecting significantly have higher free cash flow with the clear goal of having more than sufficient funds to retire 750.002 million 24 notes, which is our nearest maturity.
With that I'll turn the call over to Blake.
Thanks, Mark the third quarter marked are returned activity with four rigs and to frag cruise now running in the Permian.
Structural changes in incremental operational efficiencies have caused our cost to continue to decline. We expect this trend to continue.
While market rates for services are leveling out we're seeing continued cost reductions driven by efficiency gains in our operation.
As such or go forward DNC cost per lateral foot has decreased from 800 and $900 per foot two 800 to $850 per foot.
To provide some detail are year to date 2020 average drilling fee per day is up 31% from 2019 levels. A result of increased pad drilling and offline seem any.
A great example of this is our count fleet development, and Culberson County, where a new two mile Wolfcamp, a well drilled to TB and 10 three days a new company record.
Improvement continues on the completion side as well with our 2020 year to date average completed fee per day of 21% from our 2019 average.
When we combine these DNC efficiencies with additional operational cost savings such as commingling surface facilities, and reducing flowback cough. The result pushes total cost per lateral foot to the low end of the go forward range across all programs.
Has always when we reported dollars per foot, we are including all capital costs associated to bring that well online, including drilling completion facilities and flowback.
Q3 lifting costs came in at $2 and 70 per bow, which is down 20% from Q3, 2019 and down 22% from Q1 2020 before the pandemic it.
We estimate 65% of these low reductions since Q1, 2020 or structural and will be sustained.
These structural changes include reductions in contract labor implementation of new maintenance programs and fueled efficiencies gained through automation.
Our cost structure is a critical component to ensuring cimarex deliver strong free cash flow and are off teams are up to the challenge, we are pushing efficiencies and innovating across our entire value chain, which will continue to drive down our cost as we move forward.
With that we'll turn it over for questions.
We will now begin the question and answer session.
Questioning that press store them, one on your telephone keypad HM.
Of hearing used on speaker phone, please pick up your handset before pressing the keys.
To a charter question. Please press Star then too.
At this time I will pause momentarily to the similar officer.
Our first question comes from Iran. Jairam of J P. Morgan. Please proceed.
Good morning at Tom and team Tom.
Tom I was wondering if you could elaborate on the inventory comment that you mentioned in your prepared remarks, I think I heard you said you had 20 years.
Inventory.
It is a 1.5 times peavey Irish so does that is that just assuming.
Flatus activity, but maybe give us a little bit more made on the bone in terms of.
Of what you've done here to estimate you go forward inventory.
Morning Road I appreciate that question.
What I should have said the 20 years or so.
Current investment right, obviously as an investment rate increases inventory decreases but that's also.
I said in my remarks, we use a combination of ready to return and PVA Tan and that's kind of a new language that you've heard us externally speak we we started emphasizing PVA tan.
About a year and a half ago. In addition to rate of return.
If I were to speak loosely on rate of return that as an inventory at $40 oil that generates give or take a 50% IRR are better if if we lower if our cost structure changes or we look at lower rates to return certainly our inventory increases, but that's kind of where we need to <unk>.
Side of the draw the line that communicated externally.
That is so direct answer to your question that's at our current investment right and that does not include additional ads that some of our new landing zones or developing but we we view those as hydrating rather than necessarily extending.
Hopefully I would answer your question.
Just to clarify to the price that we use that to Pgi 10 was results using a 35 to $40 price deck to use of the PPI 10 cut off of one five.
Is it using a 35 to $40 price deck at 250 gas and 40% Ngls is the price that we used for that cut off.
Got it got it.
My follow up is I wanted to see pop maintain if you could talk about slide 11.
You have been pretty clear about in a plant to relax spacing.
And I wanted to see if you could give us some thoughts on lookout fleet development and a couple of thoughts that come to our mind is and it looks like you are now looking to land lateral in the XY zone versus Ah before I, just a little bit below that my upper Wolfcamp and.
You are using in a wider spacing so maybe talk about.
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Some of the longings and some of the implications to low productivity and I go forward basis.
Thank you for the follow up burn.
Referring to slide 11.
It's one petroleum system.
And the critical question. We ask ourselves is are there frack barriers or or hydraulic fracturing networks freely passing from one strict stratigraphic zone to another and then the upper Wolf camp and that X Y that is one patrolling system.
So what you see there is we've added a few landing zones move them up to the X Y that gives us a little more vertical separation.
<unk>.
But this is really just an outcome of a lot of years of collecting data what we've observed is that.
We did see we talked about this and past call. So last call. In particular that are 2019 program really did observe quite a bit of well interference and that our per wolfcamp. The upper Wolfcamp, which includes the X Y is a highly permeable rock system compared to others.
And so the drainage as well beyond the fracture tip and now was a big learning for us in 2019 and.
And as we experimented we found that we can drill fewer wells and half.
Very modest impact on complete recovery out of that section and so in the case you have in front of you were spending 30% less capital.
On wells I mean that doesn't include facility, so I'm doing a little bit of arm waving here, but 30% less capital and generating more net present value. The relax facing not only is more capital efficient it actually creates more value than the higher spacing and that's something similar ex has learned.
I think it's something that the industry either has learned or is learning.
You really have to look at those incremental wells and not just the total project ready to return because the total project rated returns going to look great on both the left and right side of that slide.
It's a few go from wells seven through 10 was that incremental capital well invested or should you taken taken that capital included a different project and that's the lesson we've learned and that's the point of slide 11.
Great. Thanks, a lot.
Our next question comes from came out of town.
And just as requested by management in the interest of time, please limit yourself to one question and one follow up. Thank you came please proceed.
Good morning, everyone. Appreciate all the prepared remarks, so far Tom I guess for for 2021.
Yeah expectation of flat to slightly up oil volumes on similar capex of it.
Are there any further capital efficiency improvements embedded in that outlook, whether whether on the cost side or perhaps on the productivity side, particularly as your relaxing facing in the Wolfcamp as you noted.
No we modeled where we are today, so generally as we as we go forward. We don't project, what we haven't achieved so that said Kurt what we were saying is current capital efficiency and current costs, but Markham and invite you to comment on that.
No. That's that's correct, Tom and we're using our current leading edge costs that we would be looking at into 21.
David in further on the efficiencies on productivity as we discuss as Tom discussed with the Redact spacing, we do have all of those.
Sort of measures built into our forecast as well.
[noise], Thanks goes up helpful.
Well I guess this is a follow up.
You guys.
Kind of noted that through 2024.
<unk> free cashflow to pay down debt and particularly the 2024 notes, but I guess on our numbers, we look through the 2024, it would appear that free cash flow generation.
Posted dividend would be more than enough to cover the 24 notes, while while also still growing the dividend and Mark I guess in your prepared remarks, you did characterize the dividend as growing. So the question is should we anticipate annual.
Increases in the dividend through 2024, and and I guess take to what extent with the magnitude look like thank you.
Sure Cape Yes, we do have expectations to grow a regular dividend, we're going to make sure that growth that dividend is very manageable. So we're looking at a measure of it relative to our cash flow at flat price cases, as world and probably target something in that around 10% of our cash flow for our did regular dividend and to extent we.
Have free casual above and beyond that gave that will have to have to make decisions on that we're discussing with the board with variable dividends and other options, but began to first priorities right now our debt repayment and making sure we have sufficient cash there and then secondly that again at some measured growth in a regular dividend make sure it's very sustainable.
Awesome. Thank <unk>. Thank you guys.
And our next question I was going to come from Janine Y a Barclays. Janine plays proceed.
Hi, Good morning is Janine way, thanks for taking my question.
Hi, Good morning. My first question is for your time, maybe if we could go back to your comment on size and you mentioned that similar access capturing the overwhelming majority of efficiencies at your current scale.
That you are open to exploring opportunities to partner in order to capture may be additional efficiencies on top of that so I just wanted to kind of dig into that comment a little bit is that more relate it on the opportunity side to things on the midstream or is that more of that is there more opportunity capture additional efficiencies on the upstream side.
Well, yes [laughter].
Junior I'll use the Chevron joined development agreement Culberson County is.
A good example, there we can share in midstream costs gathering in compression and our operating costs are I think.
Based on leading low because of the efficiency of our midstream there and our ability to optimize that midstream and that flows into a whole.
Set of good outcomes not only cost with our flaring is also very very low and Culberson County, because we control our own destiny at every point of that value chain Salwar disposal is another very important benefit where we've built our own saltwater disposal network and not only does that a lot.
To us tremendous flexibility and savings and disposal, but it also has introduced tremendous cost savings on water sourcing because we use at times, 100% of our water for recycling.
It also has just.
Absolute project size.
Because we're partnered with a with an outstanding partner and we're 50 50. The projects are bigger and we can have longer laterals, we can take advantage of.
Zip refracts.
We haven't moved to sell a fraction uncovers county, yet, but I think we may and then something else that's coming here in the fourth quarter that we haven't talked about publicly with all mentioned now is we have a real push on electrification and will be experiment with.
Something that we think is really important and that's.
Electric Frat crew, that's taking power off our own.
Owned and operated electric grid, and that's the smart way to do this towing.
Throwing a turbine around on dirt roads is a really bad idea and we have some of our own experienced that tells US why it's a bad idea. It's much more elegant solution. If you can get that electrical crew or electrical drilling rig to take power from your own electrical grid. So these.
You are all things that add up some of them are big ticket items some of their small items, but they are benefits of scale and we think there are other opportunities in the basin too.
Replicate what we've done in Culberson County.
Okay, great. Thank you and then Amy and a little more detailed question if I may.
Simex continues to pull find wells given got efficiencies previously I think the commentary was that given the lag and timing and all of that that production would start to churn and grow in December. So we just wanted to check and see if that yeah.
The new case, given the new completion schedule and maybe if you had any comments on the accident rate that might be helpful for us to frame the growth in queue Q1.
Yes, Danine, yes, we asked some conditional wells that are moving up from 21 into the last part of 2020.
Five five net wells, but those are coming on very end of the year, which does position as well into the first quarter and as Tom stated in the first quarter, we do see our oil volumes growing at a high single digits so into the first quarter.
Okay. Thank you very much.
Thank you Janine.
Our next question is kind of come from Neil Diamond Suntrust. Neil. Please proceed.
Morning, Tom.
Tom could you John maybe talk about how you just see the baseline decline progressing it seems to me you're holding production quite nice with limited do activity. So just wanted your thoughts there.
Well based the client is always.
Hurdle to overcome and we do have a very young profitable asset base and that does lead to decline, but mark one or two to handle the detailed or.
Yeah sure Neil that said is obviously something which are challenged our production teams are always challenge to make sure. We're doing everything we can to defend debates as we call it with operational option activities to maintain that base, but that is something every E&P features and trying to.
Contain that based production.
Okay, and then just one follow up on the prior to call you had talked about likely I think it was some time in early potentially 21 getting a bit more active on operated Anadarko activity could you talk about your thoughts we're turning into that play more on the operational side.
Well, we're still looking at our 2021 program Ram finalize that but we're kind of where we were last quarter, we do have.
A project or two on that oily remedy Anadarko based on some wells that we brought online.
Over the last year year and a half.
We have outstanding returns on those wells are they really.
If we choose to do this Anadarko project, which I believe we will.
If we rank are opportunities companywide, it's top 10, I mean, it really competes with Delaware basin on all measures.
Like the project or like the returns.
But I'll I'll, just say, it where right where we've been in the past we're talking about something that that the high side would be 10 or 15% of our capital and again.
I wave my arms, when I say that because we're still finalized in 2021 capital it'll be it'll be small program, but it competes on all measures heads up.
Very good thanks, Tom Thanks, a lot.
You know.
And our next question comes from Josh Salvarsan of off research Josh place percent.
Yeah. Thanks, Good morning, guys, Tom I appreciate the comments on M&A.
It sounds like you've been involved in multiple conversations recently I just wanted to see if those were both on the divestiture and and the essentially the acquisition side and and what is the main pushback from the board you said right now.
The right time, just because of where the stock prices are just the right combination that it doesn't make sense to do a deal.
Well I am going to restate your question Neil.
Look we've said in the past and I'll say again now there are there have been lots of conversations going on throughout 2020, CEO CEO phone calls and that's it comes as no surprise to anybody and so yes, we've had opportunity to have conversations.
And we've looked at both sides of it.
We've looked at.
Mergers, we've looked at the opportunity to acquire but.
Big receive an automatic as you said pushback from the board our board is highly focused on creating value over the long haul.
Our board is also.
Aligned with the executive team with having a long term framework and viewing things through.
A patient lens.
Yes, there has been some good commentary on this through through some calls you know.
And your.
Pay attention to them as we do we are in a cyclic business and I think that we need to be very very careful making decisions and the downside of cycle now I don't that doesn't mean, it's a bad idea and careful doesn't mean don't do it but careful means care.
Four.
I'll come back to what I said in my closing at everybody thinks they know what the future looks like and yet there are some very constructive voices out there that think that.
Natural gas and oil prices are well poised for a rebound.
We haven't slammed any doors and I wanted to be clear on that are we have tremendous flexibility for any option available to us, but our borders the side for now given what we have consider that our current position is right, where we want to be Mark you wanted to add anything.
Yeah, No I don't think there's much I could add Tom other than that it just comes down the value proposition of board is recognizing looking out for the best for shareholders and if we can make it better company and create more value to something like that manages <unk> blue suit pursue that very hard right now with our asset based on quality of our balance sheet and exposure we had on a go forward basis.
Current point, we think we can create more value for our shareholders as a standalone a decade, Tom said will continue to be monitoring was the best company, we can build.
I appreciate the common stay on classifications.
The second question is I just wanted to ask was the the.
The 50 wells plan through through 2023 on federal acreage.
It kind of nice day lines up with the the 50 permits that are either approved or in progress.
I'm just curious from a development plan do you guys intend to actually speed up the development or is it actually kind of even around.
10 wells over the next five years, given the current backlog and problems that you have.
Well.
We have we've talked about the the 50 or so permits over the next few years, we actually hold we think by year and we're going to have.
168 permits.
And we do have the ability to.
Accelerate we've recently been looking at an acceleration plan that would give us the opportunity to bring a lot of new Mexico value forward.
But right now we're going to watch and wait.
I.
I'm hopeful that new Mexico development is going to be prissy.
Preceding a pace.
But we are ready if we decide we want to accelerate we would redirect capital to new Mexico, and we have the projects lined up we have the permits and they're.
Great opportunities.
Great. Thanks, guys.
Hey, Josh.
As a reminder, if you have a question please press star than one.
Our next question comes from John Abbott Bank of America. John Please proceed.
Morning, Amman for dogleg it this morning.
And thank you for taking our questions.
I just wanted to go back to the commentary around the 20 year inventory and just want to make sure that I get clarification is that all Permian or does that include some anadarko.
And then how does that sort of change if you've talked about you talked about 35 to $45. The inventory sounds like it's based at 40, what is the impact of oil prices, it's $5 lower as far as the extended that inventory is it reduced by maybe a quarter how does how should we think about that.
Well I can tell you exactly $35 to 50 gas price. It's about a 15 year at 1.5, CVI 10, and it goes to 20 or $40 oil price.
It includes Anadarko and Permian, although it's overwhelmingly driven by the Permian.
That's.
And then again that has a very high economic cut off.
One five PVA 10 is a fairly steep cut off if we lower our cut off it.
Just adds to that and again.
I don't want to communicate how.
How we see inventory incorrectly we see inventory is giving us tremendous flexibility for near year financial returns Ah deep inventory means a deep flexibility to high grade and so we really like to have a deep inventory because that means we have a high degree of confidence that.
Over the next three to five year window, we can achieve outstanding financial returns.
I appreciate it and then just for the follow up questionnaire is could be on the net con.
Going back to the commentary that you could spend potentially 10% to 15% of your budget next year and that sort of loan rock area.
You've increased your spacing of wells and the Permian you've made progress on costs and the Permian. If you did go back to the mid Connie went to lone rock area I.
I mean, what should we be thinking it's spelled spacing would increase and also what do you think is the ability to drive down costs lower there on it per lateral foot.
Well, that's a very active this space in question and add the Archos very active debate internally.
I will say that based on our data.
We don't think we need to relax facing an ad arco.
Again, I said in the Permian the challenges that were draining a reservoir well beyond our fracture tip. That's typically not the case in the Oracle, particularly on speaking about Woodford shale and the Woodford shale your drainage area is more or less.
At least in the.
Early economic life of a well, let's combine two year.
It's restricted in your fracture area. So we have not seen the degree of world of all interference Darko that we experienced in that are for Wolfcamp.
That said.
There's a little bit of better to be safe than sorry floating around here. So I suspect that we may.
Relax or spacing and urge arco.
Lightly I mean, not not to the degree to which we've talked about and therefore, wolfcamp, but we I would expect we're probably going to relax.
Very modestly.
Thank you very much.
As a reminder, if you have any.
If you have a question please crestar than one.
Do not see any further questions at this time.
This concludes the question and answer session I will now turn the conference back over to management for any closing remarks.
Well. Thank you all for your questions. This moring really look forward to getting back to work getting back to a serious momentum hopefully we've been clear with what we can and will deliver and hopefully we've been very clear with you that we.
We have tremendous flexibility on all fronts. So thank you for your questions and I wish you a happy new year now.
Thank you. Thank you everyone.
The confidence now concluded. Thank you for time to his presentation you may now disconnect.