Q3 2020 Contango Oil & Gas Co (Texas) Earnings Call
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Good day and welcome to the contango in the third quarter 2020 results Conference call. Today's conference is being recorded at this time I would like to turn the copper and silver two will be Collier. Please go ahead.
Thank you.
Good afternoon.
Thank you for joining US right third quarter 2020, <unk> earnings Conference call.
And the smoking call your guidance.
The executive officer current trends.
Joining me this afternoon and on the call for the character and the company's President.
Chad role for the company's Chief operating Officer Joe.
True Grady the company, the Chief Financial Officer and.
And the cool the.
Companys General counsel.
Hopefully everyone has had an opportunity to read three of this afternoon's press release, including the cautionary statements regarding forward looking information and non-GAAP measures and apply for the state.
That's cool.
Walter.
I will make reference to your presentation. That's the chart of website you get the interim president person.
Called Central Oklahoma, how low you reduction.
So please pull that up if you'd like to follow along.
Well I probably spoke with you are just a few short weeks ago, we announced our merger what they try and energy partners.
The merger at scale substantial long lives and low decline of oil reserves the increase.
The increases our exposure to oil and what we consider to be an attractive and forged true.
The next rises cost out of the combined entity.
Enhanced liquidity and free cash flow generation.
And the growth after that to our portfolio and pine tree and.
And requires very little and the way of maintenance capital spending.
We were able to structure the transaction and manner and allows us to keep it simple capital structure.
Price of the only bank debt and equity.
The allows us to maintain the optionality and we continue to pursue additional opportunities.
Our supporters of lending growth led by JP, Morgan and supported the shareholder base or major competitive advantages and this environment.
We continue to be diligent on the head of new dry.
For the balance of this year, we have 71% of our forecast for the GP oil production and $55.12 and 67% of forecast the PDP gas production hedged for $2.57.
The next year year, 69% hedged and well PDP and $51.71 and 58% hedged for gas PDP and $2.49.
Recently, we entered into additional 2022 patches, bringing us the 37% cash on oil PDP and $42 and for sites Threed shoot Threed of 2020 channel and 65% hedged out of gas PDP and $2 and 59 from through Q3 of two.
And he 22.
Not included in these numbers are the oil hedges and should have for mid con when we close on that transaction late this year or early next.
In terms of results.
I think we did a great job of managing the business and the tough environment and.
If you. Please open up the slide deck that I mentioned, the contango Central Oklahoma L O E reductions and turn to slide three.
The slide three executing our business plan and central Oklahoma This year and 2020 preview.
And we've been able to reduce Oh, we substantially strengthened during this year and lease operating expenses or 48% lower and the.
The previous year prior to taking over operations. The if you look at the top right chart you'll.
You'll see and marks of my team and this was Oh and by White Star.
The assets were running at about four and a half million dollars in the month.
In October of 2019.
About $2.9 billion a month after month before we took up for operations. Since then we've reduced the L.E. by 48% for about one and a half million dollars Spike go for data and that's a gross total production expense of <unk> dollar per month.
That was the reduction is expected to result, and over 50% of the value increase of or 41.7 million increase from PDP PV 10 for the Central Oklahoma region by the way. This is a subset of assets and we purchased from from White The star I feel that the us.
Clark of those out of it.
For the year and reserves, we would expect to see year end 2019 and reserves when normalized for the same pricing the viewing box right out of the bottom.
And your and 19 and you feel that 72.7 last year and 19 that basically you know today's strip you see there's some roll or roll off from production and that's free cash flow essentially from.
The minor of vision for what the dialog with the reduction that's about three times the roll off of production or free cash flow during that year. So very very material increase to our reserve base, just by going in and and cost cutting a lot of body of these assets.
And so the rights for acquisition and specifically the subset of assets categorized the central Oklahoma and the case study and how we approach and organic growth.
We were able to purchase the asset for the significant discount the PDP and then strip the.
363 sales process.
We've been hedge that production to Medicaid near term price risk.
Finally, we were able to kind of significant cost out of the field level of opex without any degradation and the operating performance for production further enhancing returns.
While the price deck and lower today than it was and closing the.
The price paid and the action taken post the closing provide a margin of the safety against downward price movements.
We believe that this process is repeatable for.
Particularly with regard to assets and by non natural entities such of banks bondholders or other creditors, which continues to be a focus of ours.
Our metrics all came in at or better than we guided to during our last earnings call with production at the top end of guidance and costs, but the elderly and GSK below the low end of guidance.
In short we executed on the internal things, we can control to either add value or at least not detract from value. While we continue to look for inorganic opportunities to grow credit.
On that front and the pipeline of opportunities were evaluating continues to be as strong as it ever has day.
It appears to us the bid ask spreads and merit and volatility and subsided somewhat and the WG guy for her.
We are seeing almost unprecedented opportunity as the assets to our portfolio the of banking and liquidation and pre and post reorganization of combinations bilateral trades and the acquisition of credit Securities.
Our flexible mandate and multi phased in approach allows us to be value of reacting to the best opportunities and our simple capital structure and low leverage the now and in the future give us the ability of play off and at a time when many of our competitors are unable to do so.
Thanks for your time, this afternoon and and for your interest and contango.
With that operator, I will open up the line for questions.
Thank you and he would like to ask the question please well they pull things start.
And your telephone keypad.
And you're using the speakerphone. Please make sure you and me function is turned out to a lot of your signature of each eye equipment.
Oh Boy spoke on the phone line will indicate when your line is open.
The state your name, but for posing a question.
Again.
The star one to ask a question.
And we'll pause for just a moment.
Once again that is star one if he would like to ask the question.
Good day said no questions at this time I would like to turn the conference back to your host for any additional and closing remarks.
Thank you and thanks, everybody for taking time to hop on the call and the hear about our third quarter earnings. We continue to be really excited about where we're at and the current environment and that look forward to update and you guys and the near future. Thank you again and have a have a great evening.
That concludes today's presentation. Thank you for your participation you may now disconnect.
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