Q1 2021 Penn Virginia Corp Earnings Call

Good afternoon, and welcome to the Penn, Virginia first quarter, 2020, One earnings conference call on.

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The recorded I would now like to turn the conference over to and the company for the prepared remarks. Please go ahead.

Thank you and good afternoon, everyone. We appreciate your participation in today's call.

Clay as you all saw director of Investor Relations and I'm joined this afternoon by Darren Hinky, Penn Virginia's President and CEO, Rusty Kelley, our senior Vice President and CFO and Julia Gaultney, Our senior Vice President development.

I already getting started I'd like to remind you we will discuss non-GAAP measures on this call.

Definitions and reconciliations of these measures to the most comparable GAAP measure and provided in our first quarter earnings press release issued this afternoon, which can be found on our website at www Dot Penn Virginia Dot com.

I would also point you to the language and the forward looking statement section of the press release, our comments today will contain forward looking statements within the meaning of the federal Securities Law. These statements, which include but are not limited to comments on our operational guidance are subject to a number of risks and uncertainties that could cause actual results to be.

Really different from those forward looking statements, including those identified and risk factors and our most recent annual report on form 10-K, and our quarterly reports on form 10-Q.

Finally, after our prepared remarks, we'll be happy to take your questions with that I'll turn the call over to Darren.

Thanks Clay, we very much appreciate everyone joining us for today's call.

Once again, our team delivered solid performance and the quarter delivering on our commitment to driving down on capital costs, increasing operational efficiencies and generating free cash flow.

On the production front, we beat on oil by selling 16324 barrels per day, which exceeded the high end of our guidance of 16200 barrels of oil per day.

Our strong sales volume for the quarter were largely due to the outperformance of wells brought online during the period, which benefited from our advanced completion designs, coupled with drilling improvements.

Volumes for the quarter were also less impacted by the February winter storm that we previously anticipated largely due to the outstanding efforts of the Penn Virginia operational team.

We have seen significant improvements and results from our drilling program. The wells, we spud in 2020 are outperforming their D N M projections by 13%.

Wells that had been turned in line in 2020 one.

Are performing even better their combined I P. 30 results are outperforming D N M projections by over 20%.

On page eight of the presentation, we provide highlights of some of the great wells, we have drilled and their results.

Our strong well performance to date provided us the confidence to raise our full year 2021 production guidance by more than 6%, while still maintaining our previous target on capital expenditures.

Looking at expenses for the first quarter, we posted adjusted direct operating expenses of $13 and 55 per Boe.

This low operating expense typifies, our lean cost structure and culture of cost containment put simply we will continue to leave no stone unturned to find ways to improve the operating performance of our business.

For the remainder of the year, we expect our direct operating expenses per Boe to trend lower.

The same holds true for capital spending where we continue to do more with less capex for the first quarter was $54 million, which was below the low end of our guidance range.

The combination of increased operational efficiencies and reduced capital spending and generating strong margins supports one of the Penn Virginia as key priorities generating free cash flow for the long term benefit of our shareholders.

I'm pleased to report that we generated free cash flow of $6 million during the first quarter, which was used to pay down debt.

This represents the sixth consecutive quarter, and which we generated free cash flow and we expect to be free cash flow positive for 2020 one.

Over the last several quarters, we have taken multiple strategic steps that we believe have positioned the company to deliver free cash flow and the future through our commitment to our returns driven strategy.

We expect to use the free cash flow, we generate this year to continue reducing debt.

Consistent with our disciplined approach, we expect any further improvement and cash flow from higher commodity prices will accelerate debt reduction.

We remain steadfast and our commitment to free cash flow generation capital discipline and maximizing cash on cash returns.

So with that we will open up the call to questions operator.

I will now begin the question and answer session.

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At this time, and we'll pause momentarily to assemble our roster.

Okay.

And on my first question will come from Neal Dingmann of Truest. Please go ahead.

Good morning, and afternoon, guys had nice quarters.

During my first question I like that slide eight you all have it really shows the the the deep inventory and so my question is around that deep inventory I know kind of the next 80 or so wells you have planned you know certainly seems like Theres high confidence there could you talk again without obviously go on too much detail, but it talks about here that you know even of your 500 locations.

Case, and you'll have the competence of two thirds of these are estimated to have sort of the 55 plus.

And I are at 55, and so I'm just wondering.

Is that all of you know looking at that slide is that all kind of in that general area I'm, just wondering how how far out if I would draw the circle.

Is the confidence continue and and you know is this all just I guess my second part of that is really just this year next year would you consider most of this now just sort of pure development activity.

Yes the.

We do have a great inventory and I appreciate you acknowledging that the.

When you think about where these wells will be drilled there, they're really all across our acreage the the longer laterals and <unk>.

Generate better returns and so we can have longer laterals, where they show up on our acreage and the generally yeah. They rise to the top so there isn't really one particular area or areas that generate the are the best returns, it's really all across the acreage and play the function well spacing and lateral length of play of.

Our role and and those economics.

Okay, Okay, and then just lastly.

And just looking at it costs, maybe a few of rusty it looks like to.

For us that the costs had gone down a little bit I'm, just wondering based on sort of assumptions not only oss, but just again just ops cost in general.

And I'm wondering if you could talk a little bit about the you know kind of what expectations are for at least the the remainder of the year for that.

Yeah, so relative to and <unk>.

Well costs, where we're working to drill our wells from existing pads to utilize the existing facilities, where we can to put as many wells onto one pad as we can and to drill the longest laterals that we can and so those are all the things.

And we're tweaking to improve.

And lower the cost of the total of the total wells relative to the lateral lengths that we complete so from and inflationary standpoint, we are we didn't really see any direct inflationary pressure and the first quarter and by and large them you know and the second quarter, we're overcoming them.

What little inflationary pressures, we see out there with efficiencies and our and our drilling and completion program.

Thanks for the details.

Thanks, guys.

Thank you of team.

And once again, if you would like to add.

Ask a question please press star.

The question and answer session I would like to turn the conference back over to Mr. Henry for any closing remarks.

We thank everyone for participating on the call today.

We're a company that's focused on cash on cash returns. We are we've got a great balance sheet and we intend to maintain the strength of that balance sheet.

And we absolutely are interested in and looking at M&A opportunities. This year, and we will be looking for accretive opportunities to grow the company and stay tuned. So thanks again for participating in the call.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.