Q2 2019 Earnings Call
I will be your conference operator today.
This time I would like to welcome everyone to the W.P. ex energy second quarter earnings call.
This time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone I would now like to turn the conference over to your host Mr., David Sullivan Director of Investor Relations. Please go ahead.
Thank you good morning, everybody welcome to the WPS energy second quarter 2019 call. We appreciate your interest in W.P. ex energy, Rick Muncrief, our CEO clay Gaspar, our COO and Kevin Vann, Our CFO will review the prepared slide presentation. This morning, along with Rick Clay and Kevin other members of the management team are available for questions. After the presentation on our website W.P. ex energy dotcom, you'll find today's presentation and the press release that was issued after the market close yesterday also.
Our Q will be filed later today. Please review the board looking statement and disclaimer on oil and gas reserves at the end of the presentation. They are important and integral to our remarks. So please review them so with that Rick I'll turn it over to you.
Thank you David I appreciate everyone joining us today. Thank you for your interest in our company our results and our plans for all of them are coming together quite nicely just as we've expected.
We've wrapped up another strong quarter here W.P. actually look forward to visiting with you today.
Everything we're accomplishing starts there people, they're delivering incredible things many of which never make a press release, but are essential and foundational to our business. Nonetheless.
Let me give you two examples.
Over the Williston Basin, we just celebrated five straight years without an employee lost time accident.
I work out on the front lines, you know first hand, how much there is to manage not to mention the extreme winter weather. This common cold in North Dakota.
Congrats short team up more for staying safe.
And keeping our operations to talk to you.
That track record has kept a lot of barrels moving at a lot of revenues flowing.
Especially when you think about the record production volumes were now producing on the block.
Secondly out of the Permian or midstream investments are continuing to pay off in numerous ways. As we are rapidly building a solid midstream business with our crude.
Gas gathering and processing and our water systems.
In early July we cut our learning <unk> percentage to an all time low all way down to nearly 2.5% we look forward to even further improvement.
That's supports revenues to but also speaks to how deeply we care about capturing value doing the right thing and working through whatever challenges come our way.
In our case, increasing our gas capture is more of a complex mix planning.
Contracts pipes processing capacity.
Very key partnership and a series of timely strategic investments.
It's certainly paying off considering the strength of our price realization to the Permian.
That's simply didn't happen by accident.
It happened because our people got ahead of the game has started assembling the right road map for volumes.
The same can be said for our Permian technical team.
As we strive to simply be the best three is amongst the very strong peer companies.
Those.
That's who we are here W.P.X. and it shows how we get things done.
And that's not all were working on a lot of things for our shareholder just like we said we'd do.
Now, let's turn to page two and again similar progress.
Back in February we discussed our desire to return additional capital to shareholders beginning in 2021.
And then in April after accelerating the monetization of our work system. We said, we'd look at the feasibility of adjusting or timetable.
All along we said that could evolve continued debt retirements dividends and or stock repurchases.
Yesterday, we followed through on our work and announced the decision to implement a share repurchase program.
This is the next step in our efforts to return capital to shareholders.
As you saw in our news our board of Directors has approved a program to buy up to $400 million worth of W.P.X. shares over the next 24 months.
The market's current sentiment about our sector has created favorable circumstances for an action like this.
And if the market remains your rational we will be opportunistic.
Doing so will not impact our development cadence in 2024, our ability to continue to grow production.
We are generating free cash flow today, and expect to generate 100 million to $150 million in free cash flow in the back half of the year, which will help support our repurchase program.
The company is showing strength in other key metrics as well.
We've increased our cash flow by 48% in the first half of the year have seen outstanding outcomes for price realizations of Permian.
Receive $350 million from the sale of our interest in the Orix pipeline project and doubled the capacity of our joint venture processing plant in the Permian.
And we see more momentum ahead in the next few months.
We are raising our full year oil guidance by 4% and our full year volume guidance by 5% all while keeping our capital plan unchanged.
I'm very pleased with our execution, our outlook and what we're accomplishing for shareholders.
We're confident bullshit undaunted and our belief in our people our plans in the future of the company.
Let's turn to page three.
They are definitely an underlying success story here W.P. exit underpins, where we're at today.
We've made a number of decisions over the past five years to transform the company and none more important than our entry into the Permian basin.
We never doubted the asset for a second or whether we could execute but doing so put significant pressure on our financial metrics.
But however, we saw a very compelling cost for the company and what it could ultimately allow us to do for shareholders.
Today, we're reaping the benefits of acting almost convictions.
This slide shows how far we've come once we got the Alps assets in house.
I started unlocking their potential.
Not having all the potential is an ongoing process process that continues to this day and it will for some time.
So far we've reduced leverage and dramatically completely turned around our ability to generate free cash flow and sizably increase production in both physical barrels and on a debt adjusted per share basis.
What I do it all over again absolutely.
It punctuated our switch from gas to oil and our ability to drive our margins higher and with that I'll turn it over to clay Gaspar our COO, Thanks, Rick and good morning, everyone.
Yesterday, we announced a farm reiteration of our 2019 capital guidance and at the same time significant performance speeds on all of our critical quarterly metrics and bumped annual guidance on all three commodity streams.
We also posted some very impressive price realizations that are the product of years of work focused on staying ahead of our of the midstream bottlenecks.
I've heard our pure talk peers talk about the challenges of how this low commodity price environment can be I can tell you we consider today's environment mid cycle.
Our plan is built on $50 oil with our assets and with our team we can do quite well in the 50 to $55 World. We just stay focused on driving out costs performance up and ultimately generating full cycle returns to the bottom line.
Since our company, making acquisition of RK all in 2015.
We have been working hard to get our balance sheet rock solid.
And then make the very significant turn to generate free cash flows as Rick said, we are there now.
This is a major milestone for WPS, we're incredibly proud of this achievement now, let's turn to slide five and talk about how we're creating value from our groundbreaking paperless state project.
On the third quarter call last year I discuss the technical work, we're doing in the Peco stay pad in the Delaware.
You might recall I'd describe it as one of the most successful tests I've ever seen in creating real time tangible value.
Just to remind everyone on this six well pad, which included the upper and lower Wolfcamp, a and the X Y interval, we utilize fiber optics, microseismic chemical tracers, geophones and external temperature and pressure gauges, which allowed us to monitor the effectiveness of our stimulation in real time and watch how the changes in the Frac design impacted each perforation alone lateral.
Ultimately, leading us to more effective frac designs.
Also we've continued to monitor the production of these wells to further understand the impacts of the design changes.
In the case of the well with a fiber optic cable we're still continuously watching the pressure and temperature for every answer that lateral.
The learnings from this project had been seeing have significantly contributed 20, the 22% reduction in Delaware costs. We've also been able to apply some of the changes to the Williston basin that might not great in the Dolores. It's our first two wells and pads, which have incorporated the learnings from the Peco state.
To the Williston basin.
We've been able to lower well costs and improved early time production I'll be talking more about the mine at Grady in more detail in a few slides.
During the quarter, we took a 1200 foot core in the third bone spring interval in the state line.
This now gives us over 2000 feet of core in the state line from the base of the second bone spring to the base of the Wolfcamp B.
These cores are giving us invaluable data, which allows us to target.
The optimal landing zones development cadence and horizontal and vertical spacing as we develop this vast world class resource.
I should also point out that the improvements in well cost and drilling times are not theoretical or projections. These are actual costs that include drilling completion facilities artificial lift as well as any trouble time with these wells experience.
The drilling times are averages from spud to rig release and also included in the associated travel time.
This is not the best of or just record wells. These are averages. This include all the wells for these periods. While these improvements are very impressive. We believe we have more to come in the coming quarters and years ahead.
Now, let's turn to slide six and talk about the 2019, Delaware activity.
This slide is a summary of our activity comparing the first half to the second half of the year remember we entered the year with seven rigs running in the Delaware and drop two rigs during the first quarter to average about five points six rigs for the first half of the year. The second half of the year, we will continue to hold five rigs flat.
For the first half we benefited from higher average rig count and efficiency gains and put 47 gross wells on for sales, we spread out our locations to better understand the inventory quality and to meet some CDC obligations. We also landed an eight different landing zones and the first half of the year in the second half will be putting 31 gross wells on sales with over two thirds of our.
Of those in the core Stateline acreage position.
With 100% of the first sales coming from the third bone spring or the upper Wolfcamp.
The more focus second half of the year will yield more predictable development type activity and will also drive lower LTV costs by predictable and lower water costs.
Let's turn to slide seven and I will discuss the Delaware realizations.
We have been publicly discussing the importance of our midstream and marketing strategy in the Delaware for two years and quietly working on it a year ahead of that.
On the second quarter 2017 earnings call are presented in the slide titled staying ahead, and securing infrastructure in the Delaware, it's spelled spelled out our basic strategy on oil gas and Ngls for the gathering regional and end markets. It didn't get much air time on the call, but is the foundation of our price realizations today.
Everything from our takeaway capacity excuse me takeaway agreements with Atlas Whitewater and works to our buy sell agreements out of Midland and our catalyst JV with Howard Energy partners are all important components to a much bigger strategy to avoid bottlenecks and create value, where we are able to identify pinch points in the system way ahead of the market.
As you can see in the realized prices, we received for oil and natural gas in the Delaware, They both exceeded W.P.T. and Nymex for the quarter.
On the oil side will receive $60.12 per barrel, including basis swaps as we mentioned on the previous call our capacity on Grail comes on later this year.
It will allow us to get our barrels to corpus Christi, and realize international pricing, which could further enhance our oil realizations.
Our realized natural gas price was $2.04 including basis swaps.
When you include the positive impact of commodity management of 95 cents, our total realized price for the quarters $2.99.
This is despite waha gas being worthless basically worthless during the quarter.
The positive impact of commodity management relates to the physical hedge we have on our Atms transport transport to offset the dedication.
To sell to offset a dedication to sell some of the gas into our walk through February Onest 2020.
Our excess transport on Atmos allows us to purchase gas at Wahab prices, and then ship that gas to receive Gulf coast prices.
Realizing 60 and three in this environment is a pretty impressive print and reflects the hard work and forward thinking of our midstream and marketing team.
We have created very significant value in the monetizations of some of these assets and they are still creating value value through superior price realizations going forward.
Now, let's turn to slide eight ill provide some updates on the Williston basin.
Wilson continues to exceed our own high expectations as a as I discussed on our last call we slowed down our activity in the basin late in the first quarter due to some extreme weather and safety concerns related to that weather.
I said at the time Wilson will decline in the second quarter, but I was confident that it will quickly get back on track.
As it's worked out the team has significantly recovered from the second quarter production slowdown and we'll show a very impressive rebound on the third quarter.
I am happy to report that we've met and continue to meet the North Dakota Industrial Commission gas capture rules every month since it's been in place.
This year, we've captured over 90% every month.
As the Indy I see ramps the gas capture requirements next year to 91%.
We are confident our ability to stay compliant and not be production constraints.
The mine not gradient divorce and pads are two recent examples of why my confidence regarding will instance, getting back on track was so high.
Both these pads are exceeding our initial type curve and the might not Grady H.Y. set a company daily production record of 5862 barrels of oil equivalent per day.
With nearly 5000 of those barrels being oil.
The monarch Grady indoor sand pads, where the first wells using the modified completion designs from the technical work, we did in the Peco stay Pat in the Delaware, We continue to drive cost down productivity up and this just old fashioned value creation.
Now, let me turn it to Kevin for his CFO update Jeff.
Thank you clay.
And thank you to your entire team for producing the results that are driving free cash flow, which enables us to accelerate a return of value to our shareholders.
From those of US here in Tulsa to those in the field, who are on the frontline, making it happen everyday.
To our midstream and marketing teams, who are leading the industry and optimizing the realized prices on what we produce and sell you give me options that a lot of Cfos don't have.
The WPS team understands the need to execute in a disciplined fashion always with an eye on value creation and being opportunistic when the markets give us the chance to do so.
That spirit of exploring for opportunities has really made us who we are today.
From the timely entry into the Delaware to our midstream partnership and our marketing strategy around our oil and gas now we're going to take advantage of an irrational market.
As Rick indicated earlier, our leverage was up nearly four and a half turns in 2016.
Now our trajectory trajectory by the end of this year puts us below a turn and a half in 2016, we're outspending, our operating cash flows by nearly $200 million and our trajectory. This year puts us at a $100 million of cash flow above our capital spend.
We as a company company know how to take advantage of the market conditions and to manage the risks to continue this trajectory for years to come.
Now, let's turn to slide 10.
Our capital spending exactly where we communicated it would be halfway through the year. We had indicated initially that approximately 55% of our capital would occur in the first half of the year as we were transitioning from a higher rig count and 2018 to our current level.
As you all know our activity and spending is not a linear formula across every month of the year and can be a little higher or lower from month to month.
Depending on how wells fall within that particular quarter. So for the full year, our capital guidance remains unchanged at $1.1 billion to $1.275 billion.
Further we expect approximately $260 million to $275 million of the remaining activity to occur during the third quarter and $260 million to $270 million in the fourth.
Now as far as full year production guidance, we expect full year total production of 160 to 165000 barrels of oil equivalent per day.
Up from the original 149 to 161 per day, or 5% increase midpoint to midpoint.
We are also raising our full year all guidance production guidance to 101 to 103000 barrels per day.
Up from the previous 96 to 100 per day.
As clay mentioned earlier, our third quarter production has already trending materially above our initial expectations as many of the wells that were completed late in the second quarter or early in July has come on line.
This level would moderate slightly as we got into the winter months.
Turning to slide 11 for the quarter, we are reporting gold production of nearly 98000 barrels per day, which is 21% higher than the second quarter of last year.
Both basins drove this increase from last year, However, our sequential quarterly growth from the first quarter was driven by the Delaware.
Natural gas volumes were 35% higher than last year and were primarily driven by the Delaware as clay has and as clay discussed our cash realizations on both oil and gas were industry leading.
Our second quarter NGL production was 46% higher again, driven by the Delaware our realizations per barrel were impacted by higher than planned ethane recoveries, which also drove volumes higher.
For the second quarter, we are reporting an adjusted EBITDAX of $339 million, which has $51 million higher than the second quarter of prior year. This increase is primarily primarily driven by higher oil revenues with the higher volumes of 21 of the 21% increase we realized $99 million in higher oil sales, however, with the quarter over quarter decrease in oil price revenues were negatively impacted by $55 million.
Lease operating expenses were higher than last year, primarily resulting from higher volumes, but also from an increase in water handling costs as we drilled and some fairly remote areas and that Wilson. In addition, we incurred some unplanned workover expenses related to electrical service interruptions in the Delaware.
For the quarter, we are reporting adjusted net income of $37 million versus 23 million in 2018. The improvement was driven by the same factors impacting adjusted EBITDAX. However, our DDNA was $24 million higher than last year and was driven by our increased production volumes.
Despite this absolute increase our DDNA rate improved by a little over $2 per barrel as we continue to drill better wells at lower cost.
Catholics, our capital expenditures incurred for the second quarter totaled $341 million versus $355 million last year, our second quarter activity reflects a $42 million increase in process development activities, primarily driven by the timing of 24 wells that went on first sales in July which again is driving our current production rate as well as some midstream spend that allows us to get ahead of our development activity in the back half of the year.
As I mentioned earlier this is exactly where we thought we'd be on capital for the first six months six months of the year.
From the CFO seat, we had a very solid quarter and were nearly cash and.
And were nearly cash flow positive for the period.
As you think about our current production rate the way, we are executing operationally and how we are managing the commodity risk and optimizing our price realizations, it's hard not to be excited as we transition to generating excess cash flow and beginning begin returning some of that back to our shareholders.
Returning value to our shareholders starts with this repurchase program due to our view that buying our stock currently represent substantial value that we will consider other forms of capital return in the future. If we determine them to be effective methods of driving stockholder value.
With that I'll turn it back to Rick for some closing comments.
Thank you Kevin.
You know I can't think of another time, when WPS have been better position financially or strategically.
We plan to remain opportunistic we continue to shape a company that is known for generating healthy margins attractive returns and flexing our creative muscles.
And you can see all of this in our discipline our execution, how we protect pricing for our production.
And how we're returning capital to shareholders ahead of schedule.
WPS has never been content with the status quo and we never will.
We've come this far but taking advantage of times, where market conditions unwittingly worked in our favor.
Where others see challenges, we see opportunity and it's how we keep creating value.
At this time, we can open the lines for questions and I'll turn it back to the operator.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered all your wish to remove yourself from the queue. Please press the pound key.
Your first question comes from the line of assets from with Bank of America Merrill Lynch you are now live.
Thanks, Good morning, guys.
I have one for clay and then one for Rick.
Clay Williston basin has been somewhat lumpy this year as we think about 2020.
Should we expect a much more level loaded program and also any early thoughts on completion cadence in Delaware next year.
Yes, so the lumpiness of Williston, It's interesting as you look back and I think our references all two or three quarters ago. If you look back probably the last 10 quarters WPS post a big gain one quarter production gain and then it's kind of a model gain the next and then a big one and then a model we only had once where that cadence file fell out and we had to kind of model gains I think first of fourth quarter to first quarter first to second because of the Williston slowdown in.
In completion activity related some winter weather.
If you take that one anomaly out you basically have a big quarter, and then us and then a quieter quarter.
In the background Permian is just steadily increasing every quarter. Okay. Every quarter every quarter, we'll think comes in with a big splashy pad really drives the numbers and then it kind of is quiet the next quarter. So.
I think what we're seeing this quarter, we're talking about kind of a relatively mild quarter for second quarter for Wilson big quarter in the third relatively mild quarter in the fourth I think it stays with the same cadence.
I think as long as we're running three rigs as long as we're drilling these super high quality wells, that's just kind of what gives.
Williston gives to the to the to the bottom line of the company I'm sorry. Your second question for me or there was a part b of the first question.
No since the completion cadence in the Delaware for next year, you kind of uncertain.
Okay, yes on the Delaware side, it's kind of steady.
You have the economies of scale five rigs running is probably.
Relatively low end of where we've been over the last 18 months, but even with that we are steadily wanting running one.
One Frac crew and then at times, a spot second Frac crew to kind of catch us up, but it's a little bit more.
Predictable quarter to quarter.
Great.
So Rick.
You mentioned multiple times and in the press release as well if the market remains rational you will be you will become more opportunistic could you elaborate your thoughts.
On the irrational.
Irrationally, that's you see it.
Based on your track record your experience with multiple cycles.
Your conversation with current investors what is the market missing in your mind.
Well I think.
Your rationality in my mind is when.
We haven't reported a good quarter, yet, but some of your peers report.
Maybe some less than favorable results and you see.
Your your equity trade down dramatically and when that happens time and time again, and there's really no basis.
For your performance tied to that we think that thats.
Lets sets up a great opportunity and for us and so we will be rational in our thinking.
And and address that.
I think the market is is missing several things if you look at our oil growth, we've actually doubled our oil growth in the Bakken and the Permian basins in the last 24 months.
Probably good execution.
He has been top tier.
And then you think about the balance sheet improvement through the creativity of our teams here.
So I think that just a fundamental.
Really.
Lapse in judgment, if you will market and I don't want to be overly harsh, but we just think it sets us up really nicely and so we're prepared to take to take full advantage of that.
Thanks appreciate the color.
Your next question comes from the line of Derrick Whitfield with Stifel. Your line is open.
Hi, Good morning, all congrats on your strong quarter an update.
Thank you.
Perhaps for Clay I know you referenced steady growth for the Delaware in your earlier comments just now however, when I think about slide six to me would seem fair.
To say that your capital efficiency should materially improve in the second half as your completions.
Shift to more oil prolific formations in the third bone spring and upper Wolfcamp intervals is that a fair assumption.
Yes.
Yes Derek.
Somebody else will of coal.
Hey, what.
Yeah, I would say you know what I was talking about as kind of a little bit more stork in the prior question thinking about kind of the big quarter quiet quarter cadence and we've had that's really on the Wilson's side Permian is nice and steady quarter to quarter adds every quarter. It's improved short of one I think fourth the first quarter this year.
I think you will see that continue to ramp two things are happening.
In in the Delaware, one what you're talking about.
The quality of the assets moving more to develop note development mode right in the middle of State line. The second thing is we're benefiting from a flatter base decline in both Williston and Permian, but especially in the Permian side.
As we've seen this tremendous growth that Rick just referenced obviously the flip side of that is a significant base decline that's not.
It's not a bad thing, it's just kind of a factual basis of the the shape of the the type curve. These kind of wells from resource plays, but what happens in year, two and year three as these things materially flattened you're building off of a flat our base decline and so your growth continues to improve year over year right along with your capital efficiency from drilling these better and better wells. So yes, I'm very bullish on where we are headed on that on the Delaware side.
Very helpful and then staying on the Delaware given the increased attention on spacing and parent child issues.
How would you characterize your approach to kind of element in the second half.
Yes, we are unwavering in our opinion that co development is the right approach I'd say all of our peers are at different stages. I think we are probably a little further along than most.
I'll reference back section 22 that we've talked about and I must been two and a half years ago that we were talking about the first fully developed spacing tests, we've tested tight we've tested loose on purpose we have tested.
Places, where it's going to be too tight to tighter spacing.
You have to cross the line to know where the line is we're not we're not ashamed to say that.
Well, we're chasing now and we're really excited about with the amazing amount of inventory. We have you can think about things like not just maximizing PV 10, because you gave may get more inventory, but you may push yourself into lower returning wells, but pushing that into higher returning wells thinking about the spacing that really drives significant bottom line full cycle returns to the corporate bottom line. So.
In today's commodity price with that kind of.
Value creation mindset.
It's it things continue to evolve on the contrary to that is decreasing well cost men sand costs. All these things very significant.
Components, but we think are most important is the number of landing zones. The thickness of the interval the timing of which the revisits happen because you can't develop all of this in one visit if you wait too long to come back that well interference from the prior test can negatively impact your second visit so we're very thoughtful about that as well.
Much more to come on this but we're excited about our understanding and how we're driving value to the bottom line in an amazing amount of quality inventory.
Very helpful. Thanks for your comments.
Sure.
Your next question comes from the line of Mike Kelly with Seaport. Your line is open.
Hi, good morning, guys great quarter.
Rick I was hoping to kind of check in on your 2020 priorities. So just hoping maybe you could discuss.
The strategy.
Headed into next year, and maybe just give us an idea.
A ballpark idea how are you thinking about growth and in general activity levels. Thanks.
You bet, Mike I think that growth is still going to be important were going to be working on our.
Our finalized our 2020 plan every year, we have a strategy session in September with our board and we we pressure tested over assumptions, we try to stay current on.
All the data that we can get our hands on in whole perspectives, we can get our hands on and then we'll be ready to rollout.
Toward year end the final 2020 plan, but we think that growth is still very important we think that.
Free generating free cash is very important so those really are the two foundations.
Foundational things.
From a platform perspective, if you think about it that way we want to make sure that we maintain a strong balance sheet.
And.
And so I think as we look at the second half and clay and Kevin will talk about our results a lot of momentum in the second half of this year and I think that's going to sort of really bold bode well for 2020, and so we feel really really nice Smith of how it's setting up for us.
Great I appreciate that if I flip over the Bakken clay just.
Be curious to hear your thoughts here.
You know I think last year the market may be concerned that your nor Sunday Island wells, well spectacular we're going to be repeatable.
It's kind of answered the call here with the might not stated to lower sand looking as good if not better.
Just curious on if you think that's kind of the new base case going forward. If you have had a running room and inventory that could look as good as what you put up this quarter. Thank you.
Thanks, Mike I know, it's a set of question and risks give me. The I. We've had this call for this question on this call a number of times over the years.
How far are we going to push our our type curve for Wilson, we're going to hold this.
At the million barrel Mark that we have today, we think we think in type curves as kind of the next couple of years or so of inventory what we can repeatedly deliver.
And knowing that stuff happens.
You know we have operational upsets. The you know the reality of weather or whatever comes our way we want to be able to make sure we can deliver for that.
I'm I'm as excited as anyone else on the the well performance.
Theres some real questions as we stepped away from the North Sunday Island epicenter of the Williston Basin.
Can we continue to deliver these well results.
The team has stepped up the completion guys have been very creative as I mentioned, we're bringing in ideas, we're not ashamed to look across the fence and learn from our peers, we look from other basins.
Anything and everything is fair game.
Therefore, the performance has been great also point out.
That's sub 7 million dollar well costs fully baked.
You know on the reservation lot of a lot of my peers are.
Kind of thrown in the towel and don't want to fight the good fight to work on the reservation.
I think that is pretty industry, leading so we're pretty excited about where we're at I think it's repeatable going forward I would still hesitate to shift your type curve up.
To any any group of wells subset of wells, but we hope to continue to.
Consistently deliver and beat on our our type curve expectations.
All right I appreciate it guys.
Thanks, Mike.
Your next question comes from the line of Brian Downey with Citigroup. Your line is open.
Good morning, nice quarter, thanks for taking the questions I noticed on slide five the Delaware well costs are down 22% from 2018 average levels, which I believe is a 5% greater decline than was shown in last quarter's deck could you give any additional color on what's driving that incremental cost decrease and any additional runway you see on efficiencies and well costs production throughout the rest of this year.
Yes happy to talk about it again, thats, a two mile lateral including drilling completions facilities artificial lift and if this is look back numbers. These are actual so includes any kind of.
Issues, we might have had with well sometimes industry to tends to talk in if everything goes right, we could drill a well for dot dot dot. These us thats not this kind of well this is look back numbers.
That 22% I think the stimulation design.
Is a big component of it changes we've made will go into the details give all of our secrets away, but I can tell you some of the some of the design changes that we've made.
We're we're effectively stimulating the entire lateral and doing it in a much more.
Fission cost effective manner.
That's the real trick of the trade also point out the bottom right of the slide.
Shows our improvement in drilling times drilling is directly the drilling cost is directly proportional to the drilling time. So we tend to use that as a proxy for for efficiently getting the well placed.
In the right position safely and if we can do that in a quick manner. We're usually money ahead. The drilling team has done a phenomenal job and again, it's not just a best of a one off well.
Our drilling manager here is.
Repeatable consistent results kind of guy and he wants to see that average move down consistently over time and I think that's the right approach I think you see it.
Yield in the in the results in these kind of look back numbers.
More to come on that by the way.
Got it and then going back to slide six and then Derek Prior co development question now with Delaware for sales activity concentrated in the upper Wolfcamp during the second half of the year Directionally, how should we think about that mix shift shifting into 2020 if any.
No I think we will I mean stateline, let's just be honest that is are the epicenter of our of our activity.
The addition of the third bone spring inventory as that inventory matures, we learn more about landing zones. We've tested at least two landing zones in the third bone spring sand excuse me in the third bone spring line today.
We both have been very productive both have had very competitive individual well returns with the.
The best of the Wolfcamp, a so that's very encouraging for us what we don't know yet we're working on is how many ultimate landing zones, we have what's the spacing for it how do we go in to co develop we have very very good strong belief that this is an independent flow unit from the upper Wolfcamp. So what that means is we can go in and individually independently develop that and not feel obligated to at the same time as the Wolfcamp a it's very important because we want to go in.
With five rigs were kind of having to take basically a small bites as we can.
Sometimes to as many as five or six wells.
Hit that with the rig the rig Callaway get complete crew and get those wells online and then bring the rig back in and do it again.
With the the third bone spring as it matures and really falls into the full development queue. We'll have another ability to go in and then plow that down.
For hugely productive.
Again bottom line full cycle returns.
Great I appreciate the color. Thanks.
Thanks.
Your next question comes from the line of Brian singer with Goldman Sachs. Your line is open.
Thank you good morning.
Ron a question on the free cash flow and how that relates to the pace of share repurchase as we go forward into next year.
Do you expect to fund the share repurchase so Lee from free cash flow and if you don't see it you would wait on the buyback or would you use.
Recently strengthened balance sheet from asset sales.
Yes.
And are you willing to use that in part in addition, the free cash flow.
To meet the buyback expectations.
Hey, Brian This is Kevin the buyback will primarily be funded by our free cash flow I think as you think about the timing of working capital changes.
In the back half of this year.
Crude settlements the current kind of later in the month you may see a little.
From time to time.
He is a little bit of the revolver in order to be able to do so but the intent is we're going to be using our free cash flow in order to buy back shares and as you project into 2020.
I think if you were to look at the consensus.
Most of the consensus estimates out there projecting pretty good free cash flow from our portfolio next year, obviously as Rick mentioned, we still have some work to do with our board and in our September strategy session about what 2020 actually looks like.
But with the portfolio that we have in the trajectory that were on the well results that we're seeing.
Most of the program is really just going to be funded with our free cash flow I think as we mentioned.
Earlier.
Whenever we did our orix monetization in our whitewater monetizations of our equity investments there that might accelerate it and really what this does what does did was it created that that kind of balance sheet support as we were projecting our leverage for the balance of this year and our leverage for next year to be able to do that now one thing you will see is as we start to buy back any shares.
We're going to adjust our hedge book in order to.
Again as Clay mentioned, we plan at 50.
Strips, a little bit above 50, and we can maintain a really really healthy balance sheet profile with the little bit of additional hedges as we.
As we start executing on this program.
Great. Thanks, and then my follow up is you highlighted the disconnect that you see in terms of how to market. It and how investors are looking at WP acts are you seeing a disconnect elsewhere in an asset or corporate level that would peak your interest from a consolidation perspective or is the buyback here a signal that here at your carrier solely focused on the free cash flow and.
And buyback capabilities the WPS.
Yes, Brian I think our priority I answered his question on the last quarterly call. You know we're focused on ourselves right now we've got to when you know the assets you have better than anybody else Thats whats given us.
The.
The confidence do what we're doing you see crude price.
Hanging in there pretty well and yet you see the equity valuations just totally disconnecting from that and that gives us the confidence do what we're doing and.
And you are right I think you're you're seeing so the multiple compression.
In companies is in the sector is is really over done I think and so.
While there may be some things out there that look kind of interesting.
Bottom line is.
We're really focused on ourselves and I can tell you if you could.
Before the conversation clay and his team were having with.
Some some of our neighbors in the Delaware on putting these two mile units together, we have checkerboard.
Positions and the the return enhancements, we see from that that's that's really where more of our priority is right now.
Thank you.
Thank you.
Your next question comes from the line of Neal Dingmann with Suntrust. Your line is open.
Hi, guys great details today.
My question.
Maybe Rick for you a clay or even Kevin when you guys think about these days the.
The pad size versus tying up Im just wondering how you view that versus tying up the capital and potential efficiency behind that I mean, there's obviously couple of rules ways to think about that I'm just wondering.
Yes.
Kind of test a bit different but I'm just wondering how you think about it if you would even venture to even a larger size pad. These days.
No I think its a.
Yeah, it's an interesting balance we have.
A guy in our organization is titles director of subsurface for the Delaware Basin and his world is every day trying to crack that code and optimize that scenario.
Sometimes we've we've given in five rigs to run with and sometimes seven and sometimes it's more than that but I think.
Balancing.
Land requirements, making sure we check all those boxes.
Understanding the different parts of our geography, we still have some.
Kind of parts of the basin that are a little bit further removed.
In the state line, we have to understand those and figure out when they fall into the mix and then thinking about the flow units and very importantly, not.
Partially developing a flow unit and leaving a negative.
Path behind you if you know what I mean, if we say just developed the upper Wolfcamp a plow. It down then you come back in a year later and trying to do the lower Wolfcamp a guess what is not there anymore you feel of ruin that interval. So that's that's a big part of the motivation as I mentioned earlier, we're trying to kind of take the minimum byte that we can in a kind of a vertical slice. So we might hit an X.Y. upper a lower a even a b sometimes those would be four wells.
And then.
Give the gift that rig or two out of the way and then go in and complete them and then come back in six months later do it again and again and again as we scale up rigs over time.
Years from now we'll be able to take bigger bites I think you'll have more cost efficiency.
Each mode that you avoid is.
As efficiency gain.
The efficiencies of being able to scale the completions given that frac crew on location and completing more wells.
Your facilities efficiencies come along with that but then there is another side of that cooling where if you bring on too many wells at the time at one time the requirement for facilities and pipe in infrastructure can be incredibly big and that can kind of get to be the flip side of efficiency and actually cost you more in the end. So there's kind of a sweet spot in there I would say anywhere from three rigs or excuse me three wells to 10 wells per visit.
Probably as we see it today is that is the right approach per visit and then importantly, you've got to get back to a pretty quick catalyst thats. It for a year or two before you go back you will have some really really bad.
Awareness when you when you come back to visit.
It's great detail spend that that leads me to sort of related follow up you mentioned about sort of pushing the boundaries.
When it when it comes to spacing and sounds like just on that which you just telomere you sort of have done. The same now you know as it pertains to formation. So is are you sort of at the point now that you feel good or are you going to continue to sort of push those boundaries a bit more or are you already there and it's going to be more pure developmental.
When you look at sort of 2020 and beyond.
We are moving to more and more full development mode now on your first point.
Do we have the final respi on exact spacing.
And how many wells and all that stuff no because what happens as soon as you get a five dollar shift or $10 shifting commodity price I everything changes well cost changes local sand versus importing sand everything changes and so we're very attuned to that and we're we're self aware enough to know that we're never going to have the final answer we're always working towards.
That that right approach and it's but it's a bit allusive and you never quite quite reach it but I'm really proud of the work that the team's done the core that we've taken the Pacres project that we've taken the spacing tests that we have in the ground that we've been able to watch for a couple of years, there's nothing like empirical data to tell you what really works and what really Doesnt and so all of that is very incredibly important for us to work towards that the right quote right solution.
Great details I know you guys keep up the good work.
Thank you.
Your next question comes from the line of Brad Heffern with RBC. Your line is open.
Hey, good morning, everyone question on midstream so I think in the past you've talked about the success that you've had has has led to potential partners coming to you with with new opportunities that you might have not seen before I'm curious if you're still seeing that kind of activity. If you think that midstream investment is attractive at this point or repurchase program sort of supersede fat.
Yes, Brad I think the the questions have evolved but the questions keep coming.
Everything from.
Exporting oil along the Gulf Coast.
How that functionally works, where does the oil go where in those conversations.
Now let me, let me be clear, we're not building ports on our own or anything along those lines, but.
It's interesting and very humbling to have some of these.
Super majors and other world leaders in that space call up little WPS and what our opinion on some of that so very flattered to be part of those conversations and always have an eye for how do we create value for our own shareholders in those conversations we want all the way back up to right in the middle of state line and in the heart of the basin.
The water discussions are fast and furious you can bet, we have called that a call yesterday, just inquiring about what our plans are and you know we're very.
Opportunistic we watch these things and look for how do we create the most value at the same time, most importantly, protect that upstream MP business because.
You could you could do something really flashy and cash in some money on one of these deals and really live to regret it.
Quarter after quarter after quarter, if that counterparties not performing so we're pretty selective and those kind of marriage type proposals, but we're always always looking and creative and very very proud of how we see.
What others may perceive as challenges as your opportunities to create incremental value add bread. All this regale energy I think that.
It's just a capital allocation.
Decision and as you know that's that's my job.
I think is is to try to work with clay and Kevin and the team is on.
What is the best capital allocation.
Decisions, we can make and.
And so we are seeing those opportunities and we have to be very thoughtful we now have the the share repurchase which when you look at.
What our Navios, we feel like our NAV value is.
Where were trading at today, that's a that's a pretty good slam dunk of an investment I think and so that.
Versus some of these so wonderful Delaware at Bakken returns were seeing or wells versus some of the the midstream equity investments that we've made that we've done very very well so.
The opportunity still come are coming our way and we will try to do the best we can to being great capital Allocators.
Okay. Thanks for that and then sort of along the same lines you mentioned the water, but just how should we think about the plan going forward for the midstream assets that you already have including the Howard JV and so on are we going to see more monetization is like we saw in 2019 or how are you thinking about that.
We are going to be very very thoughtful its.
We'll watch the market.
We think in lot of ways or midstream asset portfolios is still a little bit immature.
And.
We also know that that from time to time monetization is the right way to go and so once again, we'll try to make the right decisions.
When.
When is the right time to monetize and if if it is right to monetize it and so.
We'll we'll keep you posted.
Okay. Thank you.
Your next question comes from the line of Betty.
Credit Suisse. Your line is open.
Good morning.
Have a question on 2020.
So given the well cost savings, you're seeing today and generally doing more with less equipment.
If you maintain at the current eight rig pace do you think you can do the same well activity with a lower year over year Capex next year.
I think we could because if you think Betty.
The first the first half of the year, we did have some some higher well cost.
We had some obligations I believe on some sand sand purchases such that if you walked away there's been a little bit.
Those sorts of arrangements have.
Lastly, we will have expired so.
I think your assumption derived same same.
Level of rig count you probably see less.
List DNC Capex.
Great. Thanks.
And then just broadly on 2020 planning I know, it's early days, but high level perspective are you solving for park, some adequate level of free cash flow.
More than adequate level of production growth with free cash flow margin output.
This is Kevin if any you're right we're still in the early phases, but.
I think first and foremost we're focused on returning free cash flow.
Our optimizing our free cash flow.
With an eye on how much production growth is the right amount of production growth given the kind of threading the needle between how much free cash flow, we can generate with.
With and I only want to talk about rig count it's more as you just asked it's more about the efficiencies that we're getting out and how much free cash flow given the reduction in capital that we're seeing coming on a per well basis.
So thats really I think where we start.
Is it it's free cash flow and capital efficiency Thats driven by the well results and then.
Kind of whats, the resulting production growth and in our recoverable with that production growth.
Got it thanks for that if I may squeeze one went yen.
On clay.
No probably not an issue for WPS, but on the Bakken.
Gas infrastructure constraints in the basin could you give any comment around that.
Thanks for the question Betty I'm real proud of what the team has done we have worked very hard on this.
We do have the advantage of being very high oil cuts nearly 85%.
On our into the the Williston basin that works in our favor.
But we worked very hard with our our midstream gathers.
We've worked very closely with the Indy IC make sure we understand the rules. We explore every option to how we can possibly meet those gas capture rules as I mentioned in my prepared remarks, we've met that every month very proud of that.
We continue to do so and we will continue to do so going forward.
There are challenges out there.
When gas price is the way it is in the Williston basin. The midstream providers are often theres no financial motivation for then delay additional lines every now and then you have right away constraints or other.
Challenges like that and so it's a really a big deal for the Williston Basin.
I think the NDRC has worked very well with industry, but also has some very strong opinions rightfully so about not wasting resources, we share those opinions and I think we've done a very admirable job of being able to meet that month after month.
And now a year after year.
Great. Thank you for that.
Your next question comes from the line of Leo Mariani with Keybanc. Your line is open.
Hey, guys, just a question sort of surrounding the thinking with the buyback here. Obviously, you know that the buyback is opportunistic which can certainly involved you know a fair bit of capital and consume a lot of the free cash flow over time do you guys see the buyback is kind of delaying a potential dividend announcement.
And then additionally, does the buyback also potentially obviate.
Sort of earlier discussion about maybe adding a rig in 2020.
You're right. It is we are being as opportunistic as we can and I don't know if it really delays.
The implementation of a dividend I think what it is is as we look at returning we are committed to returning value to shareholders.
We have the portfolio the and now we're starting to generate.
The free cash flow that gives us the options in order to be able to do it and as I said in my seat when I look at well, what's the best return, what's the best mechanism to return value to shareholders right now with kind of the irrational trading that we're seeing in the in the upstream equities.
As in particular, the way we've traded against as Rick mentioned, our NPV that is the best opportunity or that's the best mechanism to return shareholder value now it doesnt take dividends out of them out of the toolbox for US I think it's it's just a matter of as we start thinking about over the next couple of years, how are we going to be returning value to shareholders.
We needed this tool in our toolbox and we're going to be opportunistic as we think about that free cash flow and how to get it back to the shareholders, Yes, I'll just add some covenants.
It's an evolution right because of the first thing was we need to pay down our debt that was our first quota paying back the shareholders was driving debt down.
That was a massive focus for us over the last couple of years, we feel like Weve, if not check that box, we're well on our way to move from one five down towards 1.0, and net debt to EBITDAX I think that the dividend conversation is really that sustainability to the point that okay. We are ready to commit to this for the very first foreseeable future and the point that we can continue to increase that dividend over time and all the things you like to see and to be honest, we're just not there today it's not.
We're not at the point, where we can.
You know, where you are ready to commit to that I think in the face of having the the dividend or excuse me the buyback opportunity, we do see that as a better opportunity and then once the dividends come into focus.
We'll move that direction as well.
Okay, that's helpful and I guess.
Just to follow up here, obviously, you guys talked about better oil price realizations when gray Oak comes online later here in the fourth quarter can you guys give a ballpark of obviously some price benefit but can you ballpark of how much you could see GP and Ti per BOE, We go up when that comes on.
What does a number about when GPS win gray outcomes on what's the increase in GP into the amount owed to problem somewhere around 15 to 20 cents.
Yeah pretty pretty negligible, we will.
See that.
Added on to the.
So the Wilson.
Okay. Thank you very much.
Just an important point on that is when we get great back up and running obviously, we're getting that to corpus that's tying those barrels to Brent pricing international pricing and so now you're you're really.
That cost is much more outweighed by the benefit of seeing international price right.
Okay helpful. Thank you.
Your next question comes from the line of Kashy Harrison with Simons Energy. Your line is open.
Good morning, and congratulations on getting to the point, where you can begin returning capital to shareholders.
Thank you. Thank you.
So I mean, maybe one for.
Maybe one for clear Kevin.
You highlight the Delaware well costs, I think tracking maybe around nine and a half million for a two mile lateral well spend looks like it's tracking sub 7 million when you take those lower well cost into consideration when you take your base declines exiting 2019, and consideration, which I imagine should be lower on a year over year basis.
I was just wondering if you could help us think through.
That being see maintenance capex level to hold the 2019 or 20, I think Q4 exit rate flat through next year.
Yes.
I anticipate the maintenance capital question and it's one of those tricky numbers Kashi is a.
How do you you're talking about oil we're talking about will be always and how do you manage that here's the way I'll answer it and it's in a kind of a high level sense for us to maintain essentially the same ratio of rig counts that were doing today.
Same.
Gas oil ratios the same kind of mix in general and to to when we think about maintenance capital fourth quarter or fourth quarter exit exit to exit kind of flat, that's probably eight or $900 million.
To get that to get that point.
Excellent and then that's very helpful. And then building upon you know a few earlier questions I know that.
Very highly dependent on and quite frankly, an enormous amount of variables but.
I was wondering if you could just walk us through as you as you stand today, how you think about your base case horizontal spacing assumptions on average for an interval. How you think about the optimum vertical spacing. How you think about the number of landing zones all of that that could be economically developed then call. It a 50 to $55 environment and then maybe as well as I think you made an earlier comment, but how you think about them maximum timing lag between the parents and the Enfolds wells before you run the risk that you are going to start to see degradation in the in the infill wells.
Alright, Casio as I realize it was a follow up question sub point a to Z.
So I'll try and I'll try to remember with yes.
As we think about in today's environment fit if it $5.
The optimal spacing, let's just start in Stateline itself Wolfcamp at the upper Wolfcamp sleds, upper a lower a X y and sometimes be wherever that flow unit is.
That's probably.
For landing zone, two to four landing zones, depending on where you're at in the area now it's an interesting.
I mentioned the number of landing zones, one because as your question and into it affects the.
How how tight you can drill those wells if you have three landing zones versus zones versus two.
That definitely impacts.
How many wells you can cram it on a on a horizontal sense.
When we're driving for higher returns.
And making sure that were yielding enough.
Meat on the bone to get all the way through to full cycle returns I think we're probably as few as four wells per landing zones.
Maybe as six wells per landing zones, probably in that range for each one of those so.
Forums for 16 six times four is 24.
For that that would probably be your your your range.
The the wells that we land in the upper Wolfcamp, a and so.
Different ways to talk about that and kind of birds eye view, but it depends on landing zones and individual well thickness and then obviously, the well program or the reservoir parameters like permeability come into play as well.
Got it and you would still have incremental landing zones associated with the I imagine with the third bone.
Yes, a whole nother full unit and like I said earlier.
We are holding back on saying just because we don't know yet.
How many landing zones and well spacing in regards there but.
I hope that it shapes up something similar to the upper Wolfcamp a.
To me the individual well results the thickness that we see.
Interestingly it has more natural frac barriers in that formation, so you'll be able to better control some of the stimulation.
But it's too early to kind of nailed that one down.
All right. Thank you.
And don't forget about the well the zones below the b as well, we still have see indeed, it has lots of opportunity. It just has a higher gas cut that'll that'll come to us in time.
Got it thank you.
Your next question comes from the line of Irene Haas with Imperial capital. Your line is open.
Okay.
Irene you might be on mute.
Irene.
Your line is open.
Let's go to the next caller.
[noise].
Your next question comes from the line of Gabe Daoud from Cowen Your line is open.
Next caller gave you on there.
Next caller next caller please.
Your next question comes from the line of Jeff Grampp with Northland Capital markets. Your line is open.
Last man standing I guess I appreciate your [laughter], everybody else moving into the cloud [laughter] collateral I appreciate guys squeeze me in I'll just leave it at that one kind of philosophical one here at for you guys on the buyback you know Ricky you mentioned in the release you know you don't want this to impact your ability to grow in 2020, but just kind of curious how you guys kind of settled in you know why is the 400 million kind of the right number to put out today and you know how you guys may be balanced any conversations internally on do you. You know were there any conversations I guess on scaling back growth and a and doing a larger buyback program given the you know the opportunity and your stock here.
Yeah, you know the the buyback is something we've contemplated here for quite some time. This is not just something to them.
[noise] came about in the last 10 days, we've we've discussed this auction over more for quite some time, we always feel like that to do it you needed to be in that plus or minus 10% of your total outstanding shares to make it meaningful for shareholders and.
It was.
We ended up getting there and so we went ahead and the other was the right time to implement the program, especially with some of the recent performance. So we just we hate to keep beating the dead horse, but.
The the behavior, we called irrational it just seemed like the perfect setup for us to to step in and once again make a just a really good fundamental investment in the end by ourselves.
As far as great as far as upsizing I think it's much too early for that we're just we'll see how this.
Al. This first tranche goes over the next 24 months, yet I think if you look at it again, if you look at our projected.
Kind of consensus estimate free cash flows over the next 24 months and you think about $400 million.
That's not that's not a bite that's too big for our balance sheet.
I did mentioned that we were going to.
As we buyback any shares in order to protect the balance sheet that seems to be a little bit more hedging.
But again 400 million over two years.
It's really pretty commensurate with the amount of free cash of it.
We have the opportunity to generate and still give.
Pretty good.
Growth profile to create more cash flows as we think about 2021 and beyond.
Got it understood precise details guys. Thanks.
Thank you.
Your final question comes from the line of Gail Nicholson with Stephens. Your line is open.
Good morning, Thanks for fitting me in I just wanted to ask you on your thoughts about ethane rejection versus recovery in the second half of 19, you know you have a unique situation with your flexibility and optionality with the cryo facilities. I was just kind of curious how you guys are thinking about ethane.
Yes, thanks for the question Gail.
You know it's.
It's a very dynamic market I can tell you a situation that happened within the last week.
The issues happened down in Baytown.
I think it was Oh, maybe mid week evening.
By within 12 hours of that we had already talked to our partners at Howard we've already made.
Changes to the plan were already switching to ethane rejection in the face of a crashing ethane market.
That's a pretty unique ability for an ERP company to be able to control.
Have a say in that real time. So we believe we'll continue to move with the market.
We're very thoughtful about.
Staying ahead, obviously on Waha gas prices working hard on the Ngls as well as just a little more difficult market to kind of pin down.
Because it's so dynamic.
We'll continue to watch it I don't have any strong predictions on where ethane prices are headed but I can tell you. We'll continue to watch it as quickly as real time and make appropriate changes to stay in line for the best value creation.
Great and then just going back to the kind of the comments you guys. You made in regard to the optimal landing zone post the core the core data analysis you did when you look back at that.
Landing landing zone.
Before core data packet core data do you know what percent of wells are being landed optimally prior to the core data being done.
Oh, that's a great question it's a.
You know sometimes this core data.
You're moving.
The landing zone, 10, or 15 or 20 feet.
So it's not like you're going from two landing zones to three or Youre shifting 150 feet into a really a a different interval.
Sometimes we'll we're trying to do is push that landing zone.
So you're getting the energy of the Frac to break through a frac barrier and make sure you're accessing part of the reservoir. Other times you are trying to distance yourself from that Frac barrier. So it remains an effective frac barrier and you're able to keep that that frac constrained. So I would say, it's more about fine tuning, it's kind of like the ultimate Frac design, you're never fully there.
And then once you figure it out for one.
One drilling spacing unit you move over a couple of miles and it changes again. So we have a we have really good core of that core is able to tie back to the logs were part of a consortium in the area. So we share information with other operators learn from that information.
We have a very robust.
Framework structure of all the geologic data so we're able to move kind of around the.
Around the field and understand if we learn something here how does that apply to the five to 10 miles away.
So it's pretty dynamic I would say.
Very few are landed perfectly just like your completion design very few are ever perfect. You're always in search of that perfection and always trying to continue to move towards it but this incredibly important data helps us get get closer everyday.
Great. Thank you so much.
Thanks Gail.
There are no further questions at this time I will now turn the call back over to Mr. Rick Muncrief.
Thank you operator, and thanks to those that are still on the call. Today. We appreciate the opportunity spend time with you today, we're excited about our future we had a wonderful quarter and we're going to have a strong second half and I think it really sets us up for a nice 2020 so.
Thanks, again have a great day.
This concludes today's teleconference. You may now disconnect.