Q2 2019 Earnings Call

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Our next question comes from the line of Gabe Daoud with Cowen Your line is open.

Hey, Good morning, guys. Just a quick question on cost you hit on it a couple of questions ago, but maybe you could just talk a little bit about what was driving.

The Oh, we beat this quarter and then if you could just talk a little bit about how you think DNC cost per foot can trend this year and I guess next year.

Great. Thanks, Yeah.

This or so.

Our regional teams out in the operating areas are really laser focused on cost and they look at every component and it's really paying off and I got to give kudos to everyone is working this.

So there's been lots of examples of structural change that we can do in LNG and for example, we instituted a program to accelerate electrical hookups and reduced number of generators and that's been a significant reduce or to our ela, we lowered our rental costs, we initiated program, which reduces failure rates on some of our artificial lift and the saves a lot in well workover costs. So you see lower workovers as a result cost there.

And then in our higher GR as we transition from one artificial lift lift method to under lift in that phase a lot in actual power usage.

So.

We're really focused on Halloween, we've got numerous examples of of making progress there and we're going to continue to do that.

Awesome Thats really helpful and just I guess any color on that on the DNC thought.

Yes look at it and see it.

Yeah, and Jay Jay mentioned, the 10% reduction that we've already achieved that in some cases, so for certain types of wells.

It's a combination of lower stand costs, which are structural.

Lower fluid volumes and some of the wells.

And.

Lower pumping costs, but then it.

Goes through across a number of other years lower chemical costs a lot of the ancillary services have have dropped and cost. So that's where we're seeing 10% and where we are.

Very confident we can achieve that next year and the current operating environment.

Awesome. Thanks, a lot Thats all I had guys. Thank you.

Yes, hi, good morning.

Let me, let me interrupt just for a second I heard I kind of feel like.

Peter do you have your opportunity to talk about our well results from because I did the whole pre recorded call myself, which I know you want to brag about that a little bit would you like to comment just a little bit on our well results for the quarter.

Yes. So this was this was.

Phenomenal quarter again, and we continue to see.

Well results exceeding our expectations or being right on our expectations and the Merlin Maximus is the Best example, where we continue to see it perform at the level. We feel we've really found how to optimize our spacing and achieve the returns we want so we've always talked about having that 25% return on.

And minimum on the last well drilled and we're finding that we've been able to dial into that really well.

Any other issues on wells. This quarter you were talking about in terms of mix or we have so the mix of wells. This this quarter, there can be a little bit lower IP and.

Shallower decline just because of where they are located and on top of that we've also shifted on that artificial lift side.

On it to lower cost artificial lift which leads to a little bit lower IP thirtys little bit shallower initial decline.

But.

In terms of.

Capital efficiency is phenomenal and we can really skew more lower spraberry wells. This quarter, we did in the previous quarters as well, okay. Sorry, just want to make sure I gave you a chance to right to address any other questions.

Your next question comes from the line of Mike Cielo with Stifel. Your line is open.

Hi, guys. This is actually the animals from Mike.

I got one question regarding cost for the rest of the year based on your full year guidance same slate.

Operating cash would be a little bit higher for the second half of the year is that is that right.

Well.

So all we're doing we're not we're not really changing guidance, yet we're going to just going to work our way through threeq, but yeah. We're seeing good results on the alloy and where we actually come in will depend a little bit on Workovers right now things are looking good, but we weren't ready to change guidance yet.

Okay. Okay, great. Thank you.

And I hopped on a question regarding the development on and that will be on that information.

You've got it you guys have.

Great Good wells for his thoughts on perhaps why.

Could you provide some comments on on future development.

So Jim I am not quite following your question are you asking about the Wolfcamp b.

D or B B C D. Steve.

Yes, Delta isn't boy, Oh ideas and Delta.

Yes, Wolfcamp D. Yet so we have a great well result, there and where were monitoring it we're looking at where the next locations should be we have not integrated them into our plans yet when we get to the budget cycle in the fourth quarter will decide whether to drill some wolfcamp b wells, whether complete come next year not but we're definitely excited about that first result, and the great thing about the DS we when we built our when we did that acquisition and built our valuation model. We didnt include value for the at all in that model and so this is really very additive to our to our program.

Great. Thank you.

Your next question comes from the line of Gail Nicholson with Stephens. Your line is open.

Hi, Good morning, everybody I got on a little late I apologize.

Just a question been asked but anyway.

The Austin chalk it to incremental wells that are being done.

Are those landed in the same.

Zone area, the Austin chalk or are you testing anything that you know.

Upper and the upper interval the Austin chalk.

Okay, Yeah, Gail this curve so the though the way we've lined out that program as we have accelerated to more wells into 2019.

On the Austin Chalk one was just flip over from China.

You referred well that we switched to an Austin chalk and the other was additive to the program and those wells are really delineating the Austin chalk lower interval that E bench.

Aerially is not testing shallower interval, we're making plans now on on testing the shallower interval, but we don't have that in our plans yet.

Okay, Great and then there is there anything that you guys had very good success testing different intervals and over at Howard is there anything else that you guys are looking at Howard you kind of might you on the horizon that test over the next 12 months.

I'll, just say, yes, but we're not ready to talk about it yet.

Okay, great. Thank you so much.

Again to ask a question press Star then the number one on your telephone keypad. Your next question comes from the line of William Thompson with Barclays. Your line is open Ed. Thanks for let me jump back on so well talk more about well results I just looking at slide 12, I understanding a greater mix and lower Spraberry and I know you guys have kind of given us the color that lower start but shallower decline maybe just talk about how that's performed on the lower spraberry side versus expectations.

Okay. So I think on the lower Spraberry is actually performed better than expected for the one time to border Laxman for new well results yeah, Yeah, the Maryland the influence of the Mellanox is correct.

Sure.

Okay.

Hi, so willing can just repeat the question.

Yes, just looking at slide 12 seen obviously that the strong performance here and I understand there's a greater mix in the lower Spraberry, which would have a shallower start but then a shallower decline.

I'm sorry, just the I'm just trying to get it how has that performed versus expectations.

Yes, the lower Spraberry identity is that it is better than we expected I wouldn't really expect is out there and it's not really that big a deviation anyway from in terms of better or or anything and there is a mix on the well so no there's nothing anomalous there whatsoever.

Well I guess, if you think about that curve theres a lot of Wolfcamp a wells in there so if you're doing as well as that curve with more lower spraberry wells that implies the Florida.

Doing better than better and if there is yes.

Small influences.

It was better, but it's not going to be big.

Okay.

And then on I know, it's kind of early to determine the upsides the benefit to the upsize facing program the longer laterals in the Eagleford.

But maybe just kind of comment on what you're seeing there and I understand it's very preliminary to see kind of Pathfindertg wait 20 days of production there.

Yes, let me just say that you know with what we're seeing companies the longer laterals. The wider spacing also the Austin chalk in the mix that the returns have significantly improved from.

2017 to 2018 into where we are today and what we anticipate for 2020 with the program we have there and.

Every one of those interventions we've made on that program has been beneficial and the team's done a great job of sorting that out.

Oh really looking at using advanced data analytics really.

Great. Thank you.

There are no further questions at this time I will turn the call back over to the C O Jay Ottoson for closing remarks.

Well. Thank you I will be attending several conferences later this quarter and keep you updated on our results and forecast.

Thanks for being on the call today and have a great weekend.

This concludes today's conference call you may now disconnect.