Q2 2019 Earnings Call

July 31, 2019

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Thank you for calling.

The conference.

Which covers all your attending please.

[laughter].

Thank you ma'am please get your first name.

Evan K.E.V. I end.

[Analyst]: Thank you for calling.

Operator: Thank you for calling.

Thank you Sir.

[Analyst] (Aiera): Good morning.

Kevin LaFlamme: Good morning.

Please get your last name.

[Analyst]: We have the conference this morning. Which conference are you attending, please?

Operator: We have the conference this morning. Which conference are you attending, please?

Flom.

S.L.A.M.M.E.

[Analyst] (Aiera): The Encana Earnings Call.

Kevin LaFlamme: The Encana Earnings Call.

[Analyst]: Thank you. Ma'am, please get your first name.

Operator: Thank you. Ma'am, please get your first name.

I'm, sorry, but there's a lot of distortion on your line.

My last name is Ciena as DNA.

[Analyst] (Aiera): Kevin, K-E-V-I-N.

Kevin LaFlamme: Kevin, K-E-V-I-N.

[Analyst]: Thank you, sir. Ma'am, please get your last name.

Operator: Thank you, sir. Ma'am, please get your last name.

Thank you Sir you May I. Please have the name of the company that you all with.

[Analyst] (Aiera): LaFlam, L-A-F-L-A-M-E.

Kevin LaFlamme: LaFlam, L-A-F-L-A-M-E.

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[Analyst]: I'm sorry, there's a lot of distortion on your line.

Operator: I'm sorry, there's a lot of distortion on your line.

Thank you so placing into the conference now.

[Analyst] (Aiera): Yeah, my last name is Sena, S-E-N-A.

[Company Representative] (Aiera): Yeah, my last name is Sena, S-E-N-A.

Can you development is working exceptionally well in the Anadarko today in today's materials, we provide a direct.

[Analyst]: Thank you, sir. May I please have the name of the company that you owe?

Operator: Thank you, sir. May I please have the name of the company that you owe?

[Analyst] (Aiera): Aiera, A-I-E-R-A.

[Company Representative] (Aiera): Aiera, A-I-E-R-A.

Himself.

Good morning, Matt have your conference.

[Analyst]: Aiera. Thank you, sir. Placing you into the conference now.

Operator: Aiera. Thank you, sir. Placing you into the conference now.

Better oil wells at significantly lower costs.

Doug Suttles: Key development is working exceptionally well in the Anadarko today. In today's materials, we provided direct comparisons to our new results versus the legacy 2018 results.

Our chief development approach is a demonstrated winter.

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Reduced cycle times, lower cost and enhance returns Mike was.

Operator: Good morning. May I have your conference name, please?

Doug Suttles: My name is Cube, sir. Bringing better oil wells at significantly lower cost. Our Cube development approach is a demonstrated winner.

In the Anadarko.

Good morning, Matt.

Frequently mentioned topic is the timing of additional asset divestitures.

Operator: Good morning.

Doug Suttles: To reduce cycle times, lower cost, and enhance returns. Mike will speak further on this in a moment, but you are seeing Cube results today in the Anadarko.

Our recently announced agreement text chat.

<unk> commitment to portfolio alignment with our strategy, we have a long track record of managing the portfolio.

Operator: Good morning, ma'am.

Doug Suttles: Another frequently mentioned topic is the timing of additional asset divestitures. Our recently announced agreement to exit China and sell the Arkoma demonstrate our ongoing commitment to portfolio alignment with our strategy. We have a long track record of managing the portfolio consistently. Our base assets are high quality, so an important role in our portfolio. Combined, these oil-rich assets produce about 100,000 BOEs per day and are about two-thirds oil and condensate, and provide exceptional returns in free cash flow. The final topic where we get questions is around our leverage metrics. We have always prioritized maintaining a strong balance sheet, and liquidity in our credit ratings represent this. On an annualized Q2 basis, we would include a full 12 months of EBITDA from the legacy Newfield assets. Our leverage ratio would be 1.7 times.

Portfolio.

Its assets produce about 100000 Boe per day and are about two thirds oil and condensate and provide exceptional returns in free cash flow.

The final topic, where we get questions is around our leverage metrics.

We have always prioritize maintaining a strong balance sheet.

And liquidity in our credit ratings wrecked.

Represent this on an annualized Q2 basis. We would include a full 12 months of EBITDA from the legacy Newfield assets, our leverage ratio would be 1.7 times.

We recently repaid $500 million in in senior notes with proceeds from.

A more cost effective commercial paper program, our business plan as our free cash flow growing in the second half of this year and we intend to use this to strengthen our balance sheet and fund the remainder of our buyback program.

Doug Suttles: We recently repaid $500 million in senior notes with proceeds from a more cost-effective commercial paper program. Our business plan has our free cash flow growing in the second half of this year, and we intend to use this to strengthen our balance sheet and fund the remainder of our buyback program. With the noise of transaction costs and the partial period reporting now behind us, our Q2 results provide a good analog for what you can expect from the business going forward: consistently strong execution, capital discipline, prudent financial management, free cash generation, and a return to cash to shareholders. If we keep delivering on these elements, we believe the value of our equity will come to reflect that of a premium E&P company. I will now turn the call over to Corey to provide an overview of our financial results.

With the noise of transaction costs and the partial period reporting now behind US our Q2 results provide a good analog for what you can expect from the business going forward.

Consistently strong execution capital discipline prudent financial management free cash generation and returned cash to shareholders. If we keep delivering on these elements. We believe the value of our equity will come to reflect that have a premium NP company.

I will now turn the call over to Cory to provide an overview of our financial results.

Thanks, Doug it's important to note that each of our assets will generate free cash flow at the asset level.

Each asset has a distinct role to play in the portfolio and collectively they help us deliver the desired corporate outcome.

As Doug highlighted earlier, we had free cash flow of about a $127 million in the second quarter.

Corey: Thanks, Doug. It's important to note that each of our assets will generate free cash flow at the asset level. Each asset has a distinct role to play in the portfolio, and collectively, they help us deliver the desired corporate outcome. As Doug highlighted earlier, we had free cash flow of about $127 million in Q2, demonstrating the strength of our assets and the sustainability of our business model. For the quarter, we had net earnings of $336 million or $0.24 per share. When excluding the impact of certain items, our non-GAAP operating earnings were $290 million or $0.21 per share. Cash from operating activities for Q2 was $906 million. Non-GAAP cash flow was $877 million or $0.64 per share. Our total cost performance, excluding the impact of long-term incentives and restructuring costs, was $12.78 per barrel and in line with expectations.

Corey Code: Thanks, Doug. It's important to note that each of our assets will generate free cash flow at the asset level. Each asset has a distinct role to play in the portfolio, and collectively, they help us deliver the desired corporate outcome. As Doug highlighted earlier, we had free cash flow of about $127 million in Q2, demonstrating the strength of our assets and the sustainability of our business model. For the quarter, we had net earnings of $336 million or $0.24 per share. When excluding the impact of certain items, our non-GAAP operating earnings were $290 million or $0.21 per share. Cash from operating activities for Q2 was $906 million. Non-GAAP cash flow was $877 million or $0.64 per share. Our total cost performance, excluding the impact of long-term incentives and restructuring costs, was $12.78 per barrel and in line with expectations.

Demonstrating the strength of our assets and the sustainability of our business model.

For the quarter, we had net earnings of $336 million or 24 cents per share.

When excluding the impact of certain items, our non-GAAP operating earnings were $290 million or 21 cents per share.

Cash from operating activities for the second quarter was $906 million.

non-GAAP cash flow was $877 million or 64 cents per share.

Our total cost performance, excluding the impact of long term incentives and restructuring costs was $12.78 per barrel.

And in line with expectations, we expect total costs to remain under $13 per barrel for the remainder of the year.

We remain on track with capital spending at the beginning of the year, we indicated that the capital profile would be front half weighted for a couple of reasons first we inherited a much higher level of stack activity from Newfield, and we have now level loaded the program.

Corey: We expect total costs to remain under $13 per barrel for the remainder of the year. We remain on track with capital spending. At the beginning of the year, we indicated that the capital profile would be front-half weighted for a couple of reasons. First, we inherited a much higher level of STACK activity from Newfield, and we have now level-loaded the program. Second, the activity levels in our base assets were front-end loaded to maximize operational efficiency and free cash flow. About 60% of our total pro forma capex was spent in the first half of the year. With disciplined capital allocation, production momentum, and cost control, we expect to have significant free cash flow in the second half of the year.

Corey Code: We expect total costs to remain under $13 per barrel for the remainder of the year. We remain on track with capital spending. At the beginning of the year, we indicated that the capital profile would be front-half weighted for a couple of reasons. First, we inherited a much higher level of STACK activity from Newfield, and we have now level-loaded the program. Second, the activity levels in our base assets were front-end loaded to maximize operational efficiency and free cash flow. About 60% of our total pro forma capex was spent in the first half of the year. With disciplined capital allocation, production momentum, and cost control, we expect to have significant free cash flow in the second half of the year.

Second the activity levels in our base assets were front end loaded to maximize operating operational efficiency and free cash flow.

About 60% of our total pro forma Capex was spent in the first half of the year with disciplined capital allocation production momentum and cost control, we expect to have significant free cash flow in the second half of the year.

Our market diversification strategy continued to enhance cash flow margins in the quarter, adding 96 cents per Boe in the quarter and a $1.23 per BOE a year to date.

Our Permian oil realized price, including hedges was strong at about 105% of deputies.

Corey: Our market diversification strategy continued to enhance cash flow margins in the quarter, adding $0.96 per BOE in the quarter and $1.23 per BOE year to date. Our Permian oil realized price, including hedge, was strong at about 105% of WTI, more than $4 per barrel higher than the Midland benchmark, thanks to our downstream marketing efforts. Our Canadian realized gas price was about 87% of NYMEX, including the benefit of our downstream marketing arrangements and hedges. Strong production from our three core growth assets more than offset the impact of selling China and Arkoma, which together produce more than 16,000 BOE per day in Q2. These transactions are expected to close in Q3. Our full-year production guidance remains on track despite the impact of these transactions.

Corey Code: Our market diversification strategy continued to enhance cash flow margins in the quarter, adding $0.96 per BOE in the quarter and $1.23 per BOE year to date. Our Permian oil realized price, including hedge, was strong at about 105% of WTI, more than $4 per barrel higher than the Midland benchmark, thanks to our downstream marketing efforts. Our Canadian realized gas price was about 87% of NYMEX, including the benefit of our downstream marketing arrangements and hedges. Strong production from our three core growth assets more than offset the impact of selling China and Arkoma, which together produce more than 16,000 BOE per day in Q2. These transactions are expected to close in Q3. Our full-year production guidance remains on track despite the impact of these transactions.

More than $4 per barrel higher than the Midland benchmark, thanks to our downstream marketing efforts.

Our Canadian gas, our Canadian realized gas price was about 87% of Nymex, including the benefit of our downstream marketing arrangements and hedges.

Strong production from our three core growth assets more than offset the impact of selling China, and arkoma, which together produce more than 16000 Boe per day in the second quarter.

These transactions are expected to close in the third quarter.

Our full year production guidance remains on track despite the impact of these transactions.

On capital, we expect to come in at the midpoint of our pro forma 2019 capital budget of $2.8 billion.

Our cash flow continues to grow through a combination of increased liquids mix, our relentless focus on cost efficiencies pulling through the synergies from our newfield acquisition and our approach to maximizing realized prices.

Corey: On capital, we expect to come in at the midpoint of our pro forma 2019 capital budget of $2.8 billion. Our cash flow continues to grow through a combination of increased liquids mix, our relentless focus on cost efficiencies, pulling through the synergies from our Newfield acquisition, and our approach to maximizing realized prices. Our Q2 cash flow margin came in at $16.27 per BOE. We are committed to preserving our strong balance sheet. Our trailing net debt-to-EBITDA ratio has improved since the Q1, and we expect this to continue through the balance of the year as we're able to include additional EBITDA contributions from the legacy Newfield assets in our leverage metrics. Our Q2 EBITDA run rate would imply a normalized net debt-to-EBITDA ratio of approximately 1.7x. As a result, we expect our reported net debt-to-EBITDA ratio to improve in subsequent quarters.

Corey Code: On capital, we expect to come in at the midpoint of our pro forma 2019 capital budget of $2.8 billion. Our cash flow continues to grow through a combination of increased liquids mix, our relentless focus on cost efficiencies, pulling through the synergies from our Newfield acquisition, and our approach to maximizing realized prices. Our Q2 cash flow margin came in at $16.27 per BOE. We are committed to preserving our strong balance sheet. Our trailing net debt-to-EBITDA ratio has improved since the Q1, and we expect this to continue through the balance of the year as we're able to include additional EBITDA contributions from the legacy Newfield assets in our leverage metrics. Our Q2 EBITDA run rate would imply a normalized net debt-to-EBITDA ratio of approximately 1.7x. As a result, we expect our reported net debt-to-EBITDA ratio to improve in subsequent quarters.

Our second quarter cash flow margin came in at $16.27 per Boe.

We are committed to preserving our strong balance sheet.

Our trailing net debt to EBITDA ratio has improved since the first quarter and we expect this to continue through the balance of the year as we're able to include additional EBITDA contributions from the legacy new field assets in our leverage metrics, our second quarter EBITDA run rate would imply a normalized net debt to EBITDA ratio of approximately 1.7 times as it was as a result, we expect our reported net debt to EBITDA ratio to improve in subsequent quarters.

Our strong operating performance is driving the leading corporate financial metrics for returns and free cash flow and this is clearly visible on slide six.

We plotted here, our free cash flow yield and return on capital employed against our peers.

Encana has an attractive balance of free cash generation quality corporate returns and growth in high margin liquids that support our record of returning cash to shareholders. Again. This is the model that should get differentiated by the market on the road ahead.

Corey: Our strong operating performance is driving the leading corporate financial metrics for returns and free cash flow, and this is clearly visible on slide 6. We plotted here our free cash flow yield and Return on Capital Employed against our peers. Encana has an attractive balance of free cash generation, quality corporate returns, and growth in high-margin liquids that support our record of returning cash to shareholders. Again, this is the model that should get differentiated by the market on the road ahead. I'll now turn it over to Mike McAllister for an operational update.

Corey Code: Our strong operating performance is driving the leading corporate financial metrics for returns and free cash flow, and this is clearly visible on slide 6. We plotted here our free cash flow yield and Return on Capital Employed against our peers. Encana has an attractive balance of free cash generation, quality corporate returns, and growth in high-margin liquids that support our record of returning cash to shareholders. Again, this is the model that should get differentiated by the market on the road ahead. I'll now turn it over to Mike McAllister for an operational update.

I'll now turn it over to Mike Mcallister for an operational update.

Thanks, Corey and good morning, everyone. The second quarter of 2019 marks another strong quarter of law.

Across the portfolio, our teams are meeting or beating their production and capital targets, while finding new ways to innovate drive down costs and maximize efficiencies.

Mike McAllister: Thanks, Corey. Good morning, everyone. The Q2 2019 marks another strong quarter of operational performance for Encana. Across the portfolio, our teams are meeting or beating their production and capital targets while finding new ways to innovate, drive down costs, and maximize efficiencies. Encana's track record as a leader in unconventional development has been proven over a sustained period of time. Today, we are the second-largest unconventional player in North America with nearly 600,000 barrels equivalent of daily production. More than half of that is liquids. I think people may often overlook that our oil and condensate production today is more than 230,000 barrels per day. We are growing the commodity that matters. Let me give you a quick asset update, starting with the Anadarko where we have seen strong growth in our oil production.

Kind of track record as a leader in unconventional development has been proven over says.

Today, we are the second largest unconventional plays in North America with nearly 600000 barrels equivalent of daily production and more than half of that is liquids.

I think people may often overlooked that our oil and condensate production today is more than 230000 barrels per day, we are growing the commodity that matters.

Let me give you a quick asset update.

Starting with the Anadarko, where we have seen strong growth in our oil production last quarter, we reported that $1 million per well cost reduction target has been achieved well ahead of schedule and then we saw a room for further improvements today, we are consistently drilling wells for about six and a half million dollars, that's 5% below the original target.

Mike McAllister: Last quarter, we reported that the $1 million per well cost reduction target has been achieved well ahead of schedule and that we saw room for further improvements. Today, we are consistently drilling wells for about $6.5 million. That's 5% below the original target and nearly 20% below the legacy Newfield costs. We actually have some recent pacesetter wells coming in below $6 million or around $2 million below legacy Newfield costs. Anadarko production came in at a record 163,000 BOE per day this quarter, with liquids up 47% from Q1 2018. STACK oil production is up 63% over the same time period. Our rapid and recent growth is due to a combination of strong well performance and a very active drilling program inherited from Newfield. We have slowed production from 11 rigs in February to 5 rigs today.

And nearly 20% below that legacy newfield costs.

We actually have some recent pacesetter wells coming in below $6 million or around $2 million below legacy new fuel costs.

Anadarko production came in at a record 163000 Boe per day this quarter with liquids up 47% from the first quarter of 2018 stack oil production is up 63% over that same time period.

Our rapid in recent growth is due to a combination of strong well performance at very active drilling program inherited from Newfield.

We have slowed production.

From 11 rigs in February to five rigs today.

We're preparing to drop our fifth rig we'll get to steady state four rig program for the remainder of the year.

Consistent with our plan and guidance production peaks mid year.

Directly related to the reduced activity levels.

Applying the Cana advantage has allowed us to reduce stock well costs by $1.4 million in a matter of months. These cost reductions can be seen in detail on slide nine.

Mike McAllister: We're preparing to drop our fifth rig, and we'll get to a steady-state four-rig program for the remainder of the year. Consistent with our plan and guidance, production peaks mid-year, directly related to the reduced activity levels. Applying the Encana advantage has allowed us to reduce STACK well costs by $1.4 million in a matter of months. These cost reductions can be seen in detail on slide 9. It's important to note that we continue to see both strong and consistent well performance. Notice that we are showing you 120-day well performance from all 89 wells brought in production in 2019. We're dramatically improving our rates of return and making STACK very competitive with all plays in North America. Our rates of return in the STACK are more than 50%. STACK well performance continues to impress.

It's important to note that we continue to see both strong and consistent well performance.

Notice that we're showing you a 120 day well performance from all 89 wells brought on production in 2019.

We are dramatically improving our rates return.

And making stack very competitive with all plays in North America, our rates of return stack or more than 50%.

Stack well performance continues impress our liquids cut and oil yields are moving in the right direction on our in line with expectations.

High intensity completions, we have been employing since taking over the operations are showing strong early time production results.

As shown on the graph in the Blue curve.

Mike McAllister: Our liquids cut and oil yields are moving in the right direction and are in line with expectations. High-intensity completions we have been employing since taking over the operations are showing strong early-time production results. As shown on the graph in the blue curve are the first 18 wells Encana completed, spaced at 6 to 8 wells per section. These wells are significantly outpacing the cumulative oil production of legacy Newfield wells over the first 100 days of production. These first 18 wells were completed with Encana Cube design and high-intensity completions. Well costs were reduced by $1.4 million as described in the previous slide. In the Permian, our production in the quarter was about 104,000 BOE per day, and we are currently producing at record levels of 110,000 BOE per day. Our production today is up nearly 20,000 BOE per day from the Q1 average, I should say.

Our the first 18 wells Encana completed spaced at six to eight wells per section. These wells are significantly outpacing the cumulative oil production of legacy Newfield wells.

Over the first 100 days of production.

These first lien 18 wells were completed with Encana cube design and high intensity completions.

While costs were reduced by $1.4 million as described in the previous slide.

In the Permian our production in the quarter was about 104000 Boe per day.

And we are currently producing at record levels of 110000 Boe per day.

Our production today is up nearly 20000 Boe per day from the first quarter.

From the first quarter average I should say.

Since 2015, we have grown our production in the basin by more than two and a half times again.

This is an asset that is delivering both oil growth and free cash flow.

Running at a flat four rig program for the remainder of the year, we expect to see continued production growth and free cash flow generation in the third and fourth quarters.

Mike McAllister: Since 2015, we have grown our production in the basin by more than two and a half times. Again, this is an asset that is delivering both oil growth and free cash flow. Running at a flat four-rig program for the remainder of the year, we expect to see continued production growth and free cash flow generation in Q3 and Q4. We put 38 net wells on production during the quarter and continue to see strong and consistent performance. Our success in the Permian continues to be driven by our Cube development approach. This approach allows us to exploit maximum value from our STACK pay resource while delivering volumes as efficiently as possible. We brought on two new Cubes in Q2, including a 14-well HNC 248 Cube, which deliver a record oil production rate of 17,000 barrels a day after 60 days.

We put 38 net wells on production during the quarter and continue to see strong and consistent performance.

Our success on the Permian continues to be driven by our cube development approach.

This approach allows us to exploit maximum value for our stack pay resource, while delivering volumes as efficiently as possible.

We brought on two new cubes in the second quarter, including a 14, well agency to 48 Q.

Which delivered a record oil production rate of 17000 barrels a day after 60 days.

Since entering the Permian in 2014, we have successfully drilled more than two dozen multiwell cubes. We have demonstrated continued improvements in reais in results year over year.

This continued operational outperformance it will get is what gives us confidence in our cube development model and our ability to dramatically improve returns in the Anadarko.

Mike McAllister: Since entering the Permian in 2014, we have successfully drilled more than two dozen multiwell Cubes. We have demonstrated continual improvements in results year-over-year. This continued operational outperformance is what gives us confidence in our Cube development model and our ability to dramatically improve returns in the Anadarko. Moving to the Montney, we remain on track to grow our average annual liquids volumes by about 20% year-over-year. Liquids volumes averaged 54,000 barrels per day during the quarter, with total volumes coming in at 203,000 BOE per day. Production volumes in play were down about 6,800 BOE per day due to planned maintenance and third-party outages. These issues have been resolved and are not expected to impact Q3 volumes. During the quarter, we placed 32 net wells on production. Recent well performance continues to be very strong, outperforming our type curve by about 25%.

Moving to the Montney, we remain on track to grow our average annual liquids volumes by about 20% year over year.

Liquids volumes averaged 54000 barrels per day during the quarter with total volumes coming in at 203000 Boe per day.

Production volumes in play we're down about 6800 Boe per day due to planned maintenance and third party outages.

These issues have been resolved and are not expected to impact Q3 volumes.

During the quarter, we placed 32 net wells on production recent well performance continues to be very strong outperforming our type curve by about 25%.

The improvements in cycle times that we achieved in Montney are truly impressive.

Rig and Frac crew efficiencies have brought our cycle times down 44% year over year. We now estimate that we can execute our 2019 program with one less rig than originally planned.

Mike McAllister: The improvements in cycle times that we achieved in Montney are truly impressive. Rig and frac crew efficiencies have brought our cycle times down 44% year-over-year. We now estimate that we can execute our 2019 program with one less rig than originally planned. That concludes my operations update. I will now turn the call back over to Doug for closing remarks.

That concludes my operations update I will now turn the call back over to Doug for closing remarks.

Thanks, Mike.

Before we get to your questions I'd like to highlight just a few things from today's call first Encana is performing extremely well today and we are firmly on course to deliver our 2019 objectives and guidance. We have quickly exceeded the key synergies we identified in the Newfield transaction.

Doug Suttles: Thanks, Mike. Before we get to your questions, I'd like to highlight just a few things from today's call. First, Encana is performing extremely well today, and we are firmly on course to deliver our 2019 objectives and guidance. We have quickly exceeded the key synergies we identified in the Newfield transaction, pulling through the value we saw in this combination. Our strong financial results today, which include significant free cash flow, are being driven by the quality of our portfolio and our never-ending focus on efficiency and performance. We've built a business which is sustainable and can thrive in today's commodity environment. With that, we conclude our formal remarks and would be happy to take your questions. Thank you.

Pulling through the value we saw in this combination.

Our strong financial results today, which can which includes significant free cash flow are being driven by the quality of our portfolio and our never ending focus on efficiency and performance.

We've built a business, which is sustainable and can thrive in today's commodity environment.

So with that we conclude our formal remarks, and we'd be happy to take your questions. Thank you.

Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star. One we will now begin the question and answer session and go to the first caller, Greg Pardy from RBC capital markets. Your line is open.

Operator: Ladies and gentlemen, as a reminder, you can join the queue to ask a question by pressing star one. We will now begin the question and answer session and go to the first caller. Greg Pardy from RBC Capital Markets, your line is open.

Thanks, Good morning, very nice very nice operational quarter and so on.

Question really had to do just around.

Western Canada and condensate prices you guys have certainly amongst the most sophisticated market asking a market group. How are you thinking about condensate pricing on a on a go forward basis, maybe a question for Rene but.

[Analyst]: Thanks. Good morning. Very nice operational quarter and so on. Question really had to do just around Western Canada and condensate prices. You guys are certainly amongst the most sophisticated market group. How are you thinking about condensate pricing on a go-for basis? Maybe a question for Renee, but.

Greg Pardy: Thanks. Good morning. Very nice operational quarter and so on. Question really had to do just around Western Canada and condensate prices. You guys are certainly amongst the most sophisticated market group. How are you thinking about condensate pricing on a go-for basis? Maybe a question for Renee, but.

Yeah, Thanks, Gregg Rene Sir with Us I'll, let I'll, let her pick pick it up but I think broadly speaking, we don't see it it moving outside where we've seen for quite a while but Rene would you like to pick that up.

Sure Hey, great and.

Thank you and as Doug said, we're not really worried about condensate pricing in Canada, we've seen differentials throughout the year trade right around minus $4 and when we look forward, we see demand continuing to outpace the supply growth that's coming on so we're not concerned about condensate pricing for quite positive about it.

Doug Suttles: Yeah, thanks, Greg. Renee's here with us. I'll let her pick it up. I think, broadly speaking, we don't see it moving outside where we've seen for quite a while. Renee, would you like to pick that up?

Operator: Sure. Hi, Greg. Thank you. As Doug said, we're not really worried about condensate pricing in Canada. We've seen differentials throughout the year trade right around minus $4. When we look forward, we see demand continuing to outpace the supply growth that's coming on. We're not concerned about condensate pricing. We're quite positive about it.

Renee Zemljak: Sure. Hi, Greg. Thank you. As Doug said, we're not really worried about condensate pricing in Canada. We've seen differentials throughout the year trade right around minus $4. When we look forward, we see demand continuing to outpace the supply growth that's coming on. We're not concerned about condensate pricing. We're quite positive about it.

Okay perfect. That's it for me thanks.

Thanks, Greg.

Our next caller is Brian singer from Goldman Sachs. Your line is open.

Thank you good morning.

Good morning, as you as you've highlighted from the beginning of the year. The 2019 Capex program was always meant to be front end loaded and you reiterated that on the call here.

[Analyst]: Okay. Perfect. That's it for me. Thanks.

Greg Pardy: Okay. Perfect. That's it for me. Thanks.

Doug Suttles: Thanks, Greg.

Operator: Our next caller is Brian Singer from Goldman Sachs. Your line is open.

With the second half liquids production expected to be flattish to slightly down relative to the second quarter, what impact do you see the reduce second half capex and activity run rates, having on production trajectory as we look into the first half of 2020 and and how do you view the importance and opportunity of production growth versus free cash flow beyond 2019.

[Analyst]: Thank you. Good morning. As you've highlighted from the beginning of the year, the 2019 CapEx program was always meant to be front-end loaded, and you reiterated that on the call here. With second-half liquids production expected to be flattish to slightly down relative to Q2, what impact do you see the reduced second-half CapEx and activity run rates having on production trajectory as we look into the first half of 2020? How do you view the importance and opportunity of production growth versus free cash flow beyond 2019?

Brian Singer: Thank you. Good morning. As you've highlighted from the beginning of the year, the 2019 CapEx program was always meant to be front-end loaded, and you reiterated that on the call here. With second-half liquids production expected to be flattish to slightly down relative to Q2, what impact do you see the reduced second-half CapEx and activity run rates having on production trajectory as we look into the first half of 2020? How do you view the importance and opportunity of production growth versus free cash flow beyond 2019?

Yes, thanks, Brian I'm kind of it won't be too many more years before we start talking about the next year in January of the current year, but.

I think we've been saying for a while in this sort of commodity environment, we expect the business to grow at a modest rate and generate significant significant free cash flow. That's what you're seeing this year and I think thats. What you should expect in the years to come a little early to be specific on 2020, but the shape of the year is what we expected we are working to more level load the programs going forward and we will be looking to that as we shape. The 2020 plan but.

Doug Suttles: Yeah, thanks, Brian. It won't be too many more years before we start talking about the next year in January of the current year. I think we've been saying for a while, in this sort of commodity environment, we expect the business to grow at a modest rate and generate significant free cash flow. That's what you're seeing this year, and I think that's what you should expect in the years to come. A little early to be specific on 2020, but the shape of the year is what we expected. We are working to more level load the programs going forward, and we'll be looking to that as we shape the 2020 plan. At this point, you should expect continued growth of our liquids with significant free cash flow generation from the business.

At this point you should expect.

Continued growth of our live goods with significant free cash flow generation from the business.

And does the cost savings that you're seeing in the mid con in particular, but potentially elsewhere offsets.

Uh huh.

The lower activity from keeping production flat perspective, or do you view yourself below maintenance kind of below maintenance capital and and in the second half of this year.

[Analyst]: Does the cost savings that you're seeing in the Mid-Con in particular, but potentially elsewhere, offset the lower activity from keeping production flat perspective? Or do you view yourself kind of below maintenance capital in the second half of this year?

Brian Singer: Does the cost savings that you're seeing in the Mid-Con in particular, but potentially elsewhere, offset the lower activity from keeping production flat perspective? Or do you view yourself kind of below maintenance capital in the second half of this year?

Yes, Brian what we've said for a while is kind of maintenance capital is sort of in the low 2 billion dollar range. So you can kind of do the math.

On the full year basis, obviously of we have capital grow in the second half thats roughly the run rate.

Doug Suttles: Yeah, Brian, what we've said for a while is kind of maintenance capital is sort of in the $2 billion range. If you kind of do the math on the full-year basis, obviously, if we have capital grow in the second half, that's roughly the run rate. Each asset's slightly different. As you know, some were more front-end loaded, some were level loaded, like the Permian. When you work it through the years, it's kind of playing out exactly as we expected to. We're not changing the capital program. Mike highlighted efficiencies that are improving across our business, including cycle times, but we're firmly committed to staying right at the midpoint of our guidance that we've given for the year.

Each asset slightly different as you know some were more front end loaded somewhere level loaded like the Permian.

But when you work through the years kind of playing out exactly as we expected to end.

But we're not changing the capital program as Mike highlighted efficiencies are proving it across our business and including cycle times, but we're firmly committed to staying.

Around right at the midpoint of our guidance that we've given for the year.

That's great and then one more if I may can you talk about the flexibility that you have with regards to continuing to add to the share repurchase program.

Particularly this year and can you refresh us on the priority of where you see leverage and and how significant debt the debt net debt paydown could be.

[Analyst]: That's great. One more, if I may. Can you talk about the flexibility that you have with regards to continuing to add to the share of purchase program, particularly this year? Can you refresh us on the priority of where you see leverage and how significant net debt paydown could be?

Brian Singer: That's great. One more, if I may. Can you talk about the flexibility that you have with regards to continuing to add to the share of purchase program, particularly this year? Can you refresh us on the priority of where you see leverage and how significant net debt paydown could be?

Yeah, you know as you know we have the ESI be out there, which is a bit more than $200 million. So we're going to be out to them.

Executing that program through the balance of the summer here. So we'll continue to buy back shares.

And of course, we are generating significant free cash here in the second half of the year, which will do a combination of help fund that program and also continue to reduce our net debt.

Doug Suttles: Yeah. As you know, we have the SIB out there, which is a bit more than $200 million. We're going to be out executing that program through the balance of the summer here. We'll continue to buy back shares. Of course, we're generating significant free cash here in the second half of the year, which will do a combination of help fund that program and also continue to reduce our net debt. If you look at, on a run rate basis, I think Corey highlighted this, our leverage is about 1.7 times, and that continues to reduce over time. As you also probably know, it's not very cost-efficient to prepay long-term debt. Our next maturities are late 2020, 2021. We'll look at that as we get there.

If you look at on a run rate basis, our I think Corey highlighted this our leverage is about 1.7 times and that continues to reduce overtime.

As you also probably know it's not very cost efficient to two.

Prepay long term debt, our next maturities or late 2020.

21 so.

So we'll look at that as we get there, but as we see it right now we're continuing with our buyback program and we're actually accumulating some cash on the balance sheet.

Thank you.

Our next caller is a run jayaram from JP Morgan.

Your line is open.

Doug Suttles: As we see it right now, we're continuing with our buyback program, and we're actually accumulating some cash on the balance sheet.

Yeah I was wondering if you could give us maybe a little bit more details on what you're seeing on the well productivity front and the Anadarko basin as you play Samir enhanced completions versus new fields design.

[Analyst]: Thank you.

Brian Singer: Thank you.

Operator: Our next caller is Arun Jayaram from JPMorgan. Your line is open.

Yeah, Michael pick that up one of the things obviously, we're trying to highlight today I think some people have been waiting to see cube results in the Anadarko, what we're trying to highlight is you're seeing them now we have.

[Analyst]: Yeah. I was wondering if you could give us maybe a little bit more details on what you're seeing on the well productivity front in the Anadarko Basin as you apply some of your enhanced completions versus a Newfield's design?

Arun Jayaram: Yeah. I was wondering if you could give us maybe a little bit more details on what you're seeing on the well productivity front in the Anadarko Basin as you apply some of your enhanced completions versus a Newfield's design?

Several there were several areas, which are essentially our cube approach to development, which now are approaching 90 days of production history. So you are seeing the benefits of our.

Doug Suttles: Yeah. Michael picked that up. One of the things that obviously we're trying to highlight today, I think some people have been waiting to see Cube results in the Anadarko. What we're trying to highlight is you're seeing them now. We have several areas which are essentially our Cube approach to development, which now are approaching 90 days of production history. You're seeing the benefits of the way we execute and taking costs down, and now you're seeing the benefits of our completion design. At the well spacing, the well density, we at this point expect to develop the Meramec STACK oil window with. Maybe Mike highlight some of this recent performance.

The way, we execute and taking cost down and now you are seeing the benefits of our completion design at the well spacing. The well density we at this point expect to develop the meramac stack oil window with that but maybe Mike highlight some of his recent performance you Betcha you betcha.

So on on slide 10.

We've kind of provide the graph that shows our first 18 wells.

That we brought on under our completion design and under our Q4 operating.

Operating model and you can see for the Blue Blue line on that curve that the wells are significantly outperforming the historic well performance and all of those were completed with high intensity completions tighter cluster spacing higher a higher water rates and we're really pleased with what we're seeing on those initial results.

[Analyst]: Yeah. You betcha, Doug. On slide 10, we've kind of provided the graph that shows our first 18 wells that we brought on under our completion design and under our Cube operating model. You can see for the blue line on that curve that the wells are significantly outperforming the historic well performance. All of those were completed with high-intensity completions, tighter cluster spacing, higher water rates, and we're really pleased with what we're seeing on those initial results. Great. Great. Just to follow up, you talked about reducing activity according to plan going down to four rigs. How should we think about volumes in the Anadarko Basin in Q3 and Q4, and just your overall thoughts, and just manage some of the seismic issues that we've seen in the play over the last couple of years?

Mike McAllister: Yeah. You betcha, Doug. On slide 10, we've kind of provided the graph that shows our first 18 wells that we brought on under our completion design and under our Cube operating model. You can see for the blue line on that curve that the wells are significantly outperforming the historic well performance. All of those were completed with high-intensity completions, tighter cluster spacing, higher water rates, and we're really pleased with what we're seeing on those initial results.

Great Great and just a follow up.

You talked about reducing activity. According to plan to another four rigs how should we think about volumes in the Anadarko basin in Q3, and Q4 and just your overall thoughts and just manage some of the seismic or issues that we've seen a in the play over the last couple of years.

Arun Jayaram: Great. Great. Just to follow up, you talked about reducing activity according to plan going down to four rigs. How should we think about volumes in the Anadarko Basin in Q3 and Q4, and just your overall thoughts, and just manage some of the seismic issues that we've seen in the play over the last couple of years?

Yeah, just a couple of points I think that.

Essentially the production is kind of following the cadence of activity. So.

We came into the year with Newfield operating 11 rigs in the play as Mike highlighted were five were about to go to four as part of the plan.

Production sort of peaking here at the middle of the year, and we'll see a little bit of decline naturally as you'd expect from that lower activity in the second half, but that that was all built into the plan for the year in the guidance in the second half guidance.

Doug Suttles: Just a couple of points. I think that essentially, the production is kind of following the cadence of activity. We came into the year with Newfield operating 11 rigs in the play. As Mike highlighted, we're at 5. We're about to go to 4 as part of the plan. Production sort of peaking here at the middle of the year, and we'll see a little bit of decline naturally, as you'd expect, from that lower activity in the second half. That was all built into the plan for the year and the guidance and the second-half guidance. Mike can pick up the questions about the recent seismicity in the basin, which, by the way, is a known factor and something the industry has been working through and dealing with for quite some time.

Mike and Mike can pick up the questions about the recent seismicity in the basin, which by the way is a known factor and something the industry has been.

Working through and dealing with for quite some time.

As you might be aware there is an array in the base and allows us to continuously monitor any seismicity activity.

And our recent operations on the kind of Michael.

We saw seismicity show up we ended up mitigating that with longstanding protocol as we've done in past operations and made the decision to move those frac spreads off of off of that Pat to another pad that we had available.

Renee: As you might be aware, there's an array in the basin that allows us to continuously monitor any seismicity activity. In our recent operations on the Kenneth Michael Cube, we saw seismicity show up. We ended up mitigating that with longstanding protocol, as we have done on past operations, and made the decision to move those frac spreads off of that pad to another pad that we had available.

Mike McAllister: As you might be aware, there's an array in the basin that allows us to continuously monitor any seismicity activity. In our recent operations on the Kenneth Michael Cube, we saw seismicity show up. We ended up mitigating that with longstanding protocol, as we have done on past operations, and made the decision to move those frac spreads off of that pad to another pad that we had available.

Okay. Thanks, a lot.

Our next caller escaped.

From Cowen.

Your line is open.

Hey, good morning, Doug and everyone.

Maybe just on the stack well.

Cost savings could you just talk a little bit more in detail about.

[Analyst]: Okay. Thanks a lot.

Arun Jayaram: Okay. Thanks a lot.

Operator: Our next caller is Gabe Daoud from Cowen. Your line is open.

What's driving those additional savings that youve realized from from the one Q.

Average you might have hit you hit this a little bit on.

[Analyst]: Hey. Good morning, Doug and everyone. Maybe just on the STACK well cost savings, could you just talk a little bit more in detail about what's driving those additional savings that you realized from the 1Q average? You might have hit this a little bit on the prepare remarks, just curious, how have you been able to drive down well costs while still pumping high-intensity completions?

Gabe Daoud: Hey. Good morning, Doug and everyone. Maybe just on the STACK well cost savings, could you just talk a little bit more in detail about what's driving those additional savings that you realized from the 1Q average? You might have hit this a little bit on the prepare remarks, just curious, how have you been able to drive down well costs while still pumping high-intensity completions?

The prepared remarks, but just curious.

How you've been able to drive down well costs, while still pumping a high intensity completions.

Yes, Gabe thanks for the question I'll, let Mike pick it up just I just want to highlight one thing that.

You know we've always believed by by just getting the cost out of these wells that they would compete for capital with any play in North America, and I think you're seeing that when you combined we have relatively low royalty rates here in the high teens, we have a we have actually shown what we can do with well cost operating cost in this play are quite low on a relative basis compared to places like the Permian.

Doug Suttles: Yeah, Gabe. Thanks for the question. I'll let Mike pick it up. I just want to highlight one thing that we've always believed by just getting the cost out of these wells that they would compete for capital with any play in North America. I think you're seeing that. When you combine, we have relatively low royalty rates here in the high teens. We have actually shown what we can do with well cost. Operating costs in this play are quite low on a relative basis compared to places like the Permian. Of course, we get a good price for our products here, particularly relative to other places across North America. When you roll that up and just use the type curve we published here and not even the improved performance you're seeing on the oil side, you'll find that those returns compete very effective.

And of course, we get a good price for our products here.

Particularly relative to other place across North America, and when you roll that up.

And just use the type curve, we published here and not the even the improved performance you're seeing on the oil side, you'll find that those returns compete very effective but Mike can talk some more about how we continue to drive cost out here despite pumping more intense completions yeah.

Thanks for the question again.

So there's a number of factors that are there a play allowed us to to drive our cost down by $1.4 million.

Doug Suttles: Mike can talk some more about how we continue to drive cost out here despite pumping more intense completions.

We went to in basin sand, which took about 30% out of the sand costs from where we were previously.

Renee: Yeah. Thanks for the question there, Gabe. There's a number of factors that our play allowed us to drive our cost down by $1.4 million. We went to in-basin sand, which took about 30% out of the sand costs from where we were previously. Went to rearranging our sand deliveries going to SandBox. That, again, allowed us to drop our costs, and become significantly more efficient from a scheduling standpoint. Increased our pump rates from 80 to 100 barrels a minute, which allowed us to get our stages off quicker, as well as giving us a much more effective stimulated reservoir volume. With that, we also went unbundled or frac contracts in terms of separating supplying our own sand, and supplying our own chemicals, which allowed us, again, to drive costs down.

Mike McAllister: Yeah. Thanks for the question there, Gabe. There's a number of factors that our play allowed us to drive our cost down by $1.4 million. We went to in-basin sand, which took about 30% out of the sand costs from where we were previously. Went to rearranging our sand deliveries going to SandBox. That, again, allowed us to drop our costs, and become significantly more efficient from a scheduling standpoint. Increased our pump rates from 80 to 100 barrels a minute, which allowed us to get our stages off quicker, as well as giving us a much more effective stimulated reservoir volume. With that, we also went unbundled or frac contracts in terms of separating supplying our own sand, and supplying our own chemicals, which allowed us, again, to drive costs down.

Also then went to.

Rearranging, our sand delivery is going to go into Sandboxes and that data again allowed us to drop our costs and become a significantly more efficient from a from a scheduling standpoint.

Increased our pump rates from 80 to 100 barrels a minute, which then allowed us to get our stages off quicker as well as giving us a much more effective.

Stimulated reservoir volume.

And.

With that we also went non bioflo, our frac frac contracts in terms of separating supplying our own sand on supplying our own our own chemicals, which allowed us again to drive costs down.

And the last thing and we are relentless on this in both our drilling and completions across the company is we really focus on non productive time and when the pump start running that's waste and so we've driven our pump and pump times from 17 to 20 hours per day all of that allows us to be on the lease for a much shorter period of time and again allow us to drive our costs down.

Renee: The last thing, and we're relentless on this in both our drilling and completions across the company, is we really focus on nonproductive time. When the pumps aren't running, that's waste. We've driven our pump times from 17 to 20 hours per day. All of that allows us to be on the lease for a much shorter period of time and, again, allow us to drive our costs down.

Mike McAllister: The last thing, and we're relentless on this in both our drilling and completions across the company, is we really focus on nonproductive time. When the pumps aren't running, that's waste. We've driven our pump times from 17 to 20 hours per day. All of that allows us to be on the lease for a much shorter period of time and, again, allow us to drive our costs down.

That's great color. Thanks, Mike.

Just a quick follow up I know you.

Again, you hit on this in the prepared remarks, but just curious how we should maybe be thinking about any additional portfolio optimization for for 2019.

Thanks, Jeff.

Yeah Gabe we.

[Analyst]: That's a great caller. Thanks, Mike. Just a quick follow-up. I know, again, you hit on this in the prepare remarks, but just curious how we should maybe be thinking about any additional portfolio optimization for 2019. Thanks, guys.

Gabe Daoud: That's a great caller. Thanks, Mike. Just a quick follow-up. I know, again, you hit on this in the prepare remarks, but just curious how we should maybe be thinking about any additional portfolio optimization for 2019. Thanks, guys.

If you look at our history, we've always been I think really disciplined about managing the portfolio and then obviously weve.

We've announced the exit from both China and Arkoma I just want to highlight one thing with both of those leaving we did not reduce our production guidance.

Doug Suttles: Yeah, Gabe. If you look at our history, we've always been, I think, very disciplined about managing that portfolio. Obviously, we've announced the exit from both China and our KOMI. I just want to highlight one thing. With both of those leaving, we did not reduce our production guidance, which shows that the rest of the business is outperforming because we've been able that's about 16,000 BOEs a day that were with those assets. We've obviously covered that with outperformance elsewhere in the portfolio. We look across the portfolio, essentially, we have now some very high-quality base assets, things like the Eagle Ford and the Bakken and even the Duvernay. These are areas which are not growth assets because of the size of them, but they're very high quality. They're very oily. They have very high margins. And where we do deploy capital, very high returns.

Which shows that the rest of the business is outperforming this because weve been able.

That's about 16000 BOE used today that were with those assets. So we've obviously covered that with performance elsewhere in the portfolio.

When we look across the portfolio essentially we have now some very high quality base assets things like the Eagle Ford and the Bakken and even the Duvernay These are areas.

Which are not growth assets because of the size of them, but the very high quality, they're very oily.

They have very high margins and where we do deploy capital very high returns.

They play an important role in the company as we balanced growth with free cash generation. So I think we feel very good about the portfolio we have today.

Great. Thanks, a lot Doug.

Our next caller as I said Sen from Bank of America Merrill Lynch. Your line is open.

Doug Suttles: They play an important role in the company as we balance growth with free cash generation. I think we feel very good about the portfolio we have today.

Thanks, Good morning, I have a quick follow up on the activity cadence.

Looks like 38 wells came on stream in the Permian into Q and I think the one Q number was 33.

[Analyst]: Great. Thanks a lot, Doug.

Gabe Daoud: Great. Thanks a lot, Doug.

Operator: Our next caller is Asit Sen from Bank of America Merrill Lynch. Your line is open.

How should we think about.

[Analyst]: Thanks. Good morning. I have a quick follow-up on the activity cadence. It looks like 38 wells came on stream in the Permian in Q2, and I think the Q1 number was 33. How should we think about the split between Q3 and Q4 in the Permian?

Asit Sen: Thanks. Good morning. I have a quick follow-up on the activity cadence. It looks like 38 wells came on stream in the Permian in Q2, and I think the Q1 number was 33. How should we think about the split between Q3 and Q4 in the Permian?

Edible.

Could you update about your thoughts on maintenance Capex to keep let's say.

Doug Suttles: If I could, I don't have that data at my fingertips. We'll have someone from Steve's team follow up with you.

2020 liquids production flat.

[Analyst]: Okay. A quick one for Corey. Corey, now that the operations become more ratable, could you update about your thoughts on maintenance capex to keep, let's say, 2020 liquids production flat versus 2019 levels?

Asit Sen: Okay. A quick one for Corey. Corey, now that the operations become more ratable, could you update about your thoughts on maintenance capex to keep, let's say, 2020 liquids production flat versus 2019 levels?

Versus 2019 levels.

Yes, Hey, Hey asset.

Score here, we're still building out the 2020 capital programming to give you a good.

Overview on what we see for the whole business in the low low 2 billion range. So that's kind of the extended the detail we've been providing so far.

Renee: Yeah. Hey, it's Corey here. We're still building out the 2020 capital program. I think Doug gave you a good overview on what we see for the whole business in the low $2 billion range. That's kind of the extent of the detail we've been providing so far.

Corey Code: Yeah. Hey, it's Corey here. We're still building out the 2020 capital program. I think Doug gave you a good overview on what we see for the whole business in the low $2 billion range. That's kind of the extent of the detail we've been providing so far.

Okay. Thank you.

Our next caller is Jeffrey Campbell from Tuohy Brothers. Your line is open.

Hi, good morning.

I was wondering what portion of the additional gionee and operating cost savings.

[Analyst]: Okay. Thank you.

Asit Sen: Okay. Thank you.

Announced today is related to the announced asset sales as opposed to from ongoing operations.

Operator: Our next caller is Jeffrey Campbell from Tuohy Brothers. Your line is open.

Yeah, Hi, Jeff. Thanks, Thanks for the question actually it really isn't from the enhanced asset sales that's that's effectively separate.

[Analyst]: Good morning. I was wondering what portion of the additional G&A and operating cost savings that were announced today is related to the announced asset sales as opposed to from ongoing operations?

Jeffrey Campbell: Good morning. I was wondering what portion of the additional G&A and operating cost savings that were announced today is related to the announced asset sales as opposed to from ongoing operations?

I mean, what we've shown you know I think you probably know the numbers, but originally we said we'd get $125 million of DNA out than we raised that to 150 now we've raised at 475.

Doug Suttles: Yeah. Hi, Jeff. Thanks for the question. Actually, it really isn't from the enhanced asset sales. That's effectively separate. I mean, what we've shown, I think you probably know the numbers, but originally, we said we'd get $125 million of G&A out. Then we raised that to $150 million. Now we've raised it to $175 million. Most of that is already out of the business today. The exit of China and our KOMI really don't impact those numbers. I think we've indicated there may be even additional savings here we continue to look for. We're actually quickly approaching the entire G&A of Newfield's, showing that one of the strengths of this combination, kind of one plus one, can basically be one, not two.

And most of that is already out of the business today.

The exit of.

Of China, and Arkoma really don't impact those numbers and I think we've indicated there may be even additional savings here. We continue to look for where actually quickly approaching the entire DNA of Newfield I'm showing that we are one of the strengths of this combination kind of one plus one can basically be one not too.

And then of course mikes highlighted by.

By applying our proven practices, which you work everywhere we've done it we've shown we can take cost out.

The development activity and deliver very strong well results I think.

We're sort of demonstrating what we think are core competencies of the company.

Doug Suttles: Then, of course, Mike's highlighted, by applying our proven practices, which have worked everywhere we've done it, we've shown we can take cost out of the development activity and deliver very strong well results. I think we're sort of demonstrating what we think are core competencies of the company.

Okay, great thanks for that color.

On slide eight I noticed that the scoop production looked relatively stable I was just wondering does this.

Illustrate a low decline rate or are you doing some workovers or some other activity to maintain flattish production.

[Analyst]: Okay. Great. Thanks for that caller. On slide 8, I noticed that the STACK production looked relatively stable. I was just wondering, does this illustrate a low decline rate, or are you doing some workovers or some other activity to maintain flattish production?

Jeffrey Campbell: Okay. Great. Thanks for that caller. On slide 8, I noticed that the STACK production looked relatively stable. I was just wondering, does this illustrate a low decline rate, or are you doing some workovers or some other activity to maintain flattish production?

Yes, I don't really have a lot of detail to share on the on the scoop. There is a little bit of activity down there. The majority of the capital of course is up in the stack.

I would highlight though.

One of the challenges that we got and one of the questions that was out there was a growing oil production out of the Anadarko and we said.

Doug Suttles: Yeah. I don't really have a lot of detail to share on the scoop. There is a little bit of activity down there. The majority of the capital, of course, is up in the STACK. I would highlight, though, one of the challenges that we got and one of the questions that was out there was growing oil production out of the Anadarko. We said this was really an issue about focusing capital in the right places and sort of extreme version of capital discipline, which is put our money where the oil is and be very disciplined about how we do that. As Mike was highlighting, the majority of the capital is going into the Meramec oil window, but not all of it. There is some activity in the scoop as well.

This was really an issue about focusing capital in the right places in sort of extreme version of capital discipline, which has put our money.

Where the oil is and be very disciplined about how we do that so as Mike was highlighting the majority of the capital is going to into the Merrimack will window, but not all of it there is some activity in the scoop as well.

Okay, great. Thank you I appreciate it and congratulations on the quarter.

Thanks, Jeff.

Our next caller is Marshall Carver from Heikkinen Energy Advisors. Your line is open.

Yes. Thank you so in the Anadarko basin, you've had a big ramp down.

[Analyst]: Okay. Great. Thank you. I appreciate it. Congratulations on the quarter.

Jeffrey Campbell: Okay. Great. Thank you. I appreciate it. Congratulations on the quarter.

As expected in the rig count from what you inherited from Newfield to the second half of the year figure.

Doug Suttles: Thanks, Jeff.

Operator: Our next caller is Marshall Carver from Heikkinen Energy Advisors. Your line is open.

Average.

Rig count is going to be a good bit higher.

[Analyst]: Yes. Thank you. In the Anadarko Basin, you've had a big rampdown, as expected, in the rig count from what you inherited from Newfield to the second half of the year. Your average rig count's going to be a good bit higher for 2019 than where it would end the year. As we think about 2020 and the rig count being more level-loaded, what should we think about in terms of average activity? Should it be higher than the four or five rigs in the back half of the year, or do you have any comments there on what a level-loaded program might look like?

Marshall Carver: Yes. Thank you. In the Anadarko Basin, you've had a big rampdown, as expected, in the rig count from what you inherited from Newfield to the second half of the year. Your average rig count's going to be a good bit higher for 2019 than where it would end the year. As we think about 2020 and the rig count being more level-loaded, what should we think about in terms of average activity? Should it be higher than the four or five rigs in the back half of the year, or do you have any comments there on what a level-loaded program might look like?

For 2019, then where it would end the year as we think about 2020.

And the rig count being more level loaded should we.

What should we think about in terms of average activity would.

Should be higher than the four or five rigs in the back half of the year or do you have any comments there on.

On what a level loaded program might look like.

Yes, Marshall we're still you know it's kind of early in the if you will in the planning and budget cycle for 2020 I think the early indications are is it will be a little higher than the four to five we're running now, but it's a little I really don't want to take you too far down that path yet because we're.

Doug Suttles: Yeah. Marshall, we're still it's kind of early in the, if you will, in the planning and budget cycle for 2020. I think the early indications are it'll be a little higher than the 4 to 5 we're running now. I really don't want to take you too far down that path yet because we're still working on the plan. Like the total business, we would expect to continue to see modest growth in liquids while generating free cash, not only at the corporate level but in every single asset in the business.

We're still working on the plan, but but like the the total business. We would expect to continue to see modest growth in liquids, while generating free cash not only at the corporate level, but in every single asset in the business I mean, one of the things, which we're very pleased about I think think Corey lightly touched on it was every every asset in the company essentially today.

Is generating free cash flow, both those that are growing and those that for more of our base today, which just shows the strength and the quality of the portfolio.

Doug Suttles: I mean, one of the things which we're very pleased about, I think Corey lightly touched on it, was every asset in the company essentially today is generating free cash flow, both those that are growing and those that form more of our base today, which just shows the strength and the quality of the portfolio.

Alright, Thank you and then a follow up as well please.

So looking over the last three quarters, you've had some downtime or third party issues in the Montney.

That have gotten resolved by the time of the conference call and.

[Analyst]: All right. Thank you. A follow-up as well, please. Looking over the last 3 quarters, you've had some downtime or third-party issues in the Montney that have gotten resolved by the time of the conference call and were sort of described as not impacting production heading forward. It has been 3 quarters in a row of some downtime. How should we think about risking that asset heading forward in light of the history of surprising impacts?

Marshall Carver: All right. Thank you. A follow-up as well, please. Looking over the last 3 quarters, you've had some downtime or third-party issues in the Montney that have gotten resolved by the time of the conference call and were sort of described as not impacting production heading forward. It has been 3 quarters in a row of some downtime. How should we think about risking that asset heading forward in light of the history of surprising impacts?

We're sort of described is not impacting production heading forward, but.

It has been a.

Three quarters in a row of some downtime how should we think about risking that asset.

Heading forward in light of the.

History, it's surprising impacts.

Yeah, what I'd highlight really one important thing there Marshall the when we do have these impacts.

In the Montney, they have very little impact on cash flow and the reason for that is.

We still have some dry gas in the play and well.

Doug Suttles: Yeah. Well, I'd highlight really one important thing there, Marshall. When we do have these impacts in the Montney, they have very little impact on cash flow. The reason for that is we still have some dry gas in the play. Of course, we don't invest into that. Effectively, we're able to manage those outages by prioritizing our liquids-rich production, our condensate-rich production. That's why you don't see it impacting financial performance. A lot of this in the Montney, there's some that's going to continue because a lot of this is around the NGTL system as it continues to be debottlenecked. It will have some impact to the reported volumes, but I don't see it as any real material issue to the financial performance of the company.

Of course, you know, we don't invest into that but effectively were able to manage those outages by prioritizing our liquids rich production or condensate rich production. So that's why you don't see it impacting financial performance a lot of this in the Montney. There's some that's going to continue because a lot of this is around the NGL system as it continues to be de bottlenecked, but it will have some impact to the reported volumes, but we I don't see it as a any real material issue to the financial performance of the company and in fact, despite the 6800 BOE used today, we talked about in Twoq you were right on track on where we expect to be if not stronger for the year.

Okay. Thank you.

Our next caller is Ross Payne from Wells Fargo Securities. Your line is open.

Doug Suttles: In fact, despite the 6,800 BOEs a day we talked about in Q2, we're right on track on where we expect to be, if not stronger, for the year.

<unk> cost pain your line is open.

[Analyst]: Okay. Thank you.

Marshall Carver: Okay. Thank you.

Thanks.

Operator: Our next caller is Neal Dingmann from Wells Fargo Securities. Your line is open. Neal Dingmann, your line is open.

Hey, guys can you hear me.

Yes can you hear me.

Given the price of natural gas can you guys talk about your current hedge positions for the remainder of 19 in what you're looking at for 2020. Thanks.

Yeah, Ross I tell you what it's actually in the materials online I don't have the detail at my finger tips here, but it actually.

[Analyst]: Hey, guys. Can you hear me?

Ross Payne: Hey, guys. Can you hear me?

[Analyst]: Yep.

Doug Suttles: Yep.

[Analyst]: Can you hear me? Given the price of natural gas, can you guys talk about your current hedge positions for the remainder of 2019 and what you're looking at for 2020? Thanks.

Ross Payne: Can you hear me? Given the price of natural gas, can you guys talk about your current hedge positions for the remainder of 2019 and what you're looking at for 2020? Thanks.

It actually is in the materials were released today.

So we've got good production on this year and then.

Doug Suttles: Yeah, Ross. I tell you what, it's actually in the materials online. I don't have the full detail at my fingertips here, but it actually is in the materials we released today. We've got good production on this year and then some production for next year. The other thing just also probably noticed and it's reported in there is one of the things we do to manage gas price risk is we diversify the markets we sell into. That helps us with the exposures. Those numbers are actually in the materials.

Some protection for next year. The other thing just just also.

Probably notice and its reported in there is one of the things we do to manage gas price risk is we diversify the markets we sell into.

And that helps us with the exposure, but those numbers are actually in the materials.

Great. Thank you appreciate it.

Uh huh.

We only have time for one more caller your next color Paul Sankey from Mizuho. Your line is open.

Hi, good morning, everyone. Thank you.

Doug you mentioned that you you've been on the road quite a bit talking to investors. It seems like the biggest problem you guys faces the share price.

[Analyst]: Great. Thank you. Appreciate it.

Ross Payne: Great. Thank you. Appreciate it.

Operator: We only have time for one more caller. Your next caller is Paul Sankey from Mizuho. Your line is open.

I was just wondering what suggestions to get in the course of those those conversations that you spoke about from shareholders as regards some sort of actions to.

[Analyst]: Hi. Good morning, everyone. Thank you. Doug, you mentioned that you've been on the road quite a bit talking to investors. It seems like the biggest problem you guys face is the share price. I was just wondering, what suggestions do you get in the course of those conversations that you spoke about from shareholders as regards some sort of actions to get a better share price and better valuation? Thanks.

Paul Sankey: Hi. Good morning, everyone. Thank you. Doug, you mentioned that you've been on the road quite a bit talking to investors. It seems like the biggest problem you guys face is the share price. I was just wondering, what suggestions do you get in the course of those conversations that you spoke about from shareholders as regards some sort of actions to get a better share price and better valuation? Thanks.

To get a better share price and better valuation. Thanks.

Yeah, Paul Yeah, clearly and we've highlighted this I think when you when you look at the company's performance against our peer group.

And you compare that to the valuation the valuation just doesn't make sense financially, we're performing incredibly well when you look at free cash generation when you look at.

Doug Suttles: Yeah, Paul. Yeah, clearly, we've highlighted this. I think when you look at the company's performance against our peer group and you compare that to the valuation, the valuation just doesn't make sense. Financially, we're performing incredibly well, whether you look at free cash generation, whether you look at returns. Now, clearly, there have been some questions about the Anadarko. I think we're showing the competitiveness of that asset today. When we meet with shareholders, I think the biggest thing they tell us is keep executing, keep doing what you're doing, communicate very effectively, and show the benefits. Because we keep coming back to this point, you cannot deliver these bottom-line results if you do not have a quality portfolio that you execute well on. I mean, we're now doing what other people are trying to do. We just generated $127 million of free cash in the quarter.

At returns.

Now clearly there has been some questions about the Anadarko I think we're showing the competitiveness of that asset today, when we meet with shareholders.

I think all the biggest thing they tell us is keep executing keep doing what you're doing.

Communicate very effectively and show the benefits because we keep coming back to this point you cannot deliver these bottom line results. If you do not have a quality portfolio that you execute well on I mean, we're now doing.

What other people are trying to do we just generated $127 million of free cash in the quarter were going to generate.

We expect to generate considerably more through the balance of the year and we're doing that while actually growing quite strongly and we see this formula going forward and we have a lot of flexibility to adapt to the market as it moves and changes.

And so I think we don't get pushed around about why don't you manage this piece of your cost or you're not allocating your capital properly.

Doug Suttles: We're going to expect to generate considerably more through the balance of the year. We're doing that while actually growing quite strongly. We see this formula going forward. We have a lot of flexibility to adapt to the market as it moves and changes. I think we don't get pushed around about, why don't you manage this piece of your cost, or, you're not allocating your capital properly. I think the push is continue to execute well, maintain the discipline, and then communicate those results effectively to the market.

I think the pushes continue to execute well maintain the discipline and then communicate those results effectively in the market.

Yes.

Sure and ultimately I guess buyback stock.

Is there any potential for M&A I assume you're not going to buy anyone can you sell the company will much amount on I'll leave it there. Thank you.

Paul is that just between you and May are we going to include R&D does share.

[Analyst]: Yeah. Sure. Ultimately, I guess, buy back stock. Is there any potential for M&A? I assume you're not going to buy anyone. Can you sell the company or merge? I'll leave it there. Thank you.

Paul Sankey: Yeah. Sure. Ultimately, I guess, buy back stock. Is there any potential for M&A? I assume you're not going to buy anyone. Can you sell the company or merge? I'll leave it there. Thank you.

We have to tell everyone. All at the same time so.

You know Paul look this we think we've built the MP company of the future and its here today.

You know we've talked a lot about this that we think the commodity market today could look like this for a while and we have a business, which can perform exceptionally well in that.

[Analyst]: Paul, is that just between you and me, or are we going to include others?

Doug Suttles: Paul, is that just between you and me, or are we going to include others?

[Analyst]: Yeah. Do share it. Yeah. In fact, we have to tell everyone all at the same time.

Paul Sankey: Yeah. Do share it. Yeah. In fact, we have to tell everyone all at the same time.

Doug Suttles: Paul, look, we think we've built the E&P company of the future. It's here today. We've talked a lot about this, that we think the commodity market today could look like this for a while. We have a business which can perform exceptionally well in that. We're also, obviously, in a very nervous energy tape. I think we just have to be patient and go out and execute and deliver. The value will get recognized, and it'll show through. I mean, this business generates a lot of cash. It's growing. It generates free cash. It has very competitive returns. That's not just in our sector. Those numbers compare very favorably with other sectors as well. We think that will get recognized.

And we're also obviously in a very nervous energy tape and I think we just have to be patient.

And go out and execute and deliver and in the value will get recognized and it'll show through.

And in that list business generates a lot of cash it's growing it generates free cash it has very competitive returns and that's not just in our sector those numbers compare very favorably with other sectors as well and we think that will get recognized.

Sure Thanks very much.

At this time, we have completed the question and answer session and will turn the call back over to Mr. sat off.

Thanks, everyone. Appreciate you taking the time to join US today and look forward to seeing you in the future.

[Analyst]: Sure. Thanks very much.

Paul Sankey: Sure. Thanks very much.

Operator: At this time, we have completed the question-and-answer session, and we'll turn the call back over to Mr. Suttles.

Doug Suttles: Thanks, everyone. Appreciate you taking the time to join us today, and look forward to seeing you in the future.

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