ESTE - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, good morning, and welcome to Earthstone Energy's Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

Joining us today from Earthstone are Frank Lodzinski, Chief Executive Officer; Robert Anderson, President; and Mark Lumpkin, Executive Vice President and Chief Financial Officer; and Scott Thelander, Director of Finance. Mr. begin. may you Thelander,

Scott Thelander

welcome Sabalo conference Energy. and pending regarding acquisition of to you call our our Thank

statements of Before as of to Exchange XXE today's forward-looking of remind get Act amended. you the we started, amended, and that call I of XXXX the may and the Securities XXA XXXX of Section would as like within Securities meaning Section contain Act Exchange

please XXXX. refer issued a to press For this complete was XX, of release on disclaimer, October description that our

described more Although, uncertainties it we are give materialize These our section will statements to management filings. our on of no based SEC be subject can of to or they www.earthstoneenergy.com. the make and fully These believes, one Should these Investors certain will or assumptions website, as has risks risks, that reasonable or correct. can expectations, are in be more prove statements assurance documents found in at results should information actual underlying Thus, materially. this longer available webcast also XX, going information October the of of any assumptions on the A be replay. speaks website, to XXXX. Earthstone's section time-sensitive The replay. may recorded proved via Investors of by by will call only today, telephone time no as incorrect, and any today's of be may replay accurate vary call

in release. press our find can those how information the access You to about

find also website. can a You our this presentation to on related acquisition

I'll prepared turn Pages certain the our to remarks possibly to detail. refer in not likely over Frank. the but now will review in and We presentation in call Q&A will

Frank Lodzinski

on us Okay, everybody thanks, Scott. joining to call. Welcome this

which scale with Midland locations position, existing potential greater acreage acquisition can with developed XX,XXX combined When our be the a Basin. with transaction the is of acres today a contiguous great significant with the that provides asset, big Sabalo the our significantly and laterals. course about us Of upside pending announcement highly with inventory net more longer including news includes Energy, economic of in

and based higher a addition, We're operational into possible, and to demonstrated our as reasonably positioned anxious to generate it the as soon even on we ourselves transaction realize expertise, market. to to demonstrate profile capabilities returns. further integrate this organization our our In growth profitable highly and close

like major and transaction into new I'd listeners put review context our goals. are to for briefly, and Just proper this what its accomplishments our our

integrated would transactions additional that we of the the entered promptly We Some that inventory XXXX transaction. Basin initially our at pursue through operated may that We of that had that our size. acquired nonoperated locations, significant advised XXXX. and we major exactly would acquisition. we market the Lynden advised we of enhance time, in you market recall we a continue to our when integrated acreage while that in that Midland Bold that did continue We positions to we and pursue

longer you there As have Midland can continued inventory to Sabalo our our another have of all build positions releases acreage and transaction. with from to southern the secured Basin, up see our recent block locations we applicable significant Energy press and we

technical the to and the in record a we our continue please and that believe note our that than over some our line, value demonstrated are up creation years XX our shareholders noticed our track shareholders. deliver operational prior to consistently multiple hard resulted We on put is for more work Again, of entities. expertise in public entities perhaps, on for of returns and of have for new that will We of all substantial leadership, fourth Earthstone proven know company, – commitments. I people all

last two running totally public development to run company. experience basins, rigs years has in including X together extensive been programs X has across XX Our having our XX for and operating in to various multiple multi-rig different team basins

pretty So we efficiently our confident Midland to ability about the feel in Basin. execute

staffing in together past significant team to from XX Midland years, XX to become and add a talent the we continue Aside more for Basin. X.X that's operator years, the over the been as we've

operational of I as lot confidence capability too, going forward. execute to efficiently gives us demonstrated Our a said,

call Before on of Sabalo you confidence in and A, substantially of Particularly an I and detailed the derisked lower to our Robert entirely position. Spraberry high a technical is feel compelling new and we turn our Wolfcamp personnel and which will and in price. we the and puts advisers, us are very because evaluation acquisition the the over support or purchase comment I two. another Mark, by with Based believe leave the analysis degree

our along acquisitions, results case, the including acreage like continue evaluate and this other upside prior shareholders. has the Just in in benches acquisitions, prior further for potential Wolfcamp our with across the of we Spraberry we'll acreage, to Post-closing, combined benches, B monitor position on believe considerable Middle capitalize operators the our our to and upside the offset

questions. in have of for and does our in benefit southern Midland demand is and XXXX export hope provide you're Robert operations Midland to to the the the general Our us of guidance that open what Sabalo up the short, the ability to shareholders. assets for we'll with that we and Mark transaction the just this for provide I'll line next. over and to our well Robert, an us some assets, the really turn proven our now call In achieve northern results in then Basin, Basin. overview operations, scale

Robert Anderson

Good Frank. Alright on everyone the line. morning thanks

contiguous northern mentioned, importantly, you the to asset. operator Permian provides but growth. to acreage a very foundation because are as I’d strategic inventory reiterate, this is deep as exciting the of great block how and highly a drilling this a put, To that Basin with simply attractive us of creates this Basin Frank First excited is locations for acquisition. about the level a high-return in it Earthstone heart an Midland profitable premium does next tell Not takes only plans, we our it like more further

local grow operational our this believe such you acquisition is acquisition valuation, a bit, XXXX; As to highly meaningful large but DNA to the in number but meets since production our drill XX,XXX XXXX our by through with PDP opportunities evaluating also this. Boe to After economic a of all with we infrastructure. know, transaction, a it track as organically an an in the superior plans capital which access infrastructure, strategic, attractive upside team component XX,XXX not markets, a integrated a ability benches. very Also, and next, stacked only current efficient finally, supports utilize including: on secondly, to delineated, that development provides immediately; all pay the and downstream costs; along reservoir and multi-well water our financing large develop to that that rock puts midstream day quality assurance with operated contiguous with can allows had combined compelling to financial number for further it Earthstone deployment; criteria, down supported next, the position drive one, drilling flow produce

In will addition, our provide returns stated building of Midland significant goal leading furthers growth to a company this acquisition shareholders. that Basin profitable

include trade, Midland acreage development with Basin building large positions recent contiguous this box. attractive production. and this an Our portfolio substantial our that acquisition Both check with goals oil enables long-lateral

scale When we've capital a again, structure, this a divested long-term over this And reach derisked our past. us a company Secondly, focus increases generation by our premier base low-cost operating times is XX% should position operator. of bigger And high increase low-cost flow value with profitability. acreage so, The aiming our last held benches operator. of several cash liquidity a per-share this Basin or – in and target of substantially clearly year is content. the a combined done positioning acreage production. as of additional the total cash we working by and profile focusing This services Midland then on increase have position across the interest. and a finally, reasonable drilling efficiency. free we while transaction and oil majority benefits the high Midland portion of improving while at being these have the includes a assets, in accelerate interest This the possible significantly working substantial program, helped least operations to average with combined dedicated on in maintaining acreage number helped Further, production, strong the the increasing four additional high are about aspect in flow with the secure footprint high-cost XX%, us to much has being XX% properties we acquisition drive and of that trading by focused a as on operated positions about as Basin with larger operated

vast obligation to production drilling acreage only – expect of XXXX that. beyond have majority mass held minimal with by We in the the

production a following this late in doubled will which have drilling of Sabalo our Earthstone growth expect early reserves, upon our So shareholder created. the we momentum trajectory. will XXXX quarter occur the transaction, the from and and we growth vote, acreage, closing increasing inventory, has benefit strong year effectively that will first or we be substantially to

XX of base. repeatability demonstrating the last asset the has and production months, well Over quality grown over the Sabalo's XXX%,

Additionally, Boe was with Sabalo's net production a being oil. day, XX,XXX September in approximately XX%

is XXX Basin, area has the producing our drilling the the as on in our highest in of delineated percentage extended drilled and has its Lower the operations Sabalo we to the Slide as a offset improved a two from contains be our maintaining Sabalo's recently on A. these Lower should the type activity landing operated. The almost XX,XXX lateral detailed showing ideally lateral On feet, a operator zones. over acquisition. support posted Again, situated curve program at and located we combined and laterals, crew. of Howard we're accelerating our for Wolfcamp as formations, Midland Boe are this of barrel on equivalent, XX,XXX our rigs improvements of currently on one seen significant can will website A improved on basis, XX,XXX-foot approximately capital that operated extended team Midland of operated see well we X,XXX supported a current the on entire in Wolfcamp over have offset using three nearly history that an we their well will the plan acreage, closing, that Upon you with in have and rigs excited outperformed Basin numerous Post-closing, Earthstone rigs highly recent this of will Sabalo with efficiencies. will XX transaction, Through operators So gross laterals rig about with well of after to which in cash and inventory an also Sabalo operating these the wells greatly acreage XXX lengths far designs on and our operations resource the Sabalo performance million strong growth. standalone over valuation drilling Sabalo frac continuing performance, assuming A our development, frac will almost extended have production run basis, while for significantly presentation look performance benches day, in formations presentation, primarily help And in website, Spraberry the the locations along focused acres Spraberry on drive existing slides Wolfcamp Midland estimate acreage X Basin XX% on flow this to all in will they County. acreage, well operating we and X,XXX to have acreage a productivity for operating entirely along laterals enhanced delineating increase We closing. economic and on for experienced Howard XX%. acres multiple position. place generation combined forward which, XX,XXX is County. across Sabalo have initial drilling average spacing. inventory basins, with assets, the taking to two suitable gross and have over longer operating future dedicated our on transitioned XXX-foot operators those assets on have the is close the of The oil acreage, the basis, combined approximately locations locations is net which its

running disposal costs, further will discuss in Mark anticipates few year throughout X, XXXX focus $XXX of preliminary rigs our and operating $XXX moments, Sabalo lowering CapEx in Basin costs management million which if three completion has infrastructure to and this on saltwater rig resulting and The assumes disposal significant miles a demonstrated system utilization. of spend equipment closing efficiently the pad As of Midland along to operated to consisting fracking million. of gathering cost wells, access capital to recycling in operational a service of fresh team unit history per all our water the the and managing improvements the disposal, as on efficiency An we will with initiation program, cost lead and acquisition and January prudently project integrated a will specifically, occur to of transition for water XX water needed, development, improvements. third-party multi-well more efficient leading company-owned lines

trunk constructed while to gas. cost. contain a which need flow Sabalo this on has oil midstream line, X-year flow essentially place to supports Sabalo commitments, an also gathering growth. Delek process and and and very of that has minimum transport acreage multi-year of gather, assurance. Delick of Sabalo a provide these for transportation agreements gathering XX-year is Refinery Another years attractive production by Big that owner any important that characteristic agreement with its assurance near the oil, of with located has agreement natural Spring X-year removing recently is a a us. agreements optional the very is is WTG in its extension, long-term gathered acreage at solidifying important Oil The Sabalo very acquisition and and volume tracking contains Neither transported XX via

So high-quality create We returns position. we're expertise worth excited to plan in to to have of acreage attractive and from outstanding presently in-house have to this our the generate access value Midland shareholder combined locations a asset. on summary, decade's substantial execute effectively Basin drilling

the to guidance pro Now I'll Mark turn and forma discuss plans XXXX. over for to it financing

Mark Lumpkin

fund managed funding Partners committed is as financing approximately that the Earthstone Well, of $XXX into later the quarter fully along share to approximately from million $XXX consideration Sabalo Holdings’ new purchase approximately Class X, us acquire We total million includes $X.XX fully of close of funds including producing common of membership entered participant, Energy cash $XXX of XXXX to B acquisition. $XXX with of Global subject shares a credit intend price an Energy, price bridge, financial also, borrowing cash Class closing stock currently assets EIG committed assets shares. XX.X preferred by undeveloped and fourth of revolving unsecured million $XXX purchase of conditions. minimum million the year with all issuance fully million. first Earthstone of the million, to per a to senior million purchase held which equates consideration of with acreage to transaction Energy gives which about the going or May from is customary definitive and we've transaction this in Robert. at effective units a corresponding Energy XXXX. the base date certainty of shares The and the and and investment $XXX The by facility Thank a equity closing expect Sabalo of quarter go read, to you've We B the agreement a to approximately in notes which net for of upsized sometime the the by $XXX and price price proceeds and million committed you, backstopped common a adjustments at assets includes

of leverage below outspend June As you expect operate XXXX, year. levels combined we our leverage and XX, forma on we to cautious to results very cash we’re year leverage debt to plan, annualized result do second our our with anticipate of and expect a production Sabalo’s basis financing plan incurring X.Xx. next if operating XXXX. were terms fairly to all approximately second operating leverage, We this On know, we pro Earthstone our Xx add flow, plan significant EBITDAX. in standalone plan in in will considering as that’s to similar in significant have later deleveraging in or be to in Xx of of EBITDAX quarter XXXX, in aim an below consistent rig Further, a early a

During June some pro liquidity flow due at cash that XXXX. make towards at million. expect borrowing XXXX, considerable XXXX expect point to forma XX, Also, in to we approximately increased $XXX we our closing, is free the progress generating do base

we’ve So structure capital versus standpoint delivers in and the that need that in level additional other supports the and results one a liquidity any financing for of ultimately, outspend, immediate growth, it of future. a and plan financing words, got ample our development reasonable with from liquidity really any eliminates plans for foreseeable

which in our Moving $XXX the this for with expect, January would to which operational both CapEx mentioned, the Sabalo on in similar of on day, a a forward budget that on in preliminary Basin of be and Ford XX,XXX to production basis, what they assets, XXXX content is of program our and program the of as spend transaction we consistent in Midland all range the running guidance, Well, next somewhere also year’s Earthstone three-rig in XXXX. we’ve on and And this we one assumes set estimating a this between the acreage we XXXX, mentioned. million, of have XXXX we’re rigs X, in terms a on $XXX there. range is as been million XX%-plus. Eagle something close Robert rig XX,XXX side, operated expectations the with And Robert two Sabalo XXXX. assumes oil per and capital to existing And

are, think quarter change somewhere an will a subject focus realize added the scale In With around deck XX,XXX quarter, basis, and our and both we third EBITDAX on of These going the standpoint, per basis, XX,XXX also an we $XX amounts to of continued between of somewhere be on it in on in third give to Earthstone third a the estimates production forward, controlling be shake do we’re combined terms of really to OpEx. to and expecting with we adjusted the for of indication basis, the million, contiguous nature $XX CapEx but should million course, on cost stand-alone day. to and out. and as to for on put BOE how to quarter, you on early expect efficiency expecting preliminary some we’re and assets EBITDAX a out both production benefits relates on

cash visible close with saying of transaction expect in results locations position. drilling a that an see for scale asset certainly Let deep our to path lower and development we base this able And just greater free just of extended high-return inventory be and we foundation larger a a and me with boost be really contiguous provides through to by exciting the growth lateral acreage and operational flow, cost should to realize. economies

So wrap that, it we Frank to I’ll before turn up this Q&A. with into over to head

Frank Lodzinski

Thanks, Mark.

So several our on that this our and night participants interested a includes we lot and and call see parties, we new we this screen analysts, the of of can dedicated here Many last audience morning. like shareholders, of our looks spoken already it to have thankfully, most have our which course, for employees. of that of

potential company our the company. and our with to we’re I a timely acquisitions, per We’ve committed to demonstrate basis. share basis. each in value like that post predecessor a in in on and past absolutely been we very shareholder that Further, public building of are to this both on able transaction shareholders, say to investors, integrating just on analysts, So this closing focused absolutely efficient

our no take for integrating it’s line. Get that employees to so the this to offense but, I into for efforts thank forth, because ready put our for the this shareholders, the guys, across much existing you employees, finish Now this and coming. particularly asset you very our shareholders

take do any so want that, to all very And we effectively. we’ll with and questions. So operator,

Operator

from from Our comes Neal the Instructions] Dingmann [Operator line you. first question Thank SunTrust. of

live. now are You

Neal Dingmann

Frank. like Good nice a morning, guys. price, Nice asset, great deal. Looks

Frank Lodzinski

you. Thank

Neal Dingmann

pretty about first be you’re on there and based the that how program, details stays out about many when I talk bit of outspent minimal rigs. first payout bit too looks Robert you Is Frank, a how just how that you would just comfortable placed my with of you everything but Could three for pricing Mark now, talked of more year be think talk going initially, – the about around level into know, kind of or came me talk or Could question, based the you and up about you you rigs out outspending sort it, comfortable really, spend is plan? – of you it that I yet that of three see? where you sort XXXX kind a sort like would little budget on what not true if there. what – to little then on

Frank Lodzinski

a this second, I the on question. to I Mark day but XX I’ve – expert Neal, to Hold here. got calculate go a only a ask only times We’ve got to

about, kind we of thinking have, million So $XXX what say, budget? capital are we if a

Mark Lumpkin

of mean, I lot like a model not kind your standpoint, and work about a information. to, take is a and by assuming. From this are say, is, into and we large the Yes. way it modeling I ton standpoint I model, from analysts just recognize modeling I know, a certainly would would that with overnight standalone I – the that see Earthstone think of, think

Frank Lodzinski

starting. a That’s great

Mark Lumpkin

rig, of And production add the Earthstone second And basis. dissimilar in can a that with like. Sabalo. incredibly outspend would then, guidance around consensus from look So be gap probably our rig. XXXX number and what second fill numbers EBITDAX to Earthstone and of not an outspend terms you’ll that’s you at kind out the your on and adding Figure and looks standalone, take what don’t our get

late this there’s early year. of moving running a be parts, Sabalo rig the and – operations until we either year lot of will two until next or the or is up rigs hear sometime picking that certainly You’ll

Frank Lodzinski

we’re a acreage, of And basis, and southern talked folks a XXXX estimating are that be on they about outspend. it talked running generally second are that models will the forth. with had similar guys for, so combined then normal us folks course the what, dealings the be, on outspend, will adding basically the reaffirm rig a you you things forecasting over how – our to So have

Neal Dingmann

Okay.

Frank Lodzinski

that in And XXXX. Yes. get free we flow get cash And that sometime to. we to

Neal Dingmann

Got it.

just then And Okay. lastly for Robert.

Frank Lodzinski

and one significant Lock our guidance, amount Let given is going of me growth combined risk production XX,XXX, that estimate to guidance the fact given alleviating not is that in, and well, the – forward other these so we’re that the equation. we’re XX,XXXto that of those trajectory a our so from add – we’re assets hedge thing. that

Neal Dingmann

Okay.

will talk the Okay. being you bit area? just about of slides again, prepared processing. in Robert, Yes, a oil, like infrastructure, of very I how and little theirs, all my to impacted a lastly, third-party sort a just you by talking talked think just, talk about ramp, the the is that as – water, you more, leverage perspective that of sort But I an then of, keep seems again, me. minimal, maybe feel, guess, gas new SM the particular about question third-party in bit – about and processing about between update little light between remarks, on growth and from gas more Could processing, gas you was

Robert Anderson

point capacity grow in themselves done able the it. back two to set great the some water job and have different up oil, and as outlets. of marketing with on some all said, but future barrels at allows be piped contract to Delek, to taken The it’s the be I Sabalo’s other infrastructure to for Midstream a up to keep getting the production takeaway

look has the it go. even to base, doesn’t So somewhere the else refinery so at pricing good if

issues. the any they’re disposal, no problems. gas problems and infrastructure, The it’s WTG will be issue. without you the now, lots is very to short reaches deep bring and all terms of barrels don’t own leave the on third-party commercial not an plant integrated, plant for have not the pipeline than when whether water a there’s necessary new that’s integrated. going nearest have of may to having tank flare no But there’s little system away, own goes disposal. up it and on you no WTG. been time. there. barrels capacity gas to so so few period till is And in there The all out the tie-ins of plans, And of where so may lines to other further position, wells, got there’s a has several trucked, have a instances any the the or you batteries facility, they’ve well, lastly, third-party The got issues then the then, outer saltwater plenty its And of I the and the that way in access to mean, all capacity go with acreage so

So of it’s terms forecasting that – the in handling well-managed growth situation to very terms we’re in a year. the over next

Neal Dingmann

Very good. Thanks job. for nice the details guys. And

Operator

Thank you.

next the line Aschenbeck from comes from Our question John from Seaport Global.

now open. line Your is

John Aschenbeck

Good Mark deal. and morning, the congrats Frank, Robert and on

Robert Anderson

you. Thank

John Aschenbeck

balance a program specifically first the was my and one. you So spacing for development Middle for Spraberry. Wolfcamp share plan development Sabalo asset with to your the and assumptions B delineation, you also unfolding, how hoping I could how and determining in the your proper thoughts on regard you see understanding your

essentially the those test HBP, want of asset to different development you it and the significantly of a is understanding could since to better understand, inform So probably But better your spacing zones potential and program quickly. pretty begin you seems also a development manufacturing-style I get concepts other process. like

just So us front thoughts any share greatly appreciated. you be on with would that could

Robert Anderson

comfortable the moment. across bench John, that first at we’re this any the say part, XXX-foot spacing just on very at particular we’ll

west the some county. Lower And seeing elsewhere in both move the you the and and basin. in XXXs we’re in A are some the into as operators line Wolfcamp Spraberry it We go seeing racking do

in And So these units mile X.X general. our view up, is, the Wolfcamp early are set on, we’re wide going the to Spraberry codevelop way the and they are A. Lower

wide. eight And so that’s on a four bench, wells mile wells total per

right wells a wells two Middle units A And in B out there own then being as of see sense couple [indiscernible] both the line to is top And Spraberry later a those that drilled already, it and if turns back of in that a and most recently have Middle go the finish it’s has get it’s six or well, the of Spraberry. so develop the we’ll least well, data. and Wolfcamp on not nowhere And a but little slowly so how near mill, at makes out. yet, more bit drilling Spraberry in its which into then coming Sabalo Lower County, Wolfcamp benches. completed come

about Middle and the the Spraberry. – high pretty hopes We’re for have expectations and excited

John Aschenbeck

portfolio my Okay. a curious view regard management. in similarly, Appreciate Great you high-level non-op just [ph]. see your into question And Ford how Eagle portfolio London I next the to color. following from you fitting how And the this acreage Robert. acquired that was one, transaction.

Frank Lodzinski

Well, guess, weeks if ago, been I two you look – about it’s John.

announced couple we last has the for in weeks, and thing. where for it have to – we And non-op attributes. all where acquisition Sabalo the that, some terrific op no, going non-op just with is The Within acreage visualize acreage you traded we’re trade is the op. this of almost what opposite contiguous

down XX,XXX see trade. You’ll about acres that with essentially Reagan by We blocked up in County. this

of will existing and we from more We less have, up. of – and to non-operated blocked that the in now, have we it, a out hope look acreage it year

whole ability the to demonstrating So plan. we if market, clearly the picture that acreage. we're efficiently you have develop blocky standpoint, That's from the a will, to

sell through look an the in the Basin shareholder value. we'll folks if operational churn some acreage We'll exploitation Basin. picture the standpoint Midland So lead to trade Midland from continue look to southern may we good sense. it to should really in makes – Well, heck, acquire acreage that our make to it southern

in a it's So work progress.

the Basin are some is, forth. year, we've that say there work out these a been so But can I kind which is slow do with see in acreage mentality all able of other. the what trades each not of over people are Midland will easy, with there So last and to

XX,XXX-foot more XX,XXX-foot our move doing a acreage, is, and block So goal on just up more how recently we towards and laterals, drilled keep that. lateral,

we're owners We And okay? so drilling answer keep joint that. going folks with this. our with There position our speak course, what some in laterals activity about area extended is, on the day. of we offset And you to watching Ford the is Eagle that The have asset, Eagle is on I little would every great Ford. a to, on just didn't working

We bit and have Gonzales right a the as candidate we we in have holdings point, determination But just of developed, Mark develop, now. could divestiture will at mentioned, little that it haven't down County. to and candidly, that we southern continue some develop, made be

John Aschenbeck

Congrats That’s it me. Okay, again. perfect. from

Robert Anderson

you. Thank

Operator

Thank you.

from comes Northland from of Markets. Our Grampp Jeff next Capital the question line

You’re live. now

Jeff Grampp

guys. Congrats on the Hey deal.

Robert Anderson

you. Thank

Jeff Grampp

of, Robert Was little the underwriting can footprint, maybe acquisition for wondering that zones various for areas maybe, risked are derisked? mostly guys discuss view, kind you, these footprint maybe that across prospectivity if the if kind branches, and were any the you of, if there a bit maybe of across the or you more you the

Robert Anderson

of Lower mostly I the of Well, lots the got you or few derisked. look the my performs. a I and answer Middle of if North the see one, Lower go to to, that how West recently and there's at Wolfcamp Sabalo's XX deck, results drilled that a participating that done Slide Spraberry. A least They East and think, we've our and it A see is, good Spraberry plenty it's the the has Sabalo – South Spraberry, we'll we and other here completed said, really year Wolfcamp get you'll we've there's And like towards log highlight drilling and of good, in got job data, west. out well end wells B operators. the on with in see

the carried more proved value we A that the So Spraberry reserve day than out if there that is our total on our valuation, acquisition highlighted and and the much you report price. even look the Lower at

is in it. B, add that then valuation. the Spraberry, the proved limited Wolfcamp just reserves pretty there Middle And we've So which in proved the a very has no that terms half reserves and to also got nice of

Jeff Grampp

cycle anything. one the if of just, range. kind determinations end really And kind a I'm could other, pad sort you guys you get could this one, numbers the you that on great. little That’s that put that of, on was then generic, maybe variability what extent, timing to low of the of Is just Okay, end thing? discuss of on the the to of, can helpful. just kind get time production maybe, get comment kind versus guess, I XXXX of out. variables versus end curious you to high some maybe the you size, curious Can that the on I color or

Robert Anderson

the Basin pad has Well, to pads mostly, southern or instances, And sizes two in and we're it and right? trying some to at of couple Midland are generally still do timing, plan three, four-well in we're with our looking a maybe that. five, to

numbers, Sabalo good if do wells, got crew pads of rigs, The portion a plan a they've out be every you trying and crew we with and crew when forward, southern in Basin another out Sabalo but and there dedicated, a down a then timing. of instances, term XXXX. backlog, crew with both to for frac figure on to we're you matter two-well guidance. to the frac there short of end pads between we've of those put us a it and can that intermittently and the The foot high get we now exactly keep four the ourselves but get is the planning it what frac of three need we've couple best in is, assets, lot using news majority what been the kind a could putting got Midland of the doing our be, will So of so will a the frac in really then help is

Jeff Grampp

color. Okay, I’ll that someone really will great. That’s on. helpful let hop

Robert Anderson

Jeff. Thanks,

Operator

RBC Capital the from Markets. from Heffern comes Brad of question next line Our

live. now You’re

Brad Heffern

clues Good the time right Hey. any And the I to the a since of can for Sabalo you guess where the schedule rest versus production year? rigs the on thoughts morning couple as looks what now, turning running any deal XX,XXX the could by number the give of closes. is line be everyone.

Robert Anderson

so wells to a Well, right they've an now. pads and frac drilling of and multi-well they've some inventory one six – or they’re seven they're process, completion got got or working that right are running crew in on are wise on waiting – that now

online recently the They've the guess. year. of all of that so to this to And in of seeing used area. areas. could A Wolfcamp seven I you end that in wells the another six see again, move quite would up longer peak So as eight, Lower a that's we're other clean make reach rate by wells the we than total, some or these wells, though south, take just brought little And two they're Spraberry in on typical up and

exit provide So giving us you on exit we numbers and further and can little at this maybe down we'll then both hold any on point, we numbers to a some Sabalo. get the until road, off

Brad Heffern

guess there the thinking in need run over hire people and general. organization are of of I guys Sabalo? about scale that. for Thanks asset? bunch coming Okay. people to just the Or to go you Do new from a the

Frank Lodzinski

us simply period I expanding the a folks nice three be our months. They're because transition help through in going been won't probably enough. There the – coming operations any southern No, have of Sabalo to of Basin. folks Midland over

with company We have it and because been as always in the starts. so my in I we've pumpers production you the of operation both know, prepared that's as staff field folks, comments, all and, office the on a most where mentioned hiring dedicated importantly, in during superintendents most because field had and

– over eight of your six a So not variable. linear it's G&A what or last the in staffing months step variable, a is terms we've done

we're and just instant, existing our assets, building a this continue start ahead that we'll at bit the on little that. right So curve of

at. $X maybe million kind You worth probably can factor as much that's million. of in as G&A, of another But where $X we're

Brad Heffern

sort Okay, meaningful the And on is on, X-rig later like rigs left? in do of, lot then a infrastructure But at Is a over of time? you place. great the chose asset then it infrastructure got if front, And obviously, you has finally, think to how significant infrastructure about sounds infrastructure spend anything level. there it. add there any,

Robert Anderson

Brad. There always is,

needs, well want to want the one and and related on to deep third-party, on out that to well in the to places million spend system. trying on adding – own area assets, can we're saltwater Sabalo sure more you're of to on assets, – definitely but where we're You $X in are on water infrastructure, with and assets. the see I maybe always But both make ahead to each Sabalo million ourselves our we to both going the $XX figure disposal

something will So our that capital refine as that's XXXX move for we going forward. to plan be

Frank Lodzinski

closing. that have I to refine some closer Robert handle We're of those incremental because to that think We to the we're to that a right now, as in built get production. or need kind into does $XXX of million. mentioned that's infrastructure wide range It just numbers have know $XXX we million that to Mark simply range. going you

Brad Heffern

I Okay. appreciate it.

Operator

from the Johnson Rice question Mills next line comes Company. Our Ron of & from

Ron Mills

talk A piggyback Robert. questions, Just the presentation about completely of on one to B Wolfcamp Spraberry the you or Jeff's Lower or earlier and When one of delineated. in the basically

would the achieve would delineated" at the you mostly take that B, looked "completely you What description? they're well. to to Spraberry and Wolfcamp would suggest If Middle it describe what seem how You think those? delineated – as you

Robert Anderson

but those east. the owner wells an then, as producing. lateral, short-lateral Middle west those B. on little bit well, being a really in of And short Wolfcamp other to Ron, north around, of Sundown Spraberry. say a couple is working out basis you have who interest both Sabalo's – there's by drilled a – because horizontal operated and well a B a or B worry There's the looks don't to wells. about got look good then drilled acreage Wolfcamp the And And I'd SM a you've well. in have along instances, position the has because good got a off of directions, well, the lot south old the going than farther definitely in lot you Apache but operators Maybe then by And the see B is both you that in owner operators. that that you've to is

like so logs seen the out Middle to of additional some hopefully, production. based horizontal Spraberry got it'd compared on out operators of is if Spraberry. good, said, drill we'll looking the the But in the need own well, Howard it's drilled has like Sabalo seeing have a really drilling out We've the quality get of some part the log. we're their some well not indications year Middle Spraberry east, we rock a here to good and what without I maybe where end nice by would results. western well in log test there So the But completed, Middle it we've strong County, sitting a and be

the So nicely. up setting is us I think analog

Ron Mills

Okay. a Was on background And deal? from standpoint, with been the give Clearly, you previously relationship my Can this a little Frank. pulled? transaction brief marketed was EnCap. history for it of that have that had was you history long-standing fully this marketed a is bit of us it transaction, maybe deal the a

So a curious this negotiation? came of it more of more process Was or how more a about. I'm about just

Frank Lodzinski

both, think I it Well, was a combination Ron. of

goodly nauseam know, and the with As the that you happy of a have they worked when – of fact Sabalo we turned happy to background are are transaction. on file and us job people this pages our out we we with transaction, and with But EnCap just there'll say, for this that very the have there, with done has portion transaction. ad this year, into XX proxy, be a let's negotiated the

talk private all with and been that's there'll call regular in on be – in a year. the early say – with to all for equity for the since We just keep the individually – this investment out one And guys, more right going to thankfully, we going now, proxy. worked us. that this we've We working about I'm all bankers regular folks momentum we there. keep a the So

Ronald Eugene Mills

then, one And last Great. for me.

their Thanks. can versus think some it you refinements work as you've enhancements so operators? did relative you do the and What to targeting, of curve? improved as results recent kind mentioned you think even they maybe improvements Sabalo from do other changed far, design, recent do show the to have talk in You the to you Robert, do some type how or about been wells on able lateral – productivity completion

Robert Anderson

little little kind or ongoing of X some there's or little for that's bit of that on than discussion wells tweaks these And right around landing and acreage there side frac by on do clusters, Midland fluid. is more of XX you. in have holes amount first. see there'll minor to of one in across on everybody have in B what higher the land way initiation. that okay, Yes, best target like Landing clusters it of two having you're of out better pipe, a the of more I in the A, frac and and amount zone benefit, moves when the over thing, trying it, the kind is kind biggest zones? southern the some that Basin jobs, be we're using an one, doing the bit Whether position line, it pump out, world wells portion think you where of in A probably that we we're a the working figure that still or Other we have that whether is and the instance. clusters, maybe old difference propane the a we said, improvement or some that, and I the And the

towards that closing. to work with up something Sabalo, we So going it's we're as a going plan continue to develop forward

Ronald Eugene Mills

you. thank Great

Operator

you. Thank

of from Baird. from comes the Allman question Joe next Our line

Joe Allman

Just With does couple from ones. SM east, your to a geologically quick of SM's? how differ your acreage

Robert Anderson

Say that Joe? again,

Joe Allman

if acreage, pretty but differ question at the close question you've the how Yes, geologically east, acreage your is, SM's is, your to SM got does from all?

Robert Anderson

might But debris the you little see working you carbonate doesn't, materially. and the forecast certain results Southeast little you of land. you are bit and where where east, It I the it interest out a benches, I'd to a see has and Sabalo may translate especially wells, SM say in some a flow of might on results SM the at Sabalo into look really acreage. good when there. – bit mean, impact in a

Joe Allman

continue that Is the beyond to really as – or to flow basically point how targets, helpful. the some keep free just cash activity free plan does the free XXXX. cash that's and cash after flow flow? generate to know flat some levels? at Okay, forward goal in generate flow. relate they And just that that question plan free have in activity to is XXXX? So going now, cash the I your level your on the And of right then to

Mark Lumpkin

You financing, it to know, Joe, smart-alecky are the the answering I depends on is. source what of conditions what this, the in all price market and but don't and stock want be what

me growth part, – past you been answer. like is, – if slower for – I'm for in You intolerance give growth. look for an means the growth from and moved outspend XXXX, has to and aleck market the not the has But year, definitive going timing that we'll even tolerance here's – moved market's pace from you the a the the smart outspend to whatever of a and what tell a market's or

operations don't it to right comply we to the And the always way is our market perceived any can we just So if know changes, the in targeting now. with market how ramp I up are accordingly. answer that differently.

when this forward. that line, tact but acquisition, on to hedge we're there's couple rules little in me night, and our get different we highly you violate: – here not a two not that times. it are We're for be never a one, it are leverage of down the the a a that last of going below We a are financing to barrels to to folks bit XX,XXX spoke we day, couple And going justifies company. leveraged taking are there's going the

about could Joe. the as basis kind to to cash scale. an could on another flow do this. could that's acquisition. And mealy-mouthed assess bring net So we're we know just but I ongoing that's the excited shareholders. pretty that always We'll We of We have forward more We benefit answer. have, build of

Joe Allman

just follow-up. a Frank,

economics cash activity keeping about some to the wrapping assume justify? flow the point up flat? of and Or it did the accelerating it at was assumption terms economics, there some In level

Frank Lodzinski

a I in I economics. have economics, basically modeling, – economics, I think to two did you – modeling? know the have shouldn't I'll did you guys economics it our and our to but put think our of the on economics sets Rob, with rigs One two SEC rule, refer that we comply but to forward? three up aside, in Is we of going our think to move what I constantly? sets you So do say Or – always fourth right? sometime X-year

Robert Anderson

one assets look. we're doing I we've rigs on or Joe, based a of price and Frank's we the our run two and running point, an Sure We're increasing institutions that's different we a work on the going bunch or the Yes, we're right absolutely too. whether on on mean, basis. rig changing of right to or Sabalo is combined EnCap, skin have to or tags, in rigs individual do game shareholders, And whether as what two ago, have as best grow years interest in it a is that's we we was think think And doing different everything would of assets. can, the scenarios, run now it's cost three rigs adding we've ton running is or a the the changing scenarios. based now But everything timing on definitely the I shareholder. thought fast you for

Frank Lodzinski

today. Mindset

Robert Anderson

or whether and years, may today, it mindset in same. the or terms yes, valuation But it's two scenarios may of of we're what our different others. a adding looks on Yes, from it in assumptions or rigs I mean, and different be paying, rigs good three not lot

Joe Allman

Okay, all very thanks helpful guys.

Frank Lodzinski

– So to operator, this our is going be this is David?

Operator

will David questioner. Yes, be the

Frank Lodzinski

Okay.

Operator

[Coker Palmer] Beard line yours alive. David

David Beard

Good and right. me morning, in, on gentlemen acquisition. sitting thanks All the for congratulations

around cash circled to your to positive flow kind in – Just assumptions XXXX. free get of we've

three So there? guys I now get assume rigs, and using to running are that's oil you price what

Mark Lumpkin

movement is XXXX I most of, down a run is timing think some strip. pretty some of dip it the $XX? we've a it. look is mean, put strip, thinking weeks. you scenarios price we're we've our absolutely. already the mean, XXXX. I how strip certainly, goal bit assuming of a taken The versus Yes, But based target a and with around kind here model, on frame in probably And guide a we've I to after standpoint based what what and like to in I just oil XXXX, X.X of some not deck very on recent it there's late that. price little hedges different, even the really, where if standpoint $XX be decent some bit you're But on in variance. It a degree, from XXXX a might the XXXX Yes, and, reasonable. looks past, doesn't mean, reasonable base that's a on

Frank Lodzinski

year? What do for you next dips run

Robert Anderson

minus our model, Our dips we're bit assuming I dips kind the the Obviously, that. tightened – Midland Basin. versus like, a in have mean, of $X in quite

Frank Lodzinski

it look better. might So

Robert Anderson

hedges XXXX. we've we there's I But are put I in minus hitting mean, conservative on some do have price $X.XX this price goes in are $X, and more it on around the No, week, Yes. for our for obviously in And doesn't our cash XXXX. model. just minus on definitely change XXXX assumptions Midland embedded definite at the the Basin dips some basis variance free mean outlook where our than down $X.XX that. flow

Brad Heffern

geology. understood. about question the And little more then Now detailed a

is and we to As Slide XXX. about you about looked size? you and move east variance XXX there at at western It's wells degradation. foot and move just there, Or Are talking eastern a XX% a too side XX small sample a some across wells average as of looked west the I when east?

Robert Anderson

Well, we're the performance bit on at that on at XX, and is say, probably a Wolfcamp Spraberry, you is on the higher Slide curve. could – you sandbagging A, type our curve and XX, the David, Slide look wells, look that than little where type because of perhaps, if you the average, Lower

type big economics east, and our at and and our more data of wells position, wells west. incorporated spaced So the Tightly a single and we across looked wells that all north, into set curves. south, all

So occur we're of will the move to some for to as out variability of and east data smoothing kind you the south. west north that

Brad Heffern

appreciated. Great thanks,

Frank Lodzinski

call up free thank wrap call. the closed you have so as we this And investors, with Mark have the can any get to the proxy on can you phone much. questions, that lawyers call – so get So look, and We the thank accelerate to possible. shareholders, If everything any or analysts actually call quickly as we to we very have joining any get for feel any us. lingering – all of

Operator

this ladies you, our gentlemen, Thank conclude teleconference and today. for does

now may disconnect. You

Earthstone Energy (ESTE) 18 Oct 182018 Q3 Earnings call transcript