ESTE - Earnings call transcript Q4 2021

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Operator

Good morning and welcome to Earthstone Energy's Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference call is being recorded.

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

Scott Thelander

XXXX Thank welcome full-year fourth quarter our and call. you, and to conference

we started, I meaning that contain will call within get would the you Before forward-looking federal of laws. securities today's like to statements remind

to be results includes from begin comments they from www.earthstoneenergy.com. are are financial announcement Robert. These Annual or of references in will conference these fourth statements directly followed to call have in the comparable Today's announcements assumptions XXXX found GAAP for I Should earnings CFO; yesterday. our no earnings may from now COO, contained Robert. our based call to these and the can believes also can our expectations, measure Report non-GAAP Lumpkin, most closing our non-GAAP our assumptions Reconciliations prove correct. of give in quarter by Anderson, will Steve the under that more CEO, reasonable measures. comments with Robert be remarks certain This issued Mark our underlying we'll Investors materialize one over certain call section vary Collins, management and some turn actual statements measures financial risks on will they to materially. then of these Form or our Although website, full-year as described and assurance XXXX incorrect, and on prove subject and risks, in to uncertainties should XX-K. documents These are

Robert Anderson

managing of us The balance call. then and XXXX you. pretty organically the for has six last is fourth everyone. accretive of through financial We strategy to and today employees creating for spoke our or we acquisitions, well, and our conference sheet is total quarter bit, a And fourth the in good announced. now joining out continuing far including results Scott, closed results. and goes delivering all and growing been a the all busy we strong been what acquisitions It since few shareholder that employees Thanks, dedication to since full-year value our evident full-year XXXX with for so delivered months as you the we by what XXXX, corporate in appreciate drill our morning, have my quarter, our of have And were gratitude accomplished. of

ability continue and accretive production that to cash to to meaningful flow and assets continue well We our demonstrate our overall and cash integrate costs. down acquire drive generate and located

acquisition XXXX, the Chisholm we're with extremely since acquisition is Bighorn, the including behind to which expected have five of us not start pleased closed the acquisitions now, With of in the we close pending mid-April and results.

to maintain much margin acquisition high-level levels. of needed us and in robust drilling combined to a positions with production producer inventory lower Our order more a our of scaled, larger being low goals high achieve cost reinvestment activity

We are last. is better bigger into truly that and transforming a company Earthstone built to

identifying we flow, As cash our continuing free to remain XXXX, generating assets, focused sheet substantial balance ahead on integrating look these to and strengthen synergies. we operational

integrating of cash unlock significant into the in As means what existing in these to-date production and capacity. These acreage. Basin with flow free the Delaware our planned, about daily We've now flow rates and the and further Delaware assets this generate expand this and generation us deal Basin, rigs our Delaware running potential mid-February. we from closed wells, operations two closed Basin, excited on cash largest our for are acquisition, the production assets begun already

high the that return opportunity Delaware gross the assets consists over Basin operated drilling to of with a us drilling locations. additional inventory Thanks provide Importantly, for XXX growth.

impact with flow. close will in the Additionally, and series to on cash we where acquisition on low. maturity This decline of Bighorn to in the the about acquisitions low excited are rate assets. mid-April we operating of as assets, in reduce the incremental and operating our Also, expenses identified with anticipate being lease acreage be further track production highly investment have on Bighorn asset relatively accretive terms is areas will both on could largest of additional capital there a synergies given be And this incremental these our this latest overlap we our existing company. and have

assets rate have Bighorn and more per daily the footprint, greatly day acreage all expanded past of our quadrupled end than over XXXX achieved will a approaching XX,XXX BOE included, With the this production year-and-a-half. we should and with

number We flow the us generation expect The well a cash production, only our four-rig acquisitions our uses drilling this generate enable flow shareholder cash further consider including flexibility reduction, as free commodity some us cash of while free gives program, strong may about include to significant additional to that returns. and to of debt for half flow EBITDAX. of prices magnitude our our and reinvesting future

the recent acquisitions that history. two most we've company's our mentioned, announced largest in I are As the

below would the consideration We're be year-end However, leverage that debt-to-EBITDA positioned acquisitions, these targeted this remain and continued our transactions in our XXXX. sheet, won't strength time and jeopardize success the strength. using of with cash of equity our consider and we one of by balance we proud ratio to structuring

and in will criteria, to continue deals touch our more first, and integration the capital our I our on activities a in some hear additional While provide to acquisitions, that efficient the fit dictate of potential opportunities details size near-term, that. high integration we just make drilling but latest moment, our Steve that you'll pursue we our want budget. about on a priority

given Midland basins our we both We run inventory in to strong running plan are this continue drilling pace Delaware cash and As the rigs two rigs the a now continue two and reminder, in Basin in Basin. to flows.

for $XXX million our program, of $XXX a flow. generates operate four-rig We capital XXXX free currently are which substantial to cash allocating million to budget

the continuing experience to and that capital of expect some Our cost are accounts budget for foreseeable also the for future. we pressures

will expect cost of mitigate the but We to team remain real, impacts, are been has job operational our impacts doing these a are manageable. working challenge efficiencies, they that although a with and great inflation

with I'd like over Now Collins operations. to provide that, to turn on it update to an Steve

Steve Collins

due be Thanks, brought net in of we rigs in third feet. operations Robert. factor our our where excited to XXXX XX.X update. to of bring operations we're And Good average drilling program net gross, gross, out, been we been in our turned approximately of XX encouraging, out shape lateral and since a operations Basin of Midland And found our those drilling schedule operated morning, XXXX length XXXX. have online X,XXX In operating XX expect we total two XX.X reservoir the the XX feet. results dynamics, everyone. with We've XXXX, XXXX in can Basin sales quarter where February to Midland online average operated an to came Details lateral operated the about the wells program, X,XXX wells while length wells. of

margins We low our the the very things under for continue increase and field the side manifest fourth My in for goals $X.XX $X drive saw in overall LOE cash itself. LOE operator very for works quarter, downtime reducing being to at order see happy hard cost flow team costs to BOE I'm per of production generation. full-year. the of a to under and and XXXX, On

which encouraging, These with zones, to that over Upton to are moving particularly day. Saloon wells County. Midland in discussed per A the are estimate on average we've $XXX wells wells In the Now signs lateral C some per Wolfcamp pad Wolfcamp feet. gross, very approximately Nickel in wells range while the end online an on up, current with five the Wolfcamp and just brought making B of C activity. length X,XXX for A, drill and B is XX,XXX the wells XX,XXX And at foot Wolfcamp be our lower to cleaning we past. you for BOE of Basin, net and the foot that XXXX still these early wells five average Wolfcamp complete, targeted like

also an Wolfcamp where project early We currently and be Wolfcamp completing of online X,XXX A, feet six the wells of our expected are wells These in have length Wolfcamp to C six area zones. B and gross, lateral Hamman the net in average to we targeted mid-April. process on are

Chisholm there's the field X.X providing focused assets waiting where another all acquired gross and our into net integrating majority consistency hired are staff Additionally or six Midland in wells the drilled operations. operations, We're have Basin of we to newly on the efficiently completed. that very be

pad pad and and just in the two New hold laterals our currently the quarter. in operating early targeting finished XX,XXX wells a of will the a We project Anaconda on two the to foot activity second drilling working Bone the Minis well will with zone. of working within pads Delaware interest, will where foot continue Northern a project March Harkey where we and rigs average we We will well start Spring XX% Mexico. XX% Basin we Chisholm acreage laterals our interest Spring. in these the targeting Xrd Completion hold X,XXX Xrd and In two in the both in average Bone have online in zone expect these middle

rig on are Xrd in zones. County have and our Bone XX% Zones. total closing interest. are X.X rigs One County our the project located Chisholm is online the Both to two-well of wells targeted targeting Xnd a Spring two-well interest. other of working and and the project, we working the late a have Lea drilling and Xst to is we Spring net XX% which located the in in Lea a the Xnd and in January gross, five In returned pad acquisition, And in of now all prior pad Delaware drilling Ram which [ph] pads Bone a

Basin of million capital rigs million bring a provides program the two gross, and a Our Midland wells Basin, expect four-rig XXXX we XXXX. in for of the XX of Delaware program, online rigs continuation total XX.X in to and to the in operated $XXX two net $XXX

some expect in projects capital total X.X non-operated Midland incremental online participate of should an Basin bring to net We $XX million and that also wells.

spending our already budgeted And material these of capital to Bighorn smaller anticipate the the acquisition, we another projects on into of a capital than on acreage, amount are million now full-year baked more we developed project. for our workover workover infrastructure the given moving is acreage Additionally, budget. don't outside assets that and have $XX other land,

forecasting we of annually the and go-forward cost result, growth As XX,XXX same flow public we're production significant low-single-digit as and see out total time, to be currently to well laid coming a development real level free the in a the our a to saw program. expect seeing in as production, currently once many we've side benefit switching we expected activities expect We're completion acreage for to BOE at Bighorn full both as to on remain our and guidance, currently have cash four-rig on the around experiencing. And and as the XXXX. basis, and XX% with a inflationary our And drilling commodity prices per should raw similar see of production costs. day, what materials we increasing peers lifting to field of over in by now service Bighorn we are quarter pressures company prices under increase from

like it companies makes offset continue $X.XX expensive of protected costs supplies this services source we to locked have been increase prices our to and sand as operating less guidance disruptions. sense our both And demand from increases. As and full-year reflects BOE BOE where chain LOE By be tube, things base, long-term To adding are in we expected supply per and that. have and per production than are on which that we position, to pushing to expect $X.XX for XXXX contracts Bighorn frac asset we of of have our higher the legacy higher Chisholm where LOE historically. field to service

way that confident find maintain a around create consolidation, both had own chance we our costs, additional on apply team and we've handle to operations. ways assets. arms and to our our procedures, expertise execution we once operating very our and the assets these disciplined and are a thoughtful of the will both reduce to get value approach However, We

turn learnings sure newly With understand have monitor it gained our apply make acquired I'll throughout will fully closely any assets may the to we Mark. promptly We the and that we process. over that, pace,

Mark Lumpkin

you, Thank Steve.

full-year as As going guidance February is and the also bunch I'm a I our on repeat a or to also did there deck. from our which reminder, investor metrics you operations website. website in not And last numbers earnings of our our quarter, from on can release find XX-K, update XX and our

So M&A around balance activity impacts sheet. sheet begin balance on our let the with and the details me some of

on With of As of debt year-end, had year-end base EBITDAX at borrowing debt-to-EBITDAX borrowings at approximately for we adjusted credit we year the million facility of quarter $XXX $XX on XXXX, was quarter, million and our of Based end, had $XXX our a million fourth $XXX undrawn our X.Xx. million. of capacity.

borrowing to acquisition, of million did the of were borrowing March give us As from and we of elected capacity debt as post-Chisholm, our upon we you idea we fund commitments of undrawn related million the to about mid-February, we the Chisholm just X, And Bighorn cash, million $X to and an had million base cash. approximately closing guys $XXX borrow And the $XXX stand, outstanding of in in announced $XX leaving where $XXX acquisition. $XXX increased million deposit. of million with to

that So as will total To the we is lower reiterate Bighorn debt-to-EBITDA of facility our debt $X.XXX or commitments optimistic $XXX by bring March an million the what Robert touched to one base commitments $XXX we'll targeted times the base X. which acquisition, earlier, in of credit and commitments additional of borrowing elected borrowing closing on secured that our XXXX. in billion. outstanding on achieve reflected and increase the at our to million we're the Further,

leverage significant and us Our while equity incremental acquisitions debt dilution. the mix on of using to make minimizing ability impact to add equity also and has minimizing a enabled scale

Our million fourth LOE BOE increase our this Steve us free lower a driven cash fourth as $XX basis $XX.X to new the also flow free cash of quarter $XXX costs. quarterly which and million on flow and flow quarter-over-quarter mentioned and in high number strength increase and to in brought to added both with the by for just company, million we expect Bighorn. in EBITDAX full-year XX% prices, was cash control a G&A but per the our for of of additions not We free XXXX of quarter, substantially the ability commodity Chisholm

flow XXXX addition cash Chisholm the we we expect With Bighorn free of to and assets, in XXXX. a what pending the the saw of be assets in multiple

for As make free short-term, we guidance in a XX% granular high-level that flow moving strong in production to for but to to of all cash deck. of flow. expect again, expect gas or to at to more reported the full a approximately day close In utilize repayment, April. timing the our break of what of about result, the half found acquisitions, Bighorn XX% as future to with out the the delever about our quarter, are position be clear XX,XXX in Bighorn contribution expect And expectations for That consider day the cut. Chisholm the BOE half the cash Chisholm from between be we'll oil a down the the we XX,XXX BOE and year, quarter a and second to half between quarter cut can best both uses day year. somewhere oil quarter, with further and to Chisholm expect Chisholm full rest in free detailed XX,XXX a consider related hit first quarter February a a further, we XX XX% return second liquids. of finally When But barrels production XX%. which of In and oil shareholder with approximately And a just be our we've an until we summary came to per and the we able a per XX,XXX about of a was that, From XX,XXX release in production first should of oil, of we did Bighorn a then and production XXXX per we for to includes we program. our closing be step looking on BOE up and be day, none the little standpoint, laid guidance will investor above get XX,XXX equivalent the XX% which with our our gas natural quarter we X,XXX second full-year, the expect somewhere with and that fourth of the as the and per for results closing to XX% cut. don't parts and oil produce natural we Bighorn the debt

gas oil, build fourth XX% and than guidance. of were lower day and also midpoint the of that full-year $X.X XX% to equates came somewhere XX,XXX production, a Total NGLs. which million production, bit a XXXX comprised barrels a million between little on respectively, cash of of natural XX% about basis production So full-year XX,XXX $XX.X a for and up our and barrels G&A quarter in day the

For $XX XXXX, XX% midpoint approximately guidance, to $XX G&A unit a of our compared a per G&A cost on which BOE XXXX's the implies we're decrease $X.XX which BOE guiding of would to per full-year based $X.XX million cash per cash to a of of cash million, basis G&A. on be

On per coming quarter about exceptionally mentioned, the lower the in had this of than LOE BOE. LOE resulted low as $X.XX per per midpoint fourth And of front, in an about with BOE we of guidance. achieving $X.XX LOE XX% full-year BOE Steve cost

guidance $X.XX For is levels per LOE the higher of the to XXXX as of BOE for in Steve and range with mentioned. LOE, reflecting assets our $X.XX acquired

acquisition pro timing holding includes course, the about reinvestment Bighorn the a expenditure mid-April. largely of more the acquisitions. all XXXX ahead And in while and provides look of total forma generation our year flat pro standpoint, significant than of for of a to EBITDAX assumed not for capital forma production Bighorn we much a free cash from that As we're this the rate flow half targeting throughout

to On we a a over both were hedged for did bit in the plan last oil than gas for hedging XXXX for Chisholm as bit front, on call, the our Pro acquisitions been have hedged past. onward. Bighorn our has less forma from we XX% in and be also the and May

cash from it and increase relates in assets bit the what acquisition, the is and the signing. closing particular, date I at acquisition, a and and pending closing we're will closing expect Bighorn This the over $XXX of effectively the of those the on back versus the targeting. recent effective the turn beyond it that, the we that have With lowers date to in comments. assumed unhedged and be paid production assuming price will a closing respective the Chisholm reduction date benefit over As at significant really million, Robert that mid-April closing in had Bighorn we commodity prices through we to to from purchase for

Robert Anderson

Thanks Mark.

guidance all deliver a XXXX, As our from to We you well for transformative cash results, better a flow best our was tell can generate Earthstone. shareholder in position operations, year free as But strategic we significant to believe come. XXXX XXXX and as for substantial our the yet optimize truly enter is value.

of XXX,XXX today billion in benefit Our with to footprint by team's of and our confidence developed to us prioritize strip $X.X strength the attractively complete as illustrating prices, our core acquisitions These commodity have PV-XX have sheet. a our the Commitment value acquisitions. we we proved beliefs all validates over shareholder And of heard, increase to given of we an of you XXXX just $X.X with past change closed and or demonstrates pricing. X put and total acquisitions with where or million technical not the these expanded while ability NYMEX to reserves six at potential. entity. barrels transactions, bringing will to billion, of all in equity it's have value which strategy, significant acres, approximately March market ability consider equivalent as value the sit of execution XXX recent much our acquisitions conditions prioritizing our oil microscope resiliency we our strategy component consideration and as built When meaningful to potential total acquisitions using larger business proved shows else. our we operate This and a the successful the under done have above a we've announced and that year-and-a-half, in are you using remain continually as get priced the regardless upside balance our in long-term integration financial also a sellers

in However, our we'll of an balance complementary acquisition we will that the sheet. and our to criteria, continue allow to accretive also focus and maintain on assets consider us strength fit scale manner, building

in We And maximize one responsibly people. have will continue put best per the every finally, and possible operate each and position value of will every community we in to Earthstone area or where share we assets our for stakeholders. to

operator, that a to with we'd take be questions. Now few glad

Operator

you. Thank

We session. will Instructions]. be conducting a question-and-answer now [Operator

question first with the comes Our Dingmann Please proceed with Truist. line from Neal of your questions.

Neal Dingmann

or morning, fantastic as flow Good job question have cash of past, good done now up a the in versus bit you've that mentioned great scale free well having but cash you a that paying free scaling flow the know only profile obviously not a I doing certainly have using Robert, all. so team that free have How guys the still and or you about it dividend now at Certainly a near-term about flow? cash do thoughts more it. Mark, cash scale; today the think and and flow. for the look the you the sit I'm just you down buyback. wondering, free either

Robert Anderson

some of paying spend to are at alternatives but free not or a good opportunities get our flow answer debt, absolute maybe start an got I'd about our well just what besides other considering shareholder We've have question, that couple cash under that's close. of there's execution other thinking as and to And looking quarters yet. then like sort, to Neal. belt, flow. also for cash just returns a Yes, Bighorn down

couple all we of just and environment those once. continue of look of all couple of this months, stuff a quarters on the see the Bighorn And close at after how So we'll we operating year table. when get of is a are up throughout the after

Neal Dingmann

look a the folks straight, I incredibly include mean think shares; of your And issue. are that I does again an lot who float I think but obviously

is -- know don't question is, that option? of is I for So or an Mark, that you a part

Robert Anderson

you're think Of buying what I asking, back Neal. is shares

Neal Dingmann

that's Yes, right. That's right. right. That's

Robert Anderson

us, option. don't do there at alternatives an mean is to we consider head is program to It and I no have sitting anything, gun we for a are as all there point either out shareholder down some consider that road. the way our we'll return

Neal Dingmann

Okay.

did. M&A the where I asked where last versus So that's get you there out Do on is shares strip. value run you I our I'm going you your how method Mark deals you question I'm your starting kind more in is was are another on this And kind are just your market? a more deals, trading? of prices today deals looking guess those just guess way now your on that see just glad one and you're how expensive when the curious bit how is at I attractive there's your over thoughts think you versus given best look the you sure seeing get shares asset what deals to quite about in deal I'm shares that, of

Robert Anderson

basically there's a Yes, disconnect. huge

we and XXXX. that least buying going way lot some curve need the or about don't I our happen. nobody's can being $XXX probably we strip isn't maybe Nobody's price, about transactions current based, when you at buying like other back the A&D a stock this, that's tough value or use M&A say cautious to price to than would As stability. do of near-term transactions the in on there's know be or the really a very current price We'll I definitely imagine, the appreciated. think and that right. at environment into it's selling in is we look for strip for something in

easier. take So the a bit market to some to stability it's make the A&D in market little going

Operator

Thank you.

question Jeffrey next from with is coming Global Partners. Please the questions. your line Our Alliance with proceed Campbell of

Jeffrey Campbell

confluence acquisitions. to in Is events of future oil what said investment flurry capital gating high temptation Robert, items ask recent kind there the any the just and increase the current have commodity and successful might picking any volatility, Good congratulations that world on very prices. you this on up morning of want about to to subject to identify? you of

Robert Anderson

were all this considering talk the I going doing to something time? are price, that you we ask bunch hedges at a of Good. thought about, which about we now

Jeffrey Campbell

No.

Robert Anderson

need activity the wise, we'll think before couple comfortable won't we really Delaware we can convinced that on I which we of Activity execution a I'm make walking, of again get quarters run yes, asset, that all there. wise, start that sure we're an that Not of before today. ramp some time. there's I issue. just I activities issues We a you as just flawless want ramp be as up quarters But need can any there, get. we production, up mean, have of to couple

under of the balance the or prices, little on And increase side, our improvement Midland a prices, in the focused end the the happens getting with oil On we're sheet sooner. ratio by we and could. that one maybe But think leverage I again, in our year.

think we about it. could so And

in to the in at on So not going for we're it is near-term But the that accelerating sure. some things terms we're activity. pull trigger looking of

Jeffrey Campbell

year Midland a gain several Delaware what with we operations over two? expect familiarity this could quarters Okay, illustrate question attract you as I this the of anyway. already broadly let more Slide And that very On Or sort Basin, to alluded or think weighted Basin capital is a helpful. that's me you've is to in this, significantly ask capital there? XX, but the or you should the program next

Robert Anderson

longer more activity portion we're this terms on we wouldn't Maybe the little we definitely more activity good a the capital programs bigger had to this northern drilling Delaware but Rob is in federal you spend bit surprised get little driving morning there in be what you, there. in some have we or to I in a of familiarity, a have pads know, today. that it's actually year acreage, And have a bit Basin, sure. you more great, there, cents, like could with conversation of our one I've guys place plan economics. after more it out than dollar takes as It's capital. said, planning for not spend we maybe but and great

Jeffrey Campbell

this thinking the category, too slide. on go hard Then great. Okay, but into could same the

You illustrate be I a capital this rig plant attracting Irion XXXX. some in might if just County. suggested in wondered

Robert Anderson

It is. Wolfcamp. five-well and the turn down pad We'll now we're right look drilling those a actually good. in see two economics there intervals It's different out, how drilling

stay we like and so it's that's move XXXX we to another there from look and going data that said, the back towards pad now we of it a the year, I five-well drill, rig of there down then move wells and a could Our there, with offset own why drill won't end good, put we'll pad. out for whole

Jeffrey Campbell

great. Okay,

one, am last so bit to to return little differently. I approach capital shareholders a the going And to ask, I'll

you insight. a can a color you think special what the repurchases, as dividend, of dividend, or merits on share provide that I helpful some relative would see If dedicated be or

Robert Anderson

investors I've And let Okay. members. me lowest other chime How probably we're let and just then say shareholders two-thirds first, board doing by alternative, really the some good Mark been the Well, about and one I'll all because because the in talking. here, held that? the thing buyback is two,

Mark Lumpkin

of, the things Robert integration ton returns, hey, really questions Bighorn versus to get? our things are come even we Those are do analysis as going about a if not you you're ground naturally go going if that quarter belts, terms other, now. other between will pretty just operating on We point will Chisholm where year. one size a a We terms of opinion way done. got where was I right as thinking in real don't that. any But really getting quickly. shareholder any think dividend do about option at later we've we're to on strong close, great dividend, say, so we're Getting versus or mentioned, the in nose one And think kind two Yes. what of the on in or special getting cetera. have we Jeff, doing they completely the regular if et

Jeffrey Campbell

pretty And fair. that's Well, hard what presently. great. complain you're Okay, about it's doing to

knitting. your to So you. stick Thank

Mark Lumpkin

Jeff. you, Thank

Robert Anderson

Thanks, Jeff.

Operator

you. Thank

Hanold RBC. Scott with with from Please comes your question proceed next of Our questions. line the

Scott Hanold

program the you Yes. growth you the you few big guys mid about strategy, into what develop single-digit the picture you for all Hey years. pace think want is? optimal that to mentioned strategy next to all think And what sort rate of the over like is of gets longer-term long-term that kind you you do as deferred

Robert Anderson

future, maybe It's one bit and with going of probably if spend somewhere, we the sit, below that, But Scott, about we're like out but what's there, have New rigs four and happening today, the things I'm leverage in the of we're just low-single-digit single-digits, Mexico, really out excited and to viewing on capital there results, talked depending getting and work growth. how we've more off -- higher and for where then out kind the it's lot all already we about. cash a our foreseeable throwing a running little things growth, in

Mark Lumpkin

bit to for the get a points, there's to rig oil And the very decision about we're steps acquisitions us past Scott, to a significant when feel done run hitting screen do on on static, in a we certainly but think it's things? here we or dropping we anything forward that's things we when don't around. to about do of the the quo, things moving digest When year-and-a-half. than like, of XX, made a rig what a it's And or a absolutely. is different in still front. terms some acquisition our think XXX models, on hitting adding when assuming Are acquisitions. Absolutely. But rig look status pausing going ton sort not we've we it's further

things, So three flag the what the two stick bit go next ground to we of think about really our these even us but little in thinking all just or years a premature it's like. we're for looks

Scott Hanold

right for now bigger let biggest the PDP the Midland opportunity price Okay. issue want PDP? market could just is way. the get to ask right now, current in -- now, parts what at between And a then is strip and inventory or well it there paid strip Delaware you more little than you this the a color plus the give like that like the of more is E&D Do bid you're kind do does ask the spread set find it just me opportunities, sound on bit and question you

Robert Anderson

a with question to loaded of Scott. a that's lot it, Yes, pieces

than it's Basin. things that opportunities less So, on have my Basin; consolidated and board view are in both lot a is our of that sitting Midland number consider Delaware there they the are a But at of look that we opportunities. as

sort that not suspect And With are won't prices for activity month say bid activities where and December it's the there's we're much on flow out or kind A&D working out of deals because ask, to things. accelerating, deal stalled. -- thought would slow volatility I stalled I be of come that there's as are. then in the we've quarter the of that and the last slowing kind as sure. when But seen as, first in it it's I advance of is is the down

much is price. But in to we current a you're you a And creates than to near-term this isn't leaning paying difficulty buyer put don't just, a inventory. that A&D becomes at that going that universe think on that mind going and problem much difficult strip the $XXX of do deck just I and for when market. so got PDP lower then price volatility a

Scott Hanold

the three in comment just on OFS that's the And how sense. to quarter, you I'm you just to months? that last XX% of curious four makes you're remind in say I then seeing last quickly, the budget? us Can think what's inflation, changed Okay, So XX%. like, made kind

Mark Lumpkin

Yes, there's baked further into definitely the inflation budget. some

was foot under into that Steve higher XXXX just ago, at completed Rob capital or a what off look you you side. a sort were just we've side, $XXX from finished put per of just a If now days on Midland bit XX the absolutely They're Midland XXX. from than something ago. there mentioned, they can we XX up, back side, days or

a And do no prices there. confident have in I sort feel XX% way inflation of great they there's got baked XX%, as we are, it's to throughout we're built So about in. the mean more with certainly like little in. to we some bit year baked bookings, but

Operator

you. Thank

with coming question Charles from the Our your questions. next Rice. line Please with of Meade Johnson proceed is

Charles Meade

on availability basin this continuously, on fleets either of environment? inflation guys little frac question on about because so one it how clear question service availability ask your not, appreciate service perhaps I on belated also thinking and wanted particularly, for the being as is, And bit But a that. for a and really looks I to me. in are you you the concerned you I'm I on shy are running thank rig commentary side of

is be we something all? you just about at should worried up that So what's what or about worry

Robert Anderson

on a And I so don't answer you, it ancillary worry got there. our all Steve's relationship with services But it. probably completely. about here, tell pumper. pressure our we've he more side long can the frac I'll

going that our deviate history from the sort obviously, they the on year know of year know And So Basin for Delaware a plan. is don't have to not same were we that. too and they schedule, assets, we're they but for then company. plan the record, much in track the that locked frac and using we're And what and large again, on

the sand Steve, keeps So doesn't you that keep of it, night. up up side at other me night? at what than

Steve Collins

about, that. us worry can something let is about Well, to worry you but it

first. that do like want that relationships be to to what and we I out think Robert's I business our service create is talked mean and culture companies makes come hope going these how we're these there okay. And to I we us about all

it out been go Midland relationships So far, New need But I create in to that's Basin side. on the know services. struggling and people here We still is are you every pressure Mexico. day those get and pumping to the case.

I keep being far So to And expect okay. okay. been we've us

Charles Meade

prepared just but it helpful because leave inside guys. this I'll goes is Steve. you your perhaps you thought to then operation, That for your And was comments, back to

Wolfcamp in drilling Basin, I'm Basin how mentioned plan in You figure Midland the Midland it prominently and overall how the in in the the that is curious, on your prominent just XXXX does side? C inventory

Steve Collins

We'll Upton by well we it's sea And to localized in This the that probably drill was years that very famous get to isn't that wells a drilled one or is It's you area; works several in a go back fantastic. geologic in longer low phenomenon was very name. for as area. County XXXX us. really more -- that same sea two one operator back Reagan in well an well no a County that

is not wells third Upton a drilled little different, our so. Reagan piece wells a wells in a a it's but And in different some in the that This big like the and geologically. in bit It's other inventory, Reagan it, bit sea our County Our not of aren't we've County are of inventory. overall little we even participated or County same.

Scott Hanold

for. it. Got That's you. the Thank I'm looking detail

Operator

Thank you.

from with is the question next Subash coming proceed with Chandra Benchmark. Our Please of your question. line

Subash Chandra

you. thank Yes,

on one borrowing First is utilization the for base forma pro Bighorn.

with help trying lower acquisition a think preferred we close perspective. wrap on will that, you billion peak my from around based actual cash the convertible $X.XXX and be head -- and preferred do to then the With get cost -- I if can the on How borrowings? that to the you timing, mentioned

Mark Lumpkin

Sure. Maybe let me hit the convertible preferred first.

$XXX approval standpoint to get and the event the Class a Ultimately, A a and they're that That's shares, did in converted And equity. transaction. and Cap that's NYSE cash within goes of Post around of that's that million Bighorn sort timing that shareholder So that vote. pipe Oak. we should putting sequence requires into

There it's to not anything We have consider happen. the to hand, cause real something vote would formally that happen, already lawyer but could practical is but risk. in would has some that that you still imagine not any that

that A that they if until So Class effectively helps. get in sometime common summer is won't the but shares, converted probably

purchase We need got $X.XXX Total right we million, the basically a base months billion. the we've million drawn. kind on roughly cash about of to just flow. over on maybe versus billion, $XXX the free adjustment, price reduce and $XXX the we're about Bighorn, in be is paid our think going closed think, April. we of that's $X of that's so deposit. closing liquidity, the of That includes billion borrowing speaking, X.X $X.XXX higher, tad which drawn We'll And at clearly On high. now, day a having RBL Bighorn so cash Bighorn,

wood There's have and RBL makes probably dropping yield. looking lesser But more areas point, on some to out a a going some monitoring issue is an is to the that. at it the drawn a keep that on the to option And sense And lot are could amount We're that RBL. markets. other term high We debt we currently. where of radar. the at

Subash Chandra

it. Got

Okay. Excellent.

was the The interpretation? the second maybe to to seems report, put should Or were by sort strong some were was in a fresh so exceeded performance I there pre-book, that It spacing revisions there then context? that elements but seems how on it of negative Is that from but reserve discoveries. correct there is extension provisions me -- the bookings.

Robert Anderson

and You of -- all got Subash. it, a drill into type they and on curve. don't And are not spacing areas got, perform drilling second that you going then in offset got you and is mean, area wells times a I which lot different go data we based in curve it's area it, the and what it's type an that exactly or other wells. you're by wells you into call and wells an child like you've

performed areas, And ads it areas, in is some it sea nice we enhancement a that new then other went some got up. surprise. in and The in could some we've well. make. not areas, in It's some went So down

Subash Chandra

it case? production level, just were asked way as of And Okay. do rigs. are program a production a Got an previously, of at I than is you this the might door, in Do capital think of a a activity level optimal that optimal? the And that's number optimal be, optimal working stuff higher all it. think that think think with whatever being kind the which questions and where an is that six-rig you also level budgeting world that four like of coming finally, follow-up on activity expressed an -- and we the revenues you to number ease there we of there's optimal

Robert Anderson

If mentioned, optimize, day? No, in turn kind tried not inheriting little I'm whistles acquisition. keep not trying we're not on flat own two does -- at we a of to model Chisholm It's quo, what Are our like? just because -- production. rigs XX,XXX rigs. have our two BOE bit we a would And sure what really. production what number. We of and to look We we a for we've this bells we're keep growth like a, got the status production

one. New couple is buy, said, our figure could already of of assuming a out we give much and on what what optimum we've in how else, anything who position us we quarters we we'll based buy but don't there knows activity of working now. Mexico here that nature. have else the increase through to plan. takes I reservoir little and and we're best we have today of bit we're sitting lead working But not things a time, that -- without development it like So It's mean, definitely a not that right then plan, and acreage and

Subash Chandra

you okay, you're Do of is know a good of base a this ask not you're operations, think at are a the you that a But way. -- way? guys look this So And you XXX,XXX number return-driven, differently is kind do of acquisitions if steady-state at world the that day. day, I like, I there could if Okay. right? just at you XXX,XXX looking which production world may

Robert Anderson

we acres to XXX,XXX have if hit we And as got discount value. an and inventory create we've can operate there out a to Earthstone a assets bigger years buy scaled get a than Irion County stakeholder. to think nice and opportunities we I to all say, got of at BOE benefit day. look I in I we at can No. and got don't put or cheaper XX a have business them or of target okay, XXX,XXX

those I your base. asset outputs all of are think

Operator

Thank you. [Operator Instructions].

coming is question. with Robertson Tower line next Our Research. the Water of Please with Jeff question your from proceed

Jeff Robertson

over you Thank you can the also maybe little or a talk of year initiatives Chisholm, where but Can LOEs XXXX? maybe all you both Bighorn bit the LOE think about this on heading on into you. lower course

Robert Anderson

you, like sounds It Steve.

Steve Collins

they're the looking you in spending. what that process of and tell that this out, we're can but I at Well, figuring learning

probably the XX%, For than program example, run XX% we Bighorn is Midland the higher Basin. in chemical what

lot we could adapt of done, What's what needs increase mechanical. some and that figure out to go production, there. each is help they're which could repaired we'll So of what be BOE LOE actually been category be dissect on principles and doing A going side. our and per from can maybe to the it

figure we it. what doing taking -- got a we've but I they're what incorporating The out, lot and yes, best. going to works to be know that's it's So think

Mark Lumpkin

completed on higher. production just one assets, Hey, of drilling fall from the I like year. picture And Jeff, not bunch are been DUCs, than the Neither a last a guess, not Bighorn Basin, there's the other they've in if costs Delaware some flush some on I can going think get Steve those add, team standpoint, a LOE having the or that, just because big to of kind And is. like what to quarter our pre-acquisition Steve this to digested. us are us a execute your But maybe put two already record. have BOE haven't even on go give sounds per is just is time, to saying too, hey, to I Basin, figure those are down the down. But goal give these time is yet but just get that and take repeat can of little what is the certainly, and is a the but to but going figure very think got possible. And looking closed do to it's in But the to ways some ideas, some got you've out time you still hands, to really exactly reasonable. much in on We what can out out until to have assets it's range of you how bit Delaware you've lower things. Bighorn absolutely we a is hard we Steve's goal drive go that not of those beat range. assets, which things some

Steve Collins

some to I Earthstone we I'll leases. next Bighorn add, out there's leases synergies just mean, have literally also there. legacy the geography and right

incorporating go routes to lease trip not lease. one be in going to consolidating we'll to and another So that and over we're

there's that, a got think to there. but efficiencies gain figure I going lot we've So to some out on be

Jeff Robertson

can months about So to that's November and XXXX? do you a as those better assets for owned have what think start really four or discussion to five for in you've

Steve Collins

I should what can and then. be do I I'll won't guessing Yes. can't. I what -- I by know

Jeff Robertson

question one just about rig activity. you've Thanks. And since talked

Earthstone's comfortably really current is run Given rigs stressing size, six four right run five, number? the the you could team? operations without Could you

Robert Anderson

up team four to is the sort I think to when Jeff, more start than there's capability, rigs. us. we and Well, a can it's run ago, ability whether had strides five get grow for we're next operations bigger more to year even you ultimately, the integrated the or organization people the we're get a set good some manage it to to ago. have that. to as And to much We've just But the have of for than and and place these But stress expansion. to run six, going even making do staff we we right-sized, more we be company years two our continue able now a and ready

and a we'll then pick So bit, some then let's for close and activity Bighorn bet. walk I'll little up

Operator

would like at questions call I the time. further Anderson Robert any for this no turn are There back you. to closing comments. to Thank over

Robert Anderson

and We Thanks, interest to Bye. appreciate talk questions, you the everybody. soon. and your we'll again

Operator

conclude your This does appreciate today's participation. teleconference. We

day. lines this disconnect the your may at your of time. You rest Enjoy

Earthstone Energy (ESTE) 10 Mar 222021 Q4 Earnings call transcript