Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to Earthstone Energy's conference call. .

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

I'll now turn the call over to Clay Jeansonne, Director of Investor Relations. Please go ahead.

Clay Jeansonne

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

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

the December documents in in management and website, Form announcement. section vary certain expectations, XX, underlying more can ended fourth reasonable assumptions year full should prove risks, quarter year our will or to or assumptions uncertainties give based XXXX, statements XX-K These and may can described they materially. they the be that incorrect, and believes of correct. XXXX earnings these our assurances materialize results these www.earthstoneenergy.com. are of the These Although Should on are prove one found risks on for annual statements be report no subject Investors as to actual

non-GAAP non-GAAP directly or time only This any under announcement to references Reconciliation recorded may longer in our speaks Therefore, Also, certain conference issued most the measures. the this to accurate call any earnings yesterday. today. these also reading. call transcript comparable are no of please measures note contained at X, financial information of GAAP includes measure time-sensitive March listening on information replay as be financial XXXX. of

we'll CFO, then remarks followed Today's Collins, call and will begin some our Lumpkin, with Anderson, from our from Robert. Steve by our and comments and CEO, closing from President Robert COO, comments Mark have

the call over turn to I'll Robert.

Robert Anderson

via the to appreciate all time listen the morning, join call I everyone. Clay, or good you and Thanks, web. taking

importance on scale management prior as to to position a and significant the the team few we years, recognize Earthstone's the COVID, grow business Over upon Permian went been evaluating in even know, opportunities prudently. board operator the lowest path a to strategically company mission in have United basin the and of the a all breakeven you our down strategic identifying, and States. and most executing We prolific onshore as targeted and Basin, past of

past Our year, perseverance. outstanding $X success employees' directly billion this reflects and work in over invested we during where these efforts, our including hard

about we opportunities allow growing our and also see shareholders' long-term I'm that us many benefit. immediate to for business excited will our continue the

clear, targeting a particular are However, focused are but production creating value. we rather be level, to or not on size additional we

years of proud entire the exceptionally team we've will into I'm have company have saw and XXXX us responsible over and we assembled, we few built for the last lead the the been success who in future. the

entity, achieved achieved was -- with the in has drilling levels, over Our EBITDAX future record XXXX, investment during the a of our clearly company includes success cash company quarter our team The million heights. of throughout performed team focused fourth in outperformed but an repositioned XX than adjusted $XXX shareholders full free a Permian operating substantial only and generation asset and flow. locations record our in and This new expectations and with much a has consolidation amazing. year XXXX production have the solid of efforts provided years Not materially base larger underpinned more Basin. footprint by a

continues these quarter assets substantial to the Earthstone we acquirer proven put up are great quarter. demonstrate performance with ability to and after that a integrate metrics

a was As I our mentioned, XXXX transformational for company. year

those These business. that $X all we of and have assets With our billion, into X X acquisitions delivered have XXX successfully high-quality, acquisitions integrated I'm to more the of pleased than high-return closing totaling over significant locations. report

inventory in acquired clearly are productivity of apparent levels. fourth oil this recently quarter our and production quality The

approximately that is quarter XXX% was a The will performance. of significant of oil several X%. quarter barrels increase Steve our quarter Our supported wells oil production by wells production outperformance. driven the of to per our XXX,XXX of exceeded our record-setting component midpoint range day topped an fourth fourth has The highlight strong in day guidance by of XXXX, oil fourth increased and XX,XXX that new which production strong which our quarterly year-over-year. of level number per almost equivalent barrels came the online drove

pricing As a development SEC with current X.X we value strategic our developed result equivalent more than about enterprise alone proved of of targeted is stands increased increase component approximate XX%. of valued our billion, activities billion acquisitions $X proved $X.X those times on XXX about million an reserves. barrels of Reserves strip The $X.X value which more proved billion. developed proved a than saw of component oil and reserves guidelines, our and acreage, at at existing in about year-over-year at under the to is

Warburg asset addition of by to about shareholders share Pincus, to early driving million additional Class stock X%. our always repurchase value In per we returned from from A million of count approximately base, we our create X our opportunities $XX our October, through proactive common reducing for value look In the shares to share.

The continued investment. while they private remaining have to consolidation maximize They own value our the on continue in strategy. will investors to the focus support equity Earthstone seeking shares to of their

they now to done Warburg them And continuing in with shareholder future focused on current grow to X the us has investment we manage see value sales our are NCAP, shareholder, on been manner. same expect too in has As with further. their separate largest as Earthstone, prudent previously, us occasions.

focus Page all proved production XXX%, reserve XXXX, increased Our basis per earnings creating on Since have on is our of share value presentation. our XXX% X clearly share a of and and we on debt-adjusted respectively. exhibited for per shareholders by growth

the XXXX, considerable been balance debt to lower debt-to-EBITDAX top Earthstone entered punch? year. to at the $X a we reduced utilization our ending last on a of level a in in priority with strength on down and the will focus how's at pay over a Growth amount results balance ratio for management debt a cash remain and billion quarter of of our X-X fund using flow conservative which acquisitions leverage, free despite year the and of leverage sheet to continue our us has a finally, annualized And sheet than that

in Midland at X-rig on the a Basin approximately for an million, our rigs investment and a guidance, X part XXXX with call and deliver the plans additional Looking plans day reporting in our first during active we focusing of Previously properties. approximately both to year rigs program guidance. X $XXX for BOE XXX,XXX of our of of area Stateline the for production XXXX, Basin, ahead, the call midpoint Delaware expect our

on I'd call over now the to an to With to all that, provide like update operations. turn Steve

Steven Collins

morning, Good Robert. everyone. Thanks,

outstanding spending a and a quarter, total net gross the quarter fourth on for was XX XX wells, gross quarter of had The total another group. we a net XX.X put wells. operations XX and operated and of We busy production

brought operations on online our -- the some mentioned, really wells Robert some during brought great quarter. As team

on of We Page presentation few available have shown the updated which wells these and is XX our website. want locations corporate pads. a to on results highlight I our of those of

project and results in peak Midland In rate East expect were XXXX. of of our early County, is day Reagan of acreage, production area October, Reagan IPXX highlights with online The Basin, County Central had X,XXX the in The project XX% this in lengths approximately Texas, lateral XX,XXX the well, wells Wolfcamp B and drilled average similar oil. put the located wells stream TSRH per strength per feet. and was zones. around producing was X-well an A the These in and from BOE we

and Chisholm We Bone X,XXX is averaged Mexico. production completed X,XXX X Spring XX-X well the Northern from in The on for Lea the days The second wells pad XX% acreage per New our first Delaware targeted first Jade Fed acquired with in Basin averaging intervals was day the laterals XX BOE the stream and oil. County, feet.

on County, average BOE XX% from high Chisholm. had peak length of New Mexico, of Lea another Squeeze note day, per feet. average strong started was considering a The ST oil. acquired the are pad an Com, have which with results, IPXX an X,XXX X-well X,XXX lateral year The These very out X approximately wells especially pad also

Fed that line We be XXXH. the like pad we're New cross Com the plan And state Mexico to now. to year will will and we This of first X finally, one I'd this drilling spud El highlight wells recently Texas. Campeon the drill that of

these will be to wells, from which XX,XXX ownership in will X,XXX drilled feet. have with laterals significant We

this we look is and As the known most the forward having you for know, of some rock late to country, in area in seeing results quarter. of best the third the

land I team a this the their want in to thank complex permit. dedication multistate and to work process navigating for obtain hard

on will base. we past, be our recently the in to reducing existing asset assets across costs our laser-focused acquired continue As on

focus systems Given personnel we to our production low-cost with run to as on synergies will BOE lower increase as operational times. continue and overall LOE improving per mindset, well

had the roughly per high our [indiscernible] sold $XX Given on wells, that XXX about our for a per vertical in production. $XX.XX and and focus we BOE quarter. approximately of cost million transaction cost, XXX day continuous of asset only closed fourth BOE operating

I efforts to the operational begin costs, tireless expanded run times capital increase efficiency for to their continue on opportunities improve execute footprint thank and Finally, to as to our budget. we reduce operations team XXXX want and implement capital our

Mark. I'll over it that, turn With to

Mark Lumpkin

will our additional but results. more highlights, you breakdown I to of also XX-K focus Steve. some earnings a I'll release details meaningful comments for today providing on and my key metrics you, our and Thank refer detailed on

$XXX company facility million continued flow share. credit fourth Adjusted quarter income was free fourth the approximately Starting quarter. was million, $XXX our for EBITDAX free free the with cash flow year utilize million the per paying a $XXX down income to was million record. $XXX cash fourth net to for which statement. approximately We've cash $XXX $X.XX the and or repay bringing quarter flow was Adjusted in the debt, million, for to

had we $X.X is a As now debt approximately XX, down under which bit of was below total outstanding a million December And facility, the that. at that $XXX time credit bit XXXX, billion. under

plan to Robert was for the year-end which fourth debt of XXXX. annualized ahead EBITDAX Our mentioned, our is ratio from as and down at X.Xx X.Xx, quarter, adjusted

free per approximately of to Looking of pleased of oil XX% ahead, XX% range oil X% comprised the gas midpoint liquids. we was with of guidance X% natural cash production natural to surpass being by on our production to our which XX% the oil, and day, XXX,XXX fourth quarter nearly debt to and earmarked midpoint by repayments. continue equivalent that are flow for gas From achieving facility barrels a reduce plan we standpoint, utilize credit

mentioned, strong some the have day. results Robert of BOE the in throughout with in last the at cadence through production year the that to starting XXXX expect range, be to production we year. From out from over standpoint year, quarter of guided a really we fourth quarter carrying XX,XXX momentum XXX,XXX first per half the As our upper

we expect a on a the will production year quarter the production a expect based of We quarter year completion second second of half And quarter second that production bit second lowest of the the quarter. in in step timing. our lower the levels more on be with after normalizing down

expenditures. We with Moving on which invested $XXX to our the million line capital guidance range. in fourth in was quarter,

our expect with For of over to $XXX to XXXX, D&C million invest total. capital capital million representing we of $XXX the XX%

We expenditures distributed fairly be expect year. to D&C evenly the our capital throughout

However, CapEx more we bit provide a program non-D&C with is $XX more million in Most projects in a for of to half. be XX% in will $XX million that years. in to first in later XXXX infrastructure of future the CapEx to the in and this be efficient about front-half total expect invested expected weighted related that XXXX to

performance G&A discuss in in our reward of to the XXXX. guidance briefly Cash a million general due head bonuses expenses. higher intended increase quarter let's to and fourth an higher and than count for cash and employees typical Next, than $XX slightly administrative exceptional results was an for

the expense onetime over XXX% XXXX X-year performance vesting in that in Stock-based related the chunk compensation $XX to the issued over amount a bringing of -- stock quarter were half for that year the fourth to over million. fourth it, year of of based units that of A period. was to of impact on in the quarter, January for -- total that $XX million, hit originally performance payout was the good max

in forward, around somewhere of movement expense quarter, fourth expect Going price. but quarterly we what our compensation more the level stock-based by we a stock does of it normalized remain reported half in impacted

the for On front, oil are of currently and about for midpoint based hedged gas we guidance. the our on XX% and XXXX hedging

pricing addition some Our in that not downside would us utilization provide puts highlight in you to with upside but the collars can WAHA of potential posted the basis, significant well. XXXX widening hedge hedged earnings our swaps to we differentials I of which XXXX. only and limits website. find And updated impact are protection, in on as presentation heavily and provides also the also position our both gas of the we exposure

originally mid-February, earnings well. XXXX but information this which For with being released was our on reaffirmed presentation the please guidance, more as detailed see release, in

Robert With that, I'll comments. turn it for back to closing

Robert Anderson

Mark. Thanks,

ahead, our look our credit substantial free Looking will believe to for deploy like facility. will on we increase creating outstanding continue Mark shareholder cash in debt time, same will also the on accretive scale and matters reducing our to we business, size, mentioned, our that continue value. flow, while the at additional assets we But

over attractive closing, to one of years, In future production, long to of provides approximately the including lowest $X.X E&P reserve in high-return with structure support than operating we've of than built highest base in have for the our billion, We perhaps cash $X.X EBITDA deep we XXX,XXX grow to below E&P that but one is that a current value multiples of yields into production efforts a drilling offers stable per current company low-cost free And significantly inventory at BOE a having our enterprise is an that a value. locations our less believe which higher maintain, day investors, and X Earthstone billion proved transformed valuation enterprise total further a with the the term. leading that flow proposition value of values sector. a

supported the without of Of been our have today. none support shareholders. to and commitment leading operator of business, as best-in-class dedication would cash premier hard course, continued been have and This lowest cost Permian's is constant Their by all-in propelled employees. us has important the mid-cap this become work possible our our

for it With that, operator, we'll turn over Q&A.

Operator

[Operator Instructions].

Securities. of Neal Our line first with Dingmann question Truist comes the from

Neal Dingmann

for just first asset specifically do Delaware Robert, Titus then allocation, maybe a it of because but of the on your is if to the Midland plan and specifically all and year, a the think little maybe acreage my within be to kind wondering, run single to this year? in assets, is you're the on continue just don't X anticipate best. I'm entire rigs specifically, I just maybe you you Delaware in the you So good. Titus And on rank I to X know view going want rig something among question bit the on that, potential that's keeping there? quite for color that

Robert Anderson

right plan, to us Basin We our anytime Delaware which rigs rigs question. now is Good thanks. Midland going and Neal, Basin X soon. don't Yes, are that X just continue and see veering off

of in Towards as adjust? the later availability or could year. that things we Mexico, end of But year, audible be an change wait New in more will till the we the permits Sure.

that is based all guidance So on our split.

part of state the first rock. think capital really portfolio then And Rightly so, transition later the spend portfolio acreage. back rock. there north drilling best it there anyone's the our of in drill rigs move results of all look And said, bit We'll the in and now. line along to acreage Chisholm will look good matter. is there we Titus But there down year. of forward I in on drilling down for these some down a just in or of the we're like the wells great spend time some is quite then and that a the Steve capital lot It's acreage year. and We'll and

Neal Dingmann

for the CapEx how year, the the just sort guess, make talked Great then the production cadence did you. you say and -- heard see -- then I what -- you what, you throughout details. obviously, Could about allocated it. given first I on in want maybe would spending in be Mark, you -- say result cadence, wondering, of And I right sure I about again, maybe, would half. Did you to -- call CapEx, talk just so or the what talked the I'm XX% about maybe that.

Mark Lumpkin

Sure. Yes. you. Thank

of in the $XX fairly million to of our bit. that's little $XX But the D&C not is got we've and more clarify that, first It's addition throughout front-half CapEx, CapEx loaded. to fourth evenly that half. distributed non-D&C So million a that is let XX% The me D&C CapEx quarter.

something talking million, just instead million, evenly $XX distributed. $XX million, say, it $XX if we of $XX.X being like So let's million looks million, were about $XX.X probably

So slightly mean front-end like on I XX%. as at but we're more you drastically, a do whole, weighted, we're the math not can that.

non-D&C If fourth CapEx a the the need you the and year be bit that's versus really enough. the -- But more directionally and the D&C and about of before, close quarter. third quarter second just take it first going to in little of

fourth nice I On expect quarter, are, number guidance shakes second some we're sort quarter, XXX same And we closer was a at first and it to first the really or quarter what number Not then second to higher went half but things a it above a below the carried like probably should the day. in in And about second hit are where was. than our And be tad a in the XXX out. mean a over us. we just just that looking in production it's hit side, has well, did be saying surprised reasons quarter. it quarter, however, do looks of day. bit and to the XXX X% there going above it the that

right that's XQ quarter, probably fourth more around to well XQ a saying and the and we I'm somewhere back off feel Now then generally between the in months bit move in start XX first a confident down Obviously, and what third dip quarter and relatively XQ. quarter, speaking, looking little bit. expect it up But in pick X, that second the could like first quarter looks now. road, the and

Neal Dingmann

exactly that Have Or non-D&C, -- that what that? $XX all said. you Mark, is million that is And is non-op?

Mark Lumpkin

No, it's There It's It's well. non-op. out and guidance. in workover. in largely laid as non-op our is not the infrastructure budget some capital

and of to and is of is million workover infrastructure, Lea of to the $XX more and speaking. million Lea rigs $XX made other It lots Delaware last that you infrastructure got And spend year more rock, some January really the area. doing just this later really little happens rigs and to front-weighted in the the and sometime the but too, decision oil a in definitely more a some XX% of by accelerate to that And probably tight more we I on create broadly year particular, year bit designed X we've little standpoint. most from think County takeaway it's things know, bulk there gathering capital the we'd the is processing a as or it optionality standpoint. XX% we're of in money and and water, an on in fantastic are County, gas is be

Neal Dingmann

would something annually, they this forward. that kind all that early see this or totally just more is glad you've doing this what we of Or you not maybe wondering, have onetime? would and is something belabor, I'm on and just on doing would annual? onetime think is continuing -- just Titus but this that you're more wants get assets, see I Robert bought year. comment on that kind some Or nature? of I'm of don't those appreciate this would is Steve, is these -- to to you the on others, know, a go because I you and year,

Mark Lumpkin

little a conservative. I I mean, think, Neal, we're

basically year next same for the is number. model Our

year. I there of of really this the sort and half first a thing a is practically, element it's decent onetime think that's

in X/X probably half maybe based right know now. going we So I down to next cut that don't everything X/X it's it's or but on year, know

Robert Anderson

for up or just our our trying make destiny Neal, control we don't sure need business, hung vendors to have drive companies is ourselves. service we're create you, and options by what can what get who business we different our to ourselves and drive do

Neal Dingmann

you Robert, could make assets what understand -- point want down these to monetize? you you'll you... I that up Or at that, So I would end you the just So does sure infrastructure this way try some to give are assets own? proprietary line,

Robert Anderson

Yes.

the go entity to not -- out we're way I and a think giant building make It's it. life delivery about our Neal, with they gathering just that think the more infield is points in midstream Like control. lot here. a wells, central

Operator

with question Johnson comes of Our Meade line Rice. from next the Charles

Austin Aucoin

This equity Austin what And How second, current the is be would question. is actually transaction? in landscape? your Quick Charles' associate. attractive Aucoin, appetite in the A&D

Robert Anderson

is Yes. We landscape Good of questions. attractive, very that still opportunities. see lot a

side it's the are focused transactions our think review for and side. We Delaware evaluate a very various year relatively Permian Midland guys And in of and to to the Basin, both be going I active types. the

is be There already opportunities won't may of deal we're and busy sitting we pipeline at around wondering the So things. a from. where out there, next come looking

the evaluated and use Each deal be equity equity of probably needs to an from consideration -- independently.

not a our to to going lot has at where that is, most So pretty I seller think deals. our the track to fixed record a we're the who has to price is, want in stock consistent lot where use answer. with there's But equity do is do A time. with commodity the is

last averaged all done. Over and equity XX% in XX% the transactions cash years, the we've we've X

So between I vacillate but higher it XX% it think won't of sure than the deal. could XX% get and that, probably

varies just it deal. So by

Austin Aucoin

especially length extend a of laterals. of a X,XXX be path Delaware strong feet. follow-up, strong lateral results able with Basin, And from the to average to another you the see those as quarter Do

Robert Anderson

had We makes it on land or we -- their trades constantly do operators had plans. particular to us team both sense, development sides in trying wells a of but instance, our is that of where who own cases, other lot

at produced we laterals, locked to definitely everywhere economics efficiency, extending were there. wells really we We're XX,XXX-foot what those capital those telling wanting strong laterals longer would so drill out no And can, just but laterals. from have

Operator

Instructions]. [Operator

question from The Subhasish Benchmark Chandra Company. line with next the of comes Our

Subhasish Chandra

on, if strong. Congrats just so before, I this I addressed quite apologize. again, was finishing the hopped year

the your working all will on? you mowing you you've that development co-development guess going there best budget wells, now drilling that I have have of philosophy rigs these secured that that zones, whether Now -- a assets? guide is multiple lawn, development something the is sort by And it's there

Robert Anderson

track show you the Yes. Delaware in been going Subhasish, now in I the Midland side. in that's last the we've that years historical will we've doing we're what's for and great been thing -- and X however the many say the future, Basin, our question. happen would or record same co-developing years, to

In we're just not about reservoir of best going standpoint mow most zone one to and think do way side interval development from The other leave one to or unit efficient a or pick So and Wolfcamp of full back going a down pad zones it the couple to some of coming co-develop. later. to drill effective, circumstances, the be a underneath B from then later. and ultimately in County is a going economically, back can you the deeper distance you shallower can wells Wolfcamp to wells. and shortly, and a Wolfcamp out We're here Lower we're I existing think some zones Midland because and A come D and Spraberry

needs be can are But unique you come at circumstances one to generally, where that codeveloping back. there codeveloped So we're everything time.

Subhasish Chandra

you exploration any the the similar Delaware. in mentioned of additional Do delineating of You the in Midland zones? work the in Delaware, type sort stuff sort plan

Robert Anderson

counties you Wolfcamp Midland adjacent. around other and hate great work D exploration of on in astray you and Well, tell doing we're There's D. Wolfcamp I the County that would to lots lead wells us

a seen us Wolfcamp the is have side something the which of instance, seen other So letting it's That's the Avalon, the not out up case the where there Avalon But Delaware we like acreage in in are economics that go D. little for more results couple We intervals need wells shallower wells -- is. zones. sort to other viability to circumstances time and We've different. But of to we've to position these of we're the other it well, call do it really time prove exploration and people some the certain operators from and deep D. Wolfcamp some some see fantastic. our nontypical target closer maybe in a going a may

Subhasish Chandra

case follow-up, bit. good that equity addressed of you your appetite a have have -- can way? as paint stock And been in is any amount capacity it. obviously and there defend sort sell-off, just a before of of might my that private but -- frame picture in this too, Got Okay. little to the sort liquidity You desired of

Robert Anderson

sellers if investment in that makes again somewhat us. as exploring price an future our that is. the of Warburg. a prepared undervalued is available and Sure. kind But But remarks stock to nature open a Warburg now The in market I the way. October, right and along opportunity participate to filings bought stock dictate where mentioned in actually decision and in great few again, did of nature. that trade public did The shares that on, we that our to shares. option and that of we sold want our things It's we're that whether circumstance X easy come to depending will the has Warburg a we all of do such million as

Operator

session. floor Mr. the question-and-answer our back concludes comments. Anderson That turn to I'll final for

Robert Anderson

this We and appreciate us XX-K the and everybody's that And we time glad successful reach questions XXXX a if last answer look we'll We today. have very forward concerns, further morning. time to or of out our your really few months you those. any through do preparing appreciate and to the got best we can comments, to

Thanks a Everybody, a have great day. lot.

Operator

This conference today's call. you. Thank concludes

your for You at your time. you participation. this Thank may lines disconnect

Earthstone Energy (ESTE) 9 Mar 232022 Q4 Earnings call transcript