XEC - Earnings call transcript Q3 2017

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Operator

Good morning and welcome to the Cimarex Energy Third Quarter Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Karen Acierno, Director of Investor Relations. ahead. go Please

Karen Acierno

morning, XXXX Good to welcome Cimarex's to website Thanks, call. everyone, An quarter conference afternoon. posted updated third yesterday Phil. and presentation our was

today. this We referring statements. we to A could discussion presentation differ And actions forward-looking as of actual during will will contain a to discuss. our cause be number materially our reminder, what call results from

associated disclosures XX-K for our read on our factors and the filings, should in latest forward-looking You our releases, other news risk with business. statements

We file ended XX-Q the September for XX expect our to three later months today.

during our So then remarks update as usual, Joe will update Albi, also from one John well to operations, of we will Tom reminder, that costs. to results by and an begin we present CEO, from can our production just and an COO, you Jorden, Lambuth, one allotted, limit activities followed ask and on prepared help yourself our that you SVP And answer overview questions hour CFO Burford, Exploration. more one including our drilling questions. And our on we'd like so with the of question Mark accommodate to follow-up. we have is any your

if free back to can You feel always in you the get queue like.

that turn Tom. So to with I'll the over call

Thomas E. Jorden

your to our to above development good provided of guidance answering are our given in midpoint cubic MBoe Thank per production billion, X% day. you per as and February. on updating day full XXX.X we February. we for come to performance day the of you, the and is per high-end modestly feet X,XXX the guidance first you as third per to expected and our We slightly MBoe thank XXXX well equivalent was year day Production XXXX quarter look per at forward This all Consequently, MMcfe exploration had or guidance guidance day. call original since our increasing Karen, million operating increased Cimarex quarter. at you program. XXX averaged guidance X,XXX who is range. today. another This capital per or are on the now to outlook the questions. operations MBoe to day, in XXX of in strong testament MMcfe our of production to $X.X X,XXX has And our end upper the very a

We excellent are capital achieving on returns our investments.

this productivity for with daily production average performance. well days, instead you the XX complete increased productivity, start from I'll improvement which timeframe. XX% of per presentation Delaware to more usual Well slide the well X, in were to lateral These illustrate capital increased to development both higher are XXXX on new the environment. returns in current the of lower those refer increased you growing total during projects. returns like efficiency than we and and Our investor XXXX, of and of our couple better which achieved give of XXX chose point. when We significantly days wells in a that Wolfcamp level of are course costs, picture a program the halcyon much price the well I'd our slides XXXX to productivity, XXXX. for well adjusted to has Basin length, a our infill show of early shows due to days, to in commodity

kept life the gas is appropriate oil today. County. in everything of [per else, flat XXXX back per forward We've well [$XX.XX] NGL quarter But costs, (sic) XX,XXX-foot taken held to that the to each for what On for that at of those estimated at well cases, [per returns looking price compared Culberson third slide, both mcf], the our the barrel, LOE, same Wolfcamp for or time a look we've timeframe. was drilling next We've all $XX.XX time, it $XX current as forecast well we've barrel], a for our in same were $X.XX type the used production, and well. returns

peaked XX,XXX-foot the For our $XX.X at cost of third versus quarter well well, $XX.X for million Wolfcamp today. XXXX in example, million the a

improvements around dramatically shift impressed you been past As few level investor existing flow, and We've around articulate owners months. a shareholder returns sentiment in the have and interest. value well about our to theme in philosophy the see, invite. is scrutiny cash the proposition. entirely us the welcome can have are companies and the At recently business value both conversations executive again questions speaking to team commodity testament road, with challenge making sure the that with within creation, Lower we through the Cimarex, that have with they on and to been increased the the living Upper E&P these for Wolfcamp, consistent managing achieved. aligned is fair the It a There prospective productivity we've fundamental model, incentives and cycles,

a prices of our decisions, not Our goal. future is consequence invest for primary Profitable of accomplish commodity We return. consistently mission way We capital stress is net cases. asset this to by the investments testing to to at investment capital is high unknown value at mission. simple, Growth share. best account that per increase a good of our downside draconian believe is rates investment

for salt capital capable or are burdened actual results. There assets is invested on on complex account has returns great water upon investments, land, of Our Cimarex of We not an achieved geoscience, return they the both. results the reflect is returns all are define invested. that projects. fully and culture two corporate rates only on objective, infrastructure, analysis drilling and to systems, burdened Fully cycle by primary but of ingredients results, return measured executing by organization based overhead. interesting, do return disposal Half capital. superior transparent

account share higher in employed, gathering a per a returns return out. flow fails consistently It returns. a reserve generate and we that to boils cash while and growth, burdened, Any investment do cash debt Cimarex the barrel are capital production us a growth, the that of within between system. operated capital be higher and debt companies down adjusted results to them see every well all metrics for fully what can full day cash matter debt eye these that oil results flat per share good flat to what should misrepresents achieve capability per the organizational will and adjusted flow company At living oil share generate not Furthermore, flow. higher growth in single adjusted $XX analysis on Results assets growth. shareholders horizontal you. with to able good have are Companies to actual and as to Our matter far achieve difference gas X,XXX a of simple $X flow free cycle equation, higher per and as future, and generate have double-digit cash see.

about XXXX. make we a few end as me Let capital look ahead comments investment into XXXX and

give not outlook we're how I opportunities capital, thoughts prepared Although XXXX some on can specific for we to offer a the ahead. approach

be Anadarko development the to and Looking pilot more ahead and Basins. into XXXX, of our devoted Permian projects in capital more will

And with in greater the the we in We year Permian strength anticipate very ready lion's share the manage and portfolio, for even have active than deep shovel on forward is to strong and some plate projects an our fully turn share that portfolio basins, both balance of continued as to currently investment productivity like moving but expect We maintain XXXX. perhaps in in our for the returns. Anadarko. get premier our inventory, XXXX, a XXXX a much will both of in through and over Permian We we Anadarko. a is burdened you will With than the walk the well Cimarex commitment more call to XXXX. I'll development John capital, Permian John. sheet. our the

John Lambuth

recap quick Thanks, of into results Tom. I'll before our and the specifics activity XXXX. for getting drilling the remainder some start of of well our with latest of plans a

quarter, new in during the XX. going wells XX our $XXX quarter activities. Cimarex in the with toward million region. on XX% Permian was invested region our XX% to development the and and $XXX $XXX of XXXX, Mid-Continent year million bringing invested wells. on we drilling third XX of production quarter invested wells completion net activities date the exploration to of of third We third capital gross, net Company-wide million the on total the brought During

planned. wells. Our drilling an increase billion salt higher $X.X interest Driving and upper billion now completing development $X.X to originally us in estimated is water guidance our Meramec to in $XXX to XXXX disposal million original than exploration working $X.X wells and originally the budget our of for was end from and drilling billion $XXX million allocated with the

Permian the the We plan For X to X Permian the XX the of remaining in currently We XX% region for the year and in rigs, rigs Mid-Continent. our Mid-Continent. plan in full Mid-Continent. earmarked the XXXX, operate and region invest with we exit Permian with X XX in in to gross the capital currently year

located Permian the to acreage regarding Eddy a have on exciting our you Southern New Now where I'll the share position specific County, region, start in in to City results. with in well some we results in White well Lower successful Mexico. Wolfcamp

X,XXX eight acreage used per for Com White completion While lateral XX,XXX-foot rack average of in drilled which barrels Wolfcamp XH begun peak well, the wells be drilled design. is using Page of Lower generation wells bench, IP in across an pads, Wolfcamp a wine XX,XXX-foot Wolfcamp zone us the we seen have [XXH], by an section we testing day, City, being Animal presentation. our C. equivalent performance this of on This to XX position. wells which this can helping between of Drilling to Fed oil, in breadth is XX refer of and latest XX-XX Wolfcamp, drill many of pilot and well's XX-day also Lower consist multiple NGL. additional landing the both plus first return completed of the which (sic) is the spacing the decreasing adding A Kingdom XX% greater the equivalent the infill zone had White City top the on display development, part per Marquardt two of strong our the as confidence oil laterals gain ability benches of has to an XX% gas, from early was rate high XX% in time wells This and our

consisted this which of of Wolf on wells from is spacing pads, section. pilot, – which wells are production Seattle length quarter production two early the equivalent from of First per Wolfcamp XXXX. testing Slew in gross Upper the in have expected We pilot now XX six results X,XXX-foot of our second

the Halo] of versus on cumulative wells is Slew XX be Seattle the can with the wells presentation, and [Sunny's Sol tested the over our XX-day on per days seen six further These average early updates days we And after of section. cumulative forward providing Sunny this production results del and after XX pilot Halo's time. encouraging. Gato (sic) eight which plot wells, As a for to slide production tracking look certainly respectively are

New Southern Finally, County, we XXXX remainder I XXXX. want have planned will quarter increased block Mexico, located our Wolfcamp the the XX,XXX-foot Upper the completion Lea design. about acreage we for in first of the to talk further Within the County, Red activity to in Lea in and Hills and drilling of be interval wells laterals in in three order Avalon two test XX,XXX-foot

the drilling a per test comprised equivalent six one of wells Wolfcamp bench. will wells the soon in within from be will pilot that begin section Upper XX of two that we pads Additionally, will spacing

zone. also are from of stacked/staggered will section XXXX. will spudding two in wells which be a of production pattern pads these testing an Avalon by wells wells expected consist six All We equivalent that spacing XX to first one have per will the within pilot, be mid-year

in we talk increased wells meaningful Shale. both I with onto our The the Woodford drilled start Mid-Continent, and XX- from Now to Clyde with infill pads. where results have spacing the about. the XX-well will of results Copeland X tested some two density

spacing we both of compares infill cumulative early show in exact time XX the our the Leota our are virtually parent lateral upcoming the what early and pilot on same favorably as a this well production have completion you versus plot which a see These As well Furthermore, of development page that wells. Woodford on can results scenarios our worked acreage. our the presentation, nearby across also to nice impact area, from in design still the is being rest predictive out, is for result. will the confirmation meaningful future results production under design as the as the timing long learning Jacobs of are development achieving

emerging area acres. where as honed an the best vintage net versus return of of that design implementation contiguous over zones designs, the as within After The presentation call well a improvement Finally, dramatic have years completions, the base landing many of is after we our is play Lone well page drilling into have on production we Woodford page some XX testing now highlights different the XX,XXX of new plot frac lines opportunities Rock, a which we company. most with in The line each rate showing cumulative different completion tax design. recent. the blue represent with demonstrates XX the three production creating

for recipe XX% I'll Joe the release, XX.X working was is production XH-XXXXX This million feet this As Albi. cubic zone that our a initial well very of the per to achieved recently over landing press an of is was that With peak Federal mentioned area design frac well call Hines XX-day completed further confirmation day, turn oil. equivalent which well. our in average and

Joseph R. Albi

Well, thank and comments joining on you John, our cover usual I'll on thank a and finish our third then with production, our today. and cost. us LOE up you, for production I'll outlook, XXXX items, service all updated few the quarter call

had in production good As QX. for Tom quarter mentioned, a we very

just That net beat, was a our which our sooner day stronger at on slightly volumes Gas of X.XX volume Bcfe equivalent range, drove guidance gas Clyde X.X to we which and X.XXX bit our Mid-Continent than day. per really end predominantly coming had day. our about, upper project, came Our Copeland in projected. per Bcfe with per Bcfe guidance talked John beat

nice of oil side, on strong top gains With both in the forecasted seen right production to both On be. in the levels we are the Permian the where we Mid-Continent, quarter of activity and areas. we've

while Our a a up Permian QX XXX equivalent] feet [cubic XX% of of volume million QX feet our day XXXX day is XXXX, Mid-Continent posting XXX up XX%. equivalent] [cubic from is million

and last Looking in forward, with our call, model QX to QX late both our current regions our has departure ramp little projected volumes. from QX completions

quarter midpoint we're last up from increase range as QX day, the the Bcfe With With to QX XX% each per production a increase to And day. X% X.XXX production year, projection QX And our since Bcfe be would XXXX over forecasting up Shifting which February, equivalent from us X.XXX strong projects, and XXXX to an of our our XXXX the over to with of of and guidance, fourth guidance Mid-Continent/Meramec our over an X%. initial XX% XX% to Bcfe we XX% equivalent our company XXXX per OpEx. of performance increased activity, per day X% really rich net springboard providing on day we've gears Bcfe Bcfe XX% during oil Driven X.XX enter XX% by projection activity, are X.XXX to guidance and XXXX. our our as X.XX for oil equates to and total growth midpoint XXXX giving quarter. XXXX growth to this QX great our Upper volumes and XXXX. year-over-year per production completion from by full call's in guidance Incorporating projected of the XXXX. Permian, XXXX grow XXXX. now With production fourth year versus Tom Bcfe to to mentioned, we've estimated oil quarter year's to focus Wolfcamp, X.XXX XX% is to the liquid increased well average current

low X% our $X.XX and Mcf. cost XXXX Our our guidance posting. of from in Mcfe, that's computes cents of XXXX our average $X.XX range year-to-date Mcfe, came With our that lifting QX at also per XX% $X.XX down from per cost to to lifting $X.XX per at the end

hard goal Our operating team in the to focused achieve with worked check. cost cost maintain structure lifting keeping reduced so we is to overall production a of our

as stability lifting As drilling earlier some any day to we've as on to our cost which wireline in pressures we tubular to year. quoted cost cost, such, components, the all To in rig drilling drilling cost see including comments remaining the on focus efficiencies. well Mid-Continent. Mcfe. $X.XX quarter, continue cementing lastly, of In year keep of guidance, continue we've rates the pressures pressures did increased completion previous seen, some during the and And most some general, kept in We our $X.XX on fight and range see per cost we in cost. ops

And as XX last at our an As rig median our XXXX. wells from compared days down X-mile X-mile in to release seen likewise, running lateral our current XX example, Meramec we've Meramec for program XX from days XX with days drill days, for time similar spud at currently days, year. gains normalized at our Wolfcamp is to

offset completion cost focused costs in pressures year we'd the we've productivity. on Completion has the well cost to the while seen service unit seen we well our said, refining our cost. game stay be the to improving designs and side, seem the to total pressures flattening to all per become and date, the the That that in control On of name completion prop efficiency concentrating on somewhat. earlier

to fleets and maintain continue zipper prop control we're And sourcing, our and volumes We're where in sand To we that and advance. with sand number we resource actively of experiment varying efficiency adequate the a fracs plan needs crew fluid we can fewer ensure alternatives. consistent cost. pump. to exploring our executing We well regional sourcing We're frac of stages.

range the of estimates million. changes provided well last Permian, running AFEs In Wolfcamp $XX where had some on current the completion the As procuring them. cost focus per to such we any $XX.X significant and need unit and to the no our continued made you in we resources we've our we that not call. issues cost, have efficiencies when are we With need, in X-mile stability million

Spring the the QX to to million $XX production, XXXX. coming in gains program, million. with AFE In production our efficiency our in XX% Woodford lateral XX% kept in current of now of Meramec running $XX.X better in growth million. our And are to lateral Cana, and expected While X-mile still million X-mile range million. Bone our design root, our a forecasting to lateral solid completion larger million pumping AFEs we're ramp and AFE to $X.X range we've with taking maintaining year-over-year provide nice for In fracs in $X closing, $X.X $X.X projected X-mile than we're QX changes

during on the the Our growth production at QX, projects, With oil an to XXXX. And up, company production year check, way, or focus results. wells is drilling production and end, confident momentum very provide total in about great projection our projected with our equating XX% we us oil over of either with with our our our excited waiting the midpoint year about net paving anticipated The program. drilling on we're completion into returns XX XXXX. – which from remain will record with our going constant great XXXX

call turn that – So to with I'll the over open Q&A.

Operator

Okay.

begin We the session. will question-and-answer now

The question go Stanley. Venker ahead. Please comes first Morgan from with Drew

Drew E. Venker

talked And rates capacity growth. while preferences flow, the really more different Tom, can overall of your or hoping just free pressures have sides. With Because strong little sounds free least and at bit delivering you asset at you there's may think odds that really strong different flow a everyone. to returns be about high cash it about those speak cash generate. shareholder remarks from balancing Hi, generate in you just you generation? like to base how prepared the you could guys for the

Thomas E. Jorden

certainly Well, shareholders there conversations is fascinating have thank viewpoints, think depending which you I with. And been you, speak Drew. to us. on different The

would prices. long stress sure see $XX and downside. a I make long We our is at cash test protection in bias NYMEX flow, flat ourselves $X we at stress like gas protect the oil, oil. our going think at invest gas. we to draconian to that downside, term past, we And flow. We've $X.XX we outstanding flat above capital, draconian test $XX cost talked and owners cash these And us our well on our returns can our as invest are all to be as of achieve have

we is cut February, be business I at share reopen We necessity to it Now our growth any we're not cash long environment. make a a very this discussion as weren't last in dividend about we environment. outstanding buyback In about in do kind year, back getting But and flow get dividend. good did our pay That's we'll happy the program. think looking a And the of that. we We going investments, that to in matter on are that profile. our dividend We're of bias a business. to a historically as dividend. we're as actively declining returns

Drew E. Venker

for Thanks the Tom. color,

Just XXXX one the follow up on outlook.

was broken you to like additional across You portfolio. spacing your the happen I can't seems this by quarter just conducting that spacing I guys about really hoping pilots. would you quite talked that It guess have, make the yet. And whole term, guys use

board to If optimal just design So the Maybe as you specific limits? be the and trying for think it's to where are find year? area? testing those about configuration, development across going there's next you and spacing any

John Lambuth

trying is understand this I'm broken think don't use being I place glad what it's to to kind of we're John. to at have getting But resource the word in we're overall doing. that design is ways and able very develop I testament yet. in a our guess good some understand the I Drew, frac

we're I Clyde kind the said, well. of the our Copeland performing seeing outcome do. said preconceived should with very Copeland, it what model from As fit Clyde It's

– what for resource pretty full potential getting very in interval in its what we're ways that some we're I distinct of So think and each understanding good is. place

interacting to be I Wolfcamp the pilots we're still right where go both confident could we're done design achieving up it. risk a spacing, much so understanding the how as it in working has there. getting better some that these with doing wouldn't But chance testament again, break think like that's we anybody frac our that boundary. we just But there. we're it's push maybe Lea with feel at is also Now didn't testing we or probably of we Upper County, tighter that pilot there production argue I Lea we the the in of there terms and had now than – up we're to feel I I'd the mentioned what the County, ultimate in far I tighter in going two much going out in said, Avalon pilots. a do And is get. else if

Thomas E. Jorden

Let me word a add – shift to of pilot with a development. There just that. to be seems the bit word between and the nomenclature

own. we As long our as we're the we're along acre with stamp we're multi-pad come the drilling envelope We're learning us are design, push pad development. projects, we're that multiple in up And continue wells if to is optimize you're frac management for savings off just side for value business. from each looking continuing for we team. more each things test fact the long put to the achieving you're And a so already continuing and efficiencies as way we and to to to pad, curiosity our by that mean some And a going can as it's really that development. and there's extracting benefit. capital wrong aside, spacing, to testing I the replicate – talking

Drew E. Venker

and Tom, thanks, Thanks, John.

Operator

The from Citigroup. go comes Jeanine Please next ahead. question with Wai

Jeanine Wai

Hi. Good morning, everyone.

Thomas E. Jorden

Hi, Jeanine.

Joseph R. Albi

Morning.

Jeanine Wai

Hi.

they area. questions, Mid-Con fall my So the into

you at point given would know this what like looks this prudent, do point. time? well, size the Or probably in deferred think footprint Meramec, at what handle the be program know at rocks? is or development What Jacobs it in you could the about [Leota] times what don't you So size Meramec the

John Nelson

Jacobs I our long still get have John. to pushed work will still for probably with This think you, late I And we're still although Meramec. in working the need now Leota achieve XXXX. the XXXX lateral XXXX, into to Devon on there's plans we strong is Right bit right, early regarding Anadarko. sentiment up we plate our that bigger tell development, a will you're that quite

of all we a issues the as One have are there we'll of we is lot, understand keep now the at watching our like additional lot the of thought next that we about – that kind talked the for a what – the development, plays where the to ongoing one then our several Meramec. form the mentioned have, ultimate any have we're to of is looks this, – interest questions self Meramec. go still understanding is one Meramec lot in we of Tom and least an to better of a big certainly where we what probably And ready both right each funding how per spacing what of more many pilots trying We is the Meramec in, are potential That's the within still the wells that carefully. be what program. address zone? be kind are in can again probably the even in some we our How things zones pilots Meramec. in? importantly, land in looking many frac to process the And XXXX of We're that year is those So appropriate design? we'll we

Jeanine Wai

capital be risk not guys. an just framework that from tilt you on know too a follow-up operational Or to Okay. I allocation company-wide bringing Permian, allocation. the the capital this you're the how program ever But on far might that And better I here seems the you in you more investor then is given for frame however the how And capital think level? towards the far program? thinking just maybe pendulum for general? Permian, do from the standpoint my about oftentimes would your it I'm But one. you think right

Thomas E. Jorden

return of the Permian. his every terms rates about as in we in John has said rate area our compete bit, that And think purely heads remarks, of Jeanine, Well, up program Rock return. of this with Lone

bit, every heads the competes Meramec of some And with up Permian.

see comes really to real So there I long one on we're seems capital difference another, to when don't basin for But agnostic flow from basin. the Permian. know we preference be that as the it there cash out there. to kind between of a are allocation, as returns

year. the as basins. the But returns. the think or equal that's manage one think of We capital our projects a the towards probably not have more interested like we're evolution allocation effectively. the in that we'll about Permian business greater XXXX, of in helps two that's than We did basins that's player. certainly, I of us the both I the said flexibility really this to than being And think of I more basin a some just cycles – we

Jeanine Wai

Okay. taking questions. for you my Great. Thank

Operator

Imperial The Capital. next comes with ahead. from go question Irene Haas Please

Irene Haas

Hi, A on the Yeah. Lone Anadarko really Rock exciting. question project everybody. Basin, that's

area? the wondering, the addition specific looking Just is Mississippian to for that in how Woodford,

John Lambuth

that is question. Boy, a great

We are looking at that very carefully.

Mississippian whole well of the core fact, We're rather aware operated that took the through In wells some recently as Woodford. as interesting. look a we nearby outside

we testing so see – that or our and the potential interval call will be XXXX Mississippian sometime what well, early we'll Meramec and then equivalent is. we the as And what self

Irene Haas

Great. Thank you.

Operator

comes Mike Scialla next go with The question ahead. Stifel. Please from

Michael Stephen Scialla

everybody. Morning,

Thomas E. Jorden

Morning.

John Lambuth

Morning.

Joseph R. Albi

Morning.

Michael Stephen Scialla

to I the standard Pagoda, know or XX going is got area for and a comfortable to minimum But per Are push going the now. guess Wolfcamp to – in you pad, that that you've ask the Pagoda you section wells looks use that Wanted that limits. be there with you want to data is kind victory of about of Upper your I forward? like quite bit the declare data as

John Lambuth

very results. very, Pagoda is This Yes, we're pleased John. the with

only for equivalent almost XXX we're of that The place. certainly see, can is the well. design is make I'd holding other and resource into XX up or they're very thickness days well very it, comment you in As that appropriate though

over good. Reeves good it part stamp pretty looks But of our of all a County. can't necessarily there's acreage I XX where Wolfcamp rubber So in

tighter a even still are We're to Pagoda going based tighter a going the We testing little results. and add up third go be bench to here bit on coming actually soon.

laurels. wells rest Tom in get we're very there in many our to in pushing going on to Wolfcamp section not to that We're boundary terms can said, Upper how of prolific we going keep that as Reeves. So

Thomas E. Jorden

I that, But add that to adding just want bench. tighter spacing another to is

John Lambuth

Right. Yeah.

Thomas E. Jorden

all, play true really that fits to tighter and our It's one this said. spacing be may thickness, in John It's spacing. we And where look particularly everywhere then however spacing thin. not not size we for something thicken of necessarily in a may in one well and a applicable another, particular at tests the place. in are resource underscore rocks the not Basin, well I want Anadarko at is And because derived appropriate look section

Michael Stephen Scialla

goal Thanks. on feet. it. Is I works? feet trying the some going something over in Is laterals look going that's But be in that the solid. than mentioned, guys XX,XXX results were also you John, about from to now? still And longer even there it's the the talking you XX,XXX think understand to XX,XXX-foot configuration. depend And pretty laterals Got Culberson acreage

John Lambuth

Culberson. at That's because comment the in of south have XX,XXX first as a acreage us if of down allows lateral, then said, our minimum are we That the we is Wolfcamp the length going Well, any feet this, allows acreage other a always our intervals. of well do us, to as Yeah. standard do lateral.

allow And talk again still We X it. go right acreage miles about we're doing know doing us within opposing be now, with there's of on. areas do we've We're are of, instead a up, have X.X laterals. the miles I is there where are that. that? going the about JDA. acreage There places we've drilling But the talked should we will X,XXX-foot go way further. very of been – we could some sections that lot doing that whether And, because it's question still to to the There even debate anxious section. X,XXX a line yes, to about department our

a south I doing X.X-mile aware right are now we of said talking the now longest of it. So JDA. internally about we're down Like I'm right the is

Michael Stephen Scialla

Thank you.

Operator

comes Please ahead. Dingmann Neal The go SunTrust. next question from with

Neal D. Dingmann

all. Morning,

John Lambuth

Morning.

Neal D. Dingmann

John. you, for question Maybe

– Just that I'm further and you what how I potential continuing to you the we a is area. and Clyde the particular that for even just over showed trying of or I'm get see see that get either greatest Do looks to that spacing of how Jacobs? an wondering as anticipate sort push moves to this in tight of is. eastern – Copeland, on of where of spacing sense it core to kind north? up the phenomenal on idea trying Leota to the that of type the that that spacing? this – Could just

John Lambuth

do have are carefully results. that to at Clyde pilot. Well, the Copeland We more some with we ourselves work very looking still

the our there, at at then (XX:XX) then is in going want more from we age? thickness, be we can well what model Jacobs the to what not look helps drain it's that look place, to ask and and call And Leota calibrate then one-size-fits-all individual have do overall lead What terms then is a as our we acreage the do. that? us design. self, That yeah, strut-ins It's ultimately that we to much really we okay, think what Tom And each sit We area, touching. is would area well appropriate and will then in of said. final down total for as resource as drainage the from the that

what say that we we've than XX can here we quite with I haven't partner, would on the tell I that's right something up a line definitely we'll more it final per past. like. think the be looks to in number. done But in our wells the section be the months X honed fair actual bit or as standard that AMI that on just now working you it's development in coming

Neal D. Dingmann

development sense year? get year? then, more, in two yet. make and the sort a Del do does you've the John, I'm you details with be plan out seen spacing, with to XXXX I in and down the how just full don't large I maybe these to more success And now three? have inclined of batch trying just both drilling average Versus now a much will the the guess, or next of next you know this Midland But

John Lambuth

self it's a from are capital asking on. I It's we're wells a of that terms spending time multiple from need wells the – best Three And putting our Is clear, sections? efficiency excellent a lot from a is pad. number multi matter effort all from certain no section? is us? half a or we make whatever, for best per gain are is it a by One A to that them of section? efficiency all half full Well, thing full in or clear very of whether of standpoint? There something a that's development a are something what question. works the What pad.

something with, to it's multiple too we we're wells also is on struggle you development. to hit multiple about at. many whether now say That's a may section fair it's regardless a off half, point Now pad, or a everything of you're of where full, we a have where single have do looking going But mind you just wells pad. is in

Thomas E. Jorden

a is complex Yeah. This problem.

again I sounds have burdened development? problem But a John production can question this there's first were out includes investment manufacturing, you includes earlier a when production. let's and all that mean, that view full required discussing the XX, this don't lens much of I that significant get that fully It if questions morning, development because be can bottlenecks. X, you through you It line, cost there say and is also smaller the a good It interference. return, fact, go optimum this infrastructure lot as right, includes and that And [wells]. of project production infrastructure to project. are know many is between full that a may we And into delay figure because of – first a is we wells required. rate go. many, it's savings. it In investment top that. a a you have about, consideration. to capital suggests I and have we time in includes from savings, wells like parent-child But XX that efficiencies, we'll first some that's for first can It than going XX investment

to have it too system, accommodate you flowing overbuild many have a wells If to into you peak production.

set very, very of a And criteria. so complex there's

problem manage return. of maximize rates cycle full our to this view in will order and We

you whether project It different or tell hard so something our of will I depending answer some want add asking And discussions engineers going good on. They're a this. on Permian some the There's dozen this with all today work team I at or creative questions. to can't may our dozens be our had fewer. to John, the on be And that? are on you optimum area. per morning. thinking wells this right

John Lambuth

No.

in on the hit and drill fact think them, argue I XX it see – go bigger there based it's infrastructure, wells out our Permian. very on factor the could not ability or I to governing Tom in is Probably XX complete I well. and what especially

that you're a right. needs, facility to go no SWB good your sitting absolutely us production then wells On does of come overbuild to all XX and peak compression cycle that that basis, there and needs, just of to Your full And handle has out just play. have into there. it

of a optimal, So return a lot especially to standpoint. is what we're on giving invested capital thought from

Joseph R. Albi

there Joe. itself. just is this is, simple the And battery I'd from of What add the example

three. at on all If economics. bigger obviously at drill drilled come battery, you if and of need And we wells size to drilled on well drill them nine and had than impacts all back three, significant turned another to another that going a battery the later you three, that is nine be have once a once, that can

mentioned. side, on facility this complex of John the even production facility animal. mentioned, And Tom So a the balancing it's all it's just everything side,

Karen Acierno

spacing had of on – where acreage couple It's we okay, said, based small that already and and are facilities we've too, want is developments where happened tested available in a Reeves we've to available. we've

It So drilled be we or they're drill couple wells or being go three may on spacing a in our whatever. and wells on pad. results with based the But pilots. these

it. So we're already applying

Neal D. Dingmann

good. thanks details, Very very all And helpful. those for

Operator

The next Okay. Campbell from Tuohy go comes ahead. question Jeffrey Please Brothers. with

Jeffrey L. Campbell

congratulations the Good morning on and quarter.

Or you kind how background dedicated it took mean another look you I Rock you to took acreage can First organic position? how to Lone long was acquisition? this of was tell thing. some at? want on Lone of your Rock color all, your a just And this get that And this us attention? legacy I build attracted

John Lambuth

very us while. with been for a early our acquired has we were the It on the Rock play. Lone a in originally wells was John. is disappointing. quite that into early But entry This very, position

perseverance the we we're drilling, higher have And tell is than leading that where wells. areas? other we an case And time But And of so over hard terms adjoining understand, than about else Lone paid yield going I potential work the turn saw area on unique the pressure areas decline is we there's very you these trying resource lateral much let Lone potential. something and or doing Rock. in Rock. better to Rock our pore will And really we and back blocks to keep design with say latest off length frac much much in me why next of keep Lone place. believe We it. the It's in to rates the lower this area different frankly quite fault in just to of

understanding team honing has place most issue done Shale really in that vertically a there's Lone here. because in Woodford what's has not laterals. that's iterations exactly some Rock, to a but crack. doubt this returns was job superior tell it a without It's many been in the lot our And landing where – But in seeing. of I been these on these an zone to easy critical nut both many, you we and we're of leading will of variability So the of design a interval to probably need frac taken phenomenal

gotten are, very excited. where we Now to that we're we've very,

the where that did get talk for to So something Such the now back year wanting time we that That's position. that and about much our to operate to, been for why position. longest the get it, is we we've been or our position. to part the much of enhance at best trades we've that's which Rock number Lone wanted pretty we this doing working years. held on And we to of really over majority as so have most a go us to last two

Jeffrey L. Campbell

on ask tests. And really wondered there the is about we that little I'll you. color a quick just on color. here? the next sequence then at said Gundy, give could are bit work work the it And question slide That Thank talking the what if Leon great of just exactly completion another of Okay. was you was on to phase looking

John Lambuth

first even do Do right in you have We're Meramec have North And let's because our opportunity those over terms and and we're say, Meramec place. very stimulate? frac-ed what that West, the vice trying still as what that area, sequence large, And together, of we we then call Woodford that said, do, Township to especially Or answer. we amount independently to you we potential a that take now do recognize of when things We we trying undeveloped Meramec/Woodford. follow that we a for working part because all then is it XX Or that to Meramec. to be good versa? should have deliberate the the appears afterwards? or what in to them scenario, are on that be Sure. do have the of large do we Range the a if acreage, are I XX that lack we acreage find with about instance, of that it, to cannot only, in frac versa? order Or Woodford? Woodford is and co-developed vice exactly of how Can co-develop right

we'll done watching are that we formulate block are for help three-well go-forward So carefully And have of flowing that now better we've be and our number testing right a order. that frac now to back that those acreage there. tests just two- plans that

Jeffrey L. Campbell

development try maybe okay, about tests Okay. at wouldn't I versus developments about? an to happen? you're do the think least it'll going do order this and sweet these based pick really say, and on talking Woodford in I to pick with experiment we're Meramec these Maybe when spots at area you mean can or tests. the can not And get do you get think me that to Tom Because update? These you that start want the you going mad an I that at argue have and Or if up to follow same you're that when here, time. some to testing.

John Lambuth

do just I of these testing things it to picking think lot being terms right done as off a scale. a or getting and part XXXX and in bigger of of out section a there there is that at work two Well, now

about for what wait our I that. And then just you'll and better I say to a for just tight are feel So hold would when think XXXX. get we plans talk

Jeffrey L. Campbell

very Perfect. Okay. much. Thanks

Operator

Deckelbaum from comes question KeyBanc. ahead. Please with go next The David

David A. Deckelbaum

that more geological spacing? Morning, questions. remarks. it's greater for your next ready Or Tom, of understanding development. some for Permian could I to it around wanted a year, Tom, shovel In of my the comment more Thanks larger pads? comment around a more for because ready Joe, logistically your clarify John. development a and just taking you field or being capital Is that full more share see and remarks said prepared is

Thomas E. Jorden

it's the matter what do a of the But it think I example. both. and said. Meramec sequencing complete Gundy little John the I is perfect and on order Leon may think I'll We just which you a that follow Woodford. Well, mean

XX, XX, number And pad and so on wells to whatever of that get the off just hesitant a project we're and particular wrong. are march drill

this early have be some significant indications may We that problem. a

those It's And We're have little good. so further the we're complications. – you to know, we don't Delaware a the along in Basin. all

the the got today think short I here these XXXX looking getting in Delaware. work, understanding And development plans, in further I issues things see at think move sit us of little into a we've capital is we there hard at Anadarko order. of you'll we as these some ready. think But

David A. Deckelbaum

on Or your do of guess pressures I see know how here how early the how would side. and play at of rest I pore guess you're with the guess you that, productive guess to very high zone mix? about you're think guess saturated And Cana as I on seeing. it's I landing it the more you Lone interval? this more viewing appreciate on Tom. the the just of it Rock I contrast area differences the area, I understand or I some But sensitivity level spacing I higher you a generally? that a

John Lambuth

And other that IPs, at lower and these to. carry also opportunity bit area an acreage that there is, think of pore yield we the leads well Leota certain the the but is decline rock, That's earlier, see. as excellent the drill it It much you across think But of terms way yield in I makeup performance. and we similar good that decline I part the are there. have good opportunities to itself characteristics. content. said Woodford lower pressure, very very all much pore depth it because It's I Jacobs of again has of to similar of pretty I areas And could better relative just yield. pressure, higher we a look area higher little doesn't the that content an rates. a argue much see of

point So out we're in though Copeland. I the I as in some don't say of do Clyde well the we quite that do ways to see amount of have Copeland at thickness Rock, at some things Lone Lone we translating Rock. doing Clyde will

That here So in testing and take XX be probably have of directly Rock. excellent XX as that and be Tom it very XX-well I Lone range, place don't translate said, area from to results because those XX- cannot wells Clyde soon. I easily in resource something Copeland thickness would in which near likely the to from is a will I'm to standpoint. we foolish, more

David A. Deckelbaum

at area relative less of prior areas Do the you around all that it think further from having some that benefits development north? to

John Lambuth

it per have No. we to to No, section basically an get still don't, to HBP drill I just individual because wells status.

that else that an have Woodford. not parent well section. So it's unlike anywhere have existing always we developed typically on We

its well been potential That's very parent understanding we're here. So doing a long with future time relationship development. to familiar something having we've and a

kind well. you no, the I and of Woodford that, parent it. at that rock a from So, up issue in – returns I we're Rock there given of just a assure to is tightness foresee Lone it's Rock. don't there. issue no unique is leading again the very an structural more of It at be permeability that of pressure can yield set standpoint drainage the the low to seeing its Lone is from the

David A. Deckelbaum

John. Thanks, Great.

Operator

Goldman comes Please The with from go Sachs. next question John Nelson ahead.

John Nelson

success as trying a Thank maybe your morning. of of my to to taking maybe the a I to curious, asset ask more is dated if questions. are unlock same acreage. – in see you if appetite improve is wells paring you considered – it's and I was longer inventory? there considered the being just because sales way having being keep for as value? on getting for seem level some shareholder what just returns I'm a Good

Thomas E. Jorden

things to do candidates. in that call always just things assets, probably that divestment we're And They're have some that not at we currently not good this our quality are John, and list looking that reason the discussed call. They're Well, they're currently but things arena more divest. on are I whatever for potential a would on we've non-core focus.

standpoint, not going probably they're now. at But in in valuation So right we're play, a more hands somebody valuable probably any in Delaware else's be play, Cana our our time looking from core to soon. divesting core

John Nelson

guess So want as potentially as monetizing it? deep of seeing sounds like so forward rationalization, I to kind some that it normal to inventory more course of portfolio that you'd by opposed pull the

Thomas E. Jorden

Well, we're not with this – theology us. is

And be a repeatedly up John things so much area it end that the be of tell one things. fact, got to them new that's the shedding things of stuff. let ventures would we've find in group order one success we that new some new supplanted is on better In a what what by new I than always has working that's we've got we of

John Lambuth

Yeah.

Thomas E. Jorden

talk we're but from out standpoint, is a the is net constantly on that observation present decades and refresh. present high more inventory yeah, terribly I or the value years appreciate looking So, decades anything years than net wonderful of And about, not to XX – X value. just at a

we constantly at here conversation this. look at open Cimarex. It's So an

John Nelson

sorry. I'm Oh, Great.

John Lambuth

going mean to Yeah. our of enhancing I where deals I constantly smaller trades positions. lots just on, acreage one add behind comment. scenes always we're the quick was are going there

an like gets standpoint to there that block we nothing to contiguous to newsworthy. of in get much acreage acreage from But smaller in always So are better development. operated future us effort time a will that of time from it's us that's a divest, position nice blocks

John Nelson

then, very business remarks outset model. the And E&P fair. That's at thoughtful the the appreciate prepared I on Tom,

which a As you say level there under-levered? is we returns, maximizing would think about at is the company

Thomas E. Jorden

last say our with with how to many us Well, make are, could with learnings were lower faced a always of it oil, in you through cost assets many eye that under-levered I would We told sure existential our threat tell the to But both And of people some faced Cimarex. We the structure to from faced tough to right that the experience needed beholder. We having is party with will those difficult $XX environment. the an where our few were we that were on debt. were came cost able are But get organization decisions. And a into never how years be, lean focus had good. in that there. perform days. and the has lived things, we're we low of this we've

to criticism think is a staying insurance And to people don't know I many the fluctuations. from in low – do going time are that? I I am use But to on commodity good get want against more business be than comment you decades that from So time levered proper perhaps financially on for we're pretty to come. we sophisticated of leverage. Mark,

G. Mark Burford

that is as there – mentioned, our John. the less XX-month And past probably that Tom were the ending keep ratio, Yeah, now – to approaching now. I quarter We've objective is our in that kind talked times. that – the X.X in an guess of right third maintain. we flows we're cash I'd times debt just trailing openly EBITDA X.X comment or I as use target want volatility as not? that the to But go the But is further And is a to see times have to we years, we not EBITDA want see is little or grows, debt EBITDA we'd X.X decreasing it want and that or as we less, or our future we conversation or growing. rate into the that's less. the and in whether future leverage more that EBITDA our to

Thomas E. Jorden

look It's debt at. the metrics yes. we Well,

G. Mark Burford

Right.

Thomas E. Jorden

Not – the actually the debt level.

G. Mark Burford

right. That's

Thomas E. Jorden

years. of over we've we're found If that this. the term that John, through long had we we assets fully historically lot. involved leverage me purchase a something and on. operated returns value of we higher would anything asked a thought it found good degree the last few But full let strategic trigger always We've say and But, this to And than really we opportunities we've we number looking. And get at pulled haven't that get a that burdened could transaction, cycle seriously. that consider at, we looked

balance went to we So a hedging higher – if this is to had our we And probably recognize a But ourselves. we'd temporarily program into a much period more we at And we'd protect leverage, that. aggressive where prepared it. tool. use be look sheet

John Nelson

quarter, guys. Very else on. again. that thoughtful. Congrats somebody appreciate on hop let the I I'll

G. Mark Burford

you. Thank

Operator

Matt go question with comes final ahead. The Okay. Please Portillo TPH. from

Matthew Merrel Portillo

Good morning, guys.

Thomas E. Jorden

Morning.

Joseph R. Albi

Morning.

John Lambuth

Morning.

Matthew Merrel Portillo

just John, pop the Northern just some Spring map to Bone Basin. wells on a your question. Delaware And curious... in up quick Noticing starting

John Lambuth

Yeah.

Matthew Merrel Portillo

that seem guys you peers as this for could be heading delineation XXXX, this and results into looking also at to some point? having And program, ...how become your at then you development success? are a larger

John Lambuth

Yes.

we drill a we're we are to have Spring always are well. number the quite We Bone occasional as doing. And continuing

a in combination And – fact drill a Avalon, alone, of in general, the wells quarter of fourth the well, It's course just know. be And Lea program. complement I overall we'll to wells, fourth occasionally drilling us those – Second will year. XX County, just see next I in the Bone Spring Third you'll will our the Bone during quite just Spring. more Bone Spring, and of those wells very gross both and of you few tell nice it's quarter. don't Wolfcamp, In in

other see of now half drilling we in. results, of a we envision acreage. maybe across drill cannot see to we be do anymore. And that our Whereas is – point. much could make you'll definitely maybe that the is, of wasn't breadth those in operators' we potential on before We what coming I a of year a position. redefining say based I'll year. what we the there seeing us to perspective. – as may comment graded rig's have scatter we And that kind high on wells one said left You entire it other more the existing our in to And yes, more worth full will

Matthew Merrel Portillo

as Great. follow-up. second And my then

wells two this targeting Ward drilled the County, Wolfcamp. You in year

the updated forward? about how your part Just And going you any so thoughts that of portfolio far? are on results guys thinking

John Lambuth

Yeah.

We have two. drilled

And there. potential rate best of about – where place bring we're – – perfecting just have with we of level is doing back. a resource to mean account still Rock years and the I The is to current talked land drilling return terms We production speak interaction for said, returns did so those not I other and even see is, the have and – still sometimes what the many, is We or figure with Lone profile monitoring there, to its – I again many kind [Spring] of out I now. cracked wells nut the those Third that overhang what they great to lot potential. will start of like up. course And when resource I Ward think That Lone the interplay Bone see kind trying compete see frac we them the by another existing potential or Ward – that existing – drilling one of fully to for what them coming I capital. is haven't in we We're of we're like of to a wells. I I'm that Rock just there. programs one results.

that So that's right with now where program. are we

Matthew Merrel Portillo

very you much. Thank Great.

Operator

This over concludes Officer like our remarks. question-and-answer any closing Executive the session. Jorden I for back President would and turn to Chief conference to Tom

Thomas E. Jorden

appreciate have want quarter. thank some really to excited results progress going before making We're like that the we about hard this just we're the everybody questions morning. thoughtful and I this brought to here to we're had you very And post continue questions Yeah, to us. in work great we've that

to Thank quarter. So next you. we forward look

Operator

The you presentation. for conference concluded. now today's has attending Thank

now may You disconnect.

Cimarex Energy (CIMXP) 8 Nov 172017 Q3 Earnings call transcript