Cimarex Energy (CIMXP) 9 May 182018 Q1 Earnings call transcript

Company Profile

Participants

Karen Acierno	Cimarex Energy Co.
Thomas E. Jorden	Cimarex Energy Co.
John Lambuth	Cimarex Energy Co.
Joseph R. Albi	Cimarex Energy Co.
G. Mark Burford	Cimarex Energy Co.
Michael Stephen Scialla	Stifel, Nicolaus & Co., Inc.
Joseph Allman	Robert W. Baird & Co., Inc.
Neal D. Dingmann	SunTrust Robinson Humphrey, Inc.
David A. Deckelbaum	KeyBanc Capital Markets, Inc.
Michael Dugan Kelly	Seaport Global Securities LLC
John H. Abbott	Bank of America Merrill Lynch
Jeffrey Campbell	Tuohy Brothers Investment Research, Inc.
David Martin Heikkinen	Heikkinen Energy Advisors LLC
Jamaal Dardar	Tudor, Pickering, Holt & Co.
John Nelson	Goldman Sachs & Co. LLC

Call transcript

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Operator

Good morning, and welcome to the Cimarex Energy First 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. ahead. go Please

Karen Acierno

presentation welcome call. and website Cimarex quarter to first afternoon, today. Good updated to presentation conference this referring be An we our the was XXXX call and morning, will the during posted yesterday to

will our to of results forward-looking statements. materially from what As actions discussion A cause could a contain reminder, actual differ number we discuss.

and business. factors our on XX-Q three begin latest will with we and other As of well filings then on our Joe associated our on Tom update our forward-looking XX-K production risk CEO, prepared drilling will always, operations, the our in Albi, You news activities, including statements our Exploration. our disclosures for for should months And And XX, read filed COO, from remarks update SVP ended we an from with releases and you costs. followed XXXX, and Lambuth, the March an overview Jorden, by results with yesterday John

Our is here answer might help CFO, Mark you Burford any have. questions to

feel in we you your With to hour for to that, questions allotted turn have ask during call, call that one can back if to of we'd we and follow-up, you question over get the limit the accommodate one the that yourself queue the So free more I'll like. Tom.

Thomas E. Jorden

equivalent over for off to day. of income and first day, was an which net averaged a morning. the Thank these the from sustained oil to production at operational on with peak start per a barrels rate results, per $X.XX XX of delivered Cimarex XX,XXX barrels our this per we adjusted we first have XXXX. production barrels averaging averaged reported you, XX-day wells day, strong $XXX a X,XXX quarter. In oil strong average welcome wells, guidance. We XXX,XXX XX achieved call the equivalent per or which IP-XX wells and Cimarex-operated X,XXX solid financial oil Karen, the barrels per day. quarter These production during new of quarter. Oil reported everyone had Oil million high-end the share. of Delaware Basin, to We're of of

guidance to XXX,XXX unchanged, year and barrels per remain midpoint. of equivalent for average capital be at the the day midpoint production anticipated $X.XX capital the oil with production Our projected to billion and at

We that we a look to projects have in. of underway results as discussing forward number come

is programs our factor a County, and update and are development few delivering a Lea guidance In within in not which the Thus year their John significant Our are for inflation service been underway wells, as as development of Lea the range. increasing forward moment. in you on County, majority strong we costs to program are promise number has use Reeves of progressing XXXX. decreasing that County, efficiencies included a results have far, XXXX, modestly discussing we of stimulation will our wells overwhelming projects these rolls capital our we of costs. Delaware local on. holds our of The County, Basin, sand Mexico expected. are look whose Furthermore, well, New results a multi-pad in Culberson we the

surety also of volumes our announced commitments give that marketing us through gas We XXXX. flow Permian for

creative to and us flow will additional that our commitments these to find midstream Although confidence we takeaway engineering marketing through dynamics, of operators give flow capacity expect compression market. upgrades gas

current backbone revenues. and cash that are are project conversation really oil for our around oil development flow our our insurance gas environment, are of gas, be to marketing revenues XX% volumes In While the these economics. of projected the revenues, Permian our our protects which commitments almost the revolves both total

shape good on in We are takeaway. oil

our reduces backstopped oil purchase exposure We pipe, and our which these pipeline have on leave Over with marketing volumes strategic firm volumes Permian local at index. are field have oil partners our takeaway. of the core trucking who to in areas priced XX% commitments These our volatility.

XX% price. our XX% differential that is our pricing sales to basis of majority of the a economics. in models Permian differentials the our blips are flow and at are These Temporary hedged, to prepared of part are baked oil Although are we development index business index into weather. cash

adjust our our At As time, firm ark, our not with conditions boat. dictate. flexibility retain a are we an I this CapEx we're production CapEx organization, tell holding party We guidance. as previously-announced and to

good to at to that the would year it's apply defines delivers Right interference, we're goes. ability that their results change, of to capital and beginning that as execute adapt by conditions development fully-burdened prepared a make as now, the configuring returns. projects she to that be a we execute projects, well-to-well steady stimulations science, complex continues Cimarex companies understand top-tier. science, program and changes. However, to driven year physics XXXX full the by these deliver said adjustments our of are We on work that and be as cycle, value, maximize

not and interesting, headline focus. there are decisions, have consequences wells strayed from but primary fun are We investment that Production and drivers. not of growth good

turn over We the here for long With are to the call run. I'll that, John.

John Lambuth

Tom. Thanks,

XX% drilling in which in new the the XX Permian gross in quarter, and $XXX quarter million XX production wells and We three region development first capital currently of in our brought and are XX% Mid-Continent. exploration of during the completion Cimarex the million $XXX and was operating Mid-Continent. and was Permian on region of with the XX rigs, wells. the During net spent in in invested activities, invested

I wells turn Now, quarter, brought we first region specifics wells during start online Avalon region. New the Lea to in where nine will two about each the including significant some County, I'll Mexico. Permian in

XX% XX,XXX-foot oil, NGL, the was oil initial gas. of an and X,XXX equivalent rate of had XX% which lateral XX-day State Coriander One of average barrels peak AOC day, X-XX XH, potential them, XX% of per

final these average X,XXX barrels rate learnings of peak had equivalent lateral The of While from the Thyme per are spacing in gas. wells section the the stimulation for which finalizing six FED benches NGL, the soon-to-be completed critical Avalon Triste within Avalon and the oil per section. XX% pilot, XX% wells X,XXX-foot proving two two oil, XX other, results XX-day day, is in Draw APY testing XXH, an and well XX% design

laterals spacing the plus zone landing These equivalent bench which top in to of are per two production Wolfcamp, we adding on an quarter. early spacing to development, the between Kingdom a be operations the Wolfcamp, Lower refer by C. wells we of completion. which currently part Lower XX in fracking wells both to Animal in June. to started testing have a decreasing Wolfcamp wells eight additional on in the end Moving where as third In on are County, These Wolfcamp infill waiting should the the Culberson used by begin the consists XX,XXX-foot section of the the of expected wells the zone tests

in projects section equivalent Upper County, wells the pilot, completions Another Snowshoe of to in these result Upper located development the later which testing begin wells These tuned scheduled important per for is XX Reeves Wolfcamp. in Stay later are the the is Wolfcamp, year. eight month. test this on XX,XXX-foot this

appropriate continue wells make the with investor optimal well presentation, As completion strides landing our of and we development highly-economic per development as understanding as in XX great design, designing number of shown to the section. on zone, slide projects,

parent located only shown completion completed infill wells a which but not chart, completion. XXX-day design, wells X, XX% XX Reeves As cumulative only they with the Upper the actual Gen that which first same did have bar design, significantly was County. on these in our their also parent number well wells, Gen projects, achieve on complete of to outperformed completed the Wolfcamp with latest our generation X are single-well of Not used XX,XXX-foot also was ten production

gained slide can of this wells and a that pad which the and And XX. is X completed fracs, a infill You zipper of efficiencies Gen Gen performance XX% parent view X drilled drilling cost, from well. were because approximately on at the

consists as of were We've Completion landed as a from six development Meramec to Meramec. wells own Meramec on in completion to This results of section. on our for this Now design equivalent spacing eight development Leon and into the benches learnings planned Gundy, laterals learned underway XX,XXX-foot development zones pilot, completed two of Mid-Continent. the incorporated non-operated lot pilots. recently the Meramec These other the several well Steve projects spacing the O XXXX. project, within are the and per is which the final landing operations for

begin Woodford is the September. completion JD operations production the second in projects late development will project across spud early production in the are Hoppinscotch well pilot, We our month, position. of And end Shelly area, in three on turn with that, other O Lone call over this to Furthermore, drilling finish spacing acreage begin planned expect to With scheduled Steve to Albi. first development June. with in Rock Rock expected in by First from Joe Lone Meramec to XXXX completion underway the called a the I'll operations August.

Joseph R. Albi

for I'll Thank and today. full-year few service joining takeaway, first on costs. thank with on and and finish guidance, XXXX comments our a you, call up John, you our touch quarter then, all LOE our I'll production production, Permian

for our came equivalent As in upper-end quarter of our in guidance volume Tom and equivalent We XXX.X mentioned, regional production MBOEs day. a production at set reported the both solid new company levels. with and QX, we of records had for per the above

XX,XXX With over and XX% QX XXXX areas, production QX to QX gains of XXXX growth over again, in both continue XXXX. with production day, in up QX net both we strong barrels over nice and activity up X% Oil, the the see and were XX% With Mid-Continent. mark, a the our over we Permian the XXXX. QX X% oil drove

Our again, to per first was was MBOEs up our XX.X day ago. role significant XXXX, a up XX% oil growth, quarter in QX compared XX% our while and production XXXX. QX Mid-Continent QX per compared as a Permian XX% year of XXX.X played volume up our Mid-Continent as up XX% volume MBOEs regional day volume with Oil, from to of Permian posting

that year, followed the QX. our with XXXX MBOEs majority completion in shifting our XXX ramp QX strong planned extending late for quarter some completion an of and the the QX, day QX half timed XX With half of of in a per to by we're on the relatively to for the is into net year, to XX year. production strong flat our of MBOEs last production second first activity to a into of timed guidance day. of estimated the and discussion timing second Moving slight projection Similar with second books, per for XXX be our the full-year production call, the year, half and maintaining the beginning projecting in to we're outlook, completions later

we're be QX to ramp, barrels XX% over oil XXXX our our the oil of projecting XX% With QX, day. volumes volume to XX,XXX up per

a per MBOEs the our day an resulting land day, per MBOEs we're XXX day guidance XXX XXX in words model XXXX with production on XX% our QX, guiding XXX equivalent of to forecasted to per day, XX% net to late ramp production. Few full-year range range With of year increase Permian a to in MBOEs that's MBOEs volumes per over takeaway.

takeaway move of the With gas, out at team has to NGLs oil, of product and our in basin. the the work marketing hard been ensure, recent our Permian, tightening

terms side, of XX% than residue through XXXX. our On volumes gas the October for more of to agreed of Permian the gas projected we've sale

established have place majority to partnerships oil either Permian on pipe, processing the Our And we of sale and to where is is arrangements beyond. through our flow XXXX oil long-term production in in side, the and agreements linked NGL or the facilities numerous purchaser-backed, place. oil ensure strategic firm across on the basin

we evaluating done great the oil, get remain to near Permian of well, team Our all to product our where coming and NGL they as equally has focused flow currently marketing is Mid-Continent out ensure, means a flow and gas, to out long-term on market. ensure, to job the flow of are to

Paso, Arr slightly El our the in QX, differentials lifting the a costs and to basis, the still lower-end Our be and the realized posting Waha BOE, the QX we (XX:XX) to Ann to We and but in product flow. intact, Mid-Continent some down our incorporating is saw $X.XX ensure On OGT of completion year, price the in both Mid-Continent. during however, $X.XX and Panhandle Shifting we're range previous goal and we potential in came of BOE. and labor, differentials the had our in gears and at exposed in guidance and from compression, basis costs items OpEx, as per creep XXXX, guidance per for cost the lastly, guidance pressure Permian, contract Permian the the will in $X.XX tightening the to and with of during in our books per year. $X.XX costs. midpoint rentals cost And the remainder comments some QX on we're $X.XX our to the $X.XX and such lifting to drilling keeping range BOE quarter,

On increases day to such during last well continued $X remain sand million with small the our and a current Eddy rates we us Lea sand Permian Spring anticipate and Mexico well, equal million per sourcing, relatively levels facility with in our to on million. as range But primarily provider check, which during QX. and the of million cement areas call, deeper same million range frac quarter, sourcing, should X-mile ranges $X.X lateral and Spring in logistics, some depending $XXX,XXX efficiencies to our that run million. our see quarter. to AFEs still begin drilling With and with to our current side, Bone ancillary current well northern In we've as Wolfcamp running $X.X drop $XX.X our check, the million seen by our with sand the again, million wells, local Bone focus sourcing approximately services to range $X mud pressure in New anticipating And $XX the frac are of to the per dropping we procuring mentioned with the in in arrangement components quoted of the completion cost this Tom million In our With local Counties, of the area, to beginning on Meramec exception to our $XX.X million. completion costs rig Permian, $XX.X Woodford remaining design and our Cana, to a per we on AFEs AFEs AFEs $XX result on here call. our of interval, service $XX.X the we're the design, in this drilling May. are development X-mile X-mile last benefits regional running savings in $X.X to continue here AFEs million million quoted are X-mile around $X.X and range, $XXX,XXX to with

first So, quarter. had in we solid closing, a

continues focus sizable liquids-rich oil in to the Mid-Continent Permian Our generate and growth.

up ramp, a production with Projecting XXXX volumes forecasted year from to beginning XX% unchanged. Our guidance XX% remains XXXX. QX oil strong QX QX be to production

another here anticipated Our excited sand marketing taken further to takeaway local check, either lifting for and not remain XXXX with in development costs of about the remain yet steps programs. XXXX in issues bottleneck become year do QX, ensure implementation with or for We And we've Permian well XXXX. Permian the sourcing. on in costs reductions prospects successful the a inside

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

Operator

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

Stifel. with Mike The comes from first Scialla question

Michael Stephen Scialla

brought forecasting what first kind quarter the actually in production, for Yeah, good slightly, I at guidance, in morning, Looks about ask you on flattish, planning everybody. adding think first like of only had first looking some did particular, you're wells, did down more to quarter second XX you quarter in on your wanted you're second growth. the quarter quarter, you wells. with XX the than you in you when wells I net sequential

I or can your is simplistic in Just that too approach to quarter that? guess, conservative, that guidance second to add you color wondering suggest is any

Joseph R. Albi

significant shifting the timing at that was can infill last in eight to project; on We're and XX latter our in really wells six I the drilling project. wells. wells, Triste and currently just wells primarily think, that with, I'll quarter, QX. what one due of well well of you not really is and project, our guidance well well XX regard of relative the on change eight the were that's one XX was scheduled quoting, And well year. when beginning all first in it associated first the at it's Hallertau, of of the the eight all eight wells eight at driving of affect have virtually half and with half We issue that our Joe, of completion is of to all. The the profile. not of the the eight to program about We've completions the half guess split well our question the Last Snowshoe, I standpoint got year. year the half year we'd And Kingdom we type This I into XX during projects; of the have an wells production which from with projects; here Draw, in is guided Animal six in answer but of the we to projects, a come QX, one well that seen primarily mentioned year.

the on a going don't into count we profile QX and All The we're just of to coming fact, we the business alluded profile capital Tom is of here run are X frac result return these – fleet June. get, our to wells on majority capital our with in up to, what and our rig line seeing in run on what we're here, expecting projects generate count deploy. up that. fleets we're rate QX of you're we in that And going the our and to of out of and it based production our

of the were of QX byproduct simplify dropped our about it or into fourth model, those I'll first other in of further moved you The I XXXX had move know it, and wells number of net that we out original the previous those a quarter. schedule. first questions three a wells guidance. wells wells becomes didn't, quarter line say at bottom look is, and if and us wells changing, previously to to either counts profile Seven and Two reshuffling got change. our Karen's our So, the with what quarter our XX compared some of of moved of a into drilling didn't of year year in as ones well moved QX what or guidance

Michael Stephen Scialla

Okay.

Thomas E. Jorden

just Mike, let me add to that.

tried change. guidance, of Certainly, simple is and can a that's job, of schedule and do I things. complex. then is to well. it's estimate well that's our factor the and going But anticipate we it's to our a Our per really our function production good two sometimes, don't guidance And sometimes, best sad. pretty we second

our And realistic. in report think our trying I make Well, it what produce try I model we're with hope We, us so, to the on don't quarter sandbagging, see give to conservative? not stimulation wells guidance to playing realistic. advancement. we're some I future love and certainly, is upside excess think that around you I'd there. stimulations it's guess. to that always there's based extent the best we're some of in that our just we But But

Michael Stephen Scialla

there that, Anything about to I acres you on volume Thanks. can perfect. dedication? that or Okay, And how commitments minimum sales ask associated gas your say works? want any with agreement. Are

Joseph R. Albi

number it. know questions be I there'll of Yeah. on

it cover a at just high I'll So level.

Fortunately, have with works certainly our Matterhorn Triple to markets, in we Crown favor. and which in place, multiple our systems our access

LDCs, I've who job sell either has gas and very, or tailgate sold. the directly get firm take-in-kind very or tailgate processors there on either can with in of category out we good Tom and who been for plant basin. during our to quarter, and we've as product feel we've purchaser-backed counter-parties mentioned, reputable is end-users, directly gas; the gas flow, same make gas the done We the of done that As the are that sure take-in-kind a gas put transport of purchaser What focus demand, transports hip plant. surety we selling of have of our processing that to that last I utilities, at a to we're out firm have have the the residue processing or gets like the purchasers firm their a or either the in to pocket

look gas was line XXXX volumes goal and and or with to marketing of XXXX be firm not only our drilling team was we programs. We base the under potential our have our in to those projected have firm So, we sell of get recovery looked one rejection, profiles, could basin. at up there that the We at our out production parties of purchasers. confidence forecasted took put wells, of and a to processing our but facilities able place our each residue that what to have

Thomas E. Jorden

Mike, we've committed So, – there's volumes.

XXXX those They through commitments. So, will as working pre-commit We Joe not be we're be But to And those just XXXX. volumes. to to deliver they're on said, going estimate volumes. long-term we do volumes. sell

Michael Stephen Scialla

you. Thank Great.

Joseph R. Albi

I don't this mention for but of day And case. team. that two years typically might our we marketing take-in-kind a did this just of out We for is typical go in business our sales,

Operator

The next Joe with from question comes Allman Baird.

Joseph Allman

everybody. Hi, you. Thank

Thomas E. Jorden

Joe. Hi,

Joseph Allman

the On And Slide oil about pipe? on other seen flow then you regarding folks kind actually XX% you physical tightness. talk could XX, mentioned signs tightness? Have – Could does takeaway. you you that of recent Delaware the not of also, Joe,

Joseph R. Albi

this Joe, is Joe.

about. And be seen on the perception not oil the signs back the there's you're oil is at talking have I piped there a because and out oil, some to trucked the take may safe that risk. a step want We

pipe of trucked majority on entities pipe and flow purchaser of that our albeit out allowing oil committed our that out If As piggyback parties we we're out to strategic and able partnerships pipe. in they're basin on piped those we're we've The basin. selling the we may those although, selling that and oil but we're where of have of being majority to volumes case, The have same of with have, the one refinery. local entities arrangements. have majority also to pipe those volumes is on to are vast trucked that on sold that agreements they on volumes to a we pipe, pipe the not space not, is a be the the have that of us place, that basin with these mentioned, the oil they're in

seeing on the trucking from the a end of it standpoint out risk we're doing. at to So, some costs a side the trucking up getting or isn't maybe, basin. what as standpoint risk volatility we're It might what

Thomas E. Jorden

look it, I field what truck, is what see percent and look what management at pipe when it more volumes think at and on of about Joe, know I in is exposure these we on You and weather distinction address don't I necessarily trucking Joe it, it constraints, on But backlog. other don't as Joe question takeaway. also described, think of delays to we as I'll on basin percent a terms and let that. I has your view physical

Joseph R. Albi

we pinched concerns have tightness. bottlenecked oil, not either Joe, as side the of Yeah. been result gas or or back NGL, on a about the

Joseph Allman

some more And X Okay. we Gen XX, But a follow-up. that are That's wells infill not are wells. Gen X helpful. understanding the in wells to then Gen we X described child On is parent it wells you little you wells this you child impression the those the as drilled is X wells those parent the and Gen Gen to wells prior know X of infill infill see bit. see My My that years. a could describe slide I fully, wells.

bullet wells. wells. XX% the specifically the seems your yet of infill the Gen think actually last I say to wells are that slide And that parent X on

just bit you a that could out better? help So, figure us little

John Lambuth

is this John. Yeah,

wells showing are chart, generation, You same within infill are statement. wells correct in the that that the not the on of section parent we're that same is a that the true

a) quite along rather infill was wells, the a the not lateral. generation the by as is just I it's design we frankly unstimulated that productivity probably what encouraging designed believe was standpoint, very leaving we rock cluster say in spacing way older not that that the efficient because terms argue older of well frac we infill from of would would mean an those generation actually in However,

it instead probably out grappling pushing standpoint. frac further was So a from

parent Gen we So, well would yeah, I our as to are would achieve because these would for that, just X still infill to same in they as that how that to spacing of result. we next X a type design argue wells infill when And expectation do, Gen every some attributes the is. ways, develop performing we that wells go well, have good

it most so as later as think it in see infill that we those reason very testing to number design, other kind as result we like keep of have is beyond normally in of maybe wells, thing probably that of spacing, we eliminated we projects as far. tight I would one the do mind was what Another is the you think generation which that particular why, achieving rock of yet The proximity, about would the is, and section say and again, still acceleration way let kind unstimulated rock that those we wells, so XX% geology. clear, see we with be XX%, me in I same parent even this along stimulated, we lateral, were same it stimulated similar we're we've much much that the is, don't again, it's I'll we important think new say as being achieving last which very of think of

think far. encouraging we've no, there's seen so very a So I from what chart

Thomas E. Jorden

just associated XX, that that were with Yeah, generation. When look infills those you It's slide Joe, infill, spot than parent those are better your observation's wells the wells at older though. parent wells. on, parent the those

this out we all Gen entire of the X So, in is population making the did and slide we the at we wells that looked infill parent population. in separated from

Joseph Allman

Yeah.

Thomas E. Jorden

we a call questions That's optimum intense the of looking infill-to-parent spend for, here that. a of child could ratio at about the Cimarex. And been scrutiny of subject rest there's we're on that, lot the

Joseph Allman

XX%, so are X? to that parent wells to refer does So, are that that infill clarify, if could child I that also Gen just

Joseph R. Albi

let infill parent a you of wells the same frac. generation are me XX% The in of as as X, of proximity basically these parent these wells of projects. XX% infill Yeah. But see lot is is from the all chart, cum the similar be the clear, the the

it's spacing some said, very ultimate observation but from especially in the outcome that least our expectation standpoint, a the done with start is I drilled factoring And infill multi-pad at to this date, to you good outcome. zipper we at. as is So were fracking, we given that is infills the by now, the again, it somewhat have there's we also terms know from of a relative dictated we pretty XX% of, what economic when realize drilling when a development cost savings go in, right good

Joseph Allman

All very all right. you, guys. Thank helpful. It's

Operator

The with Neal Dingmann next question comes SunTrust. from

Neal D. Dingmann

do all. Maybe large John, slide between are laterals? and John. Will you talk stacked and a about how then little looking the you amount some Or for opportunities the best one, Good number talk that? Woodford. see first about, here XX going as at Could prospectivity continue stacked my have the more sort of is go of you bit that do how you're out for going certainly, morning, guys, maybe that the to you tackle to just a to pointed that after Meramec where you that? you question

John Lambuth

see able pick for area successful Meramec overlap Woodford where very I results What call, landings outline acreage with window is significantly Woodford. and Meramec XX our are Yeah. the think last on And and as Woodford orange. Landings. see you our multi to large with a that prospective we Wolfcamp And in NIV, position, we and call stack there of both representation there nice Meramec in blue is we a have in slide drilling a the we're announced, fortunate to an XXN-XXW have demonstrated we have indeed

if that at, year. ourselves especially up particular for be. we're project some where in in just now a where what area we remarks, I the we into But Meramec ultimate projects my we'll the really do moving later with So, and the are as of this more Meramec O comfortable development other Steve with scheduled have testing number a with said spacing back get prepared is minute will to I one is additional

have that XX wells have XX Woodford learning said, testing four large of some even been some we'll still a that where the such or of Coupled may will we stacking is, decided be like to We It we large it question. development greatly and essentially in acreage confidence very we from the large, I gain and can on we the on, pretty year. answer already development convinced Meramec And position, the we looks brought with and spacing ultimate think sure to section, And to for we pilot one-size-fit-all this make challenge. not variability with a for can Meramec a design feeling more right. pressure. for that we I maybe the Meramec, because your it's commitment see that is Meramec. all type there pore projects other pretty based we large range in-place testing anywhere spacing We're our earnings that. part, wells to that to be benefited that call, us confident there. much appropriate in from It's hydrocarbon that hope volumes, things we're daunting think of will on move when that's I last up be capital the be now XXN-XXW, it that get want forward again what as a

Neal D. Dingmann

called two have great and No, benefit good. with the Perm. was Tom, optionality it sort blips, having or game? or of And not of allocate I'm very had, temporary the sway to you that having to resources to more again, that follow-up see know, you I Basin Midland – you you no, get Midland towards When or and Mid-Con, you the players cause the the now on, does Mid-Con right towards either want as maybe and the as that seeing in sorry one you then, go just all do dips the might you're in just Basin,

Thomas E. Jorden

clairvoyance. need incremental in work And perfectly is this all short-term that about game basin I volumes to they might wish and the one capital steered we've yeah, differentials. predicted me months We have just collapse Well, right we pass I these redirected a seeing efficiently of degree perfectly But off, going capital into. past, ago. longer-term are talked game, XX three markets to a that on and although, exploded call that projects I'd tipped we them of differentials the here, love swings you the we're don't be as bringing had that XX months, have – to fast get to clairvoyance. our The of so mirror into is and have had lot these

Neal D. Dingmann

Point Tom. taken. Thanks,

Operator

from The Deckelbaum with next KeyBanc. question David comes

David A. Deckelbaum

Appreciate for Tom, time the question. morning, the John. Good

Thomas E. Jorden

David. Hi,

David A. Deckelbaum

side about allocating with you're yet the it thinking in the and is that agreements you're on fair? where so how to, marketing sounds Just basis flow or curious that the you bringing far, place have wells have timing, like that changed, logistics not online, assurance, or or capital

Thomas E. Jorden

we're we're No, fair. is our it that we've holding we're our we're we're And looking now, managing flexibility. Well, remarks I managing sheet, got balance Right managing said my situation But in capital expenditures. firm. opening some cash at this our flow, closely.

David A. Deckelbaum

questions you it to those more wells to more in ubiquitous now, to projecting deploying is And that wells going or a Okay, differently wanted be Delaware. in-basin that. is of of be like And a than it are I projects, How legacy sand? I sand completing some couple be right like across would the the with of here pilot some to stage? going some appreciate there you of about you're in the especially and the you and going to larger that, going savings ask be are

Joseph R. Albi

it Avalon was This need annual at that commitment side – was would is now. XX% felt versus would Joe. provider what Permian would agreement that. based be doing well But that other program, range program the right of I terms about to say to ended through The local utilize could Wolfcamp an needs completion, be to our Bone sourcing. I'll be volume through a on provide I agreement we was feel comfortable in would our current commitment get would local and an we would majority can't and And would we we Spring great those the to on of Sand with what service And well, for of that come what sand well. X% our volumes, provided volumes be up sand least other as our whether sand on the definitive assurances with take of the detail. us to into that one. intent each volume

I numbers call. up where the came the with that's so, And that I quoted earlier in

be the well wouldn't It's program it So, Permian or type for of general. one in another.

David A. Deckelbaum

you the to that to deem you Does inadequate? be another allow take of if source sand results agreement

Joseph R. Albi

flexibility. that Yeah. had We always had

David A. Deckelbaum

Thanks, guys.

Operator

question Global. Kelly comes Mike Seaport with next from The

Michael Dugan Kelly

guys. to... Good Hey, I morning. wanted

Thomas E. Jorden

Mike. Hey,

Michael Dugan Kelly

slide how to level, about wanted your get even to on parent-child here. performance of look out? half a these take think and this potentially the mitigate at could I between Thank interested this. then one year completions performance the and to One, XX a does bringing infill divergence expect questions get you're you go see to kind you just you. the to well parent-child one the pad some further of on back just that two and sense wanted years degradation in kind as or mitigating of wells XX% together I this do delta you if I and And got stay if you all potential two, degradation that mega that? doing, by are at

Joseph R. Albi

we wells expect we regards the ratio forward, to these fully Well, to particular about with drilled develop were in hold do probably would go the recently well expectation. expectation and same to section at That from I X expect Gen that I section my that infill in would that up. same that our be to yeah, spacing parent And here infill. going with parent achieve we that if it would another develop a

that's hydrocarbon in spacing, same Now thickness, place. for the same same

appropriate we not But to look is resource economics argument then ask you at I'm those is the what infills where into all fair some are ourselves could time can what a sure say, run leaving equal be problem that and you so, behind. And we one to should spacing, parent. that is arguing the you're be carefully.

amount if we returns. recognized have too your go far, there some major can you overall be you go between always should we of can and So, in that infill you acceleration wells. and see do degradation small project argued But also too far,

And again, we've an to to be date. of parent. to given think from one what a close getting for say a we so I snapshot result we're type would has would done here this representation an infill what optimal

parent, just to have yeah, the to I with dealt development don't we think perfect I trying you to is address a have you try world, and the your just idea many go boy in that question of megaprojects, even think be other straight which have for it'd parent-child great have lease reality of immediately never can start say us relationship. the But we that in go straight us, I developing majority and expirations. then sets my if acreage to vast worry a about to and

get little in to let do well HBP to we then we looking back on order put you get impact terms drill has well ultimate at acreage, to and that have child don't cases commitments as is time hold that of we biggest where bit in that of internally well both we parent major having an develop, that those we that to say yeah, that well, have time, have us when like producing across that in perpetuate feel as have we different that me not requires variable acreage many to a We and In And status. that relative and intervals of which to to and a benefit one a the it's but parent that also very, do parent recognize circumstances the been the we by to parent-child initial spent lot you more there, the probably this that relationship, parent stimulation develop. of then relationship. has it's type well finally, factor all time parent quite that

I you with some well. wells think to that understanding don't pretty And to we have our I in want know add even will I do, relative that what if aggressively have moved very our feel Tom, confident parent if such we wells, anything. think ultimate we parent sections infill

Thomas E. Jorden

these a megaprojects. to to to add out the there is thing The that to all. on comment lot best circulating I only development there's them I we listen philosophies of different scheme. know want And on

there. it well count of a questions back of everything of the because down? down players why's one many backstops Well, is the a count that lot your mentioned tons one track month. well of development on Joe shifted of about well one side program our and not call, a respect in We're for are of motif, particular the you earlier one-size-fits-all lot espousing philosophies gotten we've have that, We that heard

when whole the timing you of of megaprojects, the cascades these interruption do of so, project. because get mechanical you risk kind delays that any run And through

also first delays and investment production. first You have between long

you John issue, the also own of yes, come manage because, big megaprojects, but parent-child their as do help problems. fans indeed so, And said of we're they they with set

lens in decisions at individual really an project. look on based each we So, we'll individual and the one make

question good we it's and So, one won't assets. our answer for have

Michael Dugan Kelly

that kind you've evolved front. Yeah, marketing checked Tom, near-term strategic appreciate But focused you'll clear, I'm longer-term out how any on strategy the change The just or the of flow all, that's me curious marketing the Thanks. assurance seems front at that Permian long-term? on approach discussion. think in and follow-up Has box. And fair. pretty I for of the you here. it's

Thomas E. Jorden

flexibility, been we got a and the like you in would Well, stories wedge, all avoid situation environment, to where far we your we're see in a caught record marketing you've to of long-term have that. commitments really mean debating We your a you peers that, here. in cash We're going broken and down you volume you if flexibility find limit commitments don't I flow deliver. price debated have time. fluctuating sound to commodity like our yourself can yet people where can that to fluctuate seek to landscape and volumes very into the look have these long-term have

flexibility our to and we'll long-term want typically preserve avoid commitments. we So,

Michael Dugan Kelly

Understood. you. Thank

Joseph R. Albi

or to and Joe. drilling if those I past that methodically under volumes of – at type to committing terms. make in follow-up into, a start-stop committed the or program would we price feel be volumes oil production, with of extent locking projections either under understand look basis want comfortable we What where have for or in the on reasons. capital needed we we is we that that them, do too, gas to This on may depending

Michael Dugan Kelly

Thanks. it. Got

Operator

The America next Merrill of from Leggate question Bank Lynch. with Doug comes

John H. Abbott

on Leggate, Good call. morning. another This is on Doug for to hopped looks John Abbott Doug like it

questions of us. Just for a couple

for X, have Permian gas the you in agreements in through October First, of sales place XXXX. your XX%

have pipeline some the apparently such your come delayed say XXXX, for end happens is expected that. if for You outlook, the Gulf which Coast at reason online beyond place of year? as What of contracts still Express, in to to half were by

Joseph R. Albi

call, marketing months the well and I this business in months, We call kind our arrangements out residue get the is Well. release with XXXX mentioned into of our day-to-day mentioned earlier try Joe. to This to And X for October to that, group we're these XXXX in as and think press sell ahead of but is agreements. I our for looking take-in-kind utilities. the to XX any these in

no, we And can't not just say, to closer that. we're XXXX, into creep we so keep as going We're ourselves past to go October. going perpetuating

every you all to We're looking or there's of past another out to yet I well. those. were there – players there with eight XXXX of saw we're And nine day Waha. in as you XX day over at potential talking around As turn those last know, proposed Waha, look are project at out cum Bcf a them takeaway of

John H. Abbott

Then for understanding is long increased Compared type returns from XX question our incorporating like our the wells. your to it results, curves talked the is lateral acreage. XQ color. returns you Appreciate and western upper Wolfcamp the Wolfcamp looks is on Culberson the about have your you're second to slide that where

a horizon, returns reflective four-year your over on three-year go-forward out look are how you As to these plans?

Joseph R. Albi

surprised do there. development the to pleasantly side to little our different. as results west of good bit We've – quite part to there southeast lot ultimate a there's acreage. But the of which we've been east Well western side. It's bit it's we're it and of east frankly, a change first the on done wells, But is Culberson side of Culberson we've with outstanding west, deliverability, a think development and a we little over I in off in just wells on is robust have the has great those of curve results. relative to terms go seeing. the It but is gassier, indeed performance recognizing look Culberson what the announced leading on like the lot outstanding those some a you're due block to over type what past even does still our how on been now

wells about decision Y major and in to additional go soon we moving that west called zones developing and will the I've sands, and to X lead able how The past in the up that what think have section like on other been further has we'll we'll is ultimately be that will looks that All recognizing final explore we'll mentioned have even some that. talk where may side be side to on that. we're about and thing landing the we're it what our I into investment the

Thomas E. Jorden

confident years. last actual mean, rhythm I I any would And the actual are we actual we measure those detail, and at that, we IP-XX one this to in years on repeatability. I wells, capital that back repeatability. the Wolfcamp call looked add and two three and upper And rates, our horizontal how in ourselves we capital any But we where excellent is expected, to and when repeatable some expected program, we achieved found on costs And that XXX-day last of rates, estimated longer look IP-XX and look ourselves years, a of and we recoveries. when ultimate how expected the half discussed expected are program and actual we've its our our say things ask went program kind at that when at allocation, is allocation with to to

and one. Wolfcamp we pricing are think with so returns our of can But go by lots in our as these there's highly is things respect we commodity control, control, being program So, cannot by. slide XX to evidenced we particularly things the repeatable

John H. Abbott

helpful. much, you very Thank very

Thomas E. Jorden

off me returns, are I associated well with program. returns level other we at looking just we're – think incremental before those and that Now when that make let drilling everybody repeatability, data decision, are grade prosecuting fully These ourselves we incremental topic. look when a this we, with at internally costs and that say burdened move an our knows we that's all

Karen Acierno

price to the that blended than curve And meant more changes type to it's one – in it's curve really show just more than in sensitivity type a area. represents

Operator

Campbell Jeffrey Tuohy The next question Brothers. from comes with

Jeffrey Campbell

morning. Good

Thomas E. Jorden

Jeff. Hi

Jeffrey Campbell

above State Slide way. producing discussion XX than a parent different says XX% that parent wells are County, wells and Wood Reeves XX% slide Pagoda State about Thinking XX the better in wells.

do how XX lot compare contrast in of So the and outperformance of the that with slide XX? discussion we've we slide analysis had a

Thomas E. Jorden

referenced are Well, the simple. are parent is answer that older generation XX slide being The wells. that wells on to parent

And slide any would parent actual so, Had trying that particular the on to slide wells more compared meant illustrate wells, a we're XX to But we an that XX. really much optimistic. comparison infill on ratio slide what of to is analysis evolution on their look illustrate to parent XX and infill not is we not project. completion

Jeffrey Campbell

Well, that mentioned times a Okay. XX. was the to think, of up, the just spacing slide discussion important of John, number I also follow and to

making Just than the about perhaps allusions have these was State there aggressive less more does the wondering he there? XX. – of or the – in Wood do spacing Is spacing Pagoda some slide State optimal some to anything

John Lambuth

and good we States, the we carefully. that's very now or State again of about John, XXX-day the over is right Wood time, that when spacing a standpoint. we that at we section Gen Pagoda generation I design perform even it spacings. it and I particular That's as feel We're we've see rather frac why those is test Wood a think frac, coming good infill type the tested results percentage, reference at and the optimal what very those do States but we to why, in standpoint, looks good, from same This longer that encouraging. said, Early the don't know from if it's watching at that but results, proof are and ultimately is still why looking the at. it. States particular where X per of wells the about look show very, that go wells Pagoda frac. We're XX again, I'll return of rate That's the given often in

that the again, we we that that where the doing show the it to what frac things here infill some design sure. certainly and in in coming right be our be proof Now when of of have similar and will next does sections for we'll will go be one and years next

Jeffrey Campbell

going And this sure question, I but up it I you if ask was with to Okay. Pagoda. wasn't brought

it's So, slides. well on but to outperformance, in wondered to that Does XX% about? I'm spacing outperformance parent were but I And fourth your still dropped the with quarter from that be nitpicky, current in significant was the slides noticed it? take what do maybe State not the Pagoda a to XX% talking the I have you

John Lambuth

in yes, be. there in would mean, the again of we limits I ultimate testing would that case stress I what Pagodas, Well, that terms spacing were of

looked I'm tell to X far sure expectations, not section. it we what you Now, But end very decision would again the based on would the had carefully. say say if wells would the we're But of I that so here like and of performance very XX in well on do obvious we high be based not be again have parent watching make. the it's for at a something our same to Generation would that will economic that

Jeffrey Campbell

those I you so sneak just wells strong. I to real looked one, Lea If one quick could County And ask two in wanted that Avalon,

zone? Draw is First of different Avalon testing as a or is that all, Triste well,

John Lambuth

same. No, no Yeah.

Jeffrey Campbell

Okay. spacing the this that two does those to spacing of Triste wells quarter the Draw? in on Avalon And compare how the you announced

John Lambuth

were No, on two different two much sections. parent we were Yeah. the they as would not wells, a announced, you test as spacing drilled they that but wells call

Jeffrey Campbell

Okay.

John Lambuth

is significance The that we wells stimulation as a landing different particular we testing as chose. those design were two of zone well

design we're here there's know spacing, wells details, now what – in be and wells, difference between of pilot, what I stimulating we'll a we good very in comments Triste design or in us cluster there's frac of of You actual in Draw on confidence two a those the those outcome determine. deploy my as two devil's want type said a bit soon. given of not to those which the The it a fracture have the terms from to lot believe trying quite standpoint

Jeffrey Campbell

Well Okay, on Thank color great. you. that. I the appreciate

Operator

Heikkinen. The with next David from question comes Heikkinen

David Martin Heikkinen

my taking thanks question. guys, Hey, for

of commentary I bring rate is cadence things six impact there program the if when of through level think just like And be, would opposed whole any then the wells of have think as differentials quarter, the value for as think And you follow-on push cause on then you program, with any to or your when long-term creation micro a months, decision-making return wells well temporary that being blips online, these you choose about were deferring to months? in well, you the cascade to is of interesting. you that months, about XX major could completions program three and it flexible kind of just the process? big curious individual the that seems how by

Thomas E. Jorden

capital going but the ago locations ship first rigs the have managing at pulled completion has Well, and our we're that's – in answer down, extent we that a But answer looking balance to cash was ask. year is what simpler say, levers have we and pull. asking sheet, we our for, our lever do have throughout projects, the is a look, and it to okay, commission for we than a question I'm your pull we to our maybe David, flow thing we and lever capital so and that these example, our we drilling we when to Often adjust year the wanted that to sailed.

call defer decided indeed full to believe lever that at or but your the I is to pull. what of asking, this a going that's have question, a you, a them roll that's completions do, into few next could answer, an months we year, that have we've we're not we So you're disclosure have what and

and we and at would completing a now would the would differing a over we of do between would the to market also that. and complete made we get that fairly We the complex a a flow, have of look is differential, well found what our later have typically in flow cash cash we want decision it's set like case inter our look well possible we'd relationships. typically at the so year look we as look why strategic big in deferral, that and futures return but operating never basis and had coming the would corporate a we completing a that's inventory Now overall soon corporate rate how the the growth and that That's economics we has we've well and philosophy, at never as look printed door. on at how a DUC DUC Cimarex out model of at and had

we so right as we is program But our flexibility, levers. as those program. our steady have our when as now, goes, she And say of are

David Martin Heikkinen

No.

You helpful. summarize way would Thank you. That's same the have. it I

Operator

Dardar Tudor, The next comes from question Jamaal with Pickering.

Jamaal Dardar

morning, Good everyone.

Thomas E. Jorden

Good morning.

Jamaal Dardar

quick question a I slide the again. had on once Culberson

You a mentioned year. more this developments few

spacing would consistent details what just to some on (XX:XX) tests? tighter I see sands. seen get that isolated to performance the the pursue, clarification wanted is wanted get was then the on if Just that can throughout more on shallower pervasive we If on these position, the given And that or some spacing we've half? western

John Lambuth

the eight decision you I'm Yeah, which given But made where our on going we're that area it's Wolfcamp spacing acreage. section. the have next is pretty be that one's can – going, tell it an again, upper one-size-fit-all-across on is – John. this a to a development all sure not wells I we

hydrocarbon us speak we a higher And eight. to do at the terms level think of and good leaning then base more to you thickness if I counts, allow feel it. toward place will very in general were where

I'll certainly at So, one is that eight. say next just the

after final that. one made decision not have a We on the

have fact, coming to review on here a that decide In soon one we up do we'll there. what

acreage shallower, at approaching here As we're far as I sit the all and least way that ubiquitous the the couldn't there. that that across our I've it, seen it's opportunity say maps

that more where the the you then opens experience new gain it's then that results. it on that and to an most where say, we're western understanding, But parts which then areas. as logical of reassess maps side open we I testing it's our on X, place most think I performance well that learnings, than the go it likely based and tell side. southern way and then interval and itself and maybe drilling up what obvious it we're will and constantly just think areas more from we is in us Y in work that changes the to also us surprised for the we might always It's up we in

Jamaal Dardar

a not That's gathering there? slides, then get the point assets on helpful. do gas sense also, become All you strategic these outlined hold And longer-term? just systems to onto right, to you. thank volumes quickly of the want what on at just And your

Joseph R. Albi

is million this that. behind our or biggest Yeah, XXX bit off that is that over a moving Triple and The Joe. line Reeves's off Crown system a and system we're day

I the value as or do what They Right ties things. stop, is move market the can them we the last out your development over of to to have As here are you down, really allow of systems where do over we takeaway do as not? two you question that the they to into systems, far with or gives think also those control see time. our true value us which to start, now, quarter left, panned is certainly flexibility, securing us these the arrangements. slow And move right and infrastructure keep the

a is don't our So, whatever, monetizing we I balance And benefits but them challenge something we with, ourselves or Tom, that with that as if of that as owning part as want always we see you constantly to. the systems. far the development. it of know valuable

Thomas E. Jorden

and and midstream a subject But it's assets. and the to Listen, perfect perfect Yeah. world, could probably question. operation this multiple our group is debate wells managing I assets. really good would In we these between we've own active responsive outlets, seamless producing think got of not marketing a right we nimble that's choose a if get now, service

that you Lift. gathering Lift you'd detail see, operate think our Cimarex could systems asset and you Central own and Gas the level the we owning System, own gives if look these of at I us. We efficiencies the operational see understand that Gas

capital and also we volume flare have wells little can our we runtime, on very high high demand. runtime, compressor Our adjust

these with volumes. with time going when One about on they're assurance challenges the the they capital and need you talked of to partner long-term of call this make commitments them commitments we is dealing to want some and midstream to backstop ahead

the But right good and the group re-evaluate our think time them. frequently a lot to to structure. argument there's a so, made to now, our current question, operating but of we've our it's hang profitability where present us would benefit decision on than more with we And we to certainly that like at constant it's a

Jamaal Dardar

right. you. All Thank that. appreciate I

Operator

The comes Sachs. Goldman next question Nelson from with John

John Nelson

and congratulations. morning, Good

Thomas E. Jorden

John. Hi,

John Nelson

operational have Hi, sales curious, the I firm in these for – to just course to of operations quite normal put now a because congratulations and the Tom, that the focus, I as departments had investor kind the disclosing agreements, recent agreements start recently of marketing year. place you've kind of were kind guess or of and a on strong some follow-on just these you're time? had

Joseph R. Albi

correctly, of trying If think call, This firms. is that work into that flow arrangements Joe. I sales I mentioned last I with recall assurance were looking have we to by did entities

was I longer percentage a year-type-term saw then focus agreements. that But at time, a sales it time, to all to In point then. add mentioned any thought as time. We focus agreements. it and perpetuate a cases, It up. did certainly So, importantly, take-in-kind under those of one volumes on of X back we the may we tightening have when many existing those from anywhere period our months things at saw we for was have I more in would

that hopefully and answers question, was quarter. finalized it So but it your ongoing was this

John Nelson

to given can't but you it de of about, I'm now. contracted seems this talk you getting service into And different more terms that specifics, that pretty sales be find recently, was of you amount of the helpful. a like accommodative providers through midstream that you go kind jour went recent in topic capacity? were kind is That's a this materially Can contracting, firm sure still as given you decent or did

Joseph R. Albi

I contracts. our we exorbitant. this we are And things not many the part as line nature team of rather But tight, by And that In enough strong on one going the obtained number felt the the if us need years for up contracts or particular for me, at like that getting easy marketing maybe basis it with take of to had surprisingly the that a place any have it's many, firm transport least to was was problems in capacity not purchaser we've price was which case, took virtue We on these to price. to way, shape form. of relationships. a did upon in

Thomas E. Jorden

and on that clear, pretty many just good relationships certainly, that arrangements. and our in we marketing how I'll we with We transparent it. on our owners. point. believe and say marketing exhibits this business good And group, believe want with We credible call relationships to be you we furthering our in time long-term relationships, good manage with of with Joe's believe you over in long-term

extend our with – impressed it's very it really time that relationships to as over that said, we've was was look feared Joe cringe a we for made so. to easy, And I so, me but herculean established task marketing those was probably ability this group's And relationships. and say it they'd they

John Nelson

condensate kind any question. helpful. guys basin just as the as And weakened? dip of in disproportionate widening separate you realizations has That's Have Permian, then of overall seen the a

G. Mark Burford

this of talking about Yeah, not API additional you deducts, type or.... John, aware Mark. widening. is I'm John condensate Are

John Nelson

Yeah, exactly.

G. Mark Burford

I'm that not John. aware Yeah, of

quarter, monitor could Mid-Cush But ramifications. obviously. realizations through very Obviously, continue differential, there moves, be the strong that. the in in to basin that Our all very were quarter the we'll realizations and just first there's first continue the Permian. a we other as through move the price We're to strong been year monitoring

Thomas E. Jorden

place. there Yeah, our API is if contracts in Culberson, in look we've good you at certainly pretty basin, gravity and our got the widest throughout

so watch So, that, we but so far good.

John Nelson

Great. quarter. Congrats, again, on the

Thomas E. Jorden

Thank you.

Joseph R. Albi

Thank you.

Operator

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

Thomas E. Jorden

Well, a meets want We're year. to top-tier assets, ourselves look asked thank, the expect for of consistency you expect. we I have set good capability goal for opening lot set and out my is, as just companies of I certainly, you've one. to always said this questions and continuing to a We the that execute there is a That's certainly, some goal is, in to where we remarks. great Cimarex everybody, morning we having rubber as There the operational And forward road. us. execution

thank for good your look So, to our conversation you next quarter. questions and forward

Operator

attending now presentation. concluded. for today's you Thank is conference This

You now disconnect. may

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