CXO - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 2020 Concho Resources Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Ms. Megan Hays, Vice President of Investor Relations and Public Affairs. Please go ahead, ma'am.

Megan Hays

you. Thank and first everyone, conference to welcome morning, quarter our call. Good

Officer, are on President, Concho's Operating the me Tim Jack Giraud. call Chief with Joining along today Leach, CEO; Chairman Harper; Will and

on Please results our to program, begin questions. our the take yourself Jack overview COVID-XX strategic Tim is financial as one we'll question our first our your with and quarter's going business review capital and position. well to of Then cost an one limit the structure impact as follow-up. will to focus. approach and

As and a disclaimers current other will based presentation. the reminder, expectations. during forward-looking our and release we statements that this are to conference on attention forward-looking provide call, provided I'll in your call earnings statements the

today And reference can comments release. may metrics these our metrics. found for financial be non-GAAP reconciliations in earnings also Our

on materials the our earnings Concho As are website. on always, Investor available Relations page the

the that, call over turn Tim. to With I'll

Timothy Leach

and Thanks, Megan, good morning.

business, for priority now implemented can weeks Before I our work safety our X remotely. right work the who talk home is from health ago, mandatory team. we of and employees the about ensuring

commitment principle I'll always strategy the X but in our been first during business our Our a circumstances. has team. minute, about talk has which principles, Their excellent to unique is these

their Our operational this quarter focus. performance reflects

I responders, crisis. Permian is this philanthropic and teachers community dedication. first to and community, compassion have for professionals, during their the Although courage health big, it's close-knit thank a our shown and them small want

a has players different seen the are and stock expired, fundamentally erased all unknown, of the which pushed energy as from even to May oil about levels. negative the half lows, billion we've before. anything companies. the duration, and restriction, is inventory in of demand, we've of shelter-in-place world's trading seen contract biggest storage some and collapse under landscape, The the has oil from record $XXX oil kind uncertainty With a record-setting market value The prices the population been test that

We We critical company of very also prices X balance oil of team, XXXX, thrive prices. principles: believe principles, wasn't the to built are set started and oil a prices to and we high for are more do oil but in around are X a all simple It's returns just them Concho low. when which sheet. survive good than year assets, when

over While the tactics. today's changed last environment years, our economic have principles changes XX-plus not our

through We continue to market low to respond is us prices. what the telling oil

$X and We capital reducing to spend So on rate. around the priorities. spend as remaining X of we million quarters plan we're roughly billion further X first focus $XXX the spent year in quarter our in the

optimizing our our rate, flow structure. production cash spend adjusting by cost and First,

maintaining strong balance Second, sheet. a

to through capacity. preserving while Third, our operational continuing cut to shareholders return our finally, dividend. to also further flexibility maintaining capital And

The world's grow. population continues to

is reduced So I norm. new the will Demand demand that don't for oil believe return.

whether deal supply. or in V the a a unknown. However, regarding market result U is the shape, it's substantially believe we of there's uncertainty current will less demand, signals Well, great

a losses and budgets current $XX of down from More U.S. oil have Permian have activity cut supply. billion last capital U.S. impact believe count planned XX% XXX. XXX oil oil in capital We half rig been of these U.S. than will long-term than far. X laid bringing the cuts is Over rigs. XXX expenditures the count upstream so in have down the on to to producers rig the weeks, the likely More rigs, where the

commodity to long volatile, curtailing prices in on are many demand a our like be will made The are and and future volatility, price oil range. we said in oil or trading but the from industry price today's represents not addition, have drop of significant have amplified current more impact U.S. normal shutting and have the believe volumes, business. don't we an going also U.S. supply significant departure which term We've in prices the producers, In current near oil supply. less, oil that

spend value, long-term an make value is not our deteriorate a investment. levers we investing dollar recognize we spending. We if to although our pull to find additional build maintain much level. and to We We're volume, every in cuts running and can machine will lower we further, still that flexibility have we at keeping conditions

efforts, water first we work in quarter. under We're we're the team challenging operational committed they our recycling. focus to difficult our especially operate time. as sustainability conditions, I'm advancing progress delivered and Even losing not of business proud in and results this on this flaring the even in

machine running the especially becomes more The but to today. this these. I'm like Concho investment emerge case not of confident and clear for on other stronger well, only is survive even expect Our we're our competitive times to of I and when this. during position side

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

Jack Harper

which guidance detailed unclear, annual to it and broader provide this makes Today's Tim. time. at Thanks, impractical quarterly situation is economic

to million However, than we ever end, competitive LOE the To this to in positioning year. we are company combined this and be realize expect environment. savings G&A on every focused more of $XXX

level guidance to and lower are quickly cost, by below range. activity And reducing XX to operational performance we X our and be to in strong inventory to lead remainder quarter recovery. the from expect our low ability of activity for the position of preserve per of to end financial foot then strong year. due decreasing This finally, XX our a our price DC&E Additionally, in us cost rigs prior to we and the allows and second predict the

in of in billion barrels we year absent day per could divestiture full volumes now mentioned, additional XXXX. about As which, Tim adjusted XXXX $X.X XXX,XXX curtailments, sustain oil capital spending, anticipate

capital lower more discipline, it allowing has last us as commitment team to well our also cost demonstrates to over as less. our do spend the our months X rate efficiencies highlights While with the captured savings,

possibly progress costs, volumes meaningful with I want translate are into our that continued productivity will additional daily, do better margins commodity changing performance, when am I that quantities. to prices improve. operating and However, in emphasize likely combined are and capital on confident we curtail to conditions and our

costs our for for were is combined outlook controllable the which On year. XXX,XXX $XXX volumes exceeded costs, of per based is per a our totaled and operating includes quarter first below the basis, totaled G&A high interest, This unit Turning guidance $XXX target on reasonable midpoint range results. $X.XX which Controllable and of an run now $X. first million, million of the which cash of absolute cost barrels to the costs unit. per lease our in range. remainder the guidance our operating, G&A end Oil day quarter's rate and the by reducing about

in including of to share proved drop $XX.X markets, equity prices in quick price, commodity and properties across The led goodwill. billion our unproved an and impairment

free and sheet. quarter, we working less our sales we $XXX reinforcing apply cash buyback. flow capital flow. balance of Operating consecutive delivered funding capital, repurchased For to the cash XX% was the of $XXX expenditures, increased to New before Shelf Mexico commitment went a third In cash a dividend on million. generated proceeds million The which January, shares, to

last commodity sheet. And zero, to the flow wide the absorbs we going position free that envision On at time, accrue cash cash balance volatility. At that the our allows of to prices. deliver can Concho to business oil continue didn't we the impact of range across to large a even said our zero, quarter's hedge call, we

cash receipts and receipts Slide ended quarter from of $XXX potential generate could $X.X highlights billion with March we in a materials million, totaled First XXXX. hedges the X earnings asset. our the we

investments cash protect navigating curtail in to The rest properties hedges continue While already some need company. well the our justify larger long-term these to cost near-term made highest our decisions of are decisions. to into cash stand-alone price on and our intended we of and commodity and not Many from maximizing to value our ever. today undergo assured, curtailments. these of hedging environment, more than uncertain But decisions. strategy decision flows focused volatility production economic flow evaluate times, or today's the serves balance the economics sheet inputs go for scrutiny those us are and We've are and the

ratio strong We've period. fact, sheet. regarding it's Finally, balance ever first end in sheet. XX-month lowest been debt-to-EBITDAX a the a one the of maintained And net long was for balance the quarter, trailing our our at of

profile us strong $X.X gives million We ended on we the and $XXX total cash long credit dated, in grade. cash our period of with is and about facility, remain by with billion generation. Our is a investment hand, supported maturity liquidity which combined further flow

In away hope I important a come few summary, messages. with you

employees our the communities health safety and of first. and comes First,

a in the first we and quarters uncertain on our confront and challenging provides good foundation performance quarter X the prior a Second, as period. builds

book, structure as capital, differentiating provide company. situation balance and a the things we all strategy control. we on overall and last, our our and And from that hedge emerge focused a we're advantages reducing will for current recovery. this cost positioning We're Third, persevere sheet that comfort stronger are cutting can

With that, operator the let Q&A. call turn over to me for the

Operator

[Operator James. comes Raymond Freeman our Instructions]. with first from question John And

John Freeman

give The margin of first kind that of ballpark production the you your just question a of shut-ins Can what regarding the wells. number voluntary of lower percentage entails?

William Giraud

Will. it's John,

expect today, sit to we it's of think month. we that As our get further X% as here grow number in about the to into But I volumes. we X%

John Freeman

LOE are go of COVID-related of impact? you legacy but of of or wells, the then along of about your are fairly all not wells kind the when you vertical some just these process, guess on all these through these I the how this back wells And And just on about think from decisions demand thought other production, to percentage maybe online? like bring obviously, meaningful whether hit, post meaningful line, kind Okay. not they an you side that think the a sort total of

William Giraud

Sure.

are going kind out, coming will this producing is we think by the guided of the those as of wells. way back economics I underlying same be curtailment, which we into

plays incremental could on which are curtailed highest month work have the same we things, on depending this out off. then curtailment. what then would And come And But so are pricing other you the first over the the those way. cost of how to have side, the point, May, here at it

the the those And come prices to justify will extent wells producing back. so commodity

John Freeman

Great. And just question then last me. for

on you Can reductions You LOE of what feel you number like you year. side. on $XXX already I'm kind get obviously cost cost schedule the how the of of trying front of million targeted and an of ahead way that achieved? just of on much terms ballpark the G&A you've a give this idea And all the -- what to are did in especially

Jack Harper

remarks, Yes, to John, rate this good a prepared is I as rate. an in run is be It's in run the quarter that the But first mentioned Jack. going evolving process.

reductions cost them. think I think these, we've we half And carry throughout year. more not think I more, are I are achieved sustainable There of of importantly, the least So that some achieved be to at can forward. if

Operator

And Leggate our next America. Doug Bank comes with of from question

Douglas Leggate

I of more doing hope production year? back there. how little guys to of philosophical, kind an of And really you going a and this everybody it see out what the one asked rate color operational uncertainty couple is you to to that end I us then -- of lot expect, is It would evolves capital next bit what the XXXX? give us there's can operational idea expect My to like can questions. realize Maybe you're year okay looks give more you'd that if look us I like guess. one is through a your I got looks on trajectory looks? a into you trajectory Tim, a we've always is the of around levels. and maintenance you But number how spending exit one for,

Jack Harper

that Doug, take it's one. I'll Jack.

of we that us to capital the mentioned capital level as lower this maintenance will in of sort remarks, level for prepared So this year. of get

when spend Importantly first quarters at the year XXX. than the over the the trajectory look it lower average though, XXX last of math year And was of the the you first that is for the in of and the around X was quarter. quarter

maintain to that think of is to average and throughout resetting being year about think that just good I the closer way a rest that. then number the able to

Douglas Leggate

follow-up you probably bit guys Texas written had is really to Commission. Jack. helpful, a That's Obviously, Railroad more the philosophical. My little

next Concho seen forward could going other out for come You've question with. happens case terms other side of think from is come probably, we're by But Pioneer? Tim, right based all out week. business what flow? what of in When will cash my has you balance growth on I'm out in And you. is sure watching Wayne the expect. right or forward see its does is what You're a has like? been with balance long this, very know you I to come How a and business we now what But of cash the returns reinvestment maybe rates, headline Concho rate the light of it way, And say, side it's I growth. -- of when try early this, you look manage production way about put model the I to what guess, Texas, wasteful the to

Timothy Leach

curtail and what world. shale and the And that will with and we to great is that's U.S. forward the a what like a bunch cartel. private working. think And managed flow stronger talked the that's And that strong balance were think about building generation. production going in time, us it's going answer a production I the a a to moderated will leverage. it. of individually And we've cause answer continuation a going price market or -- of But with Well, question, be Yes. how We're that strategy shown be for looks add production. others going have I either that of model It will we're we with strong a because part from so sheet cash swing we're will companies. be And a Concho forward into growth the the signals this. not think of and get I short in believers our lot I time production we more have less long companies, to of the is, sloppy and you company

market that. from and is is we me industry regulation. greater than what timely see be And I about going the And think the and more -- lane asked see a going the the to think working. I you're reaction if throughout You to had you reaction would probably

Douglas Leggate

in I could know one answer. I maybe for housekeeping. appreciate quick not just the answer. to squeeze I one If it's easy just

LOE obviously that leave lower costs I'll the about that we is there. it cost shutting you're -- mix? Is should in think achieving. cost? Your the how benefits, higher you're stuff Or And

William Giraud

it right higher Doug, are in the is Sure. things cost shut that now.

Douglas Leggate

to that, quantify Great Will? stuff. you can't get I

William Giraud

Probably not.

Operator

question Our Markets. comes Capital with next from RBC Scott Hanold

Scott Hanold

Yes.

a You that all cash hedge chart telling. unique step is stock a But and it's cash where you about generation right that year. that shows Is and positioned. forward? now, little balance think shareholder bit when Or forward? in bit where cash environment your is, I like about of I with in this more look you a you situation you certainly And your opportunistic that understand slide buybacks more your book situation you'd that would And something you flow of strong you price returns pretty do a talk uniquely and this how back going on but in a that rather And deck little be just guys here? are stock just cautious? that had receipts think those again, at balance going are be can tough

Timothy Leach

Yes.

probably me. But would in and first come a caution. at and take Jack the that you I use say will word that, me Let stab correct

kind times unprecedented now. in we're of think right I

generate would balance adding we do flow more and continue -- we amounts And we think of be thesis back think return cash, how investment to And as are see to to to bargain I free don't -- sheet. increasing committed and of but involves add are but us manage cautious, to with of our capital, part with it balance be that. Concho. So we our still shareholders also still the generating our unexpected cash our that sheet a in both cash activity, I

Scott Hanold

just And Can you exposure what on to give pricing market of Great. that see types now? what sense here right a is? is of my And WTL crude. on you your various follow-up question

William Giraud

in Scott. portion are a are barrels and Thanks, Will. between them that the Texas or A above Sure. we WTL Light. West as of It's produce the only of or so WTI Delaware degree classified breakpoint WTL. about Most

it a not at And pricing all. such impacted job WTL so fantastic has marketing done by historically managing our realized team that been our has

also pricing, predict likely. example, challenging, think And if able pricing, XQ you just we we our couple favorably. recognize I done and that compare more look realized but good manage But think becoming given think job. peers Midland in at our logistics could to with of midstream be it I be I we've to difficult other in the forward, against including continue meaningfully be a Going around realized impacted for do any ours, certainty, we'll of not to that very months Basin and players, of next compares kind think

Operator

Sachs. Brian Our next comes from with Goldman question Singer

Brian Singer

cash, talked, earlier to didn't know response an follow-up sheet, looks sheet, to participated there. and the question where just I necessarily Concho questions. any less potentially other of of you you dividends like, area question in in think, past. allocating consolidation rank? a consolidation been When or and what question cash you do When do And has balance the you that's balance the that on the Concho leave Scott's on couple hear if special in building think I in about think not, does that activity? And or I to Doug's stronger about cash, wanted response Scott's more leverage, to

Timothy Leach

industry. thing that have run is base, because to just consolidation a necessary multiple to continue you we more on believe for the asset tell have other is our decades. clean Yes. cost you to than right now. the we've furthest of right doing kind components been from mind business we the kind all a of trades that up our And to executing that hear consolidation to I going But down drive about now, I narrative in be our can do consolidation

return out having strong of happy think I on what that expect. sheet, So cash having I'm balance to shareholders, you this. balance kind the amounts sheet, to the -- is we a And with being when the able really can increasing my come of position

Brian Singer

And cycle Great. And When shale was out look This you cost started opportunity curve, the the to down secular at my or in or that the cost which today come look you cost some at secular is, saw structure. we in XXXX, you cost reductions the we if does this see XXXX, follow-up time back differentiate last down on look the Permian for cost XXXX. then the reductions? either more supply deflation if in and really itself on the do Permian from cycle, side? productivity the where

William Giraud

-- pretty dramatic I mean our in a Sure. do basis. on improvement think you've Brian, seen it's structure I like Will. DC&E cost

couple And last done XQ It's cost we here, a of the efficiency to the doing also forward, foot probably that we drive side. secular from And in from savings fantastic both Over because of gain that the blend side, of cost a and efficiency to $XXX are to kind low. will would both. continuation so I end think absolute absolute quarters, that of more gotten levels a $XXX comfortably more some of a just a teams low first have of to quarter. guided but I that. those continue your on point, have blend it's the modestly, cyclical, I and service April below savings of gains say previously had sustainable of sustainable activity going think cyclical. down outweighing a We're on job, a was that

Brian Singer

first at you quarter the I in. spacing Great. Were online performance in last wider-than-normal the one normal brought wells spacing? or one If impacting positively sneak that well could

William Giraud

a spacing The the the still in have of XXXX amount wells first are kind of that coming still. quarter online fair

in year. didn't up-spaced over see the you'll here probably -- kind of had design that our You're evolved see of on. starting rest the of batch that this from where versus of XQ of to see many course what them coming you But our

Operator

comes Our next Chase. with from Arun JPMorgan question Jayaram

Arun Jayaram

a just costs $XXX follow-up bit $XXX your mentioned Maybe question. in target. Well, your a below foot of are you to Brian's DC&E coming to

on give be perhaps back Concho of given consider What Basin? Delaware is move signal where would half think Midland you running need up I where would you reacting costs -- today? in are to your if -- the oil the us price X type you're versus price in restarting some kind maybe wondering thoughts going from rigs And structure So year, the what at cost of could activity? to of trending

William Giraud

previously that the Sure. the relationship and we to $XXX to, blended a second. foot that you I and said I foot kind first for a of holds Midland -- And that Delaware take that $XXX for had the that, let true. But guided of $XXX the may $XXX could we Basin add Tim subtract still Jack Basin. take $XXX part think or yes, had

Timothy Leach

Yes.

cautious, activity I would think it as pricing signals going us be -- things think you're and level that, far see to as like the and generally, think. I I

think ranges something us than in on up cash the starting will enjoy sustainable back activity would approaching generating the And it future than I I we adding activity. rather and balance require be old would think in putting that more the normal pricing in rather the sheet short term. budgets new

Arun Jayaram

operated to wells Fair just follow-up XXX give was there's balance guidance could my that some run of thoughts the crews plan enough. of know and on how the balance over over of the thoughts year. maybe many you some maybe, XXXX? if I those of I balance year. us gross you the the completions a lot Jack, of the cadence And uncertainties completion assumes over on wondering is the

Jack Harper

Yes. Thanks, Will. one Arun. going to that punt to I'm

William Giraud

see. think I yes, it that follows that generally Well, rig you cadence

some piece the a issue be well. then we same fourth. was capital there So in out I up think costs, circle and would the a we potential well the pattern. your the of on I as around you But of And little quarter working bit the -- will here inclusion interests modeling may around follow nonoperated note quarter, with just this is and that. assumed And think incremental that morning, we'll offline there I want we're the second first coming the I to and saw in do in mention higher than it third

Arun Jayaram

do frac How assumptions that. fleet just year? of the the just Yes. And for balance well, the many -- on to crews? Happy

William Giraud

territory, back half It the current be will down. in three get X the the X is of the still to will it It's plan. in but year, our

Operator

Our next Cheng Scotiabank. from question with comes Paul

Paul Cheng

Gentlemen, to going up? after how's that unit accounting your a look simple is question. depletion write like DD&A, rate

Jack Harper

Paul, is Yes. this Jack.

our saw roughly you down the with XX%. marked property So that impairment, we

that's And I that $XX proxy. or start. be good that you think but between and a will then, parts So in range gets but somewhere think a plus there that's minus moving less, more good now or I

Paul Cheng

Okay. when how model financial And -- saying that I But mean, terms is Doug that guidance business give incident, think -- that I or COVID, you after asked change. and in to XX% there the the before question, more your balance the about this the an the that that can want and operating production remain parameters, actually that? our of same. Like being actual you're do even I balance still will the that to you revised what's the on sheet X% conservative number Is talking or previously, sheet, be forward? think that, further? were that going more keep growth. you And now may also, cash any downward

Jack Harper

Yes.

a that. take at me shot Let

perhaps that the our like past. the are is of first Tim proper think preserving ability increasing combination operate get the -- other at other model. as we're with on to shareholders we until off, responsive still flow And situation maintaining that the of environment, had right I but well, our the cash production, we more today's But As what will company and being meantime, now. that side to situation of reacting And balancing the don't run free the And in of to I returns like. the to -- amount we're side believe in looks back this, doing the in growth we we're had, that to current know model mentioned, and think we Tim moment. to also we more some

Operator

Leo Mariani with KeyBanc. comes Our next question from

Leo Mariani

shut-in I little to bit get a wanted to more back the question here.

more in of get X% volume about and to trying sense, talked X% you shut to to a come. Just obviously,

interaction Just terms second you terms I wanted the more hear necessary? feel in in starting your June? take color when think later with to shut-ins marketers mean into they just color any to from primarily do in to or be guys don't really May want Are would going that's your volumes you any marketers? are be you to out. helpful. quarter Just And of the of that

William Giraud

Will. it's Leo, Sure.

important to able We note. of period, flow not Jack this our be we'll mean really cash to barrels all but it's our mentioned, is our think maximize believe today, flow. I through I goal that's goal. as to

And just out it's also so producing hedges see. be we a the think unhedged that's uneconomic important I to basis. on we're going very an that barrel pricing responsive don't that And justify to get to referenced there Jack that our otherwise

to us very And all allows so in that and thoughtful be reactive our decision-making.

situation. We of have a contractual our to tremendous amount flexibility as it relates

nomination things. move the significant into in to all have into month those process curtail have we amounts June, But as and May, volumes. of you around of flexibility some further We the here just this limitations of tremendous

things expect you're commerce of allow question, out as the things, pretty that's the demand back estimate. to a and especially I going kind side period think come one this the challenging to that a as that some over you of deal to have to storage and of hardest duration and we then June have of period come And significant still with amount you as other on oil regard, time. to but then and do think I to the May try the and see most restrictions of

will I So tell. time think

the weeks industry side and next think of equation. the will I our couple to curtailment supply of be the is see helpful of how terms responding in

Leo Mariani

guys cadence the activity obviously things helpful you to well ask guess very XQ That's color. I And in levels, new in with progress around Okay. to how half. second a terms turn-in-lines. But I respect of just wanted good gave into

the delaying the volumes to here How of those turn-in-lines maybe to think start from wells looking second kind to new come second sort frac to when you of at more on continuing new You're in Are Concho? about quarter. half? can we

William Giraud

Yes.

we have discussions and transparent, you're here May looking totally you the the at price be big to that's the June. giving market's for today Just because. Again, one signals of

strategies two. that for one a could certainly month so And the those this not is of or through to be for produce managing wells

Leo Mariani

And that them, months Or there couple any Okay. and a a be that them problem? around wells that's let you not would guess sit water with I issues? frac really frac in do think any you there could if concerns be of for the operation, those

William Giraud

do feel operational We based to previous for at variety Yes. reasons. we've of that looking confident pretty a where examples on had

shut on set, the impact your in lot for head You see another. seen don't or period. not a to wells we impact time. Admittedly, those a it that any it's or in what's into specific circumstances, set perfect is we related have got wells both or have in of this negative to returned And but robust reason around on sure And a production. that don't are that. when I'm and horizontal gas pretty question, data shutting question been one us as comfort produced data not a they a turned lot of in, gives and we've of the Both in on I've producing line

Operator

comes question Our Stifel. from Whitfield next Derrick with

Derrick Whitfield

your effort encourage the change to size to revised an regard environment returns? in with and/or you your pad for capital development further improve Perhaps program, approach lower Will, spacing does price to to

William Giraud

are It so. targeting, were probably does and the continue we where we given things to the reduce our headed. we're high-grading as zones Certainly, budget, not, we already

that, to of year. note $X.X important our budget. third I that think That's the billion it's budget

sizing. it will extremely I the That's trying spacing or so today, relates plan change components situation react probably it continue again, But transparent. project our to to be to accordingly. wouldn't -- overall and watch the but as we doesn't no, And

Derrick Whitfield

follow-up, your referencing much of G&A fixed cost you $XXX X, operating speak that and Great. reductions million how can on to And Page my is variable? versus as in

Jack Harper

cases. already are I labor. Well, in more that you made into total, are on of a half said XX-XX fixed Derrick. think And of changes associated closely little and Sure, about when made think that be range. with And as more that in that or think we of typically LOE components, have earlier, sustainable it's you that mentioned, the some been probably will as I that weighted more total, broken front costs both the

Operator

with Dingmann Our next Neal from question SunTrust. comes

Neal Dingmann

you in this do the My still while you all none seem It and to activity, sort a more more Midland your maybe Delaware you into in to to focusing Could regional guess, first producing for decisions Dela. fact, really be I -- operation plans. even 'XX? I'd the both view peers appear primarily year the how the is on going -- in bit looks Midland, say, any of guys, question be just Basin, of just XXXX you of speak more

Timothy Leach

the competitive. Yes. is seems They're a of like basins. it And XX-XX our balance two program both between kind very

Neal Dingmann

necessarily the had -- Tim, So into will be rule that such doesn't all, you question a for will play, still and primary that, lot of focus? come guys a economic cycle times about that still

Timothy Leach

not sure I'm question though. Yes. I'm tracking with your

Neal Dingmann

little this equally a some pads sort But the had Well, type environment. in more peers bit -- the cycle are bit see, all little some there as only for of seeing again, of positive of others in that Basin Midland a some you time indicate said economics. you're quicker because the of doing they're

Timothy Leach

see don't any I difference based on Yes. that. Yes.

Neal Dingmann

Okay.

any 'XX there's government Okay. new wondering other And all just based you programs accelerate the then new for if any Act, qualify And be that my eligible second this I'm will you in just 'XX credits or might all you is on wondering, year? for? AMT question tax could just CARES

Jack Harper

help. tax eligible, other for Certainly, Yes. are we will if or not take any help. we we're Otherwise, looking of advantage financial

Operator

Energy Hall comes Heikkinen from with question next Advisors. Our Michael

Michael Hall

lot observation a on about program? thinking the cadence how for climb look trajectory, is the as that you're and deeper one well A wanted of balance cash you equation XXXX, As and as the cut coming kind and the bit questions addressed, the and industry. harder little the just of follow-up around to the understand evaluating we and both kind process have but forward just bigger just that to of and forward is better some and at profiles, of your you then the thought have mine kind been hole of to you activity flow out of broadly CapEx XXXX the in of out today,

forward play future? of play today kind balance, to curious the ability back to dynamic and Just where the sort to in kind trying too cutting you much but impair of is you as program and how evaluate of not appropriately that the much at bounce

Jack Harper

situation if that we're when That's to seems we exactly the to be It's able at making this in, but appropriate. Jack. organizational we to maintain not only in the Michael. ground, environment, not at think there least running what think do our walk, I capacity fast production the levels, -- on uniquely but a our you're point Sure, is react are is which

variables we so changing but And -- And the struck to weekly. we here, this balance say think plan. to -- continued have all that we've with as that is seem be

wheel. we on both So the will hands keep

Michael Hall

all Of one think? to that you guess the housekeeping. building of pretty sort of is Are last year, then any inventory over Or course. going the you And DUC do course kind I of balanced? be be will just

William Giraud

Yes.

here it balanced, but today, think pretty be will sit change. we As that I could

Operator

Tuohy from comes with Jeffrey question next Brothers. Our Campbell

Jeffrey Campbell

as result a As current much be to have might of any market, the continue you sense reduced response in spending? you maintenance-type the rate do to your this as investment how decline reducing

Jack Harper

Sure. What previous even in capital budget we the quarters rate that XXs in talked amount. was about previous the and oil an low moderating with is decline the

lower will certainly, year. most as at we go even so quickly And we that next see this moderate more into amount,

that So better towards capital and efficiency another is level benefit going a maintenance forward.

answer. to it more quickly get is expect I short So better the

Jeffrey Campbell

supply? an it as should you're looks associated average second the market demands like we half maintenance Is to approximate 'XX, count My X second greater operated rig assume until rigs. question or was, mode this Great. the going being with

Jack Harper

half the good in back a mean, the I Oh, year. that's of proxy pretty

So yes, about to way a right I think now. that's think it good

Jeffrey Campbell

the just been last ask could one I today. one, if listening call I've And to

You've talked bit and reduce as seem growth cost market drive potentially part also -- capacity to costs contradictory. your return to it. of little a a supports about to G&A both operational little Those when the reductions maintaining

color out? that balances how insight just all some a as to was you little give give us to I So hoping could

Timothy Leach

Well, I would core just say strengths that, as strategy. I started the presentation, our our team our is of one of

things one so all say for think. long-term preserve the in that's And I we're us, in trying of differentiates the execute that the to Basin field ability long to the of the Permian things one And G&A. an our in we if though, through that has see implication lower a level roll to that a activity you this, we're be to I'll has as going environment of direct term. that is

Operator

Johnson Charles with next Our from question comes Rice. Meade

Charles Meade

Tim to I guys back ask and whole believe, in made, that question. I goes Jack one there, earlier -- of that. Will comment, the have already covered a I to a and and just morning, lot this wanted question you to ground appreciate in think I team response

you're you curtailment June. growing perhaps X% going geography perhaps the maybe than you currently front you that looking mentioned You is related you they at other possible horizontal in one expect than wells a see going as in be be vertical this curtailments they will or but of that curtailed. possibly in, of different the period are May maybe production, to kind that even of shutting -- difficult APIs probably May. curious, vintage older you have are may be That's -- that And I'm about X% character another, words, and In producing -- think so high-cost in the curtailments to behind or you? I the And to you, are happen, is to going said some they there? ones of are in that that,

William Giraud

Sure.

balance will of as horizontal this and we're step the whatnot. of horizontal there's contractual commitments cost May our to call, older of wells one a in we've other a think into kind lot on next in I lot And about -- to talked leasehold be higher things well, and trying May, the between the next. get issues

bring what can them of one also so And is back. you a towards mindset

where conversation of that a month completed brand-new you a lot may have well a producing But not a get consider of said -- is as we around number that's for well. you so And would into flexibility. we've like X, or that times,

not be to that going goal flow fight curtail. are by on to need an unhedged guided basis. We'll the We cash

with think will and horizontal And getting think meaningful, so -- I here be from it into I will do it increase production.

Charles Meade

actually, And let it. one follow-up and with Got question. me

the actually you wells? length. to for in shut that just well some kind It So And a that of that on I they able in is wouldn't seem just back of to production, when for make maybe if planning that it, of you what about to curtailing might there minimum there do? shutting is to were to be right? guys Or -- minimum the does well, think a case on of would in a -- to some where have what's you you wells send talk and dialing be going least in well it time? went day, of would the a consider all to There's XX% you you put at out balance me out you valves mean shut some it a for? on operator duration turn sense to shutting you your that in length lease doing

William Giraud

in it on matrix also around obligations a of economic leaseholding complicated decisions and production, It's choosing is both some and reducing to decisions. in. Sure. but blend decision cases the to related And shut other

Operator

question with next Stephens. Nicholson from our And comes Gail

Gail Nicholson

-- has over Most environment just that on thought the pricing -- workovers, lower of thoughts mine time? if and prices does then workover And oil was have workover been over do program? changed your curious how asked, how your potentially change but I program increase on as

William Giraud

to That's our program. a certainly going good economics. And guided question. again, impacted has It workover it's be by

these And on out commodity of down, it. so well higher the prices not work cost do extent at rush you to there to goes will much

component it I the to huge over start that so the goes, to imagine don't months. be process of more this longer of expect the a you have, couple I but of would next this And

Gail Nicholson

standpoint just then And the side. LOE -- Great. on the on

versus Looking horizontal blended basis? at LOE LOE, for is do the the program know the you current what

William Giraud

horizontal. Yes. It's for of in the ballpark the $X

Operator

from Capital with comes One question next Richard Securities. Tullis Our

Richard Tullis

questions. Probably Will. quick Two the first for

higher you lower realized Will, Looking and at operating maybe what currently, $XX main using D&C of sort a estimate? of return but say, $XX, current return of oil rates price, a for rates price, sort your of areas cost would

William Giraud

Sure.

investment the to we we're pretty high-grade, we've mentioned, making. reduced been at time the have each budget decisions I capital As hard working

level would And the at sit so I you strip where kind get, you they're ultimately. roughly those can looking say we is prices here which an mentioned, acceptable today, as of

just And there's in lower. probably acceptable they're some or XX% of And and minus plus return, higher rate that they're are ballpark. but some are so today, the that

Richard Tullis

Jack, impairment at a then price were regarding And was oil higher run price helpful. probably price at the the it see as for say, oil? would That's -- the well what what $XX to did you that oil it, impairment, be, arrive amount? to oil say Okay. And what a used

Jack Harper

averaged commodity Richard, of and at the year first prices end we XXs. quarter the prevailing the the in that use

Operator

from David have a Deckelbaum question with Cowen. we And

David Deckelbaum

how around I a the year? the cash slowing decisions, are which this you'd follow-up paying to been in this has by you with the generation you made do year. hedge think hedge Obviously, that prioritizing how cash operating just I start decisions thinking anything down opportunistic comments early? Is about on free One, there to or field you're And to justify huge to the not a early? you Is at thought book, cash the have threshold there guess, book that this do? use cash had of monetizing a now about there environment. hedges of Jack, wanted using benefit And level using given number program debt the that you now?

Jack Harper

on would the level outlined that sheet. really to of those the balance in balance I the the on Okay. the cash get the envision shareholders. the like we've and letting reduction At sheet, model be up really, the of year, way likely It's but for monetizing the we point, business of term want we set And and our growth come in accrue see for some we'll the rest moderating we're near continue to though, to balance used to even spending cash to cash rest near to the debt some balancing think the hedges. delivering just sheet. the baseline to would term more most have for really where that return on with time that's David, company we better

Operator

turn like I'd Tim I'm showing any Thank at for time. closing to you. no this And Mr. questions Leach the to remarks. further call back

Timothy Leach

look call. to much. Thank And talking hopefully, Thank you you very next for in you and I a questions in environment. better great this participating to quarter, forward

Operator

gentlemen, concludes conference today's this call. and for you participating. Ladies Thank

day. disconnect. You great have Everyone, a may now

Concho Resources (CXO) 1 May 202020 Q1 Earnings call transcript