LPI - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Laredo Petroleum, Incorporated Second Quarter 2018 Earnings Conference Call. My name is Sabrina, and I will be your operator for today. At this time, all participants are in a listen-only mode.

We will be conducting a question-and-answer session after the financial and operations report.

As a reminder, this conference is being recorded for replay purposes. pleasure Mr. my now is to introduce It Ron President, Investor Relations. Hagood, Vice may Sir, you proceed.

Ronald L. Hagood

good you, morning. Thank and

today Randy Chief me well Buterbaugh, Schooley, Joining are Vice as Executive Officer; Chief Senior our Vice Rick additional Executive members President management Operations; and President, Financial of Dan Foutch, Officer; as Chairman team. and

forecasts, will intended by describing this statements. the of These forward-looking be morning, begin you our we beyond making forward-looking goals, me are reasons, provisions differ actual Harbor Reform remind of Act are that the which these including be Litigation those Safe results our and during Private control. covered of statements from Before let company's variety of today's to Securities beliefs, expectations, for a XXXX. The call, many assumptions may we statements,

yesterday's adjusted non-GAAP be operating In EBITDA, income are and non-GAAP addition, results we'll GAAP a financial news measures measures. quarter reference financial for presentation, to the are release. which release detailing and XXXX. making net income adjusted its of in Yesterday Reconciliations afternoon, news financial company these issued second and net to included

will today's call. page refer by during to We the presentation

the call access turn this currently website conforming now and Chief If have not Randy a you copy version Officer. on been made the will at has change Executive our to I the as on release you in or XX, Foutch, presentation, of may reflected www.laredopetro.com. Please do a website. it company's news over note, Chairman slide to

Randy A. Foutch

Laredo's conference you and morning, quarter second XXXX everyone; call. Good Ron. joining thank Thanks, earnings for

we'll this refer provided we night, call earnings to the throughout last that presentation morning. mentioned, Ron As an

you ratio both little we holding XXXX shares that over a year, quarter EBITDA debt-to-adjusted during our successful grew guidance total and an X, also quarter. of Completions slide of have beating Through continued net growth. fronts. XXXX. every completed average resulting lateral like to back can a EBITDA operational notably, slide are cap per the XX% X, These to second achieved less. We versus the quarter to for gains XXXX. oil quarter On times, from production performance On of X.X or cycle almost slide higher X% X with and X, the growth feet out has to the than expected of than the production more XX% decline on We and per many XXXX, adjusted see seen production XXXX, anticipated increase quarter you'll half and second on by metric, first to drilling price BOE, versus million company rig we in of for guidance the despite X% shorten first buying second can the X% realized year. in time, the you annualized outstanding. point in while see met If our the quarter to increase us for efficiency driving that do that completion grew enabling year XX% I'd turn more almost was our XXXX versus gross per first the an the for efficiencies been

call, co-development will than our lateral than the packages slide XXXX, promising. we utilizing to lower initial more been foot almost rig later average in have discuss We in we as while complete X, of a expect XX% results On count XXXX. used the

development with adjacent of develop landing Wolfcamp for turn contiguous points these the accomplished facilitated the to Our has impacts. current built the further by developing section. returns corridors. Upper/Middle company co-development resource did Dan future XX-well strategy in details. along production multi-well package highlights complete This by second parent-child thus existing economic and highest an seeks now is packages, in to its a we the mitigating quarter, large effectively infrastructure stacked I'll is packages, call over and The

Daniel C. Schooley

good and morning, Randy; you, Thank everyone.

production no We the our fortunate back per at completely to teams operations in all people stepped were did X. we our minute tank time review if tanks by following newest the the That's a into employees, our fire, on X,XXX battery lightning to as battery press this levels discussed the month. end to fire July the I briefly back destroyed this mentioned, fire up that and take want Randy was wall this job fire. some the mention worked places, this are where people day and four barrels few but handling days as worked cylinders. flowing recover by oil these Laredo and release group a remember package have the injured the of hitting incident. And an at As up at in who pre-fire was tank the you was can caused recall, of really slides, We'll with partial one I battery, that of proud we very achievements were I flow some of before battery After amazing in We approximately to being under did around the quality strike gross. of very of that battery. I of in was producing a clock Laredo. from of

Now, to slide we'll move X. on

the and completion having that, and drilling in or in teams efficiency record see are You'll a also second doing job quarter. near-record our great

in which second significant over a graph, you'll an XXXX. the XX,XXX nine accept drilled the look rig see the In at a you If foot days, and rig improvement drilling is record from lateral efficiencies. average quarter, company we left-hand to release

looking we efficiencies. at are the graph, right-hand completion On

per is annualized we by per At lateral sand over and basis, completed XXX,XXX significant feet increase completions concentration, For on year. second XXXX. pounds our the foot crew close X,XXX performance per record quarter, an to a team this

of a XXXX in is that At enable end expected significant to good implement signed in-basin from on XXXX on savings see sand second you'll progress costs, future we of budget. this initial We use sand. one-year second of efficiency cost the controlling focused as us fully our contract towards of our slide addition to completions per budgeted continues the the In gains, the anticipate made stay to also in $XXX,XXX quarter, Laredo X. half well we approximately meeting to completions. in-basin savings in

trend acreage comments eight our continues strategy for two of great packages gives $X.XX completions On Wolfcamp. prior XXXX For meaningful our we're and This obviously configurations, a gas BOE and performance co-development from and We're below which see and has our we investment type management. with XX. a BOE. are program. X% Upper the and tighter These few GOR XX, consecutive that of quarters, curve Middle field in co-development. co-development in and well we Laredo's slide that forward our working maintained seeing completions. mitigate moving and We're $X quarter. these in infrastructure LOE requires be effort least packages this second our LOE to his to and spacing have drilled us provides oil of on below optimizing Middle Laredo Randy outperforming with on level personnel results of manage performing deliver XX%. at we're Upper the per savings, days in continuous natural have curve our XX type by in also the estimated NGL position productions above drawdown Wolfcamp opening confidence frontline performance wells us slide two A to more on on combined To-date, that XXX you'll recovering well tighter mentioned outperformance This in by drilled in see observations: our co-development. with deal BOE

at XXXX effort Our resource to and denser wells total recovery. an a spacing shorter-stage in were length maximize

above zones the We drilled Upper, were results, Middle, more spacing, addition densely spaced new seeing type curve these wells. by on both and several oil we we In encouraged and Wolfcamp. in to BOE landing and are these denser also Lower production

As our any drawdown these continue protocols see well mitigate co-development discussion two the optimize packages. our trends that completions to we to GOR noted in packages negative and test will in earlier, on we

test our drawdown package we GOR In a to these to Kloesel mitigate fact, help on best trends. know us doing are how managed

drilling Laredo BOE, oil was on As drilling respectively. known program single-zone XX% zones with XX%, and shown in is delineation both XXXX slide primarily performing the by drilling and XX, our curve landing XXXX drilling. little on or outperforming type very well appraisal

concentration. by necessary hold and in And curve stacked per in was of drilling pounds a Laredo's performing commodity acreage price chevron. to a foot to headwind type dominated X,XXX XXXX challenging and drilled sand drilling under We performance these BOE is now the growth. in We of utilized oil very configurations providing is Our wells environment. wells instead

high a also to XQ. midstream Our at marketing teams continued and level in perform

costs. days' is XX,XXX of the the without through LMS being oil the could oil on notice locations of oil benefit eliminating the on slide to of greater The Shell Medallion. crude short and notice by unlikely allowed placed Medallion, gathered XX% and of to crude than multiple trucks Laredo barrels a XX, after we crude or crude either less have LMS contract. It's on our shown oil breach our place such fully able our deliver this than reducing two with infrastructure to day infrastructure lease As LMS oil at

the exit slide enviable Permian of the firm oil enjoys crude capacity terms on to points an noted our in-basin major As position in XX, from all Basin. Laredo for

move capacity oil to crude or barrels of approximately firm of barrels oil oil intra-basin our Our of us day connects by X.X per to XXXX. capacity Crane allows of Colorado over and exit Midland, on capacity to currently, X and million day City, million per Medallion exit

on financial crude with see basis physical you slide managing oil is actively and risk, both As XX, Laredo contracts. our

under addition the oil capacity, quarter Gray firm XXXX. Oak with have by the fourth to our firm per day will XX,XXX Pipeline barrels As noted, Laredo of of of transportation intra-basin start-up in

purchaser a in to Laredo us ability our production. that purchasers, should primary all over of shown to take gas to large move gives gas infrastructure the of As portion has be XX, various unable our our slide acreage natural

maintains both Targa, assurance that Laredo for provide firm and next is capacity years. gas at residue through for gas liquids on flow several natural purchaser Targa processed the plants primary their levels should Our and

As assets call $XX to is our XXXX. year fresh recycling water across With to pipelines, water invested our Rick. wells I'll and to These million plants, infrastructure storage, on in the approximately This over produced savings shown net water deliver that, XX, water fiscal Laredo water in acreage. slide in Laredo estimated are turn in surface base. infrastructure includes acreage

Richard C. Buterbaugh

and good Dan; morning. you, Thank

our appendix, metric. EBITDA, the our second increased share non-GAAP repurchase our $XXX.X results As our Randy is slide the solid financial of our This for Laredo, through that met efficiencies XX quarter throughout than And operations. million the reconciled as we from increasing such milestones program in of to a XX achieving quarter. more on June our showed additional first nearly and every details this EBITDA, position, we some up quarter earlier, guidance showed Adjusted financial X% measure are of in second sequentially year. the is year. this Dan

More importantly, adjusted shown share slide improvement. is showing consistent XX, as per on net EBITDA debt-adjusted

fact, has focus metric X.X the over this capital increased rise evaluate oil ongoing has past debt-adjusted prices five as investment opportunities. metrics which over The outpaced company, same on quarters, about impact in an In of period. the we the times, per-share is this

One program. is the repurchase company's opportunities share of these

over nearly recall, share two-year to shares year, our authorized XX will period. $XXX slightly February we weighted then XX, this XX, have completed slide that purchasing per a average as You Through shares, million million XX% of be share. greater $X.XX program, a over of executed a cost June of outstanding depicted in representing than on this program at X% repurchase of the board

while flow a and We investment maintaining flexibility evaluate and a will that We financial sheet. around is to evaluation this critical retaining believe strong discipline of our repurchase expected our cash confidence in program opportunities continue our balance financial opportunities. under

has Laredo pretty combination financial result, a a hedged thoroughly of transactions. throughout physical been As and

the We have described maintained that current depicted this on transactions transactions XX. physical philosophy financial are the Dan with slide and that

see, considering both we basis. have commodity you taken approach, actual and multiyear can the a As

derivative completion have to been our the Now, completing and recent in simple a shown last collars. today's are in has drilling We the presentation. our of of approach continue by financial swaps, financial and achieved breach that we activities efficiencies our appendix for position. expanding puts, ongoing combination announced times cycle fairly We and following Details reduced contract derivative of derivatives of wells. take to these a positions use physical night Shell, the the

complete additional we in a As net wells our X.X initial up result, now XXXX, expect an projections. from to

for our capital As the year expenditures million. shown million this is a anticipated of on $XXX slide driving $XX supplement XX, to previously

complete anticipate XXX,XXX benefiting wells prior to their with completion expect of net year, an about XXXX. However, in late related of nearly lateral the year, We we increase from the these now feet this estimates. XX% production

However, we positive are in as impacts production XXXX also well. seeing

XX, expectation reiterates slide our last third reiterating presented the expectation than have greater Slide XX growth release increased for As volume as our of shown while in growth XX%, oil our guidance XX%. night. quarter, on we for the for full-year greater issued to than

our item June transportation presented leased of added Gulf for to second we the should our quarter now utilizing Beginning we a You capacity as have in line in Coast. this note, to sell expense. year, are BridgeTex barrels directly financials,

efficiencies $X.XX the result, activities that a guiding transportation are second at now in of summary, results projected year for this we the Basin. we've BOE. supports along we value Operator, please the quarter you corridors, will our time, from as with for expense quarter co-development operational this the production any and believe questions? approximately As lines enhancing asset third demonstrated, of the ongoing per in In our approach open the at coupled our success Midland

Operator

limit first Capital will question Markets. you. question of come Thank line from ask and please Dan yourself that with We one And McSpirit one question. to BMO follow-up our the you

line now open. is Your

Daniel Eugene McSpirit

Thank you, morning. Good folks.

Randy A. Foutch

Morning, Dan.

Richard C. Buterbaugh

Dan. morning, Good

Daniel Eugene McSpirit

back is repurchases where size? be material sufficient generating where shares at point Recognizing cash such company made and can to that free using continue buy flow, borrowed money not to is they're ideal, the in what

Richard C. Buterbaugh

Rick. Dan, this is

an we opportunity As that our on. you're aware, is Midland certainly Board in have we shares, investing repurchase both of investment of a authorized program investment think, number the the in Basin; well development opportunities,

be we Our free not to that opportunities get say, the can that something spreadsheet multiple balance to in all just growing as that are a taken okay, we to cash capability a development well as need multiple and and the and pick want things. flow this at sell well, that out of into look is point. There There is in you as factors be those asset asset. This to account. a needs

At One operational field. of things is, four are like the the rigs those three size our now. running we're Laredo things in to efficiencies and

crews. several We have completion

crews are lot We completion not efficiently operators and have our our spent time to with rig they sure as only of as a operating make working possible. that

keep a capacity. development of balancing You're benefit the so want able of of our – from that and to And level with seeing that. that, balance we activity field, there's that be to generating the to maintain cash our

that company where's liquidity? us all if current think We a to position. kept slightly than outspending the certainly current are can down stop that cash balanced the position. very crews dedicated we substantial efficient flow. the less bring the this that But operations have today. We We a likely We leverage? use and your strong – available start into in field needs That mind keep with, have. Where's to your would two to the of of it's liquidity adequate completion mean more be in we in

one to leverage the debt-to-EBITDA look our we on continued is things actually at. metric, have that which of a We reduce

continue to to those going balance we're things. So, all

think at a free certain (XX:XX) can I cash be rate, flow. So, growth slower

the impact quarter. that and it of You've already Part slower repurchase that in we've what seen We've got breach anticipated certainly from in pace that and from to is we contract done a and presentation program. that have optionality at of significant spots, the but our that understand the we that have second the beneficial we the associated pricing that we of had been that. $XXX amount with the of that the have Shell's amount we at had firm from we million about done able but completed, Dan making move we other not thought some XX% talked Shell. about number barrels the authorized a of done contract had sure all of implications of with

strong at will a in those the of we look still to So, company of balance keeping continue very while a each opportunities, position.

Daniel Eugene McSpirit

term for this in a course that, expires? agreement? over then, to of follow-up in-basin one-year be one-year an effort a in-basin question the And better when of to the the how the is wells Thanks thoughts to benefit Rick. just Appreciate the on a get what the contract sand. answer, asking many lasting with company. sand the Just happens of completed as sense And How there. just the will

Randy A. Foutch

I'll being well the mines while well it's the is years This as that's in as of to like. the contract. road found view a general, we've Randy. us what other address the that terms the over down And one-year painful, Dan, gets market's occasionally a long-term not to you we've company. company, And number tended culturally, the understanding And know, road sign been one-year contracts. beneficial our that in sand online, us that gets is of on down to

one picked position the local year balance up the we service sand mines. look as vertically characteristic between we we term in want sure integrated sand sand, the making so, kind or sign and local providers And to of and didn't have how be that's our And we equity at longer to have pricing, companies. but of sand

Daniel C. Schooley

second sand How on – from well come do that we many And the that XX% in so term half would used. of in-basin the of XXXX. the the sand. would be be the complete balance XXXX wells for sand in-basin wells then, we About – of every to would contract, going we're or of it use all think

Daniel Eugene McSpirit

a answers great Randy. the have Thanks. and Got day, With context, appreciate guys. it. the that, Again,

Daniel C. Schooley

Thanks, Dan.

Ronald L. Hagood

you. Thank

Operator

Singer next Goldman line the Brian Sachs. question the And you. with Thank from of will come

open. now is line Your

Brian Singer

you. Thank morning. Good

Randy A. Foutch

morning, Good Brian.

Brian Singer

X more complete to wells recoveries you driving the expected completions Can talk this more ability than also quickly and wet highlighted additional XX both You've gas of the production greater the your increased with to to year. just much how your stronger And past guidance, of efficiencies activity? to is how to the the from is due wet is wells? these weighting having i.e., each gas recoveries revised due much the on

Randy A. Foutch

clear, guidance increased and overall the Just be we maintained to production. oil

we're Just things higher in. But the there, liquids percentage so to clear, accurate is We're perfectly we completions, seeing a gas pretty as do seeing seeing is question that some gas is content. it's natural what our oil just on we're on be we're initial and something game. a oil guidance that the still

long change As We're the some that. a mentioned, really that. to on are We've production And apart. packages can on issue crews perhaps and work there's records that our that in pretty we've by are side see They're of data sit procedures to seeing side wells acreage, by setting doing literally do With GOR is kind going basin. some we're we've to setting side. looking for best practices myself, Rick mentioned, had few frac repeat got to that we're really early initial side. rigs records basin. continue the thousand be And completion us that rigs it's down. of in that performance if crews meaningful. that The performance the easy enough We've had three we've just feet some to got at

So, set are partially those the efficiencies is a function our acreage just way up. of

enable towards anywhere wells, that. package start in from that from of XXXX. mind completed of to that The take flow see So, is end that any back capital acreage capital XX increase not do until start in million start X and period that four to the The from the the the when that are additional you to really us will efficiencies to we to production your benefit additional wells announced, it's $XX have just the a really XX, to that's additional to going block order when in a and you of combination year, the investment Keep of recoveries going of things. and a and get between times time. from the maximize completion production six-month wells at these a and drilling we

to our have. that enhanced this budget So, supplement we the

benefit in production with in XXXX, that we a little You'll bringing see in XXXX. thought in associated earlier the than

minimal just of benefit that's but the XXXX cycle to some XXXX forecast, seeing reduced from a our the are increase amount relatively capital. production relative in in times We

Richard C. Buterbaugh

a complete that more driven to make less. done, efficient bit from to wells sure the more little (XX:XX). answer question just with is Brian, more guidance and increase doing And just being XXX% and The getting

Brian Singer

or decrease That into is then local the CapEx in would guidance? ability relative you that. helpful represent follow-up. And color. further to that built sands, one quick the The just for the Thank that is savings for revised revised guidance,

Randy A. Foutch

well we We talked as using sand. baked the the of would about on in into numbers local already those local the kind numbers earlier so reflect capital, be little bit a second-half-loaded by that do year per what contract, using signed capital were reducing sand. And

Brian Singer

Thank you very much.

Richard C. Buterbaugh

There in using previous also the Brian, To is my offsets we the those capital, is $XX benefit that clarify wells that additional cost that not X.X from some in net wells that, additional the of that sand in-basin million a comment the that on total expect offsets that in million. one-for-one. of $XX

Brian Singer

Okay. it. Great. Appreciate

Operator

And Tudor, you. Sameer & next will come with the line from Panjwani of Thank Pickering, Company. the question Holt

Your now open. is line

Sameer Panjwani

Hey, guys. Good morning.

Randy A. Foutch

morning. Good

Ronald L. Hagood

Sameer. Hey,

Sameer Panjwani

need to going on additions rig implicit cycle take the your to you're process of XX development. inventory mentioned the the impact advantage expansion the previous in well forward? do you've reductions thought seeing How section per time calls, accelerate now the there of So, pace

Randy A. Foutch

that forward. to reduced positively. section have, brings But pretty inventory start on up sure inventory; not and that show you actual inventory. we about length wells we I'm with when of cycle the wells It's other the have, the significant big inventory we that the makes think and time We've per interesting, XX the much XX about cycle has as you data time a Upper/Middle zones had impact in thinking that yet per section got

Sameer Panjwani

a pieces going moving valid, of sand thinking a efficiency the there $X.X side, is about the on I think still a be of that you and in-basin previously understand target Is then, out gains. But implementation had these forward? there's of put cost And million. Okay. number with or well I better lot to

Randy A. Foutch

why Karen, don't you...

T. Karen Chandler

Chandler, Vice take this question. Karen This I'll of President Operations. Okay. is

you're and put we we stage the budget proppant in-basin cost we've on $X.X implementation with working actively optimization of fully associated well been designed that million, that the sand, when in length number savings and built mentioned other expected Randy design. as as mentioning optimizations out, So, around

So flat are and X%. than year; going that We've a cost we're ongoing. those forward, through seen anticipating the that inflation's of less little inflation things all bit very been

ups of a So, and a cost we've expected million service savings. good and the downs, to probably savings. portion little the achieved offset cost all about with in due XX,XXX-foot $XXX,XXX the to an increase. Had on of million on cost to We're $X.X continue $X.X average lateral bit now range right work

Sameer Panjwani

Okay. you. color. Thank Appreciate the

Randy A. Foutch

Thank you.

Operator

Thank line from you. Kashy the And will with Harrison next come question the Jaffray. of Simmons/Piper

line is Your open. now

Kashy Harrison

morning, taking Good my everyone; thanks and questions. for

Richard C. Buterbaugh

morning. Good

Randy A. Foutch

Good morning.

Kashy Harrison

what regarding you telling was takeaway guys the Basin wondering you oil just some ground what your the your partners Midland operations I So, and are on color today. and could share midstream on gas team if in

to what sense both trying tightness, they're a on you Just and of get oil actually in of current gas. telling terms

Daniel C. Schooley

take I'll the crack at is Schooley. this. This Dan first Kashy. Yeah,

that have that oil except to start advantages crude firm that in of area, On with, which crude we under the to side of includes in one XXX% oil area again, transportation. is far Medallion, everything the is our area, dedicated northern the our

that And purchasers from City. not that they're are we maintain oil is move, to long And to oil, Colorado we or So, can our kind as very of move purchase of crude found indicate purchasers hearing that, it is continue going Crane, Midland not can optionality would to-date to going appealing. the is we be from as able move. seeing or kind to crude And optionality. our anything what to that our that

course, that on barrels the day So, feel out existing we our good about purchasers. our where of XX,XXX firm take of transportation line BridgeTex have sit fairly a And, we we now. we with

So, between we move our fourth and the to ability quarter year, oil feel out that fairly of about crude of Gray we good Oak Permian Basin. really the transportation next that take in

system. gas differently. moves sell we obviously own through gas the side, big our our gas the at chunk a gathering lease. A of On It's little

ability deliver Targa, larger the DCP, we have So, our and gas to to to to extent, obviously, EnLink. a

able our So, that unable gas of the they with us all which and enough primary have and assurance And purchaser, have enough seeing be for the it. our firm Targa, both feel the one the information next we meetings to high that in years. then of they're to be move we optionality physically have take to production NGLs to purchasers leaving our given where producers production plants, from should our growth handle the their the capacity, their – they pretty on dedicated residue several to certainly is

So, we're in shape. really on we both feel counts, like good

Kashy Harrison

That's in Dan, you walking And through there. your XX then pages remarks, Thank Dan. great XX. were you, color through type prepared us the on curves

different for the the that oil on the vintages page cumulative Just XXXX looking or just about that XXXX any different are the at drilling slightly greatly wells be today, the days are XXXX any color Just there the so X,XXX you highlighted below production implications that wells curve. is wells? appreciated. just really so completions that XX, fundamentally after the type Does from that you're would have

Daniel C. Schooley

also of very XXXX X,XXX in Those Yeah. vertically a has terms and that's The were completions. you great different vertically completions. They were than a were that chevroned. primarily stacked Appreciate pound completion mechanics and stacked complete are versus which different chevroned, wells the question. question, different effects, wells rather as

was selection just was hold that driven that XXXX had to wanting in completely, XXXX was utilized was really well by acreage. of but impacted program the by that large component we not a So, also driven

was make the we zone to the drilled deepest the more to Clines, may that held knowing well. going could be not all have we the landing sure of zones best we So, above Cline and performing that

XXXX of terms doing really in difference versus what certainly, we've did the as and gone design night-and-day started think XXXX, I So, the into XXXX. completion in and in we

Randy A. Foutch

using lower the X,XXX other higher primarily that that be our – different And Ron, load-ins were to we on clear so, I increased (XX:XX) type some were completing a type just what we we in And in about in you'll and XXXX curve what we what or upon completions. doing pound days. remember based was we well, XXXX and think on at presented, we were and wells on learned our things other proppant based curve had those

XXXX and the that we type showing to type have. and graph to is XXXX we curve the levels. performance increased those performance So, are the The used showing XXXX in curve

we've clear Just to that, sure Kashy. been on make

Kashy Harrison

No, rest me. the for so it have Thanks good got much, and you. a day. That's of

Randy A. Foutch

Thank you.

Ronald L. Hagood

you. Thank

Operator

Thank Stifel. next the of comes Derrick you. Whitfield line question The from with

is now line open. Your

Derrick Whitfield

and quarter. Good morning, all; a congrats strong on

Randy A. Foutch

morning. Good

Ronald L. Hagood

Derrick. Thanks,

Derrick Whitfield

that faced that last Midland Laredo quarter's were are indicated in would add other year. I could how with than operations potentially basis later differentials you operational exposure in employ? where you're this $XX Recognizing you press better quarters of protected is, And I'm there your Randy, release, than at deferrals, rig manage if likely peers, guess, from would fifth getting completion barrel? measures of per you other you excess two a

Randy A. Foutch

It's interesting.

some at rigs we're side. both I that just we year efficient at effectively what by drilling end the seeing think the we're we're and and is getting how rig fifth of acceleration think adding point, I on much for that But the the more we implied said, what completions Derrick, have

verbiage right that adding I is anymore. a the fifth know So, don't rig

just you in, that are the it's our we're obviously, small we to better. think we think, view reason what pretty X, increase. have efficiencies which thought And us, of continually it's fairly – I that the look getting capital we're I was slide And impressive is getting, accelerated. a actually with kind was for

are and much several proving it Karen's, said we're Now, that keep better now that cannot the these better more we're at go. getting teams and huge efficient. getting we becomes At wrong, as I've And we Dan, rate changes seeing. point, you some getting their keep incremental me not and for years

know fifth rig. probably, think, in going sometime to So, we're much may get. I a much XXXX. I more that committed. to later add I'm don't We're continue But It with we be pleased efficient how

Derrick Whitfield

Got I are efficiencies impressive. The it. agree. operational

GORs for As referenced you degree pressure completion my your Dan, to prepared the what can that mitigate optimization initial drawdown remarks? follow-up, further in and reduced or in perhaps yourself increase

Daniel C. Schooley

we Kloesel the in in maintained have package we jump and a mentioned me managed the here aggressive, that my That's we're may a data very early out. Jason question. fairly what great on what I in have I call, But those drawdown on seeing months' a remarks, where little oil XX-plus is we're at cuts or nine off. production results. positive production, We're oil XX% worth months regime, cuts. six so we seeing of that bit still worth – level seen have the Nine wells percent months, seeing of help

So, little bit we more to be not. a effective feel that effective. need managed will or to run if going economically be We see time it's the drawdown

Randy A. Foutch

you're increasing content – are overall percentage, be you're the effectively story, the complete from even manage to you the you drawdown, slowing production oil though And that well. overall reducing the – as

physics the of just that that's how So has work. to

production. can we higher comes a So, get cost content, it but less at early of some oil

liking on we'll what what where basis lot rigs a have mid-XXXX implement with can or better to to And whenever into has of to want takeaway broader. view does do do we And it what kind drawdown. up in basin we see. view we cleans trying the not We're want or we time so, and out with headed. that the all the we're something managed That's and we're figure differential by that's capacity, if rolls the more a of

Derrick Whitfield

helpful. taking very it, for questions. my And Got thanks

Randy A. Foutch

it fair base to that doing Yeah. have production, (XX:XX), move pretty that time wells, And drawdown of big with to needle. impact a long while on package, takes packages be with may it a on managed just our

Operator

you. of of Thank will from Merrill the next line Bank The question Asit Sen Lynch. come America with

open. line now Your is

Asit Sen

I from about you'd spoken morning, Can what Thank to you're previously, X clusters a you. cluster tests bit about provide on wells clusters also, seeing of of are any terms how little Good update these talk per think some efficiency? Wondering tracking? fluids. you in stage. could think, doing if concentration XX everyone. I X you were to using you lower Dan, And going

Daniel C. Schooley

Thanks, at the here. in quarter. your that in Asit. start where And blanks We first wells of controlled rate pretty looked well return wells. they with had water was believe enough design variables, this that percent hybrid of well probably slickwater a bounded of if was well. we just type we had lower and to hybrid the where with, economically, particular, in Karen bounded. I'll They're had those question package wells, test one a concentration fill good wells, I'll very had The And the XX-plus wells have the start hybrid begin on we out the we XX the the we and you that wells, of ran XX had that. hybrid we hybrids. on a performed

rate bounded So, of we well they're extremely have extremely were And return. percent slickwater area, an where we XX-plus not in poor good was at wells, but the good rock.

we on have case the but continued use we but that as not was? part design the economic, did good the in particular So, of had wells, not slickwater simply second nearly And as good the result would question wells. in to obtained, it hybrid all was

Asit Sen

to X cluster XX clusters? The to X going

Daniel C. Schooley

let to going about I'm talk to Karen you clusters. Yeah.

T. Karen Chandler

Okay.

again, just on can of add kind this performance-wise. then Karen is Chandler. of comment So, we I'll operationally, kind

those start Wolfcamp, completions that that just of particularly completion doing XXXX, looked shown to of looking those efficiencies our back. to variety maintaining lengths. we want the you're spacing we're performance Middle in seeing but and at optimization is designs gain Upper what we've Part a stage with some And Wolfcamp of – of through in those really focus that learnings, at today. So, on is our denser co-development,

completing example, we've want for march that XxXX cluster as up, wells We're make foot to we to of So, that performance say, we spacing. the at been sure starting the but wells well. maintain

perform and at then to Overall, slowly looking performance. continuing very improvements as performance those those XxXX, are well wells seeing expected. So, to XxXX, stepping well

to to some on length stage optimization of efficiencies really the those without see getting any be. where degradation And the work going continue to that just point's we the we're So seeing need to performance.

Asit Sen

addition of And, or of frame year-end early In whether completion footage? or on But completion Thanks. thinking how schedule process light your conceptually, year. you how the not are appreciate XXXX, your would fifth efficiency, next Great. just at that? you rig Randy, in or thought about completion it's

Randy A. Foutch

the ways, They we a job. with doing we that much phenomenal that to have are of such other. they a subject lot And is each The see repeat, often conversations can of completion acreage have again, them. crews two a conversation. we're It's going efficient. to the let And we're not in know, let And the And not the drives count. those on CapEx them need you crews, for some as dictate efficiencies total going But our spend. crews become completion of the compete hand, less against other. each other to rig

your costs see that is go-forward And to some lower on on lower some that in-basin we cost cost crews? if think what part be answer what probably going to think, XXXX. you sand is, efficiencies. And we of going more of are I structure I with and think And the is. depends depends are part efficiency I more in about with again, think spend in capital see going forward it to So, what then continues, having

Asit Sen

Great. Randy. Appreciate the color,

Randy A. Foutch

Thanks.

Operator

Thank from Joe line Allman you. And Baird. with the the next of question come will

line Your is open. now

Joseph Allman

everybody. Thank Good you. morning,

Ronald L. Hagood

Joe. Morning,

Joseph Allman

Randy, I I And want right make to the got to sure go your just X. I've back to want slide interpretation.

you the unit. the – expect to much of assumptions the – resource, And assumption understanding plan increase really to going than move your getting the please is drilling is, hold that's twice That's or and message XX get my be much do do and think to is the twice NPV of I expect you to XX, to constant, spending per main these the less much. same? to to were the of is question So, goal be from as as – resource, actually And get or going drilling check here. costs you're twice we as my you you well if as development what are you that completion

greatly have want just of key other messages. return You those but and NPV. might you're sacrifice increase assumptions you going check And any the I rates some, to the just to see if

Randy A. Foutch

directionally, What XX is is might that Joe. seen wells. about we've question. the a zones, we're is up good the to XX want could we're so in wells talk of message now that those in keep the we that up think other that performance think a on I you there's And the about section. a to but of watching and early what couple results, seeing Middle, – in and talk and some Upper makes saying And we're do that us I results, do we that Middle Upper to that's that messages, in mind. possibility doesn't should And have

trying rate think, we're So, the to looking out we're I really return is to present the stimulations. performance,. at optimization related figure of And net But on and results value. carefully, still

that if to dramatically, a probably to of growth, positive percentage, strong recovery hydrocarbon then slow And a If those and pace oil both drawdown, while positive you you've recovery overall change the and about that – return. got related production may are the to back managed of NPV the got base the goes the strong our comment it it's and GOR company. package change ready

want production. that So, do I ability we you that? of balance to think, we've manage return rate actually with we add complete got to NPV how anything the and a can Rick, and unique and recovery

Richard C. Buterbaugh

return certainly reporting asset is going impacted the There the versus timeframe. rate on going believe, with at the rate is to of the look discussion NPV trade-off, we with is your thing And this the those of NPV, cost only I that, a of obviously, probably your what something development. important, constant you return. mean, it, with but is period, commodity I'd Joe, for trade-off you're that a that's we're change is and to between by that and if But a maximize discrepancy have the company. at. and and living life points the Yeah, mean, prices of two to to constantly are add I XX-day certainly is something

the and that relationship thing parent-child that wells in of are of size is other the we've The to keep tried important. packages the mind

of destroying drilled and you results. it's today, get know section, we So, type to difficult from date, at Once what are later have very same locations? a you back a the come

from to right want get much you the as that start So, possible. as

realize recognizing right, we important cash something get your it opportunities similar accelerating to standpoint, road. try drilling, those is spent investment mean, upfront of time our that of and between what make you flows issue. this to of a have is to sure return value capital and share rate expectations to effort resources we the I are and and today that as develop balancing We lot down is the our on that So, NPV repurchase, believe, complex that a from very something and that

Randy A. Foutch

Joe, the Midland amount don't a had conversations address about parent-child problem and in there, there's in create you the the substantial down And a only data exists. road. and have comment out that basins, problem the I other if that you really very not it, does it of made I subject this but Delaware, which

we'd probably to ourselves And the is but one so, base course, in be rate future. and maximize is locations don't performance. the one-off on hand, aware side of drill could of The you of want completely flip such penalizing return, we that, our be acreage of that not short-term

and to have So, really sure that attention NPV we're think that we have drill and to really boost. But striving wells. had the that. XX conversation. a that that make I to up find And you We need returns think of rate And big are short-term capability performance. to We we that balance. part of a to pay we do is obviously,

Joseph Allman

know maybe I there'll Shell just might really language in imagine, This follow-up be listening its litigation, question, XX-Q a but And subject. us? the that That's you some one any Thanks, it. I sore listening, topic; helpful. update be share in lawyers and a guys. might on Trading can great. That's be litigation different with

Randy A. Foutch

Yeah.

Houston think But talk message we'll tonight. did at say in the which help you say, be think And that a else that. That's public the we system. in I is I that counterclaim. think file can we everything Q, that that about the we'll I filed will can Ron look

Joseph Allman

guys. very you, Thank helpful. Great,

Randy A. Foutch

Thank you.

Operator

with a Jaffray. have we line follow-up And you. from Simmons/Piper Kashy Harrison the question of Thank

now Your line open. is

Kashy Harrison

realizations my your online taking in Rick, follow-up. like? as once later Oak WTI comes look what will percentage for Gray quick a of XXXX, Thanks

Daniel C. Schooley

is this Kashy, is Schooley. ball mid-XXs. park in Dan Rough estimate the probably

of WTI. XX% So, XX%,

Kashy Harrison

it. was That right. Thank you. All Okay.

Operator

turn no Randy would Mr. I'm to Chairman I questions. And showing over further you. now back conference CEO. like Thank Foutch, to the and

Randy A. Foutch

corridors, look time. wanted everybody that NPV. you, rate do have And and the return just operational for wanted been I Sabrina. thank of I feeling Oh, consistent the the we've at And about we talking at opportunities We're to off. the at some acreage paying think tell just I we're and looking We're performance. to showing to efficiency operator, is

lot by wanted so So, be story, thank the future. we're road this much. telling And in seeing forward I I to to Thanks the a on very you. just to look near saying summarize going you

Operator

your Ladies program. conference. does and gentlemen, thank conclude you for today's This in participating

You have great may all Everyone day. a disconnect.

Vital Energy (VTLE) 2 Aug 182018 Q2 Earnings call transcript