CDEV - Earnings call transcript Q2 2018 | Permian Resources Corporation

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Operator

Good day, and welcome to Centennial Resource Development's Conference Call to discuss its Second Quarter 2018 Earnings. Today's call is being recorded. A replay of the call will be accessible until August 21st, 2018, by dialing 855-859-2056 and entering the conference ID number 7818579, or by visiting Centennial's website at www.cdevinc.com. At this time, I will turn the call over to Hays Mabry, Centennial's Director of Investor Relations for some opening remarks. Please go ahead.

Hays Mabry

you XXXX joining earnings thank company's on and quarter second call. Erwin, all us for the Thanks, Presenting on Chief the Chairman Sean and call our today are Executive Smith, George Mark Officer; Glyphis, Operating our Chief Financial and Chief Officer; Officer. Papa, our we our X, X-K Form Production, subsidiary, second Centennial a release, company and with for earnings Resource results filed the earnings operational reporting August Yesterday an quarter results for LLC.

during presentation to our that today's posted call. also reference an earnings We we website will

on presentation www.cdevinc.com. are risk more the are Report You website our to XX-K discussed homepage filings that and XXXX. our at beyond year Risk find Factors with can are that and the and Commission, call Presentations ended detail under Annual December our on could Exchange affect Forward-Looking this and the actual I including risks note Statement involve of in the or control our the Form that forward-looking statements of earnings like sections results would uncertainties Many our the comments in and these many of during for XX, plans. Securities

believe performance may we measures actual of they guaranteed are or the future facilitate comparisons to help reasonable that with are may expectations peers. not on and Although based developments also We our differ assumptions, financial materially. results refer and expressed non-GAAP periods across

reconciliation the the earnings corresponding Mark nearest turn to a Chairman to GAAP be use, that, we on available CEO. release our Papa, measures our found over can non-GAAP in any website. For call and I'll measure With

Mark Papa

XXXX and earnings Thanks second Centennial's morning quarter Hays. Good welcome to call.

financial And well comments. macro our Sean an updated new function first will the our views my of as provide be regarding as agreements. strategy I the and oil midstream operational closing macro, will hedge overview as update discuss on position follow then this will a our with follows; our give as of presentation liquidity. call George sequence quarter an from then and will results, quarterly Our

Now, results. review Glyphis ask our I George financial will to

George Glyphis

Thank you, Mark.

equivalent the As earnings flat the QX per the QX being you June day, XX of were wells approximately during and equivalent therefore month completed oil quarter-over-quarter and impacted at had frac on approximately the minimal averaged overall for shut-ins. with of XX,XXX recovery X% the offset essentially was per can production better economics for and gas in were June, slightly a XX,XXX to volumes weighted production were oil completions impact XX by oil presentation, reference totaled production that heavily of of production brought the ethane quarter, on Of for primary barrels provides shift the because approximately half currently QX. revenues. quarter. and Page volumes wells which online increased increased plant. The oil recovery barrels NGL increases in day. Ethane Average processing our

While oil quarter for compared production recovery, XX% volumes are not to the NGL surged impacted QX. by ethane by

production total and in of increased As total XX% percentage oil both from in a XX% including production, to a liquids QX. total of compared XX% and a was as oil NGLs to QX, result, as production, XX% percentage

price expect to NGL Given in barrels volumes, year production we the day to new midpoint a per end the for that wells. point in our full of XX% day, quarter. the any The XXX the of flat compares was with barrel of versus Revenues XX% recovery Inclusive by for basis increase $XX.XX average basis year quarter company's to fundamental which NYMEX the a and barrels entirely area. change our QX, the in prior ethane of oil by any $XXX total NYMEX. want the and our impact approximately higher per realized million was hedges high equivalent realized price represents totaled this the the to average XX% to essentially quarter. This GOR NYMEX the and in our the of realization per mixed not due percentage were hedges, quarter price was before adjusted by QX $XX.XX XX,XXX differential. mix I higher was oil change for our from caused prices as was offset underscore of the

quarter per G&A of guidance Boe, XXX, to wereX,XXX due costs costs XXX to of despite Turning XXX to our the higher still per which side. rising of range the XXX XX% contract per associated in range. and costs professional was Boe, DD&A lower GP&T the per end efficiencies. BOE in equipment fees. result annual field cash guidance BOE rentals. highlight expense up was slightly Unit increase a and declined at but labor as QX, near a QX from X,XXX our the which for original quarter-over-quarter, our continue came LOE above end quarter-over-quarter costs with lower to low X% was in legal

approximately QX. was quarter QX. of $XXX lower respectively. This during the Centennial D&C completions unit per slightly XX% total CapEx prior to updated Stock $X.XX was XX, and compared quarter. share A per diluted in which share annual which QX, illustrated and QX in and in our on income for level other capital because QX, Class infrastructure, Net Adjusted down the primarily XXXX decline, drilling our and interest Well facilities expenditures all million attributable million annual $XXX Common our totaled land during from acquisitions, drilling approximately million, $XXX totaled incurred capital reduce As in million or and year-to-date $X.XX confidence lower Page ranges. of approximately from to compared guidance of XXXX, $XX $XX totaled guidance, a $XX XX% EBITDAX million the for mainly CapEx million us cost $XXX seismic above to facilities, was working wells. QX $X.XX due down gave $XXX million our results CapEx, noted nearly million, is to approximately to

for sand into allow an regional our with will During the agreement contract profit coupled several years. contract contracts also provider. future the entered quarter, next of XX% approximately Centennial to its secure This means in-basin Centennial original with second under our

reminder, in-basin a future we of any cost than white, believe cost significantly mitigate other a lower our this traditional operations. and inflation As areas is service will in northern help sand

me, basis to turning oil Centennial hedging, -- hedging oil be fixed Turning oil. excuse to price on continues unhedged to completely

by blowout hedging, Mid-Cush industry, basis like Regarding in timing of many QX. that's in we surprised were the the severity the basis and started

midpoint of X can the presentation, see in of per Page we half for Mid-Cush our for differential you production guidance, have barrel. place As on XXXX, at of $X.XX second the oil of XX% approximately hedges the

per an average production in oil X,XXX per at of barrel. $X.XX approximately XXXX hedged have day also barrels of differential We

QX We agreements approximately XXXX the to capitalization and had may pro Smith Sean $XX was facility. million to we million million continue borrowings on X.X%. was EBITDAX on we've summarize turn unsecured add commitment Later will and XX of Centennial's to operations. net assurance senior With to net $XXX and notes to to we book that, cash, the On At review for facility, review end million debt $XX our credit liquidity. presentation, to credit June the elected I'll of monitor flow liquidity secure million annualized XX% Page our for into Sean and forma takeaway. oil capital position. of of debt $XXX entered that structure we under position. call At over and $XXX our of revolving both gas the quarter's market had natural hedge XX,

Sean Smith

you, George. Thank

XXXX. beginning operating During in full-field goal quarter, our made of we the manufacturing and second significant mode towards progress

co-development reference test you natural securing flow As we Spring strong can multiple on Sand the achieved a in Bone oil Xrd gas. across well assurance both a and progress made announced Slide results solid for tremendous X, intervals and on

able unit operations driving cost quarterly following, the down keeping achieve to team and CapEx year was below while estimate. the our Importantly, D&C anticipated full

shifting made from our XX program pad months, single-section extended primarily development. focus the a development has current Over to Centennial multi-well one-well past lateral strides on great

that of For our and year-over-year. length example, and average from is focus on XX% continue completed approximately will programs our types projects enhanced on going our economic returns during were in increased come the of lateral delay pads wells forward. current multi-well no to these XX% the There completed we quarter

Centennial and wells. spud the XX wells During completed XX quarter

earlier, to completions and higher our half were expected during online brought waited than offset May. the schedule more quarter quarter. June the shut-ins occurred of by were during impacted completion oil Approximately last alluded of backend of month quarter George As our or volumes completions XX% of week second the our second specifically during

resulted production the during result, quarter and flat growth. contributed second As quarter-over-quarter these oil in little a wells

recently the on we to online, year achieve year. articulated at quality to brought due target Importantly, our of track the full the beginning of wells oil remain

next With day XX is drilling, during and this Arroyo we've Xrd expect spacing the much days X. stack-staggered of contributor Sand the program CWI Drilled XH of zone XXX well, barrels had with lateral IPXX this first illustrated We prospectively. portion XX of A year the per the approximately vertical which does Ninja our average with four-well a foot Slide Bone result were With XX% oil day, oil As, Reeves X,XXX had our foot but pad the of per shift which organically which in acreage. Also lengths oil, X,XXX over oil Red XH co-developing than X,XXX one test a oil drilled second believe equivalent X,XXX year. on Rock after wells A the wells an and Sand Weaver Spring foot wells. of brought following is achieved our to two day greater A delivered online IPXX and this provide spacing Red between this X,XXX M&A. best future Upper Turning day successful barrels per of at remainder barrels A, per meaningful the Upper our to announced only extended XXH the Upper Wolfcamp County of in A day, The zone oil test the Xrd XXH Rock Spring X,XXX Most proves Wolfcamp and legacy C. laterals, XXH, and equivalent a pad an to to day, per plan more approximately test Centennial with and Bone Slide a per is highlighting drilled days of on and We test the added Unit three- confirms ever, of Bone Bone per drill XX,XXX lateral of long pattern produced the Spring targeting oil of wells X, Area oil. successful Upper of our throughout importantly, viability quarter, on Wolfcamp A the its intervals Spring represent development to four XX% addition zone in the XH Further than X,XXX barrels pad well co-development IPXX this targeting Xrd oil barrels Not a previously the A. XH XX% area pad drilled also be XH of additional Sand containing oil XXX,XXX equivalent were and the Wolfcamp foot economic and XH, Combined, X,XXX of IPXXs pricy barrels of represents drilled of day lateral Xrd X,XXX of new these oil. production. from online. during Spring The our a and Lower using averaging an of XH, and XH were feet, approximately barrels Wolfcamp Sand respectively. approximately barrels these XXX The Miramar Bone inventory, inventory still laterals

barrels During XXX,XXX online, over produced XX oil. its of days first pad

Turning to marketing. midstream and

of was flow that we've basin focus both During a products gas. Capacity is In approximately Permian of our our topic our is day been strides last to support BCF take dry primary as these approximately assurance agreements BCF we effective production XXXX of emphasized a for oil natural will a gas, plan. the certainly tremendous ability and the few and earnings out flow day. securing X.X past hot both call, late, point gas months, assurance. Centennial's away natural for Basin made with current X versus game announced of yesterday, capacity meet Starting

will past egress by future Given This issue secure flow why Delaware we've natural for a Permian working XXXX, for growth, Basin production gas. is we the in to serious over to diligently Basin. the been gas expected continue our year assurance expect that early especially become

and X, out both XXX% Centennial's end through Slide gas contracts we of Hub capacity As WAHA see you transportation sales on through firm Notably, can multiple series contracted of XXXX. Basin on the to agreements, of gross of have cover the residue pipelines a the Centennial's gas. firm of these for Permian

be us shut-in a not production required production, As Centennial the to be away a turn, period take time NGL's, will our the capacity. or will revenue. total we of envision during will these which agreements scenario available of In anticipate to Basin-wide when flare natural did significantly Permian value whereby exceed gas represent approximately we both also recognize economic result, and allow XX%

buyers Brent-based based of pricing agreements as sales X-year XX,XXX Due to crude remainder contract, Basin. be of the purchaser. the commercial this Now January will beginning for competitive Centennial barrels today's this market. turning in to firm the confidentiality XXXX, day, recently reasons, diversified FT, existing in terms per agreement believe oil provide We've entered initially physical well this for barrels agreement utilizing XXXX, agreement Midland specific of crude cannot day firm out large away a capacity we discuss switch oil will per Beginning gross sales in firm are of XX,XXX to pricing increasing into the the for oil. of of allows The but pricing agreement. XXXX. contract of a with attractive as terms in and to oil and Permian with take By the

continue is of Gulf of sweet the into demand providing approximately to expect To a heavier crude addition in crude Coast through refinery can satisfied include is we to gray Gulf to oil a Brent diversified will we of than day maximum and the the Due X diversifies This of which advantageous light per this barrels differential Centennial oil totals In sweet refining prudent reaching portfolio higher longer-term. blended being million to million put why flow feedstock's, believe oil WTI Permian agreement less configurations, be day. prove assurance, remaining believe for these of we imports Brent encourage crudes. majority gravity context, light exposure, With pricing will that oil capacity barrels of with shale into environment. today's in our future capacity refiners export X crude. current a approach to exposure Coast the accommodate pricing currently can

of Therefore, large several contract expect similar working in flow Centennials ultimate secures our our for have to into are executed recently crude future. the subject very currently this to While enter firm all portion near crude, sales contracts production essentially goal assurance of a large to agreements. we future and is additional with oil marketers

for With allowing on steps gas I'll these turn back that, beyond. through the agreements the in crude and both With place, natural plan we have our taken our and necessary to execute to to secure call Mark. us game flow assurance XXXX oil

Mark Papa

Sean. Thanks

and analogous Iran. similar, to U.S. Centennial's Venezuela regarding but developed CBS and into I’ll Regardless to expected, macro consistent. oil my macro provide shifted commentary to supply the a overall is of those some concerns as on from concerns previous develop is strategy. is themes thoughts the shale's global calls. The The and Now focus relates picture continues picture prices oil manner have in response

to hedge continue will remain We oil. regarding on

some have anytime oil but the tactical XX next employed hedge it's months, unlikely for hedges We WTI will soon. basis

macro bullish note no points. view, trajectory our organic we our to Given towards XXXX. change like barrels In in I’d of key to see targeted oil summary, need a six XX,XXX day growth

have volumes next to to gas within mid-caps lockdown both expect all Permian few several be few years. of we First, a exit one months transportation for their the and oil for

play Second, Sand rate Reeves County have viable recently acreage. well Bone we on oil our completed a our we have high Xrd confirming second indeed new Spring

focused we Fifth, the and the have cap. And the full-year finally, rates at cost be we on reduced unit this listening. continue in lowest all guidance. slightly volume industry. one debt GAAP our of go our we And group debt to ROE Thanks for keeping raising categories highest and call, for CapEx ROCE. peer will unchanged Fourth, our Q&A. Third, oil it's oil of growth while XX% in now we the and to un-hedge to

Operator

from from J.P Your Michael first of comes line question Instructions] the Greg [Operator Morgan.

open. Your is line now

Michael Greg

us talked capacity? did low-pressure on not if a to gas bump level out Delaware. bit, a thoughts view I What’s wells into we play similar about about off your how but see And something to would you basin at situation give You the DJ this you things expect more the first? wondering where was quite in if older

Mark Papa

isn't Yeah. the first likely Delaware Good Permian to will with find oil. morning, either beginning be an be gas some our to along indeed to Yes, in the has gas method XXXX, flared then the the Michael. able in read be there's just egress. in going a be likely shut-in where is had of that the issue early And or and that corresponding gas situation to

see developing. So situation we that do

could which would it XX% starting smaller and the But there the and necessarily are on probably I I is in takeaway and they duration. complicating the think, don't there likely Now that the a secure than the And might caps is don't year to large greater problem one integrated oil shut-ins, corresponding that probably that I other think to based gas probably first be there factor that is that in be develops the affected, 'XX, be quarter FT. affected gas will say it'll mitigated. a if companies be is assessment probability going have are companies our

have they we announcements six will pursuing and you FT gas one been where probably FT can pure And the mid-cap of FT. tell the who gas announced have we've to does on have I So few believe that who about likely discrimination from months. plays And gas are as this earnings have call not that be. for Permian

hasn't problem months too much will really, whole but Basin. a much pretty discriminating us. think, for the And within I be four, And so, been it the about upon believe five it factor talked I Permian is

Michael Greg

if one the of could Would you then those one just obviously do CWI think And magnitude on outperformance the in to Delaware I strongest offset pads that the ask date. wells? of the seen we've driving pad, is in

Mark Papa

any Sean Yes, in and of perhaps believe, you best think to I top effective if the now Centennial's an really Southern I in entire as several or completions Centennial have of cases statement just have colored company overarching County a place. in last that where when there, would three in the technical before analysis. likely a some we months, most done some look contributed got in I Delaware completions make the XX would one And the or some completions to -- the that Reeves And two at well team is we shell-siders we technical was Basin. in we've became have but now team, previous done by equity really company. And seen data was analyses company Centennial done a by private our public well

none. our think efficacy completion much really to I second pretty is

overarching and surprising add Michael technical that. so And best you Sean, be the the to anything southern have answer team to my you that you so in much to me. can to results would the if aren’t want particularly in chine pretty we Delaware,

Sean Smith

Mark. really concur just I’d Thanks saying with what you're there.

our And a a window, to where we have increase, zone our well our in said wasn’t results been continue a for can to of way striving and time to tighter continue within obviously We for and on then our are them of the out. period small incremental to push properly, obviously keep these There changes land we we in there. try as anything bearing wells wells longer completions, to efficacy magical do that Mark particular completions. except efficiency

as improvement to side from in and side continue completion we then certain from think some see areas the I well. obviously production the both

Operator

Chandra comes line the from Subash Our next Guggenheim. question from of

line open. Your is

Subash Chandra

these basis that not about that think flexible is agreements? is netbacks now levels completely around adjusting below you with Mark, assurance it your to say there, previously, were are might fairly fair new your get flow understanding XX, the off somewhere And there. I blowouts table activity we considering to that

Mark Papa

Subash. No,

protect we the blowout us -- us basis signed, assurance. watching allow particularly differential. the agreement the They against the are executed FT we've flow mean agreement We actually, that don’t basis agreements protect that oil differently, doesn't gas us I BP

I going that if the basis few not slowing you volumes give months XX,XXX commitments activity. a are half goals, of now really marching So hunting target chase what the of a volumes is. during of is, always in down somewhere if ballpark. of just is oil last basis what you day our XXXX, you would is may oil our to happen XXXX throughout purchase second circumstance, we goes volume purchase specific temporarily tell consider number or the about netback goes and meet toward XXXX, or not barrels resulting going basis growth in will crazy, as will third-party oil to our in our crazy, I’m you But number can on of the just just if we completion what And the regardless $XX, number the the our netback we that volumes. to what to FT And the

are we it. So considering not

all. Does We grow these commitments at volumes to you a… meet have give FT that to

Subash Chandra

in Xrd what And the -- read, conclusion operationally, Bone spacing co-develop was vertically across? that a rate. the the this Xrd to and in I should your and the we well in-house happy are guess anything obviously, result you rate, at or lower spacing pad unbounded was, with one on in design then draw But spectacular first Bone

Mark Papa

in dimensions three here. Yes, working

First Bone on Xrd that Bone's the Xrd shale. -- Sand than we're more a anticipating is the a basing sand of

you that the if is so will acre and spacing. So it plastic, a roughly anticipating is we're XXX spacing

is per not wells section it of is sand. four it's a really because more shale, anticipating a So what we’re

wells per the it's on is that section that for what at kind there. So of we're XXX looking

than Wolfcamp had. there's kind as right with be that are a second of terms was well A, as mean, not much wells paired just is what the that I to of it but because was And possibility -- This it program we out charts. Weaver. strong we well the quite just the Upper of the development turned terms that better well strong the and program the as with Weaver we it's off the case Xrd as was -- first up well Bone that In well you -- of would quality, high very development the would A. end Upper in we well, our tuning a but side a

if would are press is And you expect are I trying as likely the to model we stuff well. wells released template is once for us what these that released an will than be I use more you be something juncture. well here in that go Weaver into kind more say development for, than we maybe that see tell would a development So I a program program and this would press what well. would ongoing just it accurate would Weaver we of at unbounded Weaver we an

Operator

Our of Hanold Capital from RBC next line from Markets. Scott the question comes

is line Your open.

Scott Hanold

out several discuss on Could years. oil you can the goal obviously all lockup Strategically versus up next firm looking sign-up locking FT that you over get you was to pipeline? your talk much a pretty said strategy about going using firm, additional and your to on that sales

Mark Papa

I discuss conceptually, negotiations number in entities. are and we with entities are the advanced entities, very very it other one, Yes, can very, big other

transactions the are major major, with we are entities. So contemplating that

the for for years. to deals allow of would of to deals look mix our are the to pricing large years. companies. all And be four pricing, about that between would utilize to the the we up companies, They So they transactions doing that portfolio day, six of base generally The six-year other agreements would transactions ultimate of years, next transportation XX-year or with some us with we’re four so deals; five transportation all so of four firm over that contemplating is a these the they terms goal deals. be when of next kind firm The small six are entities, are to the not end you not the term and the Midland four Brent done -- were over marketers. oil talking at access big have end these existing pricing

So we’re to XXX% not to not pricing. Brent, Coast, not to tied base Gulf tied XXX% to XXX% we’re to tied Midland we're

So BP to XX going and in we’re have say, let’s our minus volumes. done appreciate, we're this to either to and of next contracts, other specific view ones, because other for of getting right any these on our specifics this on the the middle the contracts. of accomplished can plus some not would on these expect now all negotiations well And terms, on we're as essentially or way and contract days or you in

Scott Hanold

I appreciate you FTs clarify to so ability term just understand, you strategy, that the end that people's And locking-in duration and versus and shorter flexibility sort the Is from to as get longer of other fair color. part your use pricing. do of giving better a over summary?

Mark Papa

index to end end or portion a is up the and years price Coast index, we're to Brent or day, have the what know index indices. or the of of be those over at going would we all with Midland next don't Yes, Gulf to four five is what be off a advantageous more

average the wrong hopefully overtime. and So partially be the optimal decent partially is at we'll will us any approach portfolio on right time given which a index, index give but

Scott Hanold

going is in help in more my upper Centennial into upper that's it a around less oil if wells of Miramar mix then drilling, color of recoveries XXs you in you’re of gave And also to some was a little look the legacy stuff cut volumes. the to wells in due versus the But there move of the that kind XXs? then XQ, where XQ discuss XQ kind now targeting on mix I and question, you’re you for from example, shift to -- the something oil boosting you higher could and bit ethane as your follow-up NGL think

Mark Papa

question. do want Sean, you fill that to

Sean Smith

obviously and you increase what and kind our Thus in falling what the legacy we to oil position quarter scheduling a was this guided XX% quarter, a of But oil bit half and more last can we to affected still expect will how stated XXXX. of do is by it's kind towards I recovery. mix the for shift quarter, of is our out. said see have As the quarter ethane the last think just has back towards bit to our percent we

Scott Hanold

upgrade? Through

Mark Papa

say we I we’re in at Yes, what increase, recovery that to this if I ethane for weren’t would the -- percent day mean the fourth and oil likely of going quarters. to be is the highly will in you’re that see so end Scott. the going recovery. third it's ethane But

So the you're the to whole to like be mix second kind bunch of going of the clear. just quarter, see with NGLs,

Operator

the from line next comes Your question Derrick Stifel. of Whitfield from

open. Your line is

Derrick Whitfield

Bone large spacing for one peers Perhaps assumptions lower X,XXX are noted inventory the Wolfcamp understanding and upper for for the the of development on fulfill seen I note to is industry And such we've XXX based Wolfcamp assumptions? Spring interval. pellets and on view for both your spacing recently at development, and your Sand Southern cap A, XXX for Mark, XXX Wolfcamp. you your the that speaking considerable basing current What spacing for fulfill for optimal co-development that Delaware interval would the

Mark Papa

would bit spacing -- tough aware that’s Xrd Yes, it B since the I in you’re XXX putting a inventory is more in Derrick, various the shale, for for said a now X,XXXs. the there. it’s classic on relation Bone to And of of What C. Centennial our intervals a say situation I a Sand A the the bit foot as am whether me you than the Wolfcamp is a is predicated Spring

to And so continue be. we that's where

closer but spacing, XXXs. few spacing nothing approaching on are We tests doing slightly a

pretty I of the just with and XXXs, XXXs. spacing just juncture, won’t that on So we're the at our comment happy I this would say

Derrick Whitfield

regarding noticeable Fair and the it the I Miramar, sea response between the oil in were And yields worse discussion. then at upper Mark, intervals? perhaps for pad any be would Sean, there differences thought ninja

Sean Smith

say really a drill those you to that difference I intervals between bit different only you bit as get No. is tend we’re a would water. the seeing little deeper more

So we we have the -- drill water cut X% or increase a another so deeper interval. as

main and between A So the that's see the difference C. to B the we

Operator

Imperial next from Our Irene Capital. of from comes the question Haas line

Your is line open.

Irene Haas

sort ethane with My question recovery. is to do of

So we’re number companies. a increasingly seeing that of over

with up could to ethane getting this, have up So or price kind some much on the end transportation. ethane capacity worry too of market kind at of level? do And parallel any depressing alternative sold and flooding do you we

Mark Papa

Sean?

Sean Smith

color at our shift quarter that, ethane the for think recovery, start Sure. prices that of to I prices where they I’ll Obviously, gas date. question. and are, to on a and in star industry going Irene. general is ethane residue more because are they this more to Thanks in the shot where take the to and is first

it’s economic nice a boost obviously it's us, to us. For

think recovery being revenue an I normal by were increased quarter got of over a $XXX,XXX ethane that in numbers just rejection. ethane approximately this we our

gas plant that the good gas move So we work the was EagleClaw that by with, plant. a

perspective. So that from did they I’m that economic glad an

opposed topic direct NGLs, facility. processing to, that on a of to As the of Star line the the we NGL Belvieu have got the gate Mont Lone at EagleClaw facility, and moving tail then

recovery a a year ethane mode and all in expect from are do down foreseeable even we Mont to corporate see on of going good XXXX have to think that We any at are I So move on least don’t what then probably or issues Belvieu don’t position we line. for We future. in line for level. any be our into this NGLs issue remainder of or that’s foreseeable planning the throughout the or

can't in them, to speak NGLs are, as think to industry, to the position because on I Centennial play. be we but going general is very good So our I are

Operator

comes America. of Sen Bank question from Your Asit from of line next

open. Your line is

Asit Sen

seeing of updated dips keeps you're with Mark, U.S. inching in the operator situation thoughts terms thanks more Midland. CapEx, Any production natural gas for thoughts back oil Midland up, come behavior are you wanted generally egress. surprised? along importantly I just on peaking? thoughts what to chugging your the And on in to on

Mark Papa

over annual they is of seen me for, growing had last the of had the to the this four about it's year to year-over-year years. XXX,XXX year, U.S. production year-over-year. day the two I of to scale it beginning have -- a going to year that day was five looks estimate; a grow that X.X taking believe been years. like production. It me we grow just year-over-year. to And three have year Gulf Interesting U.S. about let declines first macro at -- I XX,XXX probably the the Mexico revise It about a I total about to talk predicted barrels to it's day now Well, going this have the barrels had year-over-year total it last million barrels going rollover.

Gulf think Mexico four finally Gulf effects or years the in So year-over-year I And now. seeing we lack are of the drilling decline consecutively on a the next of of Mexico. will be three for the

there. on we're observed else, I an the this is Permian companies you the EagleFord back companies CapEx second other company earnings are or cycle announcements of at likely get anywhere into that half some expect public them. reallocating least a equity think of that out Permian they're on I I or private of or back four although if overall will seeing don’t thing, Bakken year that multi-basin also five have from in scale The the And trend are scaling

think up was as know I growth terms Permian. the play is channeled basis. into how that differential just over months in the due to on to impact much XX less, in be the out don't predicted So being that being Permian the the of that capital expect I X end will what earlier maybe next going year not the to will to

$X was, or believe $XX. July, So $X, for I know or and $XX basis the for it's was you roughly August, now

you so, And of tell Centennial is in fluid can is remaining what kind our plans. I

but basis keeping industry we in if on end the this three grow plans drilling the And goes through other activity, our or the we basis and cutting do four think will will projected players a react Our it to for to of just months production probably next activity, But by that, growing are back crazy, big goes docks. as the if crazy. I completion year. the

whole been the cracked-up bit is a the a me. exactly of industry is surprise, It's on to it's been clouded unknown what to the very has and So thing a situation. issue kind of a as

going I fourth specifics X the they over could to That by XX months, to the more next of I go give quarter issue but that are the go where to wish pretty I So is you me. appears will to clear can't. XXXX. It away appear does

explanation So that's give. a I best can

Asit Sen

George. expect for the it first range light XXXX the have relatively wide higher to go is one still guidance of kind what George, run range? make end be to range And and -- a of at at range? CapEx CapEx low half the end the of for the lower our would quick we the of rate. Should ultimately I not, if

George Glyphis

Thanks.

lower is wells. on to driving first driven that interest have just it in think operations that the of QX. say team in to working that is that keep terrific depressed And CapEx working the QX, a was was saw lower the the trying and job and we for of really pads lower schedule by lid have the some I also interest drill costs The field thing function doing that number efficiencies. a we

field So what cost in and inflation they're that lower steel, inflation we working I pretty given terrific saw with for the anticipated higher think, and for this and pressure we things some on pumping as seeing What it. second have QX. will ranges coil had by contracts. quarter. provided the in comfortable doing interest pads impact a seeing the we terms there, obviously a I job. in at And year, we good we're the interest and of we've working drilling half look we're sand year offset of year. decline the felt market see of tubing half basin already second But the the is changed not out are range We in we But wireline, that think that's the

the as on is have effect thing I contributory of I think frac also the completion as well. being The an on production quarter well would as interest I a shut-ins, quarter flat. percentage of terms our towards interest the the in the back other for note did as impact lower that there cadence The working but the working timing were out in pointed the drivers half had big

Operator

Our Rice. from the comes line Corales next of from Brian Johnson question

open. Your line now is

Brian Corales

side? extended now the to Back on the that a differential is Permian oil for out sign of coming the oil the price macro side, of

Mark Papa

$X, there there's what is today two surplus much will told is answer, this the And the these of us from just maybe was they're answer. talking that capacity the just markets -- you the is say day months so there XXX,XXX pretty was kind Brian, a that surplus but third-hand and that was an Well, lines. capacity. a even still ago, on negotiating distilled very give months And marketers, two as barrels with they capacity. it’s to we've even very, that of ago I contracts with. telling surplus mainly small and will differential it's when And What $X we’re oil various second

completely lines we So these or what but today over started out that five of out, full. when to -- really approaching telling when they blew the us, they be believe were that lines the if as not seem six differential it's the months, being are full, past blowing

kind So a surprising situation. it's of

bit problematic. that's answer. second this have. So third That’s to from But that is we We a to is what's best point and is trying forward hand info I the give going a with differentials the you. happen project best can answer

Brian Corales

almost about seeing lower Are all CapEx one helpful. working talked were can -- you And you. operating today? just interest environment across on about but service much side, That's I seeing that lower Thank maybe just board. And the the the know costs you you you're inflation? comment the

Mark Papa

Yes Sean.

Sean Smith

Sure. Brian, the thanks question. for

are because some perspective. from industry the we softness market in We some pressure, inflation rates therefore seeing some are a obviously are the service the areas, costs We and is see cost have across pressure bit in seen certain seeing pumping parts pressures tighter, little board. that of up rig market and definitely are steel up, certain

expense by service in assumed costs. our our and XX% and prices so some structure inflation did little we our that of in and book note in And that, but higher. model gets overall year-over-year have structure that I'll offset are that we a CapEx you increase

through I So efficiencies but think we’re think decent we're of doing seeing mitigating the job a I also that, in that field.

Operator

next Our line McSpirit Markets. BMO of Dan from question comes the Capital from

Your now is line open.

Dan McSpirit

move guess, move, bases I it the put your -- would you accelerator? that go you you foot For what to see length do take crazy need of to as off time differentials

Mark Papa

craziness of … level would What

Dan McSpirit

Yes, what time? what level and length for of

Mark Papa

us level, but be on there. don’t $XX, to a $XX differentials Dan, got give specifics, it for obviously would want then I if I decision what to no-brainer on the think,

back we going be in 'XX, at of pretty there’s the three then. or the to four fourth indicating pipe if And is timeframe, differential the bucks So, I capacity. to you by look know that and think strip that goes additional that sure just future for the future quarter much by the

a is of at So I maximum maybe we’re looking in timeframe the there. think period XX months

answer not at make So take you. would at I But almost just rational the goals our month-to-month best to a we’re That’s play and not give look here, tell a you decision number priority, we’re not, one volume just goals we’ll to the going they're and volume that economic going one just can blindly just going that say economic number are it. priority, I be here to are goals. a

Dan McSpirit

going instead is maybe you what market? the the And paid as avoid directly for in follow-up, a what I’ll today’s take asking oil away rate ask

Mark Papa

basically for agreement I next oil six or got the would mutual capture just years was say, our BP deal pay It got we a we a to was just what a price. for five fair takeaway. old was and anything what didn’t the that

that And what So it to able fair a they some to during reasonable believe, was, and they wasn’t oil that is know and our period. going that price. show we up got premium extracted were basically I oil our capture

would presented So that’s way I them. the

Operator

next Our Neal SunTrust. question comes line of the from from Dingmann

line is open. Your

Neal Dingmann

you, I you four to been bring able is am different wells with Bone excellent had. selling relative you’ve three you the at you My into slide just some Xrd Do now that to incorporate pad question into success some, had anticipate something with the able similar? Ninja, that for that question the those with formations. obviously Mark were looking of as just in like, multi-well to for pads with there

Mark Papa

Sean?

Sean Smith

with we’re of formations a world. we’re, a as into not. that in different we’re manufacturing what the think like a really to mentioned so and obviously starting and more portion maturing getting get I into this XXXX, co-development bit company mode we and my Yes, more discussion of more I and we’re experimenting in spacing

see think us. more you’ll that and more of from I that

particular depending or various area Upper the of horizons Xrd of We maybe different will A, B, C. Bone that pad maybe A Upper do location, co-development more on

I a does And continue of sense to make combination of But that that do so fair we’ll co-development. think to do that. amount a

Neal Dingmann

being if And are to operators, the plays you’re you bolt-ons obviously days? then privates better continue you on wondering guys just stay, approached of just or M&A, lastly seeing these well-known you one mean, pure in approaching more Mark, I as more you, obviously, just the often getting

Mark Papa

I don’t often. a would last continuous not deal it’s more but I modest and -- no, think I there’s getting of or we’re the approached kind decreased over mean say, haven’t increased six increased opportunities, of flow months.

still to what year. we two XX we're deal X earlier or one be constantly So energy that's And like large over M&As of will deals and consummate similar able hopefully one is for -- to opposed kind tactical next as this sized months. deals our the preference the we're to we did that do modest relatively looking to

So that's our target size range.

Operator

Gail KLR Nicholson the from of from question Next Group. line

open. is line Your

Gail Nicholson

guess, do much what you You incremental inning you guys gains? your have? in kind How think analogy improvement If can use phenomenal that And go with efficiencies. you I have are done of kind of, attack? what's you the that will a efficiency think base ball you we more job do low-hanging-fruit

Mark Papa

mean XX% the industry to twice to be the we or completion XXXX. improvements XXXX And are efficiencies in that of what completions in years industry that continue I next going well where as say, XXXX fracture would we or The or then getting there I I compared the inning probably the in say, in is I efficiencies, wells had completion going good just XXXX of in well weren't better three are to hydraulic that well of terms other by we completion well to companies even is, in two over wow. getting wells XXXX, any Well, believe seventh don’t efficiencies. is think that

world. Permian tier positioned frankly with to that ourselves one of where now in shale well are in is, companies terms improvements are and the that think into revolutionary just be improvements the we things we -- not the I Centennial of efficiencies we've Basin in are I incremental And think top in believe of I completions.

expect I'm are are three or I So the two industry, that or efficiency years two XX% -- up our top than the three three But years projecting better XX% say we that be basin. of the Permian to companies would to able previously. were going they with in in we're now, to our not one two best wells from completion

think I we So there. are that's why

can G&A, just think years. In their this keep going two lower to volume or it's unit think for terms of in predict gently just be kind positioned from And rising cost next we year. in quarter unit environment, except board drive really is am the down costs. in to that growth. I dramatically three the have to for across are the going where itself of industry I efficiencies unit and to can And that think we what lower hoping in hold that exhibited the price tough that XXXX, over Centennial we I oil ground costs I terms just the costs going a quartile for and to of the have not I’m going XXXX full But versus of

and kind efficiencies you gives efficiencies. hopefully view my So cost that on of

Gail Nicholson

be that drilling up? think picked still can a from side like incremental you the Do those days standpoint

Mark Papa

able drilling drill three wells efficiency. says from think I'm XX% two I or is to there one in some years everybody going their to not advantage on now. But is faster that be that

say some would will think I be will there that I there small. efficiencies be relatively

Operator

will to call remarks. back I now Papa hand Mr. you. Thank final the for the

Mark Papa

on the an to you from very we talking you three taking up here Thank the much good hour fairly to for again Okay. now. chewed months We questions. And look forward time.

Operator

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

disconnect. You may now

Permian Resources (PR) 10 Aug 182018 Q2 Earnings call transcript