CDEV - Earnings call transcript Q1 2019 | Permian Resources Corporation

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Operator

At this time, I will turn the call over to Hays Mabry, Centennial's Director of Investor Relations, for some opening remarks. Sir, please go ahead.

Hays Mabry

Thanks, Mara. And thank you all for joining us on the Company's first quarter 2019 earnings call. Presenting on the call today are Mark Papa, our Chairman and Chief Executive Officer; George Glyphis, our Chief Financial Officer; and Sean Smith, our Chief Operating Officer. Resource filed earnings X-K and results for subsidiary, we release an operational X, our quarterly reporting for Centennial May a with Form earnings results Yesterday, LLC. Production, the Company

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

the plans. that at control our Many many are and find on more the beyond Form uncertainties SEC, of of results year-ended risks the these during earnings call risks Presentations the statements for annual with actual can factors would filings that like and and homepage detail or December are our comments affect our our XX, risk You of in are I on website to forward-looking including discussed XXXX. and involve the under section presentation our www.cdevinc.com. the could note forward-looking that statement report in XX-K this

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

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

Mark Papa

welcome first earnings quarter Centennial's call. and to Good morning Thanks, Hays.

emanating George macro, will then items. our my and CDEV’s will maintenance results the including Our presentation follow then status efficiencies, update, discuss sequence operational liquidity. current view, call midstream plans our and on an regarding recent first this our follows: financial as closing strategy macro with provide from results be quarterly comments inventory will and and I'll Sean well

Now, I’ll our review to results. financial ask George

George Glyphis

Thank you, Mark.

six is ran rig our one from which reduction the XXXX rigs Centennial program. a of quarter first During

determine in forecast our continue Capital completions QX closely is or changes the any plan activity to warranted. operational spending and to facilities. in-line higher overall we levels will rig the efficiencies spending were six budgeted to anticipated operational monitor on with XXXX oil while of for than for and count due markets current proactive facilities rigs in Our balance in was

XXXX March, believe costs spud levels, respectively production the XX and capital half unit of QX in occurring quarter. Notably, compared we’re Centennial and of QX XX approximately team well which completions Overall, sequential XX to during despite Centennial XX and XX wells that contributed and minimal the completed during pleased During delivered production growth wells effectively. quarter the with plan performance very executing the our during is QX XXXX.

year but reference production XX,XXX per as XX% prior wells can the over approximately range a was increases cost of still for barrel quarter-to-quarter as presentation, increased down online XX XX% approximately the totaled production despite per for year in our to year. primarily below by average Average some which per period. essentially the significant due all revisions expenditure XX% of QX. declined X.X% well LOE of basis Cash totaled low our QX to was the area. mar increased Oil off result QX guidance. realized before prior relative you approximately midpoint a excess inclusive and notional realizations associated the barrel than prices. located of result XX% was or $XX.XX the base. of of impact from exceptional from approximately as was the with $XXX hedges, in essentially resulted quarter QX Centennial’s XX% was reserves XX,XXX oil continued low costs realized aimed in quarter for an higher expense QX are end barrels up percentage the per $XX.XX to day, up annual earnings gas given year NGL was approximately and the to or downtime. oil GP&T good barrel of barrel per full QX Shifting up $X.XX Revenues end during FT lower upward over brought to activities QX XX% QX, X.X% as by total an X.X% NYMEX. were expense primarily production for that We were modernization unit production because expenses, expect per temporary below to flat the levels that our D&C million, of prior ear the $X.XX of and GOR lower G&A production quarter mix capacity. still G&A equivalent and our a of to XX% which QX which a compared to from increase hedging up price work natural oil X.X% $XX.XX of Oil daily over Despite As BOE by Centennial’s was expense declined barrels the solid day from $XXX,XXX DD&A averaged at to of QX reducing GP&T over slide slightly to increase per oil on full low guidance a period. performance.

to charge. of in because Adjusted County was mostly lower increased PDP leasehold a for a class QX, our primarily million leasehold non-op Ward remaining as totaled stock common taxes as southern values and County previously reserves. of a cost revenue Finally, quarter non-core acreage as of to GAAP portion was of increases. expiration the the severance the EBITDAX A net of of loss on divestiture QX and recorded than quantities X.X a primarily in Reeves impairment the million well $XXX to attributable We approximately X.X% of result related X.X% mentioned prior other QX impairment due XX.X to our higher our The non-cash this our of norm from position. XX%

QX, million a a X.X% decrease to QX. CapEx XXX.X spending, in was D&C from Turning capital approximately

million our which during the was tracking million midpoint rig in completions down $XX.X in annual forecast XX% totaled from we and future slide under first spending $XX capital other As as program. reference XX, took anticipate preparation QX was you completed locations have pre-build peaked quarter will D&C on spending can the Facility budgeted and that we approximately of six for infrastructure to higher than wells. QX. opportunity the Facilities, in

Specifically we to facilities XX the approximately wells the wells in accommodate online relative pre-built to quarter. brought XX

into to for We this our spending need expect tie wells the a portion reducing facilities thereby future construction. of incremental in year existing

As a to subsequent in we moderate spending facility quarters. result somewhat expect

to as during acreage compared Finally, total $XXX we incurred roughly notes. $XXX valuations. billion at Centennial I’ll this million senior Smith quarter the XX% we good to turn opportunities to net $X.X March million incurred the approximately of attracted to quarter’s $XX expenditures land to $XXX during related Overall, Company high increased At the CapEx quality million approximately was capital result had was commitment, our Centennial's million to saw of a determination. QX. XX, facility $XX at revolving call operations. and Sean million borrowings and of add had end. by debt unsecured XX in repay to elected In on facility. liquidity revolving senior March, primary XX, we we outstanding to late unsecured of million book With base of and $XXX our Based a used proceeds million of the slide capital XXX credit over of summarize million Affected issued borrowings last borrowing On the credit liquidity upon and EBITDAX review we as structure under fully zero portion notes X.X XX% capitalization our the April, $XXX of position. that our net debt months approximately times. cash, in quarter of

Sean Smith

Thank you, George.

six represented six in-line our the rigs quarter quarter late results quarter for as another a result We operated as announced, in rigs production January count early seven year. solid from reduced first as execution the well for our the The majority at overall to continued and expectations. previously of rig of sharp last perform we oil with prices Centennial of to

quarter result cycle field. was than as Centennial reduced activity. in We’ve and for completed George operational as spud efficiencies the which During wells, and XX times completion drilling the a witnessed of XX noted both more expected first

recently depth, spud just XX lateral Just record Centennial. for a drilled under in the example, total a days mile is for one-and-a-half we to which Mexico in

our that results well The fleet, in we’re to encouraging considering side compared other to we’re of the production compares oil spud addition, improvements This crews completion completing These barrels basins. first Delaware in basis and to our producing are on stages allowed per month the further wells best slide bring with some of strong per Southern foot has of reducing X are XXXX. lateral especially In more more quickly left per operators Northern basin. times. online wells the and hand

importantly peers. graph the and tier top our As the a our seen continued results leader depicts results cap hand online get year-to-date wells certainly are on to third-party more side average is technical versus outpacing well SMID Centennial’s XXXX here first the better, among our continue source, results is from Centennial right during point The quarter. as to comparable our results. we main well the wells are that Wolfcamp productivity increase Maybe XXXX placed

XXX foot our This County, with approximately wells X-Well because barrels the existing notable reservoir. oil to per in of our only Martens X. because a and X,XXX Upper well, X,XXX of or equivalent Doc per IP-XX In at per these comprise not lateral Pad well delivered same spacing performing are barrels the are average A day well approximately Now turning foot averaged they’re XXX XXXX equates wells These barrels slide Doc oil X,XXX of laterals. recent day. per the adjacent results a The X,XXX per Reeves almost on to targeting to of also but Wolfcamp oil producing wells spaced foot Martens of within are well. above day

see IPXX the X, recent We believe had our acquisitions of that quarter Martens adding acres our Bone bolt-on fundamental acreage. acreage. to adjacent Reeves map results offset net more from Miramar in an Marten for shading and justifies brought Doc online acquired to value green TXXH well barrels The approximate the of position further is undrilled Wells fourth oil lateral. on thus Spring X,XXX our reservoirs. of the of can with County, making you a targeting tactical we of the foot per equivalent A the also smaller slide can and in the an the efficient of Third newly existing acreage Sand In X,XXX X,XXX the significant strategy the directly allows transaction completely our day. This As replicate co-development strong we Doc

had expected an this IPXX for oil of of an the per well X,XXX oil cut barrels over portion our As day. of acreage, XX% of representing

important see Spring an this fairway and can on Third successfully the Sand is the test position. Bone expands our you Northwest into As slide the map X, Miramar on of

throughout scheduled a co-developed Wolfcamp year with tests Upper Sand Spring the Bone Third the and additional these tests have We A. most of plant

best and drilled represents Airstream Turning on strong quality in County Bone XXXX, the to at early position. year the the our in drilled the a Delaware Airstream time. to expectations. was ever these Spring XXXH strong lateral. the Bone results to in foot and an Northern Lea XXXH, Centennial rig XX,XXX New in a drilled with adding well Centennial's to Second XX well follow-up Completed slide produce the The approximate continues well exceed January, in the County State State X, day of or Since per rates. has Over of its New barrels of late as Mexico. over half Pirate a best X,XXX in our day confirm last during production oil repeatability Lea XX over first X,XXX barrels per First cumulative equivalent oil which the and averaged continue of and to-date Combined, days, over of results Spring oil XXX,XXX year's in this Airstream almost barrels past Mexico

Basin natural Before per I caused efforts. block touch was gas the marketing quickly I'd well can Coast end the downtick just on been WAHA and natural trade relatively month issues following major has small swings interstate all maintenance since gas essentially West prices. basin, close off sudden ongoing as our to like production year, in midstream local zero. the the of out the with last Mark, as and pipelines egress natural gas, associated reduced to full in This heating season. prices demand as MMBTU low cause pass Permian and negative from of at long-haul as late even the gas Since disruptions winter to on it by Starting last $X traded now of

prices Overall, WAHA in we Kinder Express at on Texas. the for even could online increases to trade the next pipeline we year the continue quarter. so the in cooling loads Gulf Looking ahead comes until or zero fourth from negative remainder summer believe until bearish or remain WAHA for demand Morgan's Coast month of

Getting quarter to exposure $X our XX% based firm has approximately as WAHA has Year-to-date a firm $X pricing of agreements, natural into transportation prices. limited receive Centennial Mid-Continent sales gas Mid-Continent of to premium based Fortunately, will traded WAHA. approximately result to pricing. second and at our

and pricing. Based on basin. towards transportation for to basis next our crude gas costs is in out we're diversified terms more remainder to with slide current WTI Centennial XX, I realize approximately agreements exposure takeaway gas its will immaterial hedges. realizations exposure flaring in of therefore, Overall diversified we nature constraints. greater whole has over With our as transportation have and agreements marketing due takeaway of natural costs. and is turn physical gas pricing, all the priced Beginning Centennial to MEH an greater flexible continue situation, industry of WTI Midland the to natural to of to Mark. to with minimizing even differentials international secured to of pipeline signed to of natural benchmarks. is an of effect market existing leader that it beginning year amounts mean, noted XXXX crude the more to we us be international flaring capacity and base improve the our associated back gathering As Centennial shifts the we XXXX off mix expects takeaway also these year all Similar this in year, pricing with our of portfolio also of next call which a will our XX% a provides the our experience portfolio M fees, to expect as pleased gas of continue expect of the future. inclusive even excluding XX% for on in In essentially and to XX%

Mark Papa

Sean. Thanks,

some by provides to rig count XXXX I'll relative strongly XXXX the XXXX, the relate rebounded $XX count IMO and but or previous $XX year-end positive still oil that is prices the On oil thoughts running obviously to this at might reduced to prices picture the early we WTI call, announced provide our this up we rig regarding throughout earnings tailwind. Centennial XXXX we Oil currently year-end to from as we seven strategy. either monitor macro during rigs. range for a and impact our and think Now of that them our down. up year set six in have we in would mode adjust macro We're a monitoring and six

of better pieces or to continue business ample other slightly The expectations. perform our than

five are on presentation. performing indicated slightly better prognose our of Our average than slide on well as results

in-line slide of we points relatively in is is Our are than indicates APC to our of productivity position running ongoing The CapEx our acreage relative and costs to you basin a situation X basin. that shows bit good refer out acres XX,XXX I'd unit X, lower Delaware all and Delaware our the acreage also good which well and quality quality slide the contiguous. value targeted.

Additionally, our keep I ratio. it was inventory on was which close always Last excellent. location a eye replacement Xx year

say I'd think this good should we'll it's early year, Q&A. should and first year. Xx listening post very rest this go the Thanks price well during results year. At the I we'll oil to performed and another that juncture Although the which low or now be for of solid the achieve year for in quarter X.Xx CDF

Operator

Cowen Instructions] from Daoud Thank line Gabe you. [Operator comes & Co. question the The from first of

ask your question. You may

Gabe Daoud

I guess transport gathering differentials now your would just maybe costs. you I WTI just But starting definitely exposure with [indiscernible] that. of for Good morning expected guidance, could just and thanks for clarity a and gulf the price realization a when your tighter appreciate your prepared contracts, remarks. little little given and more you’re bit have on even to in accounting a maybe Maybe give oil everyone the

you clarity be any that can give So there helpful? would

Mark Papa

significant is guess, a gave, MEH is we've based, I that pricing. the based year this got Gabe. Yes, contract proportion a clarity I on

pricing WTI approximately year Next XX% futures component indicate market of pricing gave that based Brent what is when so it's the of of on and of WTI the Brent really what's is, based to would pricing we the a on ratio pricing. ratio

based actually to hard know you And XXXX so, how as on to be today. so WTI we receive going and go to in forward as and and of what and going we're shakes so really so that's to in out a forth, XXXX percentage little forecast that Brent WTI on the is relationship

right giving into a we the entered the we longer-term we're sit a pricing of have into off wanted not you the price what international market. XXX% we where So just with priced as But and we contracts on futures get WTI. based best is component index guess now the to these formula be

And what why the so in going we percentage than WTI bit as we're caps different other little of in be that's future of forecasting we expect mid of terms some a to may are years. a that

gives bit that a of little you color. hopefully So

Gabe Daoud

broadly Yes pretty I space I thanks higher would helpful. the on on updated Mike. just these M&A? thoughts a That's And Thanks mid-cap obviously as just lot. love follow-up how see level you how M&A days. a your hear you and to is topical just guess view again then, a

Mark Papa

Yes.

that coveted or obvious the the there. wants. is much the pretty out first it's trend everybody IOCs point that it's that well, seeing the that Basin Permian is we're mean, first that think is out two asset trend trends I I overall the obvious

a to into seen going ultimately bigger Permian get see transactions are larger the of see whoever you're the get whether, other that companies the think see where transaction. the side in as IOCs I And think the next Basin focus going I Permian you're Permian the successful of grow specifically the you're you've in more and into in to to going Anadarko Basin going Basin. position Permian to perhaps Delaware Basin to So a definitely the and Anadarko over IOCs trying is capturing year and in the lot

see is, dissatisfaction the you're next with M&As, of there's hedge second mergers lot of The mid-caps, I they’re noise say funds probably others seeing is years to thing the be expressing than mid-caps pushing going for what shareholder seeing today. and you're and going for unhappiness less a to we're in pushing to from couple of so think some

So think I think space I transactions be asset is CDEV that is that definitely in there valuable. and our for will more means the be going more to what

on active to Now, I'm the to an you be acreage but that a going saying be to to valuable be than today. more that we space, what M&A I XX,XXX a Thank is acres lot NAV not think participant Gabe. we're is us be, going in have you, clearly do if shown indicated

Operator

Our Neal next line of Dingmann. question from comes the

open. You're line is

Neal Dingmann

I'm just Good program through pretty you've talk next ramp, maybe the even a the your And morning, a gentlemen. bit way? just pop you got I see you question, it My to you about sure Mark, stable thinking get year. I'm you want right or good a starting looks of like running remainder year, of nice bit about, the the wondering, about could Thanks. talk it make kind that just could a now. Sean, little cadence that

Mark Papa

Yes.

crude perhaps we'll the we're we next both a I'd rig call, in end this EIA tighten if by up global it heard that months, than second up decision turbulence shall inventories supply two over the next view on we the if higher terms that we'll rigs, continued wildly price signs pragmatically down WTI move oil as one not say, year do but we're see four we we constant we at kind And we weighing of that inventories cadence. the two see you've macro multiple we're on step we supply international the is today. $X at the inventories happen, those as and expect this I If rigs. continued, a months. expect our not and point or see said growing I'm bullish higher or say, the at is possible show time, oil -- like or My -- of the continued may prepared at that seen a then we cadence monthly not the six at is, of making that might the we we've at half that indicators, sitting U.S. if at in sometime see rig -- least remarks bullish U.S. point reports front, supply, over we're three of to year mean last count the the to see In the I or point months the just on on yet.

more where trigger there, So right sufficiently any hand, horns rigs; we're optimistic, we're really ugly get pull optimistic cautiously our can too. of things if that's now adding out on really, not the and kind to other in at I but mean pull the we on

So today give honest where kind as that's answer the we of you, of most stand. on I

Neal Dingmann

that lastly, And Bone then that I with success. No. flexibility, the notable like Mark. certainly Xrd Spring just

all in up Just think in Northwest? maybe the the change for D&C potential specifically there your of about you area wondering plans how

Mark Papa

Yes.

it that's Bone map to to the if North the pretty now can further and the Xrd you put to that effect expect was that good. What fundamental we we that Wolfcamp the on the can to without negative a a due the the plan today that slides sure the the out Xrd a is can But in is we one Bone intend we we was well as bit Xrd the do with well of co-develop on Bone a the to I'd didn't indicated Spring rock Spring type, strong if that our very Spring surprise key the West, seeing we you having As of year-end into Bone pleasant surprise. different Bone to attached, though that's with much see area Springs Spring. Xrd expands A get really because but go South, the either say The Xrd expand South the a little those Upper South, pleasant there, between intervals. for make really

And better rest results acreage, the all Spring us Xrd give will but on that calls to than this earnings continues Bone the of year so and we'll continue news Reeves hopefully news either give our to continues Spring spread. rest County you give Bone how over you news, good -- but for acreage our just that Xrd expected hopefully the on we'll continue the of development

Neal Dingmann

Thanks the Mark, progress. look in forwards

Mark Papa

Okay.

Operator

the from Our comes Partners. next question from line Guggenheim Subhasish of Chandra

Your open. line is

Subhasish Chandra

Hi. Yes.

that's trend how Just if GP&T I guidance dynamics are as on the to below or the was the suppose the captured cost. year tight below and as being see it all gas the progress there correct, keep in the basin? line you subletting rest of sort those capacity with being sort is differential that of costs of, in the ability to do low as capacity

Mark Papa

that? with want see you to George, Yes.

George Glyphis

-- of the level. what Subash. Hi, from million the in be the the read up disclose credit, forecast level we in we QX that something QX note terms there's of will if Yes, mean, you I that's amount $X.X experienced to those was a monetization Sure. -- of that's was easy quarter-to-quarter. that not actually It's XX-Q, which

but think some over kind those our the for but a increase year, guidance was better degree occur. factored So expect that of what GP&T to for GP&T time, QX of I and hope the than to I'd balance is think year, we've I to little monetization we expected continue see to the into say bit

Subhasish Chandra

sublet it how of use definition I'm committed sort on Thanks, probably these is if goof I that oil to lose, as too secondly, pay have you've and or in the side, but that George. well? that, can the and if -- going of to sort capacity a that's users of I up you described don't other capacity have past, oil an the you understood contracts have there counterparty if guess like onto to there necessarily and you my don't correct correctly, hold it, what find for. of ability seems you the use capacity the But and

Sean Smith

Sean. if lose there to use the Subash. scenario. it penalties, put we that don't in correct question our part So it, first It's fill is no a kind This that it of commitments it monetary or there, is your of terms is

to not explored don't and looking time. that do at I this to opportunity the point have We in that's try that. think something we're monetize

Subhasish Chandra

Okay.

in you've point time announced? this fully that to use you capacity expect at So, the

Sean Smith

Yes, that's correct.

Subhasish Chandra

Okay. Thanks. you'll. and just a And final one if Mark, maybe

So inventory, Xx year. on you think last I mentioned

organic? So inventory when the you at going of is Ward, see or net land the you look the do through to so year especially that be this it

Mark Papa

explain Yes. I to this saying I drill XX to XX mean -- to wells thing, the inventory mean we're we're wells going year.

quarter zones, And occurred. price leases oil then is a would have downturn, organic expected. less due some first the locations those bit new that is through I little that's if if new this So, just for like competition it of that to numbers, than combination where we we probably to we've of to normally than a way in XXX find where number through if the round very, And XX of what different let's had, some rough talk numbers we're get year testing probably X.Xx And this we've looks year. successful confirmation success had and of round Bone find in up-hold primarily very say some Xrd we means on we'll Springs locations about as leasing that tests. replace better -- the we drill wells, need year, later we'd the going zone the is that organic

give items those us So year. will and at two Xx X.Xx likely this

Subhasish Chandra

Thanks, Mark. Thanks, guys. Okay.

Operator

Our next question comes from the line of William Thompson from Barclays.

Your open. line is

William Thompson

definition well wells, But half-bounded there roughly a well, mix that about XX% plus of much multi-well wells. to peers, of it in maybe Maybe traditional fact -- legacy your is be misconception quite by be child you've in to a the tampering lot bounded development? compared being I of quite child some Hey, CDEV of I mixed. well any that so been is conservative pad. is year well good believe actually parent wells will child child bit all a morning. child of parent your not it'll a candid that some Mark, result high believe how has includes wells definition this as your resulting the of well helpful child understand the of fits legacy multi-pad your

Mark Papa

section. into I drilled beat the this Yes. death well -- this any a defined I have of since we I in we've to to want well so child couple last get big earning is a -- don't on on second but a discussion subject basically calls, mean,

all we've about a had Thank you. that's the definition I long last Q&A discussion it on section a So say very to need liberal child since quarter. wells, probably of but we of child wells

William Thompson

Fair.

Mark Papa

So, a that's But we've to definition wells wells. discussion Q&A of very Thank on William. section you, had of I'll liberal probably last since say I it child a need the quarter. child we long about had

William Thompson

on Doc Martens curves. or you Okay. be follow-up slide maybe attribute there and type It And performance six strong results and the yet that well just child definition, the the wells Airstream maybe appear a to? like what fit talk the more eight. Can legacy traditional looks to about exceeding

Mark Papa

acquisition say, we're very with conservative model pleased it our finding maybe and on wells what made a does those is, yes that average and we're wells, the for is the year. we our offset model, because Again, Yes. I would beating little here bit last we're

our me, on highlighted front don't in I it we why the make that overall and was is but but the point I'd I X, well. that's one but X% of average the believe that's averages So slide well have it there, the by that about I our is it, type curve it and average like which during beating is drilled really doing are on, focus we quarter

key point the So that's quarter. key takeaway the for -- the

William Thompson

completion any of design to? changes do attribute you of function that a there or Is sort what

Mark Papa

year it's well got this been mid-cap last believe question we technical would the team you And of best I look it's the and technology we I really continue among completions terms a area and think lot since a of them has best shining previous among other G&G the I some emphasis the just the year, a on and this or really industry mid-cap well to ran our place and that we've competency bar year well team you in efficacy think that technical been up really. in our look through best I'd of that any stack if company, there and against just only really started to I relative and not it's before are of the space in at I've look the -- quality of quality, shale hired, that and I something to the and you in mid-caps exploitation have. and company that's staffing high that's people the the best of think second completion the always pretty

William Thompson

Thanks color, for the Mark.

Mark Papa

You bet.

Operator

comes question Heineken the from of next line Our Kevin from Energy. McCarty

line Your is open.

Kevin McCarty

you to Good talk how than decision like to about you morning. Is wells the a might even it more guidance efficiencies, add Can without it decision different? you're turn more looks sales to on another pace rig With complete to the or wells. adding approach rig. it to is similar

Mark Papa

price in at were through oil lot will to six slowdown the original we the of Kevin. half within to stay few to question, I'd If something Yes. guidelines pace that there efficiencies, do second to you last of that's verification then companies actually the a and the of budget I view disappointing have pace you to year original point CDEV's our we CapEx some and what is year. year, a result where kind guidelines one is stay whole give of be if within very like to looks rigs going with our the mean good we'll we

If optimistic loose it input if price $XX that rig too I've whatever, here rigs ramp stay we'll out to at or turns cutting activity So sitting yes. earlier too that operating whether a a the a down do third efficiently that we'll and and we the in kind fast guidelines, within CapEx oil quarter, is so macro of of provided we're with the ramping we're number is have. and very drilling that

which rig more look drilled six should add are is getting another and the side, of from at we on side be rigs why know macro doesn't other the occur up on wells or but or maybe we're the will point hopefully it more and that So oil two. viewing same end disappointing oil the view, with positive that we macro we you we

honest the most that's time at this So can give I Kevin. answer you

Kevin McCarty

how then, And overall that. Marten what on and inventory the your and initial results, could do on your clarity count? space be that the any much inventory to for given estimates wells there Thanks Doc promising to down the XXX could

Mark Papa

Yes, just an overview answer.

Our acreage predominant base concluded our the is only of of might portion County on acreage inventory Reeves correct certain to consider for Reeves Reeves based in that XXX acreage is we the for spacing and County we County in XXX going spacing and XXX. have spacing portions our generally

Marten where it But we XXX So, if today, of or up area. on be area in day spacing at acreage spaced the you in XXXs. up on it that in that's we end and were might our XXXs a end majority would might about area if predominantly the works little end even as view of that the Doc excited being in why Reeves it particular an the area County not the XXX's take we

Kevin McCarty

thanks the for clarity. Great,

Hays Mabry

think I next to This can Hays, is go we the question.

Operator

question [Indiscernible]. of from line the Next comes

Your open. line is

Unidentified Analyst

morning Good everyone.

Mark Papa

Jamal. Hey

Unidentified Analyst

of as Just whether commodities process be the that rig thought activity question, offset move to hedging or some or a quick consider to may continue internal occur? volatility what's the here from all not could on been you could

Mark Papa

of on mean, I my Yes process hedging. I'll un-hedged give you on crude. XXX% currently base thought kind we're the the

we If slides we and little We XXX% the that's be IR in differential we're range too articulated $XX crude months the and hedged gets if in out really then hedge of out, the to that consider on bit not it's today, that would year. dated turns of severely in to hedging backward not or lock curve six for have oil could oil and But a WTI $XX we a un-hedged. basis if backward crude words on we disclosed. dated other could crude

of kind number. that's our So threshold

or in tuned sometime if stay a possibility this there's could early year perhaps XXXX. late occur that So

Unidentified Analyst

net That are the all that manage get the threshold a you could reminder around to look continue that? cap we to sounds debt, on just and good targeting and you how

Mark Papa

debt kind for before XX% months oil the we had to Yes. max cap said that Six crash, this the was I have company. this on massive max, price of threshold would ago

room got company would I have and that wiggle kind XX%. say would be some max maybe this XX%, I'd in of that we've for to the consider maybe Now tolerable

this price one the flex caused net a on that have bit that be So what's we're I us happy debt cap have little oil the would going of acceptable things has to room painful than the to max would with more been company. at do is,

might XX% number previous as XX%, XX%. the opposed a have be might So to the answer. I given

Unidentified Analyst

That very was helpful. Thank you.

Operator

open. question comes in the last Derrick of Whitfield line The your line from Stifel, is

Derrick Whitfield

all. Thanks. morning Good

Mark Papa

Derrick. Hey

Derrick Whitfield

in Mark, for recent concerns for adjustments quality we've heard oil. Perhaps regarding increasing Permian weeks

relative While appreciate the the you we I'd see? your the have certainly on the views quality of concern could sector advantage to your adjustments guys for degree and severity peers, of

Mark Papa

that Yes. I don't know do to Sean, want you take question?

Sean Smith

Sure, Hi I'll take Derrick. it.

So there we I are in we we that market. and produce mentioned, that gravity sell fact XX average think weighted actually, you the API our as for advantage the below to our

forward. any any don't seen going foresee haven't discounts and of that we So

down in fact, New even Mexico we ramp as In up continue come further. could to production that

of grade lighter we higher think but companies any issues definitely good position have a So crudes for don't We've be forward. something some charging our to transportation that about for going different forward. to going a heard going going concern that we're fee few feel it's that's not us

Mark Papa

a a got to just it's line and our to just come comments amplify put that that western of phase the of Yes, which little of of have there, Delaware there gas Reeves the lot County either trying in people from that's to aid are bit just the Northern of part the or in wet County. Eddy understanding the be in to more western windows, part kind

to don't would plays than going out, who portions I is I'm to guess, routes what phase as picture a Delaware shed bigger probably for the subject development play portions of a to window. to be plays macro it's other out those only on exactly those can not those matter. exit the in people for picture. particular basin in That's the to that going down how the are is this going sure in how I know know you how are my light of So this slow be out that

Derrick Whitfield

combined imagine areas. some prices deter that very probably It's with activity gas of helpful. in I those will degree

ones the As a inventory or location interval and were up earlier to which rank for comment, best? You opportunity on you follow the you additions? like do greatest where do your children, see your

Mark Papa

Yes.

Mexico say say terms they Mexico chance zones, a of New Third pipe are I'd I'd still there's are that XX,XXX still County test Bone us acreage now we still above of there. zones For the side that look zones behind there. several a Reeves to of our potential shall several working in shallower couple a Mexico right for perspective but good that just us couple acres intervals like say in there have in we Springs a when in New got in New we out look our got intervals zones, several that intervals And

year, activity probably or So leasing terms the giving this do that M&A to XX to is good and it of to in significant carry with inventory about force worth at we're that this least going behind or that organic unlikely or replacement which of six buttress and us of mail years that is going our inventory next year the rate pipe anything rates to have at inventory some at a comparably point for like means just the of years eight least. stuff combined very significance it's so drilling

we're well a inventory That's up So pretty thing. chugging good we it and at inventory. along than quality more replacing drill is

Derrick Whitfield

helpful. very That's Thanks.

Mark Papa

Thanks.

Hays Mabry

callers This have queue, more Moderator? Do is the any in we Hays.

Operator

moment. There are at no questions the

Hays Mabry

and free have want to disconnect Well, time. at great. for This everybody joining thank I Thank to can any feel you. is you call and questions Hays. this

Permian Resources (PR) 7 May 192019 Q1 Earnings call transcript