TALO - Earnings call transcript Q3 2017

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Operator

Good morning. Thank you for standing by and welcome to the Stone Energy third-quarter 2017 earnings conference call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I would now like to hand the floor over to James Trimble, President and interim Chief Executive Officer. Thank you, Mr. Trimble. to floor the hand you. I

James Trimble

Chief Ken? and Thank performance floor update. statement third-quarter that, Beer, and to to will for and Energy's me then the he our quarter. everyone, earnings you, Executive the conference financial With forward-looking President Ken the LaTonya, give XXXX by call. Stone joined He back operational Ken then review welcome, to I cautionary Officer. an Financial will provide Vice read am will

Ken Beer

you of Yes, this meaning gas. was could XX-Q make the of of and risks third-quarter development, In we and statements to our thanks, statements natural Securities forward-looking and Form forward-looking normally risks any Exchange the forward-looking discussion XXXX Securities that uncertainty XXXX exploration, cause may may on from actual production, and to Jim. We are make statements incidented we a annual the and XX-K call, today. conference all for read differ report the oil materially subject results those the of within sales Act in of the These our the that to XXXX. filed yesterday Act to urge

refer focus and financial attached on directly to to highlights. GAAP the most for a and deemed reconciliation In addition, measures. this under that, release issued yesterday will release financial measures these Please press we call has we the financial refer that between the may I of Act. in differences be measures Exchange just financials, assume financial the comparable may seen we non-GAAP the defined as to between With the measures the third-quarter some press so try will everyone

show February, some accounting XXXX, versus implemented at add predecessor which X, format we so successor complexity to continues fresh of presentation. to know, you third-quarter as results March financial As of statement the end the start our

$X.XX million showed share. income per of results net $X.X third-quarter or Our

from for did adjustments X.X we of derivatives. was however, quarter our pretty settlements cash million $X.X was recognize This income market quarter of non-cash mark million, which X.X and net the to to of derivative comprised expense straightforward; for derivative expense million of

received three-fourths compensation recognized also and federal overall claim, a $XX.X in approximately of royalty incentive operational recognized was gain success-based of of as connection refund million as consulting $XX And incentive recovery part in X.X a Board's approval an paid million X.X X.X over just fee, which totaling a expense, of following estimated finally, We And the net representing in July federal income, multiyear X.X about accrual this royalty this resulted million million LOE. of which we XXXX. million, of a reduction annual million. of incentive $XX.X was program royalty with the refund, the we other retention of in of million

and October, did our recovery. fourth Our cash million October delay barrel caused XX,XXX five discretionary quarter, share, days during cash greater-than-expected day. to At had the the cash around day, of to virtually six of at scheduled from so quarter XX,XXX And of from $XXX upper third living we have and to by royalty per flow in of remove cash position. XX,XXX -- over platform rig but for downtime million included facility no Production credit $XX month the million of revenue. the third-quarter net important the production, per $X.XX driven cost, for and was lower It the that quarters downtime or highlight to $XX.X in equivalents is was guidance week which which July. reinstall Hurricane production experienced full our of Pompano one end primarily million added quarter past no about XX, we at the September the this over In Nate, was debt. per $XX the barrels months, we damage, and

platform in shut days the a Additionally, to in plan replace Pompano engine. November for yesterday -- we compressor XX -- actually, to starting

shut-in are be in five-day the day. forecasting XX-day hurricane So XX,XXX volumes equivalents including to XXXX we downtime, Pompano fourth-quarter to barrel and the the per XX,XXX

That For natural gas, quarter, third-quarter and pretty remain I gas our the XX% with of volumes, liquids XX% said XX% crude gas this represented third to expect we and and about our -- about at liquids constant. thousand. XX%

was around pricing the oil quarterly our On barrel. $XX side, realization price per

for the slight adjustments in the cash expense both to derivative run the for quarter, a item. we line the and $X.X designate mark the realizations. benefit additional market hedge hedges adding provided hedges through current income million so cash Our accounting, value longer our or Remember, no fair

the which our non-cash the in and $X.X derivative hedges. future the As cash the income $X.X of quarter, valuation the expense change million, of in million was include million did to expense net from realizations mentioned of tied $X.X

liquids the our gas for offset gas under Henry fuel premium as and just shrinkage. Our price Hub, realization by the below price $X.XX, some rich use was slightly was

of our side, the we BOE Mexico LOE show attractive cost On continue Gulf properties. per to for

results down our includes LOE million per fourth the guidance included our reduced has $X.X maintenance million planned the to Based fourth-quarter of credit quarter and for which the year, transportation, the the Our recovery maintenance major The planned gathering be the well. this been and quarter. full-year $X.XX scheduled in we the major quarter fourth million to expect and million. BOE to LOE mentioned $XX of $X.X million previously further totaled expense to $X.X $X for around for was million which processing, outlook, $XX as on for the third royalty quarter, year-to-date and

down for rate the $XX expect between we as BOE. DD&A was to just rate BOE well. quarter for remain over And to the third $XX DD&A fourth $XX and per quarter Our per the

million million but mentioned million $XX.X the about capitalized as advisory to approximately the previously $X.X $X fee for consulting to recovery Our million SG&A to related $X.X included G&A. of quarter of of as in tied federal excluded million strategic fees expense the royalty the review, Board-requested well success-based $X.X

We million to quarter, $XX in $XX expect fees to associated XX% quarterly about fourth capitalized. of run XX% strategic rate, G&A be review, amount this million with the our or cash excluding the around with

expense Our charge which included other operational at July. stacking rig totaled a Pompano $XXX,XXX in the for the for $XXX,XXX, quarter platform

up balance has of restructured other lien $XXX expect $X.X is notes interest to minimal project fourth the the complete, as sheet interest, is expense this third million $X.X reported mortgage. $XXX million building of of the million the X.X% debt, net As operational a million for other we in expense approximately of capitalized made The and second incur in quarter the the remained quarter. million, $XX

interest static the in quarter. pretty to We expense fourth remain expect the

$X.X for based cash no previous on the second quarter. our taxes taxes, results, of which liability reverses XXXX. show tax as to quarter, million Regarding the And expect year-to-date longer estimate of end we pay a for tax benefit of the any therefore

tax to of federal income couple over quarters, cash $XX.X Additionally, further collect next we million of expect will refunds which our the position. improve

third P&A quarter or the million Much for $XXX projects. X $XX approximately under spent and months. at to the CapEx just million of Amethyst other through was abandonment tied Our operations it

in that into for several the some our spud We expect other P&A Providence quarter, of to well XXXX. P&A fourth although scheduled December. there's may projects And spending Mt. roll

$XXX changes. LCs. but $XXX million expenditures, restricted cash, to had now remains $XXX our base At budget just expect XXth, over in in for less in CapEx $XX this million million we amount spend to we available undrawn except and September than million the million, at for cash Board-authorized unrestricted XXXX scheduling Our due borrowing P&A remains $XX.X

fully we and have So our plenty are of the of near-term compliant under liquidity we financial covenants with credit facility. all

our group base resolution with currently on and redetermination November, borrowing bank are month. in discussions in expect early our a We this

back the around wraps due Pompano up with I the settle We reduced a concentration believe it to base on figure, additional the production million comments. with expect that, overview. I over to borrowing that for turn $XXX will Jim financial platform. And purely it to

James Trimble

Ken. you, Thank

As about pay, reached The Ken approximately of we to feet forward. a it progress Deep highlighted, total equates to XXX Rampart the reported, delayed well Derbio prospect. conjunction Deep as reduce in program. Rampart of gross Derbio August, moving its rich XXX are number depth risk And of initiatives which in that results. deepwater the have encountered of exploration our Deep the pay drilling of zones. and the We natural three believe been excited liquid with net The completion gas drilling our primary vertical has feet Rampart in results

Also, take XXXX. expected should We the And Providence to plan XXX% in Pompano both back to will operator Deep the the Stone be to we to success, if about months And to the we expect late tied and holds will working of interest development and of is is Mt. toward XXXX. of our spudded well assuming prospect. working drill. quarter nonoperating well well that Derbio in first platform. XXXX, in with platform, the of two expect from December interest first XXXX. successful, multiwell Derbio the and production a in Pompano Deep owns expected second XX% production the in this Stone the project tieback be Rampart a include This our Derbio prospects. end spud half first Rampart

projects and development Amberjack multi-partners, and both would are where prospects to and non-operated. continue We platforms the at low-risk Pompano we exploration around operated several looking evaluate have several

more capital, spread selling of We in to interest prospects our working and participate risk down in which in us projects. our some have to allows higher-risk succeeded our our out

continue are the seismic on Our within price technical this our our technical to world. projects to of work talents Mexico coverage, Gulf attractive in and teams by assets, oil sub-$XX leverage focusing our that

to at Pompano concentration look to continue production help and portfolio We acquisitions our in the Mexico Gulf the balance of property from Amberjack. at

shape, our million in cash of good and attractive $XXX unrestricted earlier, long-term sheet priced million balance $XXX noted debt. over is As of with

on million of the draw the million of no letters credit. exception borrowing have available We $XXX in base, $XX.X our with

six previously have discipline. position spending to a mentioned, is months, Ken our cash our the which last As we over testament increased

are maximize strategic and working Our returns and shareholder continue various management and review our options. to team tactical to Board

Our challenges industry price. the with continues commodity associated volatile a face to

the and tough strong the pursue projects your in morning's However, flexibility will this year. in growth. made interest us benefits call. A to a position liquidity thank drive Stone We for this sheet decisions the today we of that participating gives earlier appreciate you we seeing and are balance

questions. happy any take now are to We

Operator

Tullis Securities. [Operator comes first Thank from Capital the with Richard you One And line your Instructions]. of question

Richard Tullis

wells reserve deepwater couple the the some Going at could etc.? estimates, for you are of some quarters, looking at? planned cost specs the at back of what the give gross of level, you to estimates next Predrill

James Trimble

to I my Rich, that. have back don't be would right fingertips right to on get you I glad those at now. But

stage. think I several this the a got and planning of in wells, is what are lot we've planned

at than firm anything point. Providence, So that's this other Mt. don't Derbio, have we

are have things working several We got we on.

And so that be a say would it premature specifics. to would tell some little I you

Ken Beer

these -- XXX% drilling a more from -- you give million ballpark. Stone. just probably over these but and in little in, -- And both are jump it rough can Mt. looking of will over drill. roughly of go you $XX lap case kind XXXX, XXXX and to there, that's But Providence, are $XX million, are I Yes, the the numbers a and to cost

The is going needed in facility, have roughly so well $XX there that Derbio, that case some Another XX% is to probably work we to XX actually the in that are we will well. into only cost recognize million million-odd. success. with of be initial interest be going of There is And also another work that and that $XX the some in to got Template tie it million-odd -- facilities complete. our

get be we put also is the of prospect. some as together, Deep of prospect operator that the a will will Gulf we lease This have We but -- actual our reimbursed. costs

Richard Tullis

mainly that you you the talked landscape at a would size Jim, What the comfortable on? opening you focus What as would I little of the about look comments. know assets you Is of are with? it potential on Ken. sort be bit Thanks, it things in table? acquisitions, producing

James Trimble

the that's looking Yes, are but getting majors attractive some is to had end would doing we proactively, we upside that them, but talking be what would a to we I of for life about has PD. have really that work-overs the very has for us for stuff component a the might are assets say, are proved they that drilling. for producing developed and be operations Well, potential that

Operator

your [Operator comes question the line And Hassan Ahmad Serengeti. from Instructions] next with of

Hassan Ahmad

morning, guys. Good

some some third what QX know backing your going row guidance, would noise say you of your probably think is of is the come production maintenance of are online at CapEx? maintenance is look next am and would say based looking And some the rate couple of years, for decline the going to also a decline. If the I numbers is I time. not your work be Just into off they at to at quarter in moment? I then whatnot, what but the in prospects there I base what you in

trying just to I'm So model XXXX here.

James Trimble

Ken. ahead, Go

Ken Beer

you flattish. The would, production jump are if actually relatively think you you is in. if Yes, And -- it's will about I right. production,

we quarter. second correct; had are some You downtime the planned in

also the at and to quarter. quarter, tell We Hurricane in third will then had then XX we Pompano, is some fourth days between the going some downtime. guidance Nate now And in out you that have the

relatively If there natural we at There you if is was actually would look the just address. flattish. decline it be -- downtime, have no that production to

have at be acquisition then Providence quarter. the natural some late hitting look generating sometime in but whole cash XXXX, potential help Jim look second we have are some the quarter, the the with quarter, really we actually we will prospects additional XXXX. production. decline, or Because which have online be Mt. highlighted, Providence In hopefully some really Mt. now, projects right will the will first looking by and will in certainly don't have you to second at We interim, Rampart out us sometime a the we that buildup. of hope look on. If -- we but of would to might come that cash been well, that in experience project offset Derbio XXXX, online least as to And should volumes

projects sheet of that acquisition be balance at some can the a look there. out of have do might we So that

Hassan Ahmad

is that guys exploring to would alternatives you on use strategic you the the know And balance every do with and cash sheet? everything on or stock you be would at table? looking purely I are which Or something some is way. the

capital process is what So thought allocation? your on

James Trimble

big that we at what -- have looking I'd would something are that use acquisition. make are not is we so stock at to something to Yes, say looking we that's an

looking focused in that have to Mississippi are able we And what is would for that Green area. platforms the smaller around. really think Canyon operate be up, I we are the majors pick the we and

expanding We Mexico. Gulf of are across not the entire

really We backyard. in our are focused

Hassan Ahmad

Last redetermination is Did quarter? that you what borrowing million soon. a think that question, expecting you said targeting base the of fourth Pro are decision say you kind I in you were $XXX forma?

Ken Beer

That our is least correct. at expectation,

Hassan Ahmad

for all me. That's guys. Thanks, Okay.

Operator

questions. this there are time, further At no

James Trimble

next for this you everyone, we'll And just I'd look like and much. thank very to Well, quarter. much. thanks, very us say participating to Thanks morning forward with

Operator

Thank you earnings in participation third-quarter for Energy your today's XXXX Stone conference call.

You may now disconnect.

Talos Energy (TALO) 5 Nov 172017 Q3 Earnings call transcript