HPR - Earnings call transcript Q2 2018 | HighPoint Resources Corp

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Second Quarter 2018 HighPoint Resources Earnings Conference Call. [Operator Instructions]. And as a reminder, this conference is being recorded.

Now it's my pleasure to turn the call to Mr. of President Vice Busnardo, Investor Relations. Larry

begin. may You

Larry Busnardo

us Good the for Call. joining XXXX morning, thank you and this HighPoint Conference morning Earnings for Resources Quarter Second

me Officer. Officer; Chief Officer; Joining Bill Scot Chief and Financial Geiger, Operating Executive Chief Crawford, are today Paul Woodall,

I'd which remind everyone begin, hpres.com. on website you disclosure can review to of statements to the at within find provided forward-looking like our we please the Before statements earnings release, our

our other can filed they in You find are in or these and after yesterday. we with as disclosures filings our also review close which SEC the referenced XX-Q, the

we that, referencing GAAP our financial addition, turn to over I'll press the prepared financial to call, be can measures our found at the call In during will for be measures end Scot reconciliation with and comments. And a of non-GAAP release.

Scot Woodall

Good to today results. Thanks, joining thank and discuss our and Larry. for operating quarter financial you us morning, second

call our to to activity discuss of has of Financial our Operating team, Bill Paul an welcome financial I and promotion. ensuring to the programs. to solidified him take meet team execution I in management quarter successful will programs the of with we excited congratulate Before before over recent and guidance. continue moment Officer. review Bill a Bill would of and has Paul we managing to and Officer. executive team we HighPoint record full-scale a well-deserved second and proven our start on development the like Also quarter, begin, drilling of with a Chief our the completion we highlights track strategic months. to during overview a promotion be will to turning the as Geiger to second of key and Crawford Paul to our been member the capital deliver insights for I'm growth. you HighPoint to team returns-focused invaluable His to coming as him welcome Chief

over pleased Wattenberg organization. quarter within production into I a associated operations add of to June, volumes we above back-office continued of and had year, of initiated I'm goal that of curtailed the and second equipment we guidance. second addition well. Hereford previously Field sales generated to gas half operating of midstream, of second Northeast strong of closing in constraints reported our by XXXX intention that team Hereford midyear, had proud highlighted completion weeks midpoint guidance last feel and have were build quarter that our and as quarter. total rig the first Integration the exceeding the increase This With over quarter, issues of demonstrated a results quarter oil the excellence busy during this and on integration outlined the XX% third EBITDAX equivalent Field. XX% accomplished continue the during million entire increase respect of we resulted of second second to quarter an The the and seamlessly. our year. I'm efforts start production of our persisted the the We for of ahead the within Creek the us schedule. the to including the field a volumes smoothly, These second operations Our the liquids allow happened operational year. $XX.X as to in expectations. impacts of We momentum has by The transaction the the drilling my to gone Fifth in completion in the transaction. natural will range, our

relatively full account we volumes. from revenues and have that previous of to will year issues NGL volumes, we expectations. guidance derived majority natural our in as is the for be our adjusted oil temporary to but important outlined gas relate expect This from As these as are unchanged oil release, press volumes our they

remain intact, reiterating proactive to his outlook. as taken growth are remarks. secure we midstream longer-term have steps Our topics diversification and as our expand we objectives well XXXX the on Bill these in will

for Now update an on operations.

operating in is active approximately two in and gross We plan extended X to wells the Wattenberg XXXX. maintain are drilling this of Northeast lateral level our drill currently Basin, Field, Hereford reach XXX to rigs XXX and the DJ We in in X development are active acreage.

spacing these flowback in April now on like X the during on to uncompleted operations were in initial completions I third wells which and wells operations we would the Completion XX-XX-XX. wells, be on completed Hereford began lateral included a Codell update that of anticipated July will This wells. based an during with is X Our second extended drill on the commenced were April quarter. Hereford placed that reach were wells wells finished XX and unit in drilling of operations provide Drilling but quarter. X each. on X drilling Niobrara the timing initial pads

a consistent reminder, development were drilled spaced, full plans. wells As not optimally field our these and with

pounds lateral of flowback consisted foot approximately XX stage per utilized. design X,XXX of was completion sand Controlled and Our completions.

wells placed and flowback a on X in with were production continued high oil May peak cut. towards first to The trend

anticipated the production. with days by Although for flowback the time approximately consistent of current we the still been it expected initial in July, flowback Under it's production early, curve have our are DUCs line, and are as on early that in and production is will placed performing wells XX type stages. XX be were first production The days. encouraged the respectively, these June X peak after remaining achieved

and Our paying due below cost DUCs XX% to focus we savings for the X unit completion as legacy cost were significant spacing the cost. synergies are early dividends realizing full Completion generated. the development is drilling on

X.X addition, in days. spacing drilled Hereford initial our including below and the from the This to average In in spud days units drilling were X.X highlights drilling generated approximately per development and a the the XX% full-scale that cost. rig Field. costs drilling spacing of legacy for efficiencies well We unit well best-in-class release, was to

our expect match We operations. lower averages historical trend providing We forward updates to soon. this to Wattenberg, the continue look at assets to Northeast on expand and and Hereford achieved further we

Wattenberg. production Northeast extended was second in the BOE reach of second expectations. second XX% of the with XX placed an reach in east wells second is performing of average the consistent extended began in the highlighted representing flowback lateral to per initial increase quarter quarter. by Recent Wattenberg the over flowback wells wells We of early Northeast We a Initial during is portion X-XX-XX, drilled day and Turning XXXX. lateral XXXX, quarter located lateral produced the includes XX,XXX field. reach XX and extended quarter, which activity XX central in DSU the data and on

a is our do offsetting cost as in in of Our wells good with operations approximately job inflation the $X.XX drilled during line the million. team averaged service XXXX to impact internal of This first continues half expectations.

cycle and our and processing summary, We XXXX, total targeting call XX.X In days. driven will Hereford the excellent through managing gas long-term in which XXXX a a drilling creation asset, Bill. and days to is the approximately an average rural a the drilling addition, plan drilling over have In and times X% first value oil-weighted for areas the a I was natural half fracs DJ well-positioned our capital completion within integrating remain with and of short-term averaged favorable we over of improvement through job growth Basin. constraints facilities. turn now asset executing on of allocations third-party associated basin-like disciplined for done the and the by number reduction

William Crawford

you, Thank morning. Scot, and good

representing realized Our prices second I and go that per oil provide was strong financial exceeded over unit guidance X.XX and and volumes guidance, to a reported lower remainder quarter LOE, the volumes second of by position quarter led highlights, the of all strong of midpoint EBITDAX some sales will of discuss our highlighted XXXX. of detail of regarding which flow XX% a generation. production additional now oil over for cash the XXXX. increase the We MMBoe, some midstream

Oil in of quarter pressures, expenses recoveries XXXX. NGL caused facility and X% high above lower the interim per at from was was the hot came the comparable processing third-party line to This and unplanned guidance the consensus associated due production $X.XX by operating with a end period approximately from delays XX% Second X% with along X.XX midpoint and of production. XXXX guidance of lower result lower gas did estimates. barrels a weather, Lease production unseasonably quarter and range processing of outages facilities. of improvement million product decrease first BOE of was a the

We expect going lower the trend to forward. to continue LOE

barrel with to XX- from greater $X.XX our We value capture desirable barrels we averaged to our continue markets differential crude. as oil WTI to XX-degree price to our per the ability have as multiple generate

to per the differentials for than price barrel be foreseeable We the pricing expect oil less that future. benchmark $X will

and over differentials us low low on highest which comparable cost Touching to of XXXX generate balance BOE we peers the second $XX cut, XX% per quarter, period. and DJ oil among for operating was a the expect allowed is over our up from high the strong Our margin the sheet.

of process the and level. extending our facility expect the agreement the incorporate in from to the Hereford and amending are We current upsize to credit reserves

million. the in quarter enter current half of or comparable million, liquidity mid-September terms we as end is When our of better balance We to close with combined cash year market second our $XXX expect anticipate with and the we of in facility. $XXX strong the

the the midstream and The lower metrics as We led X.Xx expected that challenges the we're estimate MMBoe of July minor volumes. in as a to to flow XXXX. our HX and trend baked had of for X.Xx reiterate XX% this the our our last to be week. to into We impact improved continue plant amount half with approximately guidance. increased in was the operational midstream quarter have guidance. cash above third gas in debt year Mewbourn mid-XXXX. of in processing and be natural production and delays is And Northeast into first debt-to-EBITDAX volumes in Our Wattenberg approximately expect that that higher the Natural below half already QX persisted what has X.X quarter forecasted capacity NGL by are resulted slightly full net year, as third-party allocated during experienced over positive the becoming X impact first DCP factored we into year processing with and gas expecting to we

and XX% diligently gas capacity our to high facilities approximately We end and volumes fourth by Wattenberg of diversify over processing increase direct XX% line with to us providers have third-party worked several This Northeast flexibility capacity gas signed agreements quarter provides system. available the midstream to processing legacy expected outside the to to of processing by alleviate pressures have our DCP's XXXX.

million but of note which would XX impact provides our expected weather-related the to now I to the to some are approximately volumes X.X volume forma of our in XX% midstream far, remains by XXXX. is largest by revising X.X process virtually a volumes. production that anticipate per is end production to us gas gas than we is, will XX natural our operational optimality total this gas ability of Accordingly, in its natural provide Incorporating by Hereford unchanged production I and guidance MMcf of barrels processed which be forecast. our the outlook. our of update to midstream midstream, MMBoe, driver be range NGL the take to pro and we to guidance at XX.X few issues, of to will an moments maximize of All and are production, previously that per oil lower million oil or forma the pro expanding day revenues. the capacity processing

expenditures Full July is quarter operate guidance crude. the Capital for to increase the year average wells to sequential MMBoe, be placed on third X by represents offset were are We CapEx the rigs to to the X.XX expect will we X.XX of a XX% flowback expected This as continue X million quarter, DUCs, midpoint Hereford from we completion second including the XXXX of total as the third during constraints. $XXX $XXX crews. production XX% quarter to benefit unchanged. million at and that midstream which

up Scot As for are a XXXX, strong setting are we ourselves our outlook. we reiterating mentioned, and

XX- layer On continue advantage we program strength support to visibility future frame in cash rolling a have and the crude capital our taken to prices to XX% hedging the and of XX-month to strategy recent into being XX% in for predictability of time front, our provide hedged flows. on

value and summary full for in drilling XX-Q. up, has we press a of our plan, can or creation. midstream poised You are headwinds, hedge completion the position the despite wrap find and To the on this near-term executed strong release program team the

are We ready now to take Operator? questions.

Operator

Instructions]. our Derrick from And first Stifel. comes [Operator with question Whitfield

Derrick Whitfield

Congrats on your Hereford. progress at

Scot Woodall

Thanks, Derrick.

Derrick Whitfield

you in thoughts state relates associated negative and you Scot, as implications the share of Initiative sentiment? of kindly to your if Initiative local for And headlines address light kindly Initiative with government recent the could on thoughts XXX then could, perhaps XX, So on also, your it XX.

Scot Woodall

Sure.

in development. do never just first manner guess, in the And in doing too the would way we've as 'XX, gas Derrick, when picture, in oil have number do to want like And oil we regulatory Obviously, seems and together, all industry affairs, reached needs would like XX, and have gas that to it feels too percent come been as XX just of I in things, far. out where safe balance that citizens. corporate to an gas from initiatives our look trying we balance I my a that found it's it in say, have several look industry and I the gone like them takes so. from systems feels the the Colorado, So good always proposal are politicians year and there studies and a over that back just I and the we kind the the the while operations. historically, generally plans off, it's my it we've friendly basically and of of it's State be like environmentally at talk our proposed like groups it of And of of and in oil away prohibited our -- govern think citizens in the well gone for of ballot local initiative business XX-plus collectively, seems land a been we our and When last far. about big been Colorado, over executing operations just and between years. And and I 'XX we've documented

think the so that don't guess, I from does have say years. you the the last of side I because it at governor. has I the candidates almost races, support for governorship, and over think, doesn't Republican side for of current too much it the it's not And And balance the seeing the any the nor would it that have I and candidate aren't think support, the any on current have I it support we enjoyed gone key several far, both Democratic of

we So will see.

As it's in you phases know, early process we're with the through over State go a have just of and Secretary the days. to signature we of the XX validations, next

oil say strike balance would of State think as to the development we have last that Colorado years in able the strike historically always over State I I that So would Colorado. XXX gas again will of and that of been the

Secretary of that. this there's out is And similar minerals, has the proposal collected they If But been State and really, There if compensation of the have the And turned that implemented of on that landowners mineral land taking taken State would question develop entire it from value to the have rights their study the that to acreage study XXX,XXX XXX, lead what But signatures. Colorado it ballot right was one Specifically by the solidifies, for properties. Bureau, lowers that's and does reviewing that talks owners reimburse government owners value that restrictions about the was the implemented or being over was of about Farm their validity. a effects costing. get of billion imposes and of the to being I think, that the if for their a XX mineral loss with to proposal. recouping of that them some that to study out keeps is on talks that signatures the also there your the XX, ballot about in put proposal $XX think acreage is would also enough the XXX which to the XX of proposal able forward is away. I

proposal piece the how both It's them impact. -- a significant protects ballot owners two a very definitely protects of a if it's landowners, on and of So the mineral ballot that got of the them a probably lot you of of cause the them over both legal how it were favorably if will years. two headaches about and voted by several next voters, administer the

Derrick Whitfield

you've Scot, then basin. half? to the that in as the peers you of second And noted what pressures inflationary speak have helpful. was and my to some recently you're what in quite follow-up, date your larger-cap experienced Could expecting

Scot Woodall

Sure.

about with number, in budgeting area, inflation So XX% were we the like our XXXX XXXX. Northeast a year Wattenberg we entered over

that was up dead of million, Wattenberg million. Northeast And on so $X.X like year, well at we're track the a in expected $X.X the to number. the Through of cost first our taken $X.XX type half million

we in So some offset by efficiencies. challenge of to experienced half that's But efficiencies. to year, that continued decrease operations inflation. the team still second and is pressures some drilling continues some will through There to mitigate be cycle guess, have that team the of times their our future in to the I the to inflation able be be but able

that, that for so capital to we year. the able be guidance full expect we'll and range expect in And to we our manage that be

Operator

Fitzpatrick comes next Our question with SunTrust. from Welles

Welles Fitzpatrick

in I talk to a Kind of hate can a the I are little past, follow-up either was relatively talking and If But all. on rural would I'm or if that? correctly. you guys X,XXX Do footstep X,XXX it backward have minimal, remembering to mind you impacts you the And quantified that advantage? to on have correctly, about as make bit XX. the Derrick's question, this you remember

Scot Woodall

of though. Sure, Welles. There's numbers, actually two kind

And we out that the would our impacted feet be would about X% from about proposals if think I true statement. of was One And company still earlier be numbers that's of from written said proposal that's X,XXX occupied -- when the structures. occupied the structures. talked a acreage put

that written from is honestly is that and is so it deemed anything XX However, occupied a sensitive structures area.

streams, of sensitive a And of we and other throws in streams a tremendous lot it throw amount so in areas, potential areas.

And nonfederal about written. way When would off-limits done for percent heavily that estimate the of we're as all being we've pretty study impacted well. so State the of is done the been Colorado the that's acreage ourselves, XX about our in would studies of off-limits. acreage We XX% XX-plus be talks

Welles Fitzpatrick

Okay. All right, great.

would the So those so of occupied I XX% have as other -- and ask, of probably presumably, including much accurate? structures, a sometimes mile have streams of that? unfair was larger, quantification of the X% this maybe words. to three, X% that locations do suppose left acreage, of step-outs. you do to well not kind so have larger, Is you guys intermittent significantly and the four even for and any can percent if is type the you you And

Scot Woodall

really. and impact of two at the We we just units. spacing laterals, of what drilling Not mile kind look would development normal on continued be link the basically our that

scenario then run XX the So do around a that. we development plan and haven't build how that we passes

Welles Fitzpatrick

then, like And on? before you And could all a came perfect. you talk now? looking that's Okay, What line Mewbourn little they seeing are to been what have pressures?

Scot Woodall

yet, that think Welles. seen don't much we've I difference

experienced that So system ripple about you've seen line And starting change year, on we yet. we, for burnt volumes. yes, yet most take through But and significantly to the have don't some think of I our are XXX and the pressures pounds.

Welles Fitzpatrick

signed you on one. up for Have capacity last guys O'Connor perfect. Big And Horn? or Okay, just

William Crawford

that The access of super part have DCP system to. other the we

Welles Fitzpatrick

great. Okay,

commitments? with Okay, So goes perfect. the that just that's acreage

Operator

with comes Imperial question Jason Capital. next Wangler Our from

Jason Wangler

Can X your as like kind now of this what expectations you of I out? looked and are acreage. drilling maybe the you up the in all the as talk drill build well of first rigs even right where early your wanted to that 'XX as pretty as about in of Hereford to rest the there kind kind position DUCs pad middle were year the into it far you're actively, of up as ask

Scot Woodall

Sure.

the the that up spacing takes just I west. I and drilling unit of think next spacing we the we drilling right the spacing to keep drilling So the start. 'XX. into to on stepping and us, drilled, moved That east and immediately top rigs X And to We units plan that is we X think, west. then to do come and we the north, go west go And or to X back, again. basically first those

in core. just it's core, door the to Obviously, we're summit So existing right right up the is. the where drilling next plant

is And which cost intent that infrastructure part can minimizes see efficiencies. we're you to obviously, it and trying as so look drive the of And well.

As and cost already prepared some we're intent. those in so realizing my of I gains, noted efficiency that's remarks, our gains

Jason Wangler

have obviously, in Okay, appreciate I been the issues appreciate I on with the that going infrastructure Wattenberg it. And specifically. then, the

going you I and that would side bringing it? rigs because more or basis of production would you you still think As Wattenberg there issue so two you're be to Hereford, help lessen production versus you you as to as from Or do on much kind both Wattenberg is think basin the that overall that midstream is move just forward? the do think capabilities having that the their least will in guys are your DCP -- now an think slow from in up growth start in and yourselves seeing do that, at infrastructure, more

Scot Woodall

things signed which gatherers the one other with those to Northeast processors up, the have on come would of weeks things first we majority our yes, will to talk flow of gatherers volumes this experienced, over about me going be ramp to specifically X, take through and and let continuing a over some everyone month taking Northeast that it's Well, will constraints Wattenberg. kind out Yes. year, agreements gas -- volumes out this to our we in here the going we there's of us enable other If next reliance But that some to additional speak few Wattenberg year. continue online the and reduce our Most to we think there's to as the think of of DCP, particular next take quarter those processors first well and of that capacity X to start similar that. be have of purchaser half started area, and or else, of volumes in we DCP. the as to third-party field, Wattenberg

couple able diversify with So subsequent to that's the quite strategy bit. of in plant at have we'll the on that that over you there the out a then And DCP to Xst position be that next that And then XX are facilities August. the on coming came new here they XX months.

So no, I issue the don't field. perpetual think it's Wattenberg a in

I quarters. think entire have see a it's over term the with going other near hopefully, also that key cut think, exists there us on next in than of outlets to And totally start the you a it for a Wattenberg a to your I a reliance bit. the it midstream, be point And up oil the it really are lot up field. bringing goes resolved, the different with reduces marketing several secured. we because outlet high But relief would you basin, to Hereford that just quite flexibility gives Hereford, takes clearly, us

Operator

with Our is Gabe next Daoud from question JPMorgan.

Gabriel Daoud

of you how upside in the relative lateral for the drive whether more? prepared do some the landing a what's Colorado. could the bit thanks a maybe Maybe a on and on tinkering sense base-type with could remarks curve. Just area, a the could completion little forward, design you to what the you on just trying exactly to Hereford, little DUCs, Scot, just going different differently bit more all it's results and in at And get elaborate moving commentary

Scot Woodall

Sure.

widened drilling So a the I the bit. think, unit initially, that we spacing drilled, little spacing we

kind going So we XX XX spacing subsequent spacing wells. on try other did and units of XX wells test unit, drilling we're in between and some first the spacing to

of it drilled there'll much you And laterals a drilling think tighter B Codell say spacing. the placed other, the per be more spacing underneath So an kind between little like I'm that we in trying well to bit. DUCs the want each sure not and were XX to a make unit, then that. rack XX if and know the wine so And -- I spacing what there at are really a more to Niobrara

how little tweaks, a stimulate spacing just between them So balance few a you and well. is obviously,

And that a for we've go I so couple good of testing there's next we and pretty need a we learn several out pretty got good as But a to forward. things the program think strategy quarters. lined

Gabriel Daoud

And as cash growth you some then, [indiscernible] with flow will That's of the by give then of Scot. and accelerate Do bit some use cash hit Or think and generate middle of thoughts do Hereford and going be? on XXXX bulk Just and acreage? just kind more could the you things to you what some are take you us any would well? about thoughts rate a you free on more if the to ultimately, on try reiterated up of use around year cash. maybe just helpful. cash, neutral the start Thanks, point

Scot Woodall

Yes.

have you you, to either In wanted and to a comment. got communicate since mine or like Bill's, as loud analyst, feel the out prepared to it's change are gas first, guidance. issues the The all of and And these are that the I short-term short-term limited NGLs I we which really make 'XX, an to on EBITDA. associated with investment definitely and very revenues our remarks community issues that in driving impact

And of diversification of that be those the I did we with resolved couple all midstream. -- months and that will think next over so all on

the go 'XX. company and when the the a in the over intact, to company. taking yes, is outlook is and love last the questions we're you're positive. for company, changed that months the going talk XX way have in about future excited So lot XX Things And I we're excited where 'XX or of flow for cash

be guess are activity. increase so prices position, those in I to, We And look could to a think so I say of mean, do just things. in it'll could nice that commodity is we'll like that said, there's us I can favorable, be would And transactions. you position. we do it kind kinds I if much like about we think gives there. what out all to to of flexibility I and types that I And talk be bolt-on fun just of flexibility

Operator

Instructions]. Palmer. [Operator the with Beard question have David from Coker we And a line of

David Beard

a I give you just build-out the better over realized prices value. to pricings prices, meaning a could realize a time? relate oil driver those infrastructure, -- of cut how in But -- natural and the we could is see just detail gas little on

Scot Woodall

Rockies I $X.XX, Hub just of, And MMBtu. Yes. prices $X per think above compared I think current what, to mean, I are Henry $X.XX.

like a value yes, almost XX% there. well, But so crude. little our is there's And of revenue

volumes drive gas don't And it. so just really those

so think I why can to and to everything crude is gas range the going we volumes crude in foreseeable And we've that the maximize be revenue. which is done probably future, for

Operator

I'm not to Larry would remarks. his like in questions any showing call other to Busnardo And with final queue. the turn I the

Larry Busnardo

you, joining again, for today. Thank us Great.

As couple the always, outlook. to if many And Denver us any weeks to have or regarding we Thanks. the look questions of contact forward feel of seeing a free additional you in conference. upcoming you please results in our at here

Operator

day. and conference. concludes the for gentlemen, and may program, participating today's all disconnect. ladies Have thank you wonderful This And in you a

HighPoint Resources (HPR) 9 Aug 182018 Q2 Earnings call transcript