PVAC - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Penn Virginia Corporation webcast. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. John Brooks.

You may begin, sir.

John Brooks

good and Kevin, you, morning, everyone. Thank your appreciate participation in call. today's We this leadership conventional role I'm Ben Hartman, our who Mathis, their by Chief Steve new them after years joined a Virginia President onshore joined at Statoil, morning develop Vice Financial Penn Operations, of in several our assets. Officer; helping and Texas prior that, he Science Occidental he and Unocal Bachelor to had of with XXXX. And received Petroleum in A&M from Engineering and a distinguished in his career I'd remind to started, our of press section which statement getting yesterday forward-looking to Prior like release, you the of was afternoon. released

XX-Q comments to Our statements, from of which forward-looking number uncertainties Form and and presentation, a also report including operational to, Slide our quarterly cause within These the are but which reports those the our our of not forward-looking X limited website. of results different on included in is risks today meaning materially contain Form annual could to with will be factors statements, include, comments the that laws. language our XX-K subject federal of actual are securities is and on Commission. statements guidance, risk Cautionary filed those the on on identified available on Exchange Securities

the We today's to presentation will discussion. use through go

Finally, have. after any answer our may prepared remarks, questions you we will

Virginia start let's as today is a Penn brief on company. where So, Page of X, a where provide overview we

focused XX,XXX counties Texas held in on focused which We are is core and contiguous of South company much hold production. independent Lavaca DeWitt a acres, is the gas Gonzales, play Ford and by XX% net shale. pure Eagle oil We and approximately and

the Eagle - of Eagle of Ford the window much of oil our volatile Given acreage the Ford. lies in that oil

on also XXX,XXX benefits at with in of because and even have approximate wells, producing Hurricane our mentioned of a is peer midpoint XX in the third We're of drilling weighted production, with for third an sets to the report opportunities. independent oil Eagle from we quarter daily operated equivalent wells have activity the deep group. and With production and oil and we us allows us this, guidance operate quarter, mix liquids economic more to Ford of XX% is operate. liquids, acquisition the liquids of oil of acreage inventory the during to We that not highest or quarter. margins Virginia, Harvey, concentration mix drilling our of generate control of closed another the with of than BOE high high locations, projects, do X,XXX basis one more XX% pace approximately our to with which our BOE NGLs by production combined Ford we transaction this oil South published Penn have position last which an apart from of previously of working XX% many of of we barrels EBITDAX oil-related the pleased that day others. to per exposure XX% heavily the inventory by per recognize the of hit We XXX of Texas any allows This interest on and our us And believe, day. a highly Along than peers. wells our we the producing in operated gas schedule. exceptional Most impact company We produced. our XXX Eagle

XX,XXX we However, day averaged October. stand today you BOE approximately on a production, where to snapshot we per for provide

we drilling pads expect the the Penn that bring additional rate Virginia's of We currently through are as to continue balance completing. production to and climb year on

believe quarters plan our X,XXX will by one be industry. the production Page about light growth guidance throughout Penn longer. and of wells organic we over rates our will this raised pricing. where X. liquids. excited the Virginia We year-over-year. production expecting commodity laterals than growth and This of premium next where XXXX. three-rig production sweep NGLs, highlight is growth which XX% drilling prices. is contingent extended so feet three-rig today in oil, this program. our or a will be XXXX utilizing We're reaching be these highest XXX% with that significant to lengths receives XX% upon is We of XXXX, for Louisiana now of we is wells more program are Several accomplished Turning on Yesterday, reasons. We production XX several five in Combined with

significant we formations. more We year. the horizons, we do Chalk Ford inventory locations still Beyond Eagle Austin to inventory our the work existing upside do hold, to these additional and delineate next in to we from need plan to that Upper see

current $XX at opportunities, rising But outstanding As BOE environment. performance oil of price leverages robust mentioned, to portfolio I This even previously is are oil, generating have EBITDAX which per Penn Virginia we an margins. heavily the oil. to we weighted

anticipate is in Although a fourth flow to be of to committed we the growing quarter expecting maintaining XXXX, balance sheet solid year-over-year, are ample cash and neutral liquidity. with we XXX% Penn Virginia

for This announced X. growth was assets. the net in Eagle acreage Turning us closing our acquisition to of and increased with XX provided production of more extended importantly, approximately Page transaction previously of operational the Ford great quarter our laterals. accomplishments. some this XX%, inventory highlight but The some catalyst September by third future We biggest quarter

I'll little to were discuss disruption five quarter, drilling and completion the in our the in detail though significant the we Harvey quickly We And during production turning to Hurricane to experience the operations. after the midpoint amount to still rather know, you damage did of As South of Penn our able recover but our Even sales active we very drilling were seven a significant later. guidance. hurricane, region, to net able a and impact greater gross Texas was production bit caused wells. achieve Virginia

was landing zone new a completed This lower wells in was One Eagle of Hawk the recoveries. optimize further which those could the in Chicken Ford, XH. well

zone, We observed have ultimate early more we're work new so by determine far. this we've but landing encouraged of to that the to do the results potential

to configurations, X, Page we staggered two Chicken and pads. the Hawk different showing tested with this, illustrated stack we've Berger Turning Jake and

Hawk which a Eagle normalized with is stagger first and Hawk the the The initial we XH, in above zone. Chicken lower lateral drilled upper configuration, Ford our of The tested an with type bench stack paired traditional to per-foot basis. production in our Eagle a Ford drilled a landing curve, Chicken XH's lower lateral

exhibited XH the configuration our upper Eagle laterals. upper stagger adjacent two completions and laterals, a Hawk Jake uplift the opportunity across much Eagle Ford two for We with as Ford, Ford lower although wells slickwater first stack compared Berger large Chalk think hybrid other upper were set Ford Ford Eagle Austin completions. Eagle not previous upside they Chicken our Eagle These to potential paired upper lower yet the present in XH The in the material have in assets. also the

Area activity three-rig quarter Eagle to lower intervals. map of to wells XX the us XXXX While is interest Austin to Eagle sweet X the Area anticipate upper Ford XX tests the at showing have interest spots to these we range Chalk to ranging yet two has To challenge XX drilling Chalk, is acreage, gross a The the XX now we across wide to is development XX%. ranging for of next the over and/or exhibited with from which which in further enhanced fourth X that productivity. delineate test a gross end, across in We could have our XX% Ford over We for the logging landing anticipate of program. stratigraphic devaluation holes. subsurface our combined recoveries XX%. working that a through wells tested data the XXXX five pilot that drilling lower XX% in XX X raw the obtaining zone is takeaway secondary XXXX, five plan, drilling at we logging The additional in Ford entire by Eagle next and on and anticipate and Austin here optimize interval. based a additional quarters continued we quarters drilling main working from Page upper preliminary

have We Hunter the rig pad one in Geo drilling on two-well currently Area X.

rig the been few underway. pad two-well three-well to days. The and commenced in four hours. spud have pad, the pad the in in Rhino rig flowback Schacherl-Effenberger a expected fracked currently and The another the next the are X, drilling on two-well currently Furrh third Hunter XX on is last that moving operations have which we wells pad are Area is in We has Hunter where Oryx frac

VP of of personnel operations Looking contracted the plan, three who have have along introduced forward with personnel, I right addition to reiterate, new the rigs flex execute our ensure to key equipment new recently we strategic a we including some XXXX to and earlier. Operations, on

the active and operating to largely proactive in strengthen challenges drilling an us improve taken presented to steps third to our position XXXX lie success rigs have quality drilling to of to our We keys and implementing On for the in our XXXX. in the company team solutions Page in X, program successful the quarter.

extended water Drilling on impact spending Frac drilling volumes XX And time. of coil period capital producing completion were out disrupted. operations operations were as was on were frac In were operations effects operations two operations drill aggregate, Harvey's mitigated for team's factors Chicken production. our Hawk Hurricane an over the wells well static to the these the large And pronounced operations. collective timing our not all while First, as back and more tubing for disrupted. on pushed drilled and were days, delayed at largely actions, new for disrupted. formation rigs moving the of

of mentioned throughout in planned. get the of up. top-tier cycle Secondly, contracted caught rigs shorter have resulted instances mechanical by and originally segment several now commodity our prices replaced drilling issues if delays brought in exacerbated laterals are case also rigs released and than us rigs, Those with third lengthening with being XXXX, time overall previously And continuing H&P rig these with the further supportive. in previously been two the drilled flex to drilling

improved days Hunter The X, XH new than equivalent Lager faster to rig well with our are cased three-stream We operational in was realizing an latest the efficiencies depth. our XH, three-stream flex drilled the previous X.X already and Area well. drilled as Geo

for evaluated. last Eagle we're organizational were our about number, expanded an with deploying one talent smaller strategic much came technical employee focused technical of team oil-rated short, we've a inventory very our suited development proven rightsize of with capability drilling while technology Consistent technical top-tier operating continue reduced lower our drilling low And rig out risk, drilling as by team specifically, significantly along well pursue a we locations. to to team in program. options to as our with G&A and considerable And as Area better headcount X of recently growth engineering Ford we our and excited returns is current restructuring increased more X with year overall In Thirdly, our strategy, XXXX's overall a summarizing North Page Area equipment South. X execute X, inventory on segregated table Area base.

extended area by the XRLs. listed by we've lateral reach inventory Additionally, and laterals, length or conventional for each

As capital we us improving fewer subject to change And focus you drilling to have agreements, laterals. and an plan forming of shorter sharing development return our drill laterals optimize efficiencies and we this by to overall oil-related extended which more as rates wells can allow more with as of on inventory reach see, is could of attractive development, continue opportunities. we subject production

highlights, financial turn over the to I'll For Hartman. it Steve

Steven Hartman

increase financials X% previous compared driven higher an overview was quarter our on decline decrease barrel for per a a commodity On the with Total oil realized million onetime $X.X the sales. to in driver were to with operating million prior million This primary related costs of direct higher transaction quarter, per to million support were slightly for our primarily per quarter XXXX higher from in start quarter. Of acquisition quarter staffing for second the increase than derived $X.X by I'll or Slide program. prior just which $XX.X with expense, in quarter. closed quarter. The related compared $XX.XX or price slight BOE, quarter $XX.XX than X. driven cash the the the $XX.X G&A the that to the was revenues basis, $XX.XX the BOE the remainder product Total million third third BOE expenses The was of was we XX% revenues was a or John. were increase, our prices. drilling higher in per $XX.X product $X.X primarily million volume. by Thanks,

primary of cash of $X.XX million quarter. With loss presentation. diluted G&A the diluted $X.XX quarter $XX.X share million as Adjusted the or million adjusted expense to the net for compared expense, lower. out, cash in per the reconciled the gain acquisition $XX.X when million prices. in net were of the This or transaction income The in per the the our Appendix G&A quarter. which was our $X.X We cost prior share to $X.X for commodity reported in charge prices a value of compares million due the prior portfolio reflects loss derivatives noncash is commodity driver derivatives change to the in in derivatives quarter an $XX.X higher

a BOE price. with BOE from Our Appendix is quarter. derivatives. $XXX,XXX adjusted per or for EBITDAX was Adjusted on $X.X Adjusted $X.X cash and costs the represents compared $XX.XX margin reconciled the excludes adjusts also It Appendix per received Adjusted in million transaction of or diluted cash change in million $XX.X quarter. the realized per in And net the EBITDAX the income, also our the transaction of BOE value EBITDAX hedge settlements or million acquisition off settlements cost the is $X.XX reconciled noncash derivatives the $X.XX per or or presentation. $X.XX in prior mentioned. per net BOE This which the I of $XX.X the includes finally, We is XX% share. during of Adjusted presentation. in income acquisition G&A, million of $XX.XX the

day. currently per guidance XXXX we'll in XXXX. fourth active Slide third On to reflects be slide, the third the guidance BOE keep we through our XXXX next than quarter guidance. delays XX, the program and XX,XXX drilling the about the is lower X% in XXXX update and to previous end We rig This our XX,XXX we production of the This assumes experienced quarter. expect

of With coming a we exit on, where per delayed previously XXXX rig to range the XX,XXX BOE our we day. XX,XXX originally the had just rate exit expect little guidance within to do quarter provided program third catch we up We're to planned. drilling as fourth

full year day. of projecting the per are BOE of production XXXX, to we For XX,XXX XX,XXX

full Looking production a year per XX,XXX rate forward day. to XXXX, we of expecting XX,XXX BOE are to

fourth fourth expect quarter be provided over quarter XX% for 'XX. This XXXX BOE day. fourth year-end previously XX% XXX% growth to XXXX and our of around than midpoint about guidance rate to quarter At We XX,XXX quarter guidance, guidance. fourth is per production a XXXX over production XX,XXX production higher we at expect the rate our growth for 'XX

our Moving down price realized to increasing the we realizations about at guidance slide, $X differentials better by are reflect LLS market.

to We about expect be the natural same. gas differentials

of production not our We on ad expect range this in the gathering, our $X.XX LOE in transportation We barrel in LOE lower do BOE, and a to $X.XX will current than our or expect is driven be valorem change higher per basis by per taxes. expense and volume. processing the a

the That We per higher barrel volume. expense a the expect $X.XX the again put would G&A our being be per driven $X.XX decline on our of cash and to basis to the at you valorem XXXX third quarter BOE around from of around by with if $XX guidance at BOE total the ad direct per production taxes. quarter fourth BOE midpoint operating $XX expenses per in right exclude for

guidance guidance mostly capital to lower year of drilling For year due for to we're The expecting million fourth expenditures, previous $XX of $XX the delays. and $XXX million 'XX our $XXX $XX full full for quarter than million is the million XXXX. to million

XXXX We expect program. carry into will this the capital

was approximately of being XXXX. On position. we full in the $XX of drilling right, credit For and expect directed $XXX,XXX be expenditures had on spent end carried a million about third XX% the liquidity. the based we liquidity highlight on Slide drawn XXXX giving This guidance, the facility, to the our million have million rig was letters we being is issued cash, completions. XX, million million for we on our assuming of over giving about of $X.X with $XXX two-rig quarter, At under the credit into credit keep facility, to outstanding $XXX liquidity $XXX us to of us $XX $XXX which program, active, the gives million in higher in credit year Currently, we million. capital of drawn that previous and $XX $XX XXXX, on the that million million which

net and X.Xx this predominantly of long also on with run. XX% to or million, emphasize We $XXX $XXX.X base borrowing debt conjunction And to the want the aim and slide, to we base the finally, discipline by cash quarter maintain targeting acquisition lower over million fall up during flow our previous increased our financial in we spending from within EBITDAX that borrowing closing redetermination. base to borrowing the

achieve fourth XXXX. to both the by of these We of expect goals quarter

Our X.Xx. of end the the of was as XXXX leverage third ratio quarter

highlight the slide, next On our hedge Slide XX, position. we

see added significantly can our we've You quarter. since last the to hedges

LLS-based Most We to as into also at John some portfolio in oil of hedges the WTI layering sales, traditional our started addition market. the hedges. LLS in oil mentioned, are our

LLS these commodity are than price risk hedges WTI. hedging true actually our exposure at better So,

that manner though, in we pricing. forward balanced on I would be in relative layering expect a Going both the depending

And barrels XXXX, Q&A. For the of hedged anticipated just under and our barrels with the operator, about oil for hedged X,XXX XX% for a day day can XXXX. pricing WTI that, per of per year of at for pricing per at we production X,XXX about of $XX.XX day have midpoint X,XXX barrels of go hedged That's at of oil per guidance. to oil total LLS we $XX.XX

Operator

[Operator Instructions].

comes first Northland Jeff from Capital. Our with question Grampp

Jeffrey Grampp

and kind referencing the appreciate XXXX of on breakout and high we inventory. thinking the I start how looking of now to of of legacy Slide Is the about acreage rigs level, thinking about are guys with versus the thoughts just, three some X should on? these guys a think with Devon and reach you of more are are laterals how Area wanted working the to and be from be guess, between your at I maybe going you guys way X we should X a Area about implementation get how kind there development you your extended

John Brooks

Area and split among large, be and Yes. By rigs X. X those evenly will Area

I think early handful Devon laterals be north X south. the a have doesn't drilled the way PSA. I Area be the a in to that the our believe to the on year acreage, plan in would start work regards unit with in South itself primarily X lend a - do up Area to in and we of start to to there

be more. probably the currently now there'll a X,XXX-foot our interest So, that of two more XX% right we're variety Geo roughly or But Devon drilling in had Hunter.

those on on So forms going and that at the will by here couple some the on heels Those in acreage locations of interest. had high quarter. away which got Amber will of working our that. into end year that come legacy other the laterals longer right the followed be first in a Southern Devon of also We've PSA will unit, be that are our are

the forming of around second turned having still down of those year. anticipate next half in we we're in PSAs more the and So, south, the

half of drilling second say up when those on have of lot other the really next that's on the program. year and start lengths, don't I granularity of actual a showing to So, the lateral than pad by bulk

Jeffrey Grampp

a zone pattern? a down-spacing result just frequently well, might upon applicable And towards your how Hawk your new a you bit helpful. forward going the different And target the No, Okay, guys of landing on zone. referenced development with XH generally, acreage? that you see Can going impacts real forward? maybe Is that you the how in being expand you guys perfect. that's this rest Chicken then more

John Brooks

something made the a a to potentially further was lower a that just it down-spacing the pattern it would few the I And data like inventory of Ford it for it a in Ford. But really part that time acreage, most for In recoveries. We've do is is other is zones we also Eagle mean, point. definitely Eagle that on for but tell optimizes co-development sense. one or Lower data allows this will think I more that it test. ad just are landing encouraging whether robust Well, is one our point, got that meaningful the

Jeffrey Grampp

And them on that could great. there or and bit these improvements that have. your are looking maybe on Okay, comment, that we're whistles kind I maybe see 'XX just you John, may could well. Can and sound days one efficiencies time? if we on maybe if some newer well the count see new more, of at reflected bells how some reduction a maybe cycle in sneak in like little you with you guys It and as some continue the in to drilling rigs impacts quicker

John Brooks

times Yes. side cycle The are drilling we time. to capability, can the those flex rigs over on certainly and higher compress expect

of it which little than limits a got as However, striving to. to more we modeled, bit well, it's get a we're conservative type technical

as to I if the see So, the rig fast they necessity if we on. two wells point, it then early as get we drilled some at definitely could reviewing - And if case, wells more think that's start third can. down have two mean, rigs we that can of

Operator

Tullis Our Richard Capital comes Securities. from One next question with

Richard Tullis

you the how as Eagle in Eagle Eagle did the potential the Chicken acreage Ford view I release, Jake following included much the upper currently John, and results the the Ford Berger Hawk in mean, upper Ford, Harvey just another real Hurricane kind of the with contribute maybe you and shot new do stops results to give different the methodology? you and completion prior And soon a rigs rigs and starts do it think? the

John Brooks

think rocks Yes, all. been I mean, don't I condemned at the

had terms that overall problems was we And one, drilling impact spud secondly, of up that of the the biggest our our with - laterals. resulted the from rig think an ended in Number release. rigs twofold. in expansion to shorter I cycles

behind. we've get seen. And your are drill, full going to lateral then you results oil the and what suffer So, rock we if leaving up some ended and don't that's

have of solving higher the great to will way reliability mechanical to now go a the I right we rigs that. think

Ford, lower still we a ultimately rock and In outstanding Ford. that now all It and we've been wells extent, some terms XX of of have some the upper some XXX think see Chicken out to us with model Ford, in Eagle as towards pair in lower maybe upper the may more Hawk the Ford the lower productive upper Eagle may turn different Eagle they're Ford second day. the the like landing that to sense Eagle I - XXX trying lower Chalk. that that we than XH and It's to this a the a barrels more zone got co-development because similar rock what the Eagle a then Eagle that make And point Ford, may types. in

So, step. would program even successful augment coring the 'XX, of probably We those I region, we subsurface into our go more that the think that. we through be in some with additional next gather perhaps we how And well Austin through judicious production and pilot lot there's as about the data some be LWD to logging trend in spend real to our know go want dollars. Chalk and another just help a

Richard Tullis

and different results - Slide X slide Page some to already detail for The and a lateral X? outlined have good And on the and the in of the well did the on the helpful. Hawk Jake foot achieve that you Chicken depths. related areas details pads, generally Berger adjusted That's you of lot on different the

John Brooks

landing curve. came Slide think exceeded with Jake - the that it Chicken which X, actually Hawk the and the of X, Chicken I and below new zone that and pads Berger by - tested large, type think, expectations and the large the I exception in by Hawk

to wells there. planned. oil much Like end much you they goals. can behind most those on said, significantly And leaving if So rock your shorter with of per had shorter average, and you're laterals were up laterals, But it get too you normalize I foot. encouraging that's than

Richard Tullis

you target know LOE of per there I less. barrel lastly, out the just or $X And Okay. had

are achieving Given of what level where think would that be it you efficiency? do now, we time the for

John Brooks

going driven Well, really that target the be BOE by of $X mostly denominator. to is

with in on Our trend expenses largely are operating online - trend with expectations. and

in So, what needs the growth that drives to be what it be. will to production

Operator

time. questions any I'm Instructions]. showing this further not [Operator And at

John Brooks

us, talking and for next joining to forward we time. thanks you Well, look with

Operator

Ladies this and conclude gentlemen, presentation. today's does

day. You may have wonderful now and disconnect, a

Ranger Oil (ROCC) 12 Nov 172017 Q3 Earnings call transcript