PVAC - Earnings call transcript Q2 2020

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Operator

Good morning and welcome to the Penn Virginia Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Clay Jeansonne. ahead. go Please

Clay Jeansonne

Penn this and Ben in Sean in of getting we call. Investor everyone. appreciate of measures release President Engineering. you discuss John We and Kelley, and you quarter can CEO; will on website the which of Thank Senior Operations comparable our our measures on call. be statements earnings good afternoon I’d Senior I’m started, and participation remind press Vice Brooks, by morning these point today’s our joined CFO Definitions of to to forward-looking President to Clay at to your GAAP the non-GAAP like reconciliations measure our press and I’m Rusty most release. I and the you and this www.pennvirginia.com. morning Virginia’s Mathis, Jeansonne, yesterday also section Prior Relations found President are issued Director provided second Vice would

forward-looking results in on risks cause uncertainties could XX-Q. Our contain forward-looking include, from the number those Form law. and limited quarterly be XX-K our federal to Form within including actual that different materially those comments most operational are and today the recent to, subject These Report which not are statements, guidance but a will on meaning securities identified our statements, of of to comments Annual reports statements on

be we prepared will our after take John. will the remarks, to to turn With your over Finally, I happy questions. call that,

John Brooks

joining appreciate We call. everyone Clay. Thanks today's for

summary pandemic The and as and efforts. simultaneous oil operational community clearly the financial capital. gas period take quarter of with board OpEc and to battle global and oil production, the and Russia required our clearly the decisive We the a entire expectations consensus for backdrop to speak and unprecedented would business. success and was the an be challenging global the a quarter supply we results Virginia across believe our COVID-XX of disruptions In second to of including The swift actions industry result EPS protect demand our second in particular. price for EBITDAX, Penn for

crude operations in comprehensive decline in capital shortly more the prudent and mitigate drilling we and This and completions all program. Rusty In storage strategy that includes hedging in detail spending precipitous April complemented a suspended a The the in our second which remaining issued of second was ducts five completion the million reflects in ducts quarter the three $XX.X capital spending for none of during our only of course our environment of Their our I to on laser do are basis continued times we during of for work multi-faceted these emphasis appreciate employees. decision-making continued and have hard providing success. on been sheet of returns. a In cash daily balance been support Of this this was dedication largely possible of our they efficient plan cash the has results focus and the second drive our without Included completion guidance quarter. accrued night the in operations quarter. would the June. navigate on to everything on on product developed a a challenging At quarter pricing. core and oil preservation will executing and resulted during discipline, third process of capital discuss effort capital this responsible by last we

during we at production than to quarter of we with call the during lower Finally a result a albeit And will a actions expected we period. undertook second note I that over strategic the of also curtailed would the I that number level as Rusty. turn

Rusty Kelley

production or and to to demand of unprecedented evaluated mitigate financial declining of industry supply could our our prices volumes. due the in price established impacts impact commodity protect the to strategies in environment the from a put pricing company that second On to front, the a potential benefit we incremental falling the allowed proactively Recognizing we John. that disruptions Thanks how quarter. contracts face and best number depressed

to than drove a incremental generate $XX down realized pace. price were a barrel As to that which more debt payables per of at oil dollars we cash used was and an result accelerated able pay flow

We to hold us continue time. over we position will a if to give exposure upside protect but prices downside hedge increase oil that believe strong very going forward our continue

utilizing than oil us higher Ford advantage elected shedding June our party $XX currently also this In discussed of our for In addition, our as approximately a we to a maximum shut-in May are store By significant profiles performing degradation arbitrage stored take sell nature production rather the the proactively flexibility. production than well To of that April at differentials barrel very oil higher additional market storage production in fully to of and I John would provide pricing like operating and secured capture early our was per PDP were production pricing. June the of evident. as March we with a when that storage in. result we to short-term May, able May. third to wells effective no portion taking much in to dislocation note

cash balance free Our resulted the for returns preservation on of and capital in million continued cash sheet emphasis our on flow discipline, quarter. $X.X second of cash

our our decreasing reduced net remains we In focus approximately $XX reduce current by million. debt quarter $X on by approximately payables and outstanding. debt the Our million

I'll and over expect positive for that cash call use the free With to the ahead remainder John. reduce cash the year free flow flow to to continue of to Looking generate plan back to that we turn debt.

John Brooks

Rusty. Thanks

early see volatile we we to operate in environment pleased since continue spoke pricing an we're environment. in to fully improved May, last a that recognize we While clearly

portion our shareholders. believe and And with Supporting of positioned this of low cash While Q&A benefit this generating down time hedge free the go is a sheet, continued our substantial can success. call. uniquely is goal strong position, cost we the industry is structure to debt we that challenging the pay for of for further view our Sean Penn balance to the flow for Virginia

Operator

Thank you.

today Instructions] with begin now come will question-and-answer Neal SunTrust, We will from question please the session. Dingmann ahead. first go The [Operator

Neal Dingmann

Good Thanks John for achieve I pretty I all. for Rusty laid plan a cash really flow the you now next all. free first morning think details. you've is in my guess that what to comprehensive question you, for out for able year and the

if production you what you're refer So I'm wondering guess into your a thinking could just on how spending obviously continued about you I ‘XX maintenance when just basis? asking look business now at I'm maybe a is capital basis, from

Rusty Kelley

that. take will I Neil. Sure

spending the sheet main driver think the work is a environment, just maintenance I cash depending on profile think going to obviously we don't capital from our returns. a first we be need cash to and here our up balance that spend to, got to prop leverage a leverage We've when of ratios. on

there cash decline on our to and on lower future seen price given guidance the bit So we of focused you've will as a we're willing environment. the returns be through is little cash take in near

as your easily a we rig strategy return a growth give we're but market can general to the maintenance, to cash cash hesitate to get to be you over to of fairly levels, but looking to of a on and type modest year shareholders. at cash beginning and drilling at incur flow price environment and ways questions directly capital maintain in commodity just forward of to program at inside half a a a would the going these more one that I think the and creating However, profile going a production back to I reduce in dollar same to released very a thing at order debt flow the pace that we normalized free figure find

Neal Dingmann

I question PPP loans that Did receive and just Great what's I on or hear really just if could or one any tell read there? same Great. my the think to could you on get with going Thank all? you the then around benefit just you unrelated, you. certainly status just stability did you

Rusty Kelley

Neal. Sure

take when loans year that peak liquidity So little uncertainty as PPP time didn't but we seek beginning market, in action million at kind a a with strong precautionary so given with decision go to resulting backdrop the made it responsible that in the full we've with the commodity souring the a and we the market just of frame improving dollars our the of a we do March/April repay the over like and already stewards forgiveness. and took ahead we to felt full results while was to good in quarter paid backdrop back at it

no us. So longer that is with

Neal Dingmann

Very guys. good. Thanks

Operator

ahead. McIntosh Johnson with will the go Please Rice. next And from come Dun question

Dun McIntosh

and how some Good morning, forward? cost you going through LOE same. going the do What the think reductions quick all that you I lower of quarter kind could John. question, drivers themes of been and the we've were one down of second that seen drove the has just had these delivered sticky a be

Rusty Kelley

we're were is facets with pleased too team salt the a costs. I'll lower When We as the biggest disposal very the due that cost, of this had well. were had probably to focused operational drivers Rusty. the lot being on This take there we shut-ins lower very of lifting dug we into two water those that.

wells, to fully that with left some higher made was did production didn't producers our on wells sure is economic since your of cost have newer analysis what your volumes of that operating shut with was though costs. shut an we as lower in Some we lower we lower, in which of

quarter did come out lower typical than the So rate. substantially the for average our

a run absolute the we basis what dollars pretty amount hold add we probably creep have the of to an cost those to we've you're would seeing get similar more activity on a at of and a focusing kind into bit that think have a that to I absolute as as see but stickiness a up kind of reductions regard likely got until will quarter is going but we to as unit first declines offset it some first the got to the back think that constant. per dollar we I of absolute of but on quarter, really look see on we little to dollars ability of a of kind you'll on rate with wells absolute dollar recognizing will small

Dun McIntosh

a it what question books stage? then how are timing get pretty are provide that then the ducts those of of you the XQ much line come Rusty the off if maybe on putting is a Ben, right a driven you or to there. a for maybe but production Thanks maybe about with more to just price or more maybe you Is for for could trying on decision dovetailing like have bit thinking this and already just earlier, at be little rig going back out Neal's thinking you kind when line that timing of in one looks color some in sense and guide expectations all around

Rusty Kelley

Sure.

going backwards cash starting don't, just on cash be have backdrop outlook. speak. So part on something focus to big and main backdrop driver is commodity it's price commodity the but we don't your last of a on oil the so the question be the we our as with not going books we the of Again returns the the stability service then to and

So over really planning of you've up contemplates a we're ducts. me on the of the clean completion lot you seen It's tell CapEx as doing then that turn on dates things but quarter, what we you've to five those guide because with not etc. got hard remaining exact the for lines the

to If little might see probably service whole quicker with good are act that's bit they're and current mid can see of we've price a what if quarter. according a us think XXs, oil field some But we forward And cheaper very and I oil for the watch rates we're a sometimes that we're environment is very together you would going to oil now field good So very to you closely. prices of going of for downs. there give able service the want perspective feel all as to to something the sustained expecting that's can what pop a see tried sustained guide that kind more production being trending with IP third up, but these given see price. mid be right but about us XXs commodity guide of the a when see short in to conservative would feel time that create a you an want environment with upward may kind ups from as we level over you put we why

of feel kind So on you looking all. that'll based at that of a give what we're

Dun McIntosh

forward and right. to All Thank you Rusty following on. along look

Rusty Kelley

All right appreciate it.

John Brooks

Dunn. Thanks

Operator

And our from will next from go Tullis question Please Capital come ahead. Richard One.

Richard Tullis

oil do XX% What past into Thanks. XQ -XX% of hold or Good you below cut looking it's quarters you plan. morning that couple been using far your everyone. can kind up what XXXX. XXXX then Rusty level of at. out you know quarters component The as and your couple go the John prior as think couple then of as a then oil into do XX%, XX%. you and percent base see I

Rusty Kelley

of fairly Sure. production. I'll core you've flush ducts are, oily. at They the take in what on a look that will coming we be components area that's when we on good got coming also are these

a production, proportion that oil have to which going here have tends we You're pretty you're high of average cut back we a kind we'll production going good Likewise being on a near oil of get the cut. new the our a higher so stable I to in term. air kind hold production above to this as declining, to keep full that percentage slightly and to activity as higher think of total higher

on the on oil a back next So of online bringing long-range, good you're kind in seeing I might guide that stuff think are you're oil get you now going see of percentage would that possibly production and total slightly of quarter of over absolute the get decline this as bit higher but a for our so XX have feel is you're say you kind for the but decrease I think we focus long-run cut in a kind to little we then I start where to seeing on. kind of initial to

Richard Tullis

more the second the release August Okay of proved see compared that's interesting I updated value. a healthy provided enterprise prices see just what of on and little for question, give your in PDP know the strict that a just as and to as obviously number using as numbers of XX you PB Could a XXs, you reserve it's early helpful I with along guess Rusty because it's developed maybe August. you component to details PB there

info to component. on a get more little just maybe So the PDP

Rusty Kelley

all Sure. is that Almost PDP. of

that base. very, had online. market wells few and PDP have at the debt we in to it's when importantly liquidity think was value I given wanted debt at look that think are to a make future One to I to the very market well probably addition able that in given already helpful coming how and the either are to What but get through our was questions we look a lenders and to our for PDP pay relative was reason as work be lot stability bring online our PDP strong back able we of on that our now validation base. term from to to but saying had perspective has things. why in that and very base quickly addition more lenders confidence to going in investors show being there about There we strong the especially RBL feel in lot able extremely a of amount a think those down just be a coverage should can the the to NPDP will it loan pricing thought sure ability will our market us say of PDMP were small the back you that as or total. on third collateral have immediate party with of has collateral that that production strip to ability our I back two in wells questions a very this be We've timing a just been and been we the I second in a may and would within our classified you shut addressed they history fraction

Richard Tullis

All all right. much. That's very thanks Well from me.

Rusty Kelley

Thanks.

Operator

will question Capital Northland come go the Grampp next Jeff ahead. Markets. with And from Please

Jeff Grampp

you a when like on to curious morning what drilling I rig to size procuring the touch looks rig back you just so. what's the guys that to was general between guys you of behind called the adding on from Good in timing want and sense. terms thought gap can kind guys. start that that forward? we to if Can of you circle makes oil process just that assets guys that develop look project when a would kind and moving day starts time of based What's decide with come the

Rusty Kelley

have start full of quarter. spud you in you quarter think first it see have think lag at that to two a end quarter all will get to of the of then to when a and a something a cost if because going if that you're do mobilizing to a fit of beginning from we you'll talking going a following to the the rig. decisions I We turned you're you're make contribute month jump see can closer The kind we you rig little than in, of whenever continual to typically online, of kind see but the quick to moving but efficiencies I cycle is operations actually [indiscernible]. but inside full, something having I just those the quicker time about do see just what three

You're process etc. set having full everything kind not getting up, mobilization of

built front a have that you kind getting good for of but probably the of pads first in general restart You'll timeline. that's

Jeff Grampp

on able opportunities you consuming. effectively inventory some All guys cash in the neighborhood Rusty. together right. you some environment I this on My returns. in bolt-on cobble of kind of general focus guys acreage type Thanks Rusty? of been have been out to follow-up, Do obviously cash those you pencil your that the to past in emphasize replace had know

land environment? or that that fit strategy does kind with in conflict how mindset this the of does So

Rusty Kelley

environment that up also fact that we're the certainly about sight want aren't not it. we're also this but We we drilling, in aggressive of given replacing inventory through lose don't to using as

have that very just of I'd rough interior we CapEx there proportion. edges There tack back but guide get our shaping normal operations in you'll very ons been small third We but kind out is small of small that's us a and back quarter of of up. see a doing bit as little very some of and think our course acreage to the exteriorly kind the say I some both start for

Jeff Grampp

Appreciate right. time. the Understood. All

Rusty Kelley

Thanks.

John Brooks

Thanks Jeff.

Operator

go Nicholas Please from question [Operator come ahead. Seaport. with Instructions] The next will Pope

Nicholas Pope

Good morning guys.

John Brooks

morning. Good

Rusty Kelley

Good morning, Nick.

Nicholas Pope

I little how you of and and that kind next that the guess the forward about we're just long procured about bit to the might affected and over wanted storage going that of how XQ differentials How the oil differentials like, kind that might forward? storage lasts that what talking guys a I talk oil in affect look going that year?

Rusty Kelley

Sure.

to so much the tool we result turn and differential back differential to of risk were go evenly of on and in but second as the kind able came average able across we also your a and ahead kind that that to produce if in is really second were to contracts accept quarter. storage than produced just instead did differentials June appropriate our into having which of store well a out that weighted a production the it markets We the shut-ins most anticipated. than quarter was of better differential sell where materially and May in earlier blew when addition in worked we out our that as management being very able to in lot So

how it So affected. that's

a seeing risk potential volatility. perspective quarter both and We this did second a management period not differential. of we're forward that of from storage third again get huge Going just quarter for

these and WTI little storage quarter. a by part of month of and that third are that We not and part by just bit of movement was kind optimizing it of and month by But $XX was but material not huge month MEH we're difference swings you're between bit by in so change little through of month month. the month storage the kind seeing you're of of kind while a seeing that month seeing month a

a are differentials XX to are little wider overall normalized XX bit so environment. a they environment in than And

parity kind seeing a rate at $X] of spot of kind looking differentials all-in were if MEH back to flat for looking WTI return we that between coming and normalized kind oil to differential with kind I of as negative expect you're normalized prices $X back we the of as kind expect biggest think of now. to do you'd to WTI seeing of us are then a we're is see we environment. [$X do We're kind closer driver but kind that get which more to of

Nicholas Pope

those Got what's of and sense. it. term of of have priority Thanks pay the you the, cash if for and free That what's might the you those have the the the year, for at flexibility the and off able credit with you're I flow just of you to you between what's facility cash the two the to debt that's options flow I moving think. pieces the kind have options mentioned remainder be how makes you looking one guess and loan,

Rusty Kelley

Yes.

going think primary debt in paying is environment and So doing priority paying that aim to probably I liquidity I liquidity. and the down RBL that's reduction we're an increasing this if think like to my

as fact have, collateral of with debt. long-term I a growing true versus like In to RBL coverage, a use capital we working facility the the source

backdrop a coverage of think possible. the are I when if that market that and see portion but I looking in a bit the I'm commodity as with much those view are anything we you RBL So allow very collateral growing to that term more again things the stabilized and facility if have that out think potentially probably with markets capital little

Nicholas Pope

makes it. guys. had. Got all Alright. sense. I That That's Thanks

Rusty Kelley

Thanks.

Operator

question-and-answer session. to now I conclude the like to Mr. will turn back closing conference remarks. would for This over Brooks any today's

John Brooks

this your for Virginia. all We your you talking morning for Thanks interest time quarter. Penn to to Sean forward and look next in and thank you again

Operator

now concluded. presentation appreciate you today's We you now may The disconnect. Thank you. and attending has conference

Ranger Oil (ROCC) 7 Aug 202020 Q2 Earnings call transcript