PVAC - Earnings call transcript Q4 2020

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Operator

Good morning and welcome to the Penn Virginia Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Clay Jeansonne, Director of Investor Relations. Please go ahead.

Clay Jeansonne

Thank you and good morning, everyone. We appreciate your participation in today's call. and of Henke, and CEO; Penn our Vice Director morning joined Rusty Jeansonne, our Senior Darrin Gwaltney, by Virginia's President Clay Investor President, I'm Relations this Kelley, Senior I'm Vice Julia Development. CFO; President and

non-GAAP fourth discuss call. the like release to in afternoon. presentation quarter measures earnings on of measures are our Definitions comparable posted to I'd the press release, to most section measures of GAAP reconciliation getting which website. provided these the will yesterday forward-looking We the issued and to of you in started, Prior press our the remind was and language statements

in Our are uncertainties that federal to number not be comments meaning and limited the These subject those also of forward-looking forward-looking on risks actual which recent Form on Slide including in cause but posted on of materially within those Cautionary annual in identified our from operational are different to of the Risk securities X statements, comments on is our today a XX-K is they guidance the statements to results contain language amended may statements our could XX-Q. law. website. report which include subsequent be most included Form as presentation, Factors the

call after prepared to over the With Darrin. will remarks, I'll answer we that, any Finally, turn our have. questions you may

Darrin Henke

and global Clay. challenging oil XXXX entire for community gas the you, industry Thank was a no clearly and the was exception. period

our financial for unprecedented clearly in returns, to and our Virginia swift to quarter actions in base. at took of our continued of of and strengthening our XXXX value protect our result with Penn decision cash-on-cash asset balance results the and cost of these the the believe capital We and sheet the and a the core efficiency, success maximizing in decline making actions emphasis on XXXX strategy fourth speak prices, oil As the business. decisive operational

of $X.XX our proud $X.XX cash expenses adjusted of respectively. are exemplary G&A and BOE BOE, We per and LOE per

to faster front, wells from we is the in a Virginia by XXXX, that and capital spud and oil cumulative our was the pre-drill drill on were company cheaper we to D&M's focused On Penn exceeding wells forecast XXXX, XXXX the collapse in the able is on returns. prices. XX%. already a performance important production basis, especially in due In

well cash quarter to those set higher sell of report our uncertainty the to operations the duration drilling production and the generation. the balance price pleased free XXXX, quarter. we production at our the our and fourth the to the milestone optionality around assets oil successfully environment, flow in value We that of new Given preserve of immediately being opportunistically XXXX storage providing sheet. protect much curtailment, price. trend am with ceased as Starting the I curtailed to minimize base as consecutive continue secured fifth of low we barrels PDP our quarter that a oil to every fourth utilized quarter being a Company for the

and the of that year cash full free in to trend generated million we flow we For XXXX, $XX over continue. expect

Another balance this the our did in accomplishment of protection two We strengthening major sheet. was steps. and

to debt utilized closed We Juniper the by $XX on our sheet. balance which subsequently strengthen announced cash to on transaction transaction of January year. XX we flow free Then further November we reduce the First, designed X, more million. our this than was

XXX% to net position transaction, debt With by proactive more we $XXX cash with extended million steps coupled XXXX. year-end debt reduced the our liquidity improved free Juniper flow and generated from maturities Penn These the XXXX approximately by than Virginia levels. our

subtracting for cash from WTI of per full costs value BOE We to averaged adjusted realized alone. Finally, those After XX% we $XX.XX are $XX produce significant in shareholders hedging our proud what our created in for or the barrels, of robust of. hedging an million annual year; XXXX. program generated program quite we EBITDAX our accomplishment

would hard efforts our during without work basis our of everything our our been none Their have the responsible times on tireless continued strong and dedication. employees' I success and possible these materially drive do were success. results they to sincerely course, appreciate Of for challenging daily

our be will strategic Turning areas. focus attention our to on four XXXX,

objective First, cash-on-cash returns. to be increase our will primary

and will endeavor produce. We every the we cubic feet maximize gas oil of barrel of to value of

addition, continue ensure project they to expectations. meet robust capital will we to scrutinize In our every risk-adjusted

in rate the of locations $XX our earnings Top XXX XX% return presentation, As to the inventory of average oil delineated price per D&M expected flat in environment. exceeding barrel Slide well XXX are on XX internal an a

Secondly, to improvement. continuous we committed be will always

Given we improve will for pursuit our operational through and additional relentlessly performance control this commitment, to cost opportunities excellence. of look continued operational measures

importance the our Company, recognize of management monitor of force responsibility on to to Certain initial charged the the Last website findings an Board from our basis to ongoing near standards ESG. representatives across our ESG also data adherence are whom in ESG posted and We created communicate be comprised Directors. of to ESG an year, formerly with we task future. will

compensation linking shareholder we are achieving Additionally, performance long-term short-term metrics, to returns. compensation thus management's and to our coupling

cash shareholder-aligned generation leverage uniquely to And the cash these Q&A our continued make with key Maintaining substantial and Finally, Virginia to opportunity, we of strong believe to for we the and that low of flow go to positioned portion are plan liquidity are further. reduce committed can initiatives peer the success debt investment to We Virginia. group. among Penn Chad, call. use free that, Penn a

Operator

go question Please Dun And McIntosh Rice. from will first Instructions] be ahead. Johnson with the [Operator

Dun McIntosh

around was stay and question two on I decision your when last the sir. call. third to XXXX spoke really - program Yes, is first rigs quarter we the

ultimate to that those so program? that one, was two the oil with thinking and kind drivers of what up rigs drove then, all but were some You you got maybe of running about that two-rig and just $XX - we're really and maybe two, stick

Darrin Henke

really the average very forward. going dive inventory, a we deep The our our and XX, down on next did pay we two think fall those two results - to foremost, understanding to I are we on strong project to years, and inflation that last inventory Page made talk to to attention about I about, XX% plan maybe talking or commodity if rate and program cost we sense. first XXXX. significant continuing and obviously for able $XX or the environment, anything sense the see To with then price will the - returns commodity makes run run go if that flat will at concerns and deliver we're you this to would have oil around us, a way going rigs consider couple it ahead you wells to strengthened. of slowing being we the at that tell prices us service return close our time to environment, that the we

foremost, we are we and cash-on-cash And first - company, a are returns. it's what So that's returns-driven about. all

Dun McIntosh

long would, you back what color hurdles that up that green deal sets forward like from Juniper lot noticed you're on a but direction little sheet for thoughts about going the of to All looking of here, Slide guess, future the Thanks, M&A even solid to good Obviously, deal we and future and as for opportunities? XX I of there. any clear And have of pull kind would right, a prices term. maybe you get and balance for kind light the in to if pretty do not did great. it footings yes, we opportunities. different to a lot I'd your get have decently M&A from and just bit they the a reason think believe all a

Darrin Henke

we're foremost, opportunities. and of cheaper delivering When inventory accretive focusing to make, us have is But developing we the returns in been as on and as the We opportunities critical to performance results how will inventory focus the improvement, our depth look on our the - wells look to excellent maybe and it at and acquisition we drive not quicker. out, in past. our going to drilling that can for absolutely first day day continuous M&A see might and

last general, consider. balance intend to M&A any M&A going deal sheet with be strong and will we We sheet look in hard really balance They at to our need to we'll that keep a forward to absolutely year So accretive. - opportunities. worked improve

Operator

And come question from will Please go next Neal the ahead. Dingmann with Truist.

Neal Dingmann

just my Juniper far. the how Darrin, but free kicking guys for the you that the or just And Rusty, details are sheet, obviously, kind and Darrin question, just off, post so go balance improved for not forward. balance a only much maybe on the evident Thanks you and very cash of - said

sort two of at a think mentioned about now but about - the and How the of questions. the just obviously improvement with you how there hedging I seen sort I'm all wondering sheet? how I'm target of do and do wondering in forward. you recognizable see a that hedging do I already your think So of, program, going kind two-rig you the for given program you think you've guess, balance sort leverage, that certain about now, is

Russell Kelley

hedging, priority in Neal. Thanks, we is saw think about This tool we our Yes. obviously Rusty. that sheet. That's When that's order year. balance protect use the a to last performance - you

we're at our invest to like as When protect excess targeting a make Darrin hedging like X.X time it an us as cash future but lower was point. sure at see which be well in our six we this - least range I to is to the like With In this, we that highlighted, make we look toward times to allow returns of got PDP with in make we that, cash-on-cash balance end the but done level, as chief sure next capital. and basis, those using protection, that the X callers notice environments coverage collateral X that, regard those priority leverage returns. we we the other presentation sure we'd coverage puts also mentioning, downside such so to though. metrics capital, as we'd the over like that to environment well at a whole, upside. kind we you'll to Again, flow we as sheet think total that free we've material at in leverage is on of times spend tool we've You'll a a hedging hope returns we'll and months, protect significant ourselves as look

Neal Dingmann

No, it for sense. Julia. Darrin, makes a And you then or total question maybe,

of you the sort plan, the Darrin there continue have Just many you the not you just with it about seems on even if both talk notable and - full-time now two-rig how we been on should and Could on a and only start recently, thinking rig maybe like there, frac we side. now maybe to but since efficiencies guys, about maybe think probably even is see that you color rigs annually? more how bit if little frac, should has

Darrin Henke

Yes.

certain drilled efficiently. on size So a I'll week, our improvements to seeing. a we've business we're you and our touch pad, me quick industry even tend focusing how and weeks continuous very last number in small increasing increments we've on often to - what to drill we seen the relative our on our how measure and of is drill every It of efficiencies set wells in quicker records more learn for we're and wells aspects when those looking of pad improvement, dear wells couple you we've to of and and more near

we've and will as little past ongoing. so year, to pay what we already done than the transition speak, And us bit see drill in this in the times a pad we're larger seeing you that off size

results On ideas frac to per us as well turning and out intensity are we're our well as adopt the the peers' those as up statistically. stage are around what constantly constantly cluster, knobs beneficial the design, to has our the results and really architecture, side, come where others our completion our quickly with we're studying immediately own as the to well trying test that relative doing

Operator

ahead. question next come Water Jeff from go Please Research. And the Tower will Robertson with

Jeff Robertson

XX%. about you of XX. is Darrin, the wells data you leading that that there think Question you can Slide mentioned have the on outperformed XXXX D&M on for Is you that by something performance? to point have to some

Darrin Henke

think improve improvement well. through we've I into certainly, well wells, completion of think way always to back it's we're the been of from, doing the made where understanding company, wells improving as is areas but hard results. the some wells the to come better job also like it's coming performance some a child we've to a and parent the feel drilled parent and results, where there the the designs to I have drill figure tease and those the wells that relative how tweaks are stimulate And completed out and child previously how out

it's can but point are that a few to. those things a constantly process, So evolving I

Jeff Robertson

XX% the that talk And $XX locations much let's you what the IRR. the the how might were to plus on - respond sensitivity do you or XXX follow oil that, grow average other oil of prices, inventory Can say, with that about number - to? they $XX, locations in you versus and talk how about if if

Darrin Henke

learn XXX so today that, D&M about of current That X.X development, see those years years, of locations in will us of today's similar environment. and Yes, this and our those our of think locations what things bring pace them of has of rate drilling it going of flat we'll type price. about six the asset locations drilling XXX regardless XX% on inventory return average help we at will with into XXX half at than those technically we prices, in greater I for remaining inventory absolutely a $XX rate inventory return see improve and that's that oil forward commodity

way generally. future make to how that's other regardless the the we'll price, figure those I out commercial see going of commodity So and XXX the

Jeff Robertson

add of length a there acreage lateral could your of your more, one is spot the map of Slide lateral generates capital? use for Across lot XX lengths. a on I the If shows that efficient most position, sweet different

Darrin Henke

complete, the we capital I'll drill relative the lengths entire the see because efficient efficiently and to we position laterals more our that greater that that we can this deliver. speak returns in lateral and the are, general longer we cash-on-cash across

predicting the said, so if where plus we'll that foot times, type we wells average length. in our in or have over foot laterals And we we position, hand plan that at wells regardless left are of at next to laterals. and the But we'll being parent the drill to have X,XXX can. look drill curve some you two about upper we're X,XXX longest D&M minus the strive corner, That we you average years, lateral around

Operator

time And from we go Global. the with for Please Seaport come have ahead. question one Pope question. more And will Nicholas

Nicholas Pope

clarify item CapEx that here, - on flow position? cash the of the I I in Is a for prepayment of that comment Have right? current XXXX. already just wanted $XX seen through to that reading financial am just one out we does statements? Where million that

Russell Kelley

This is That's right. Rusty.

the So see yet paid in XX-K, if million working incorporates accrued. that - about appear and capital you $XX look that into has prepayments you'll as of what been not for, but

made oilfield timing early the addition, some payments from there on quarter paid we crude but and those to perspective capital in quarter, invoice In of we were cash early paid normally be in and in the fourth discounts prepaid just that would first some service locking that prices. due both for a

wanted million, an color. had flow about million. on flow but of So have cash basis, in net we debt-free cash of We unadjusted $X about give to $XX free a you'd on normalized that change

Nicholas Pope

preferred transaction. full - stand? also table and units clarify redemption with in does we that see in process? on dilution shares Where common the are exactly I outstanding, the the to assuming that of where the the these, complete? Juniper Or stock XX.X that got is you wanted the And million I

Russell Kelley

private So is there process. [indiscernible] to corporation regard Those no are up format. - an in effectively shares with formal

economic an on or and can as-converted but exercising think they those. no from is basis So are about timeframe those those, perspective, if common shares of you process an converting actually as there

think So economically shares. those you common can of as

Operator

I closing this Darrin gentlemen, back our to like remarks. conference the would concludes turn for Henke session. Ladies to and any over question-and-answer

Darrin Henke

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

Operator

The Thank you, concluded. conference for you attending today’s now presentation. Thank sir. has

disconnect. You may now

Clay Jeansonne	Director of IR
Darrin Henke	President and CEO
Rusty Kelley	SVP and CFO
Julia Gwaltney	SVP, Development
Dun McIntosh	Johnson Rice
Neal Dingmann	Truist
Jeff Robertson	Water Tower Research
Nicholas Pope	Seaport Global

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