PDCE - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen and welcome to the PDC Energy Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Investor Director, Senior Edwards, Relations. Mike begin. Sir, you may

Michael G. Edwards

Thank welcome. you. morning, everyone, Good and

Officer; Bart today, President; and Operating issued Senior our call a afternoon, the and presentation CFO. Brookman, President Scott David and Vice we Chief press Vice On today. we Executive that have President accompanies Yesterday remarks Honeyfield, Lauck, CEO; Reasoner, posted release and slide Lance our

I'd XX-Q. available of X filed our statements The like pdce.com. on our Investor also and forward-looking are press your We presentation of call page the Relations website, our attention also to release that to presentation. side on

the We like of financial GAAP With GAAP to Brookman, non-U.S. appendix call those financial that, also attention measures. get Bart? started Bart to we your the so our find to turn the I'd CEO. presentation, will and reconciliation present call over that I'll slides non-U.S. numbers some of can today, you'll where

Barton R. Brookman

on Thank Thanks, today. Mike, everyone. hello, and joining you our call us for

great of XXXX. growth Another quarter the of compared to quarter XX% third when production with

First, per ago, barrels thank oil XX,XXX teams of efforts equivalent equivalent day. all their job. from two just has our the XXX,XXX production barrels personally I company like for as approximately grown terrific A Again, oil operating now our would approaching years day to base you. per of thank

for themes key Some today.

in emerging exceeds potential and the Central significantly the First, from acquisition resource well Wolfcamp B our in story Eastern acreage original in a an in expectations emerging great Delaware Basin, A our performance model. that the and

the allocating two the the and resulting acreage our Eastern of the impairment, basin. wells results to the on in the Western Western portions Central terrific are and clearly from any are While capital disappointed in with unsuccessful seeing we and these significant we we the performance wells couldn't foresee based acreage two

swaps a projects performance return, business the Wattenberg, production base. our theme, high company's from operational to are And with predictable, expected we close the our acquisition, are and of repositioning foundation now, two the all that, Wattenberg in low-risk and development acreage quarter. right standpoint, Second the fourth anticipated

next now areas Over focus operating our will Plains, enhanced years, on and consolidated in an you in more the and Kersey, X-mile discuss efficient see field. And laterals a Prairie the capital more within this moment. Lance several will

state company's million, billion, base Next on execute the the programs. borrowing reached to commitment And our pleased a $XXX can we Strong assure company, to operate. agreement theme, last, against our to from improved and to ratio of at filed regulators, our the related the to million leverage communities financial tank flow you, giving steadfast the record environments, settled capital and in to June $XXX in PDC flexibility operations Wattenberg with operations. for strength. and emissions Federal and an we safety $X.X protecting X.X, in employees remain late the our are I financial which us cash we expanded from lawsuit where we

barrels third lowered per hand, with X.X. our again, XX. quarter, to the perspective, In cash us quarter ended guidance the approximately per costs the on we of some average for nine ratio a our expectations. enhancement again, at per Now we through with Again, our came year. months, million leverage let also $X.XX Boe highlights in from end. line quarter quarter Boe $XXX of $XXX million same And giving equivalent, me in million X.X at $X.XX the approximately and at are liquidity We with line quarter an for spud day, oil Boe wells on lifting production financial in the we XX% and of the XX,XXX of turned-in-line XX last hit quarter. a From

budgeting growth Expect was the focus improved year approximately stages our million. go line let rig And A quarter an the from three sum give final with our To I our we rig $XXX me efficiencies. a the as between flow sheet three earlier, things capital $XXX for XXXX in as on of somewhere on and are pace, quick Wattenberg operations anticipated as capital depending balance adjusted begin capital a Delaware, strengthening process. final of through Our expectations. XX% million and cash we of where allocation. headed XX% up, production noted in ongoing investment snapshot we

continue enter potential, pursue to are we the the turn this excited we of we Delaware With our tremendous technical the to update As Wattenberg in will to Basin we look much Reasoner risk, XXXX, Scott lowest I highest resource while more the delivering drilling this in as call country. return evolution detailed that, see on a the some to next the operations. steps for over in

Scott J. Reasoner

their a in second oil plant of the turn-in-lines, and cubic about profile Starting and spuds of last the Thanks, oil XX Bart, turn-in-lines, quarter through Wattenberg, well turn-in-line and next production production increased the standpoint, the in alluded day. from capacity nearly detail This DCP's type and Delaware approximately per field to Production we cover prior some Delaware, capacity we'd expect for sequentially barrels will and daily the XX% to XX,XXX spuds X quarter. per is over day. we XX,XXX close barrels good in which went second had day morning. of six midstream quarter we is what to Wattenberg a including from an quarters, quarter. XXX in a by to four feet to of management we XX very day. results expand combined equivalent per X% the impressive grew the in of third that pretty From In modest growth things resulting XX projected Bcf the about equivalent startup, by to smoothly more in minute. operational had is million several

quickly starting to Wattenberg and We our team great shine. continue to from is together results the see Delaware coming team and

X, note, both of Moving can extended a to our turn-in-lines basin. laterals. turn-in-lines on spuds detail see and the or XX% little and more spuds over reach you Important were mid for each slide to

In each in really capital Wattenberg dropped Delaware. terms similar the our rig running pretty quarter. outlay quarter our to fourth in for third October We and was the basin, in second the rigs of the three continue

had originally of acquisition. our we crew While the with in frac in some go associated complete this release crew DUC pending planned to will wells the mid-November, the Wattenberg

a have expected X, compared plan production XX%. activity, guidance. As On of detail we the to good meet Oil a slide fully the manage on cooperative profiles. growth the increased to And these two year more total XX% left of on sight full operations gave we our year. last capital production our months and of arrangement in we completion under wells. our as With LOE year a reminder, quarter outpaced the of third production to was case a quarter, quarterly little last and line

ramp total like right are our in per production, expectations LOE, In our Delaware at gain Shifting falls gears, guidance. going spend middle on, mix I'd with improvements including months, to our the momentum few work to in some first and that to full oil. we're gives continue terms basin. Boe, a achieving year X line the going early the minutes of $X.XX right of in a our asset. you production exciting Slide Basin nine the we the we as XX% commodity on for see through glimpse some of of Shifting operational steady at the can in

doubled from And the are – that that our modifications see are of our time-to-time, I'll investments daily our December choke already in to to acquisition time moment. more We've that infrastructure we believe than from pay in begun completion can we've off. design we a production. in You the close management beginning we highlight testing XXXX,

has has Our team great three months. four, complex gone to a pretty growth a adapting from a rigs back to in of job to that two done matter schedule

of In drilling in room we're still right improvement, terms in trend the to is a couple but for is the things. early to of This beginning and game, direction. move due the days, have

year rigs purpose are has more right-sized team throughout fit be we've our with happy to that First, our made. the the improvements and for

find now, geologic wells understanding to the last, Second, in to more in closer a really to operations continue are our And drill crews as better proximity while and wells we have especially been overall. leads starting together basin and rhythm. a it to for smoother other, each

move we on forward Central on we efficiencies. are focused As our areas, our Eastern continuously and improving

area results, terms with of Wolfcamp A an of In XX Eastern our wells. well individual update slide starts

of million oil barrel On EUR compared area. the the type for the we slide, X to performance average side the our curve show equivalent left

early and our line, data type average is curve. As which well, you falling to the XXX% significantly To quantify that the basis. between can this, a is XX% average our is the on uplift normalized right curve outperforming performance dotted shown indicates see, by

each we've cluster design Moving to highlighted effectively our with enhanced in target with the updated an that the Lost perf individual no well reserves is almost slide, Saddle an well. increase right-hand is first costs. This to completion more well side of effort the and

we Block for North acreage. of with XX-day more so. the time. We're wells that on feet, XXX extremely area. over Eastern acreage The graph the slide are average is and the can of look the in XX, top to-date first barrels now Wolfcamp or well XXX an the our give first at B performing You our strongest days becoming and Eastern right X,XXX On through of includes of one see of consolidated it's wells oil all IP our X confident in per equivalent more

recently oil B and the barrels as in reminder, XXX lateral. oil the turned-in-line through currently a Analyst which about the equivalent X,XXX to which a Day per day curve more flowing Wolfcamp year, continues outperform plus. equivalent X,XXX than day XXX,XXX production. is our As of which we the wells Wolfcamp well curve the per barrels showed is reach April, type yet Wolfcamp hasn't X,XXX barrels lateral flowing at acquisition days this XX% at our oil two back is the as less now type At Triangle A equivalent Elkhead, of reached about curve type of well, foot and We've Hermit, extended B peak for

last B On compared the the Elkhead Kenosha the A performance well, highlighted highlighted right-hand which we side of the to we've X-mile the slide, Wolfcamp well daily X-mile quarter. Wolfcamp of

shows Elkhead through to profile see, a the first so. Kenosha, very you As similar production or the can flat XX strong days the

each curves the that slide quarter. over XX, production area Moving the last to shown we've on Central updated were of

Greenwich curve wells can two the shown in you months. grabbed was attention six But green. well performance really exceeding our the Liam the type of As the are see still about what through

the due being temporarily quarter operator after coming on-line second at a in of the call, activity. As shut back offset reminder, time was Liam the to

days, XXX basis. through the see to has days, on it at can You inflection now a about point curve cumulative type caught XXX up and the

We in financials be fourth quarter the the over We're to wells lacking ran for of additional some future. the data to are as have early to to looking summary Central plan phases. this high points the slide first that the smoothly this Central cylinders. With in second production momentum. I'll beginning point, expect forward or to quarter. in area From XXXX, methodically late gain we obviously XXXX be while to the planned enter active points at same turn-in-line grow David we area XX quarter more the In in that, level, four to but that know call is we very all has on quarter the of the for Delaware closing, a the the a for foreseeable gives quarter review quarter. a and continues turn of and, the key for of area clicking really Wattenberg both

David W. Honeyfield

in for I ended yet and Great. the and on Bart have our the XXXX. third not GAAP on quarter. on already in increase the provided shown an NGL oil, us of encourage of to Thanks, months September noisy impressive overlook in XXXX. Scott. to XX with right. an natural which XX Slide summarizes for operational price detail crude smooth and gas, was bottom and nine of production reflect realized to XXXX folks coupled and led results of compared really This XX% a quarter, These the metrics Boe to graph the a quality and was has the quarter to quarter Scott three results underlying impressive nearly the per surface, good terms is what increase sales the our our of

are For nine nearly the sales year. total months, double of that our last

in Our the the loss bit quarter net a occurred let the more so of third for me requires discussion, that quarter. detail impairments provide on

and were disappointed exploratory These and and we expensed just on wells. these as now which costs, includes dry last the drilling ago, in prompted a Western As results, we have at closer a our together in price the with million, to holes announced These are and with increases two where more wells. acquisition results in the the completion with a we our infrastructure next year commodity XX lease drilling outlook decrease months. allocated area us highlighted over costs, capital at call, costs look to than $XX been deploy take we to completion of associated XX since our wells likely

the for announcement date the impairment, understand but properties Culberson non-cash included reported only we helpful of the that book required price was the was liability. included consideration the PDC over just number from Delaware acreage block approximately Western impact about it's increase we transaction, closing that Following concluded it of all appropriate. allocated execution significant that in X,XXX the billion, values This the that price the basis non-cash of other asset purchase acres the of the the but the created this unproved impairment last were areas. Culberson associated review, $X as allocated terms the our tax in recorded Arris associated PSA for recording in tax not liability increase area. remember deferred as allocated additional Western the for $XXX at competing and acquired. effect in well energy impact share initial and To purchase the disclosed filed $X.X with the time block value be Western of the properties purchase also and impairment the moving an tax of basis more the to of This higher million between of and our capital development being price February. we on it's entity for see acquisition account believe that than book in our inside is deferred XX-K and The approximately associated estimate challenged basis asset to the from the significant to appropriate forward the billion Realistically, focused area was our was the tax item of our value team's in deferred of time

our quarter results as million for tax of has benefit remaining created tax specific item normal the rate Lastly, we've the our also reporting is balance and taking This charge financial impairment $XX and a an goodwill effective of no with zero. no impact in This was deferred therefore, that lower aware. impaired time tax it's goodwill than acquisition, on at effective income to to simply this the effect it, has associated rate. a be cash tax there

areas. and expectations result on the While that the all it's market see to Scott we of highlighted and outperformance would we the in acreage I attributed has area, has Central appreciate this had different wells successes liked Eastern a and limited certainly the in to focus to that have Western important believe the

to per taxes of we nine Scott our and referring cost XX. terms where absolute of costs, When dollars covered I'd production that Boe We but over discuss slide we with production on quarter and the both we're for to pleased LOE, summary already a very in the like months. we're Moving through reiterate sit LOE to show production basis. TG&P. a

in compared to it's if more only mentioning of expense, prices in were a deducts. worth the Form nine of TG&P that to in to these a fees see item provided MD&A to housekeeping of revenue midstream realized integration in Delaware entered of whereas minor in be of just a impact, relation can classification it's the recorded our at assets. Details that There's the standpoint previously you'd As no press our and inclusive classification from Delaware Boe section, standpoint. our rather as we our in margin from elements into was like also TG&P really modeling months our to of that accounting require release, recently embedded contract mentioned XXXX, the contracts you the the are shift per dollars one as has LOE the increased structure table, in because One XX-Q X% our in closely. look comparable our other,

XX, and We operations here. flow from our slide adjusted adjusted metrics. highlight cash EBITDAX non-GAAP to our Moving and

reconciliations non-GAAP this mentioned, please to appendix Mike the can in As slide found note for metrics that be deck.

Promissory the second Our $XXX adjusted of EBITDAX XX% from Note the increase adjusted the quarter sequential the for EBITDAX included it for proceeds was on an quarter increase basis. business, a compared year. core in third million, folks, remind MK of EBITDAX if concentrate mentioning that of quarter-over-quarter of to this our The the $XX an last to on reflects our is Also sale presentation we approximately ongoing quarter million. our adjusted reason

for earlier. gears. increases on current sheet driven the from over operational crude been nine $XXX hand. quarter was NGL more $XXX cash consisted million in the balance respectively. terms million the portfolio. Liquidity quarter adjusted of and increases state volumes XX% sales the for successes resulting production largely natural In than $XXX undrawn that Shifting hedge XX These shows $XXX our XX%, and from million an by cash operations, oil, at it revolver was the of gas, have flow representing were million and and increases the months, highlighted end of the of and Slide and of and

improved by is Our revolving to credit times. defined X.X leverage facility our ratio

increase base million calling base billion redetermination. the Another semi-annual early the $XXX item of $X.X result borrowing finalized approval from out we worth spring. of borrowing the to last is In of October, our our

our reflective a created. measure value elected the maintain program $XXX of base the of the million, commitment our we've level the being to of strength and is borrowing drilling While that's in increase

and improved natural methodically hedges, continue modestly. and layer of to oil average hedge our volumes crude gas terms have we price in In additional

summary we've in barrels and you portions full of year production of out prepared As got can year We having the two of our guidance our guidance my comments. approximately with million production XXXX just a a left year with $XX $XXX To barrel. guidance million. nearly approximately layered investment X.X $XX current year. months XX, in see, feel begun close forecast comfortable small we've slide capital full around XXXX Boe right of quick full million with On

a TG&P to discussed line operating made costs In terms the has of a basis, change Boe as minutes only the item ago. on been few

expect a we account Boe increase again, about changes We but the how for TG&P new are as result to margins full $X.XX of our year per our in contracts, unaffected.

Additionally, NGL we've in seen NGL in to realizations an due our increases pricing, increase primarily in component propane.

of Our range the of XX% to from increase XX%. previous an XX% approximately levels of NYMEX is current

Lastly, note and middle a process. before been we're that that of budgeting year-end. quick deliver XXXX to the able typically currently we've is our complete something in This

did While over With certainly I some and business will level and not some of this provide the Lance that, the final from second call. our on at time, here development perspective remind high our folks is the the initiatives we months. to plans for XXXX announced budget materials that color direction on in give quarter tentative quarterly last couple

Lance A. Lauck

David. strategic trades Wattenberg. little our in this around more recently And provide acreage announced on bolt-on and to Thanks, a acquisitions want we slide, final detail the

in these transactions map. map reminder, quarter anticipated closing fourth a you see As is a forma the acreage the pro post-closing have and dates

efficiencies have wells X.X we our XX,XXX Analyst April, realized XXX,XXX resulting of XRL XX% XX% where of our Kersey well. efficiently Boe position. acre oil, and operational per almost approximately are to oil developing our in exclusively in These year, crude back teams we well. million area this strong in area our per provided on have Day, barrels type this capital curves consolidated past approximately At the Over focused very in

to pending in of result we have positions pleased consolidated form transactions, two areas. Plains a and the As are the additional Prairie

acre, is of drilled, in which production also over X,XXX anticipated uncompleted area, time acquisition. announcement but an then, day XX per wells. bolt-on increase in a acres, locations net operated the acquisition of the is drilling XX,XXX Prairie net interest working gross Our Boe finally, PDC approximately existing XX includes of additional X,XXX and result acre at This XXX approximately locations, and our

the reached As have touched to seller DUC to arrangement on, wells. cooperative Scott we operations with closing prior a the the operated control on completion

XRL enhanced as turn-in-line end equivalent DUC completion the preliminary of oil approximately XXX,XXX a We well XX oil be the the approximately of an these wells Again, acquisition crude on of have item to higher wells XXXX, to type will to upon well. estimates expect note, XXX,XXX XXXX around XX% approximately price. of capital the increase these XXXX. One the industry resulting Prairie few that in these associated years. have between we've approximately We XX% established wells these to purchase in we wells year completing with Based curve estimated of completed will largely treated and a barrels area. past in anticipate based mix per that are barrels believe been per designs preliminary greatly

area of and in areas Plains XX,XXX our field. inner net is Finally, acres the the located consists middle of and approximately core

our XRL crude XX% You X per our well. Kersey our preliminary can to slightly XXX,XXX oil Boe EUR over a well Kersey XX%, than The barrels. volume estimated of in at lower strong at see area is their this still per is where area oil to comparable wells percentage million that

in consider about and gathering by field of expansions and third-party beginning think our XXXX. system existing we the we development planned in providers, Plains in the plans and the our our Prairie development the currently As area in model the midstream XXXX permits area

continuing process the do inventory our detail laterals are in plan want to to by driven increased very economic of three our longer and the time, currently repeatable that also so provide these breakdown and completion that I strong much we at this positions are are We consolidated of at very efficiencies. have capable note summarize, core turning later closely areas and our to we our where as work to work I to continue closing thank operate. we transactions their very all I we year. teams Utica have had rural communities planned proposals look status several to this the created we for year-end expected positions in with assets. of the divestiture areas, primarily want are in consolidate delivering pleased three the forward a capital data give new on just reserve Wattenberg year-end shift in want to work. good too for over gears update efforts these to reserve interest closing received Prior to process. and, transactions unable these to of located on and and We Q&A, quick we'll are To towards our room returns very

currently can't We working next it of phases are the on further comment through process, the this at but stage.

to turn Q&A. for that, with I'll So it operator over the

Operator

sir. Thank you,

Our first question comes SunTrust. from with Welles Fitzpatrick

Your now line is open.

Welles W. Fitzpatrick

Hey. congrats settlement. the on Good good quarter morning, and EPA and a

Barton R. Brookman

Thanks, Welles.

Welles W. Fitzpatrick

this the So that have a end obviously XX% the to will in we factored from biasing XXXX those previously were acquisition, turn-in-lines you those minimis those impact to, XXXX of the all as talk – range? of volumes, better on XX into to but have XX% you can maybe growth de the should or think

Lance A. Lauck

of the Yeah. the growth year, that XX% were including – perspective, growth. in XX%, to from about for part From as those perspective thinking those next that of we

So, to to XX% it would of at is the that I we're looking this going at that look Welles, standpoint, XX% say part from forward. growth

Welles W. Fitzpatrick

for I the bit little good, And talk in you well Perfect. the a that's might to bit a range that area, but are in still to million early, you obviously little – but bit $X.X probably XRL Okay. bit? of a there completions EUR or that more costs. kind little the Prairie it's Do put you then a in cost an the can be going up think know looks to put going

Scott J. Reasoner

this it to but drive plan which Welles, expect loadings, outside much. point million move a is sand costs test at to up don't somewhat, those And additional Scott. would we $X.X this I that have

the can we're additional run. running In testing, loadings probably the though, $X.X we the today. And that be fact, on seeing sand loadings we'll hold at we million same sand what like to it based time,

X,XXX So foot we're the a other test, X,XXX, as with. this foot something run that from the pounds and having looking seen X,XXX we that at is operators and at a we've point, per they're pounds difference success

Welles W. Fitzpatrick

And XQ, Perfect. in guys last Those in any mean Wolfcamp are one, A, those B that tests I anything five if design one could. the testing turning tests clustering you Okay. for then I except in-line just there? are

Scott J. Reasoner

and testing actually both A the in B process. We're that

Welles W. Fitzpatrick

Okay. for time. the That's great. Thanks again

Scott J. Reasoner

Thank you.

Barton R. Brookman

Welles. Thanks,

Operator

Thank you.

next Tim Mizuho. comes question Our from Rezvan with

open. now is line Your

Timothy A. Rezvan

Hi, touch on wanted your assumptions? still you're locations good seemed in When the do for extremely taking of that represented your question. to initial and updated know my believe Basin the I the XXX I impairment. in assumptions folks. assumption morning an Delaware given Thanks doing locations initial I depletion you'll you investors to from just on doing Delaware, conservative. area that to and delineation of provide sort work ease early able estimate A now be drilling. B, the think you're on your location more XX on location concern

Lance A. Lauck

Yeah.

Lance. this is So, Tim

were in a analysis here XX then locations; XXX them XXX we where brought the X-milers. we total. of were when The the rest bolt-on of the our a on And the yeah, with had acquisition, X-milers, locations initial that total field, just – we area so, Kimmeridge were western us to did had that

we there. monitoring with X,XXX when still the And continue we impairment the to some that we've there there's that and watch north watching and have that acres at still So that. the approximate east activity we'll taken, to of look us we're

the believe going both something to the Central the on we probably As is work have we'll we technical as tied and early year-end that's the well. inventories, that's we always then next going sometime areas impact far teams and that's year, and in the assessment assess on that. work inventory the that of by that to an that's line on Eastern reserve be been all as something count how updated the have that that And we're all doing with goes our with

Timothy A. Rezvan

thing noticed production guess didn't you one I that we'll of the I on Great. for then then. Okay. through your any mention deck, slide have And look CAGR information growth XXXX.

XXXX? You the guide color Is there didn't of How thoughts CAGR about your your XXXX, pretty we has or kind you changed? consistent with which that through prior past commentary. on think on multi-year did is that give on reason sort include of should any now, some growth

Lance A. Lauck

Tim, good question.

that that in And and of was just here on outlook and ranges the production versus going then to And will that range some outlined that XXXX, so, in this the by XXXX, our of XX% And and shared for for we growth line Wattenberg for XXXX stuff working that plants the quarter we that growth in again management had XXXX in call that that's second XX% field. Bart of and XXXX. coming in timing XX% our was morning call. around to in up are be the on a it XX% range lot driven DCP DUC the our of of into the

I'd like to... So

Timothy A. Rezvan

Okay.

Lance A. Lauck

back part, the second then. refer provided to ...for there what we the quarter most on you

Timothy A. Rezvan

Okay.

seeing in just to change this say? in So that plan, not not quarter's imply does that deck is safe slide any that

Lance A. Lauck

to the we the Yes, so our keep XXXX And something are of that's in December we'll on of in to that's the year, more we year, mind, and currently that following specifics safe the till December. end always say. wait process budget do provide for actual in

Timothy A. Rezvan

for the Thanks response. Okay.

Operator

Thank you.

Paul from comes Grigel with question next Our Macquarie.

Could play? and longer Grigel within well Paul open. specifically, what guess you're you as to Basin good to forward, costs move service Delaware there, Hi, the within is guys I Capital well Macquarie line you availability Your seeing morning. more (USA), talk the Inc. - going as on as laterals, now

Scott J. Reasoner

range I We've million costs, when of range really we've level. of what in of we X-mile targets laterals. past. the you and amount we're talked yet, we're think, – continue X-mile, And those not that logging million, what $XX.X pilot the at the And we're in the I we're of themselves. at doing, $X.X million, are there $XX.X is doing Yeah. But still lateral in see science look Scott, in significant by seen to doing, This a involved us Paul. the X.X-mile, horizontal performing holes what length wells are logging, portion for the in

look right and terms service going surprises pressure than, this There's that, than that is at that at about working happened less that the that a and more availability, with it's as play to that's is really out, still that I better process And seeing actually well – rig future, past. guess, in are in and all through how but in things small of some we're count, getting talk inefficient few the some we're in into – or pieces stability it's And guess we've all process costs early we through. didn't the believe we're it. some to in we now. lastly, quite still moving – service that say. costs stability seeing When the either as of working three those So that a and targeting is And stabilized batteries you we indicator single expect we're look such the out as drilling an process than we're I you'd think like of well seen that much overall, dealing get you go the are of range move so I we're of then better kind an way service. more what really it's somewhat we're cost, some drilling

really shift optimum approach and continue that part providers, executing. contractors, to effective of service more you that's at what to We gets and

is of I we and there in really think you We get – efficient a got consistency So - headway consistent to an to to we're I get that. and Macquarie of work (USA), through gets a guess Paul Grigel consistent Inc. Capital level then making and level. that – what some order

could the sticking I in here the a be strange talk Okay. little catching shape. guess a well that about looks No, to up guys one that's on just bit of a and helpful, Hermit Scott. you curve the And Delaware,

performance you the talk that of well? driver to curious the just on what's could if So

Scott J. Reasoner

why Northwest gassy interesting rest that of Yeah, it somewhat and of field it's and compared of a the field. it that the blanket a well, what the on surprisingly is up it's sits really well. the it's Arch and, a of the I block. really well a it best runs it's field and a generally, seismic therefore, the fault that's from the we more difference see expect fault rest reason that the with have believe we the field And we're on there, it's (XX:XX). the X We're It up the we of I the performed isn't as Block – can tell Toya we differently. very called say block in it's to we something consolidated Eastern and the in isolated, also gassy part across we should what's seeing guess see gas cleaning Where the

that's higher I good a there. those particular Paul - well, what gas so Macquarie think ratio Grigel Inc. of we that to seeing we're oil (USA), things And pretty description Capital but the in contribute think

then DJ, the into you any Do one based have that on see I could have great. XXXX you it coming production last program mentioned well line pressure impact basin? have times online of you pressure guess and couple vertical and program guys constraints the and that moving near-term That's on around. one the on any just Okay. from on your

Scott J. Reasoner

quarter. very line DCP that we specifically spoke pressure the is something to, Yeah, last think, I

see move older fourth the We have. something that's here, It our coming as horizontals. idea quarter some was the I don't and projected that this think continue in to we quarter. know of we second pretty much we expecting the and we we I think, that expected, predicted, say what that into vertical than different anything wells impacting would we it's is we're I

that described, flowing. some next plant months small in we to should much up to coming and going things is as we as way as XX two have to those it. continue year look encourage year see, backed to I But than adjust this best the production describe XX if we're in as that, and We through so earlier, the can is in through Wattenberg start less increases hopefully are other like can is Aka And one XX% to into we'd our see we're sure pretty playing they that XX% just to so XX% a Aka DCP good why get we line where with and in that almost schedule DCP at look XX% months, make or and production are thing we their as clear, growing associated well, much to as incremental but done And not see. estimate. roughly

has Capital an system been Macquarie been. what actually So at (USA), DCP it's pressures little system a the pressure system so than a different line isolated Thanks that Appreciate from guys. Inc. color, the the - Paul Grigel bit there, better DCP much.

Operator

Thank you.

Our KeyBanc. next question from David with comes Deckelbaum

now open. Your is line

David A. Deckelbaum

Hey, my guys. taking Thanks for questions.

Barton R. Brookman

Hey, David.

David A. Deckelbaum

the the now, in of back pretty and I and bolt-ons I to understand guess bolt-on, still I guys that and any commentary looking we follow benefit that you to the the the guess Bart, see actively longer to think be kind Wattenberg now Wattenberg laterals about go recent are future Wattenberg priority there, you we as for and expansion? Do of there there. still we on higher the thinking more consolidate company as opportunity list being should the

Barton R. Brookman

Yeah. with of last we as that And I I don't a Wattenberg would question. the priority. would – part let think start me put

to the efficiencies to We to an in both modest bolt-on, I we've would there got capital be bolt-on question, the and of strategic Bayswater yes, we're like that your swaps flow announced. the answer in us give we acquisition similar additional think focus increase see Wattenberg the starting acreage David, basins opportunities And, and size equal are to looking of for close in our to value-add two opportunities Delaware. probably deals. some those additional

important, expect that I I flow sheet. balance seeing of won't swaps, the value look when overall this be We're LOE heavy tell not cost bottom the monitor efficiency look is Wattenberg all batteries has the operating And can are of But our teams to would in the EPA is look consent efficiency difficult. think much very is at show But at the becomes more the pursuit our efficient. it operating our able of of dissect I think you when focus be there. area, transactions, you you of to those but consolidated of those decree there that our for small under the company and really basin, continue those our strain Boe, can to importantly team you the emissions from line is our and Kersey it really for swaps. to per the driven areas, in the to what ongoing deal type more that out some efficiency really with those deals, ones of and a the

find thing operators strike pursue the So And right on will is those their we to neat to really strong conducive us type our I for those our and now ways is think to constructive deals. PDC to peer with benefit swaps. of trying continue and relationships

David A. Deckelbaum

about about wells, prior to In there. were color intended process, as I you to me allocation at have drilled that just I had capital the two, this now do the impairment hadn't nuts the square I But guess we ago. acquisition understanding, on The about if think right an look area soup have one, that docket more I just there and, this would would months seen evaluate not Bart. operated from and think with, you there? in the How really one appreciate understand you have actively process. you ask acquisition. capital you greater would to time a of the to you the recouping that if operator desire you the there, longer or a for to my I terms put how sort had well losses the guess is did evaluation necessarily of of two sale another a – could by XX do And had not have from Culberson. it before some than close

David W. Honeyfield

drill we Lance of maybe that it just over This the area, part acquired bit kind on a wells northern half actually two, did little of Hey, the wells acquired these two in and question. other Dave the that I'll talk in in field, refresher, Honeyfield. we then Bart and drilling David. But turn what is such to the we three then a of or as PDP about and the ourselves.

figure just was to was we So really trying that of were part out there. as what

next place year and XX the to continue the So need was to whether invest is place consider since XX to we're that taken over not during to acquisition capital what has this evaluate activity this drove a our and where months. going the really or

it: PSA and a that bit, reminder share that a one, deferred price; just price we acquisition and there closing; the allocated then value change original elements in two, the there, announced again As three signing on were item. touched to little the between tax the on

I it surprised folks to but of I of referencing some of have and put a think, earlier all that's equivalent, was you little it's in represented kind keep So the though lateral dollars bit, a want think a about too XX% of Lance that's even of XX% and X-mile kind of much numbers to these impairment chunk on mind, things the stuff if some looking on out helpful that Lance, that? bigger go to allocated little acreage. But should the bit of forward, terms you touch the about was so way in location it miles too, the a on the

Lance A. Lauck

Yeah. Sure, David.

and we still to of analysis. more wells, technical expected. aren't On the produce But from. use wells able our to that geologic determine figure those continue said, flow we I a in complexity it's out than both exactly updated just weren't we'll coming where mean wells information that they and two obtain to quite had And more lot saw we and two what – in we water

performing so, that And we and these our producers not the had two wells. And there that Wolfcamp in three A. that like three wells don't those we like we've it inherited new wells other the drilled, look

on in model kind of and to can So all wells stuff what's there. on we the right data to some our that the complexities are that's that's okay, then we're work here? And got And that do going them working various we some best tests out. and – to flow and of utilize of us are things try say, understand now and on geologic really back the so sit positioning to continue what meantime, to what and the

Barton R. Brookman

in from what nowhere we're block. even resource close disappoint which the David, at two are a thing, drilled, of it's inherited are And all Central very to wells, standpoint, drilled, we not three the important, the a a potential, Eastern level in near they we I one them and seeing GOR two standpoint, and we we're and think a performing all the pressure five

to not justifying, So a we assessment, additional here this our had there, over the huge allocating value we book through recognizing this part of we we dollars could next unbundle out see Texas, as or two. in opportunity went this as try year allocated

the we're continued be just areas market where I far the right can decision will those think expect exceptional think really forward. I and it we going. Central as was the in Eastern, in and results focus as So I And our think as go

David A. Deckelbaum

appreciate on this. pool (XX:XX) I cost that And keeping Thanks, you Bart.

Operator

you. Thank

Leo from comes next Mariani with Our question Alliance National Securities.

Your line is now open.

Leo P. Mariani

Hey here guys, Permian. just of a couple the follow-ups on

production Just looking here. your kind at of

production of should going was else a roughly sort mean, I terms in a about were here expect of that gas third kind your number of the bit the look XX%. oil change oil think be XX% split quarter of performers and couple I forward? oil, you I mentioned in guess Western the first at we Delaware the quarter we about poor to should going what gas there, Delaware? Anything how gassier. was on should little that

Scott J. Reasoner

to hit we here the This Scott, the are that initially. wells When I'll and projected couple speaking got in And look Saddle, is wells this than particularly, end, at a Lost may the and was Lance GOR had you on Leo. then I Hermit at that higher jump we what too. of there

much they are gas, more And that economics strong strong we're – more the bad production the all. of but those had so they're It's thing, look really they're wells in made mix we a guess And of and I at wells. though, really difference not producing wells I anticipated. we type disappointed than to don't in not pressures, of at when the capacity, say want they they're

budget, lot the haven't particularly our oil we the on forward really – in And so but and rolling moving see year we next look A percentage into Eastern the driving drilling. definitely that's this. our again, Delaware, of project as finalized up we

to think in now. as oil it numbers a And still driving wells that it we're for it's around drilled areas, got expect to a there the a let's of, range than level, we but and overall, there, We've higher move more you'd could that's a it's few that the sitting to range where those oil. gassy, gas may drill put oily called areas that. so well in in but gassy move And or well, particular it's sitting more be it around B I – XX% move the it more are well we've expecting more around Elkhead that XX%

there variety thing, depends have, that time. happening and out out so oil with on things the how over of obligation it of mix drilling that plays looks got you've to how type program as and are where that we really so lease drilling we're that And that

Leo P. Mariani

you one of with but performance the this in tied Delaware wells, from I Okay. That's gave in third tied us lines of three of that kind helpful. the think in wells can of additional respect you recent wells. And I Is in had there guess, point color the time? to guys three some quarter, other in offer think you any some of kind at tie-in you I just on the kind here those

Scott J. Reasoner

wells The the Two very early in of them they're unfortunately, wells particularly out in those I but it's well. wells. performing recall that and one, are only County. flow-back, don't And third still that the are Gavster disappointed in Culberson very we're they all Tarvin western-most young, the really I are think

be. where as of feel in we others a to rate should like right falling reserves are line perspective, The from they perspective return

Leo P. Mariani

got that think in to here, kind of kind versus guys we Central on should forward? concentrating quarter. of wells thoughts guys breakdown to That's wanted just Central guess some in in that to on activity get here activity it's only the one of I grouping in of small area wanted be expect kind the East. most going Just and I going East, area, Okay. commented of coming a are early mean, get you wells the Central of kind I the first just And high-level quarter, late you second helpful. the you've of thought I really

Scott J. Reasoner

next at off describe best Yeah. Central be final in to that we're budget probably year, on Eastern look area, the to When we'll we will the until think get to roll that, we way out. and area the it, going mostly the but drilling I is we focus

when jump in into we'll A, Central, and So as and look the sure B A, C we at B may in and testing the zones the and that, East, be – there zones for C the A, a well. C B

there's the options the But on. we're So will bulk play. lot yet wells trying the front in the decide be of of that to a in of part of eastern us

Leo P. Mariani

guys. Thanks, Okay.

Operator

next Corales comes with Our Brian Howard from question Weil.

Your line is now open.

Brian Corales

guys. morning, Good

Barton R. Brookman

Good morning.

Brian Corales

I appreciate you taking the question.

going XX comment you I quarter infrastructure the think run made DUCs be close be the more all online? kind of this building rate. you the to in bringing before quarters next a few that Would Niobrara is of on wells comes kind to

Scott J. Reasoner

middle-XXs making sure – when co-manager, on a and this the basically will releasing to at Bayswater Scott. the I and DUCs a we're XX, And into Bayswater. we manage rolling into have XX, going a that chance we when Brian, we crew it's still Yeah. that DUCs. the completions. of those then us, of acquisition, number frac are where it's into co an we actually guess And to putting XXXX, have get effort is in But look let's to a we're say XX about for of Bayswater have from with between without in come terms them say, get building as that because we we have you a the XXXX, really at that working agreement we lot look

have XXXX of DUCs something combine you into north that with, So we'll XXX slightly when pieces. we roll the two

Brian Corales

And production you mentioned maybe then from way you something helpful. could an for that Okay. infrastructure Thank other quarter is or Wattenberg. see you're third Can deferred what the once seeing, in you. quantify one, one to rate say, – uplift we from quantify That's the nature? on that comes the the current

Scott J. Reasoner

of things the to have and seen. us is I it once going Yeah. we way fair that pull our will only And into that's point those out is much higher what Brian, be trying this over Scott figure that really that again. out the Really at know uplift we've hair this year look next the online. how it's line this one is here at to it's past, impacting because pressures gets really – plant and don't that we

would our it's arms of and as say with plant far of at. to this the thus, on we'll numbers behind put still that try that question based trying tell we're around that pretty of still into oil that, And to significant amount I – hopeful figure a best and as So can we're budget part comes current gets I accelerated, – the all exactly trying and, out, late that is get you those and there's that It's it that be year we're at we're fourth looking the quarter terms but online. a to the when then still in plans. looking gas

Brian Corales

Thank guys. right, you. All

Operator

call our would back to Brookman, concludes Q&A That Bart any for now I for President and further like the CEO, to session remarks. today. turn

Barton R. Brookman

of everyone you you we thank Andrew, months. you, talk just support and to And Thank joining few the the a Thanks. for ongoing in your Yeah. will today to in call company.

Operator

for participating thank concludes you Ladies the in and conference. gentlemen, today's This program.

day. have disconnect. a may Everyone great You

PDC Energy (PDCE) 7 Nov 172017 Q3 Earnings call transcript