CHK - Earnings call transcript Q2 2019 | Expand Energy Corporation

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Operator

Good morning, and welcome to the Chesapeake Energy Corporation 2019 Second Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Gordon Pennoyer. Sir, please go ahead.

Gordon Pennoyer

you and our XXXX operational thank discuss today second and financial Chesapeake's results morning for call joining to quarter. Good for the release presentation had the our you've a to morning. our Hopefully, chance website this updated we that press investor posted on review and

statements assumptions existing expectations, morning's of the information, performance such regarding beliefs, we goals, including projections, which call, confirmed and and be this be making statements cannot During statements statements. by forecasts, future forward-looking underlying will consist that reference to our

Please duty recognize note except a the and statements, applicable filings. our are forward-looking materially forward-looking there will in required cause number place today SEC including that and you that Please other from should of actual in undue statements. that factors statements, update differ such to reliance not discussed on release factors identified any and results undertake as to no any by earnings law, we our

We periods measures, may also reference facilitate and peers. without comparisons financial help which with to some non-GAAP across

For we on corresponding found reconciliation measure a in GAAP measures use, to be nearest website earnings the release. can and our our non-GAAP any

the and over over Patterson. a With the Dell'Osso, turn Frank Doug the teleconference our call operational Doug of review to before call then call, turn will for results, Lawler, me and the we Frank and begin for Nick are on today Nick financial and Q&A.

now over turn that, teleconference Doug. will with and the I So thank you to

Doug Lawler

to Chesapeake's Thank you, good pleased strategic continued Gordon and progress. I'm report morning. today

cash managing maturities we strategy increased returns-focused portfolio of drive continue and advance featured through value future allocation a sustainable and to which free we're our to We're maximizing The liquidity. capital growth oil enhanced debt prudently production flow. diverse second our maintain as efficiency, capital towards margin quarter

hear value proposition. business transformational past our and will reflected future simply highlights which stated that to of the growth improvements delivery our performance, the reference you current ongoing rate change, today, are call On in

also strength will emphasizes our hear the size, You scale, our of which diversity and reference to portfolio.

and competitive economic Our scale development. differential resource for the provides foundation

reference with rate also cost change efficiency, technical future our operating and and capital drive scale cash which differential combined You'll growth. of hear leadership to capability, and our

Chesapeake we oil our year guidance record barrels oil of the integration mix increased our is asset have Accordingly, South XXX,XXX quarter, the steady The a increase and successful from of record Valley Mid-Continent. River of total day percentage by per and a from produced the Texas to midpoint driven base During oil Brazos growth volume by raised production. XXX,XXX Powder production we the approximately barrels. production Basin XXXX and oil our full the improved of performance XX%

margin volumes on focus and cost BOE highest in the years. leadership per Higher our second yielded oil cash quarter five

$XXX processing well forecasted gathering million to and new lowered Valley expense $XXX to guidance expense. our rapid savings per with for very have a asset. production year have as five fully million as annual only excited We transportation plan defined have from clearly closing, in the Brazos our year. months synergy we After we achieve I'm the of progress full made

wells. up continue We'll a on we reduction efficiencies well improvements cash on further certain as to see per on capital cost basis to capital realized projected up in the we've and build $XXX,XXX $X the identified. opportunity recognized million savings Notably, to

Valley the lowered result $XX efficiency, a As price to XX% improvement. of per barrel a breakeven capital well an Brazos oil our for approximate we have

during is production second Oil to poised the of half increase XXXX.

In share first asset on half wells Frank of Powder oil over in line progress. our approximately you few turn the more Brazos XX% of Basin, moments roughly Texas to in South a River assets, will an expect and level XXXX. Valley XXX We increase with the

our with full our the for was spending confident line in in year and forecast. remain Capital quarter guidance we

Nick for we reminder, the continue improvements to downside additional to management and quarter. of reduce protection have asset liquidity, pursue volumes. financial debt. liability on gas oil share sales approximately further We'll for a XXXX As will our and detail XX% our

noted to oil capital going assets. less in XXXX, to earnings release capital we in allocate our our expect As with growth more areas towards gas

XXXX to As will have approximately gas show flat capital an percentage a result, we XXXX growth volumes we will percentage double-digit double-digit decline. a oil show program project our XXXX, volumes our over while

lower and projected EBITDAX current same remains hedge our levels position. NYMEX adjusted our today's the pricing Importantly, XXXX at approximately using strip

We diverse further look and beyond. in forward and from value our driving XXXX to portfolio capital discipline

our I'm allocation have excited and we drive to efficiency and volatile prudent the about in using scale operating and with to future this flexible value that value offer. our remain of Energy We'll environment. capital pricing Chesapeake

employees, flow and improving are leverage through achieving high-quality assets. to of driven our strategic our and Board our of free cash from Our reducing margins committed achieving growth priorities oil leadership sustainable continued portfolio metrics, and

achievements further operational now other quarter. the to commentary growth our over I'll and on the oil some turn Frank from second for call

Frank Patterson

Good Thank everyone. morning you, Doug.

Let continues the profile operating the outlook demonstrated We've rapidly of aspects of demonstrate units me this significant Valley. business and ability efficiencies further and operations. we've team improvements to asset. the portfolio in advanced Brazos The integration Valley are moving to of development realized mode. rapidly significant to the across by full start Brazos our performance into We've capital all commenting on the already change

service seen introduction, lower well have in recognized over savings. per we're Doug million a drilling done. savings eliminated of These the costs, we've are wells we $X in As an improved faster but of time techniques, average his -- $XXX,XXX and we've completion result not and few noted oilfield over cycle

pumping completion needs stages accomplishment mine, the million This single operated set of XX two frac placing by team X.X of aided pounds supplying day. factories. which by XXX% a our our in sand now field a record sand crude and for was is week last sand Just

took XXXX and production cumulative wells On average XXX historically than top team the production XXX performance more similar accelerated days. savings, reaching with cost of operational in by also the has that days performance XX%

turned compared that three we year, that wells maximum have have barrels levels more reached reached this in similar production just seven XX-hour of a rate to have per in far XXXX. than X,XXX So day

increased Additionally, and to already to than has field activity base compared original which raise for Chesapeake's XXXX. by the $XXX,XXX effort improved standards, barrels projection operating workover our more made concerted production a we've to

Our to subsurface understanding chance of we has when completed field additional the recent even but was had data. team in acquisition, has as the stronger high the a grown gather months

our and Reservoir We've been of to increase able data properties leverage our fluid Lab new PVT field. greatly Technology in the understanding to

have locations XXX shifted than a the window black we As into oil more to result, plain.

which recently our in full as under cores, evolve lab. evaluation taken two are have now to continue will understanding Our core we

by team as While done prices, breakeven we the we've the Doug there proud acquisition, the to noted, of million. in this $XX $XX At projections have the from economics projected improved to And strip increased asset, flow redefine manage are ways since we've many in two-year most what cash current $X.X per today. or the I'm well our of lowered to play. how XXXX has performance

half approximately our to the to XX compared and XX in line And As just window we the year, look high-margin the of the allow first will forward accelerate focused Eagle to we the activity the on placing will us the second rest oil be wells cycle oil times improved Ford. anticipate our XXX% of of in of year activity half. further in wells

to anticipate forecast forward oil portfolio XX million drilling four oil to barrels to in continuing have production driving this Chesapeake's value the excited to a say, and We asset. delivering program. look currently and from XXXX from million rig in Needless XX trend Valley we're of Brazos more

day South Texas in and Derivative Awesome change is week results. per not of a drilling averaging depth This X,XXX Valley. fast. XX,XXX-foot over team restricted measured X.X feet a delivered to Brazos days, time safe well

did front, a to was team third-party that plant a completions adjusted optimization. volume performance The deliver sales production On in well the team spacing, production continues great job managing the volumes June. outage base and driven planned affected by enhanced strong this also

quarter we a forecast our the production the As field. exceeded in result, for internal

be the Texas to oil. asset. grow down deliver team free a Powder while to strong cost continues company the foundational drive generator the our River cash to South target on flow In XXX% Basin, and a remaining continues margins, for and year-over-year

continues as the oil plan more are on in to Turner lower field focused and window. the Our wells is GOR evolve moving the development

production and barrel XX% XX% central July to over We'll truck. to being more of versus facility year. equivalent this pipe expect more on came per pipeline than we currently by online continue a production in reduce are result, our Our of oil GP&T as oil move volumes and to

approximately times cycle time to expected our improve decrease XX% year-over-year. average Spud-TIL continue Operationally, the with to

to drilled the While record excited attention stacked quarter. and we Niobrara focused remain well the recently our results we on acreage pay Turner footprint. the formation, since XXXX in developing expect about potential next under first initial our our We

Mowry technical Mowry initial to the window formation, team and currently the an test volatile the the work -- this oil Additionally, year. and their continues Mowry intend drill later test on initial

the will With focused free we cash for free flow cash delivery. spend. on to core high-margin on generate oil our Marcellus we flow, of The efficient lean assets, maintain significant capital majority gas capital assets our while a continues disciplined

driven exceptional, The yield continued recoveries our position operating lateral F&D significantly completion optimized to the spacing, and longer region quality costs our by improved is has in and and improvements laterals per continue of foot. Chesapeake's lowered refined

decreased rapidly these our we've improvements, With price. breakeven

years spacing and of pace, MCF. we inventory current at breakeven ahead, of a over look X,XXX-foot As price drilling and we between have XX at PVXX rig $X.XX per $X.XX approximately

more progress the of that we of geotechnical and second seeing we're operationally. continues basins. that the Using opportunity the the engineering confident continue. year, will Overall, in to deliver I'm change expertise, across all Chesapeake our fronts control on rate can half

With performance. call to financial that, to over our I'll conference review the Nick turn

Nick Dell'Osso

stronger good margin adjusted expenses, towards production cash last BOE Driven production morning, Frank, EBITDAX total adjusted increase year. oil increase everyone. you, in our we and Thank to mix lower reported in a by XX% operating and compared and per oil

margin price away production portfolio due of last drilling and natural and not stated shift were delivering are lower the As primarily to as year last gas. margin improvements due to our we're prices we realized higher from hedges to compared intentional to rotation before capital simply quarter, oil

agreement our improved area GP&T of our Continuing gathering operating of the spend, structure over oil trend by cash the Valley shortly. optimizing cost we a second through be quarter million $XX We an the new in launching primarily for will Brazos GP&T pipeline process lower approximately RFP expenses. XXXX,

Moving oil thereby greatly reliance improving region. the our structure gathering production should cost system in reduce our our on current oil to a volumes, trucking

progress Brazos into allowing to advantage also market, take deliver In towards of WTI. addition, solutions coast our making versus the to improved pricing Gulf us we're help Valley oil

oil of pads to connecting by are oil gathering PRB, week to expenses more XXXX expect further. system we third quarter. to field on our and the our have to We every this even in the announce expect In this new lower the end gathering

noted, gas in Haynesville as environment. our are volumes in Finally, allowing specifically gas this XXXX based most on price capital Doug weak we the fall to production allocation prudent

an Our in dedication gathering no the commitments. or is contract other acreage minimum Haynesville with volumes

penalty So, we gathering volume will from no drop. see this

utilize We fully transportation volume Louisiana that do forward at North out not this we reduced have will of profile.

net million just or an the result, we a GP&T of As MCF. versus XXXX region reduction per in XXXX a increase impact Haynesville of for $X.XX to $XX an alone over absolute our forecast of

factors. year-over-year Production expenses improve disposal water in to a of Brazos higher quarter resulted and our the Valley, We in which activity base rose production due began during costs. to second work-over number

Wyoming. is add and higher Additionally, tax increased to property due well Texas assessments valuation our in

are these anticipated believe behind one-time us. catch-up expenses We and events mostly

So, to year accordingly, our our we both fourth BOE third have per range And we production outlook and quarters. expect reduced full the XXXX come expense. for down in LOE

the our $XXX quarter sheet strong of $X.X the liquidity under balance Valley our billion side, -- approximately credit under with the $X ended billion facility. as and credit we approximately is Chesapeake Brazos $X.X On availability facility billion million entered

future maturities market doing near-term We in more sales, pending when so. our will conditions are will prudent refinance, flow asset be conducive retire through to maturities in we cash

be selling currently will liquidity us We if patient And prove outcomes, yield to and portfolio, the ultimately small markets they we our have a while unattractive. are positive underway. affords hold-off optimistic clean-up asset divestitures position couple of the opportunity

have a the meaningful proportion end of price Finally, significant and we protection of this XXXX through expected year production. for

XXXX barrel $XX.XX prices forecasted $X.XX hedged For natural the our production gas at per respectively. downside production protection is second half of average and of XXXX, over per and of XX% MCF with oil

XXXX. BCF of and approximately of million XX respectively hedged oil have for at XXX also barrels gas $X.XX We and $XX.XX

Eagle Additionally, approximately we have locked in four volumes remaining pricing a barrels million premium Ford approximately in $X.XX our WTI. for XXXX at to of of

Operator, turn we'll over call for now the questions.

Operator

you. Thank

Morgan our Devin first [Operator McDermott begin now Please Stanley. And Instructions] with question-and-answer question will We comes the go from session. ahead.

Devin McDermott

Good morning. quarter. very the execution solid in the Congrats on

Doug Lawler

Thanks, Devin.

Devin McDermott

think, allocation lot highlights into shift over as wanted to useful? dive do like what to detail on allocate bit laid on list makes more into definitely oil strategy XXXX. capital there be on it sense diversity to My where about as first move it of question, I you more oil there? high And some detail, value but you of the bit away have you gas side as more portfolio cut the would out, the the I the and well. the you first, the bit a wanted some would in -- of of from get and I as be gas side, your But a more a cut pretty detail think levers a capital on Where sounds you Haynesville is you

Nick Dell'Osso

the to appreciate I the returns. can we Devin. where capture of focus is, The the drive company obviously, question. greatest Sure,

extremely very exist extremely fortunate that competitive which in obviously up and breakeven have lot infrastructure the have that with still strong are some in just very confidence we of very, Northeast. gas are in. low there takeaway assets, the Marcellus to constraints We and have The a is we

remains to investments has return top in the it our we years. and expect relatively few as portfolio past one of flat, rate of that production for So that very remain

in things investments, Texas base the that the going by Brazos assets, Powder free cash enhancement margin and all targeting, River. execution South the that and and the and be the we're that's then cash flow driving for growth oil to with notably flow The sustainable in oil -- driven now, Valley we're free growth

So, that activity current we activity leaves the as and low given we and Haynesville, with there the have, forecasted react have level obviously, substantially which, with that us we current very pricing accordingly currently flexibility reduced pricing. will

recognize will you in we see, if prices And XXXX. better

capturing that where investment Haynesville constantly will oil difficult future. capture that allocation back towards the of to the going can it make lot in evaluate the return. best we from investments and That margins direct though, capital we're economics We said, and near the the a see the capital anytime

very continue basically execution as be So the lot this where there, and there's we towards and strength is year, deliver Marcellus. the with can but pleased oil growth. monitor production what level of from of to that a sit will all directed capital, with the that We'll asset we of performance bulk the

Devin McDermott

deleveraging some think far what and detail sales a strategic Got efficiency it. time. that It's that very sale asset further over organic there you set given into comments asset asset action the far, helpful. path And nice is achieving Could And what so you provide and targets? on leverage targets there also you and or noted improvements in time? But over fit about you deleveraging those the the potential also per sales a to had would as the capital that you've more seen how you opportunity bit fit see might is?

Nick Dell'Osso

very in makes of probably a divesting and bit and we drilling on the portfolio to we're want consider detail looking just a bit PA acquisition in made, a go little us ton don't probably call, into for have that we at acreage it not acreage associated large but assets acreage a Northeast Devin, is sense that of little to target. Sure. this primary of producing our with

kind choosing of therefore that to the return in it's now, not them carefully we part continue profile every great And the have should be at other inside and about of to to, to have. us the believe inefficient could areas producers right look portfolio a profile our what but our we we attractive. to we hold attractive for and year returns is available are rather Both portfolio our acreage drill positions to are assets to development assets that think very just strategy what own is and on given It of always the market.

is And this that. just so, part of

them. really if maturities, to can the conditions makes handling the of today are not we tailwind move those will market and in a not sense versus of nice matter out to cost market that what's the available just us. plays opportunity we It decide whether to hold with all It's to forward be or continue near-term a divestitures, if attractive the that

Doug Lawler

of future our of Devin, and there and top comments just the as on delever you've of look of line I quality said, strength the when the oil organically, that to add have of deleveraging portfolio and and the Nick's time. sight with might over at we goal the you company assets a clear

However, our quickly is focus that as to possible. as accelerate

assets still non-core open one larger its that even remain priority. which deleveraging whether and dictate, or on our strategic will so, focused And we as number conditions market small remains priority,

in So that things we'll work, we've we've deleveraging look really got further opportunities that accelerate continue highlighted, and the a to and to delever few as for Nick described.

Devin McDermott

of lot much. sense. very Thank a you makes That

Operator

Our next JPMorgan. question Please comes with from Arun Jayaram go ahead.

Arun Jayaram

is Perhaps one morning. Nick. Good this Yeah. for

You line talk if was of GP&T costs, time. coming showed the on progress the I just about Basin. item, opportunities GP&T down River can other some Powder to your broadly in and portfolio, you over with lower wondering kind the cost

Nick Dell'Osso

Absolutely, in so that's in about for going how saw, be oil we Powder. put a contract quarter, you contract us. place we great Arun a Yeah. talked to and And last the the gathering lot

consistently, of get get without roll We're pipe inclement market And having that. like to things more it form reliable is to to snow, delivery. faster. going much and to traffic, and it weather, for a regard to just wait on going market We're to oil having more truck

We're basis. doing course In oil of either own pipe transportation to where per third-party a on dramatically addition market, a via to other spend point any contract, this, we through sales liquid our is capital. don't or barrel through liquid, cost the deliver, a that, lower of

We've of us. number in a the do to companies look Valley. We're to midstream Brazos thing had same going approach

We similar there, a are and out to system that seeking in for Powder. the of to a what build go partnership contracted we've kind

the here actively grow our processing is So, RFP There across around how our can that that the we'll as near-term. contract portfolio portfolio manage to think do trend. gathering, the in they undertake about very more of we for course. we We volumes way

delivering the course, hydrocarbon, highest lowest value of cost. is for always It about the

Guernsey we give that what mean of example to a up for Powder in Cushing. little incremental I us to the So, you of transportation, bit that, by did from also sign an takes

we doing pricing give And that, well. is pricing, in more market up pretty held the the Guernsey of in ourselves stability

last the You can gets see be did there winter market times where, Guernsey congested.

out And with transport we we covered. well like this incremental so that of have basin, feel pretty

we'll that So feasibly have bit that can there, pay we grow and on Guernsey a a well that sell little option. transportation. we basis. regular it's overrun for believe Especially what as in to nice we And volumes will

looking going structures Brazos to MEH premium the Ford the we're potentially to in Similarly barrels. at making Eagle well, market have as and we access gain LLS into the through that our Valley, for access and utilize direct Houston we the market look corpus to sure, pricing

we believe when that to of a options, do that. couple because have there And we are

path. And moving down so we're that

move away extensively trucking from on So we'll to pipe. in the field gathering

pay field in the overall including that all more we get improvement an And transportation, in to bases realize, do from what to have to economic position. the And price premium then, of to bit the point. we'll incremental expect we'll a we little today then

volumes our the in fall. that see note we did gas will I Haynesville,

something bit committed a to continue that pressure are in GP&T As obviously there and other spend and optimize look is we see Haynesville of opportunities and we XXXX to that's at very world. to the that next if back on year, there will little FT any that there, a different specific

that XXXX see pressure But is pretty the in we'll manageable.

prices back in feel economics pull gas to really obviously good obvious time the pretty we the capital decision Haynesville, a to so about weak. are And extremely our

transportation Marcellus We winter. and especially In the a still access the premium very the in we cost markets in get to maintain attractive gathering structure. very Northeast,

attractive Northeast we look we where one relative And to to peers, leverage that cost standout is, place position. in that. Our to gathering extremely have the competitive a continue is

pointed Frank asset up like It's and our recognize low part investment in this breakeven, as an weak very what holds prices. time extremely in of the what in that helps out, Northeast in of us its even

still in as we Haynesville attractive rate breakevens do when much very of return we gas to So our as the these a of We're the talk levels, to there. about pretty our pointed are even volumes maintaining job pretty gotten good there Marcellus. we've at well them. the going with falling Because year-over-year, is

Arun Jayaram

on And about there? Okay. thanks Ford Ford -- the thoughts just Eagle the for Eagle commentary, that

Nick Dell'Osso

Yeah.

a today. could that Ford, consider look believe, are we gathering, there best number on So in gas market the have the for we to side Eagle continue costs the of the the situation alternatives high of both things in trying to at we what reflects

out really economics. that come a where Of place in here. volumes activity expecting And years been many our course for that's dramatically has on of place to different in we the set time, asset. Eagle also a flow oil out was not in a really contract, Ford cash free the also that's that a asset takeaway, of to And are growth different generating for from grow and built

And works we're work that to with ways optimize there, that. if to those to transportation other progress. our about any in there But things think are are are all partners so going it

trying optimize deliver team hard and that is going our everyday, You marketing we're what every costs. under to to can how at work in our basin, assume volumes where and

Arun Jayaram

midpoint Great the just if oil the tilted your half. the But the TILs of XX% side follow-up the my in back more half just concentrated first Nick of range, is CapEx roughly on is of half you slightly mean, take are back I to XX% the the in and first in year. half. your CapEx the

given that CapEx, just thoughts second you mix? reconcile, can on So help half

Nick Dell'Osso

just timing. That's Sure.

happen through September. the a shows our number late largest chart TIL of is late occur about to there. for that what TILs order largest If today the in in schedule occur you the TILs slide reflect, our reality, to that, August see what number In in of quarter. you has in think There third

we've spending order that, money that. so than sooner started in And do to

money trying that in than we more often that in in have comes half. always real. to you second do still are assets out something the but half and first these very the compress, you The cycle so times are And they about think

so to wells August follow. – And and May the and in and online start you money be June that in spend bringing September to cycles

Arun Jayaram

lot. a Thanks

Operator

comes Please Singer Our go Goldman question with Brian ahead. Sachs. from next

Brian Singer

morning. Good you. Thank

Nick Dell'Osso

Good morning, Brian.

Brian Singer

Brazos quarter can little you saw upside Can you In on of wells first the locations from to color the Valley, rates see of first results add through that that to kind saw economics you on XXX more wells? data a additional from of as locations? window? what take you you you the as And oil black then bit get from well risk the us declined downside the versus of data expansion quarter these

Frank Patterson

Brian, this Patterson. is Yeah. Frank

when at walked of were that for we the through three through acquisition, entire PVT, everybody or there kind four went the PVT area. we samples point, only So field

So with of limited we were kind amount data. a of working

parts field. not the has drilling the of – several drilled and program So

the windows. of being viewed were so kind way fluid conservative cautious And very and we the we

a and shifted a As they've dug drilled it out, that wells oil, we've few analysis, and from are those into window GOR or we've do wells wells have is now able capture that oil some to the XXX shifted samples, what's volatile black basically a happened some window. to go low the and relatively PVT condensate then been

also we demonstrate we And confidence will there a do map that. presentation the that, in that not in I because but have high performance So data. data, well pretty is PVT we think have only have

good we to continue seeing now complex out We're going we're across drilled wells. a design the of a pretty in of We're but the additional which the well less we We're We're trying across extend that still presentation more go fluid around of as think in really pumping one in that completion bores big still of at of quite and footprint. to bit describe confidence put here. network and to maps getting to a high trying fluid the other we pumping the some spacing. portion We're we've that, that footprint trying delivery is the seeing we're results. and sand, the drill that eliminate optimize we're fractured XXXX-foot to key and

is and about the what next it's spacing going step core the So We'll we think XXX X,XXX. is we the that the get to day, after of results. look like that's end between at know really our more

We we through took taken section. have those the entire Eagle the Chalk across cores cores have Austin and we two that Ford just

good So here a the next months. of lot data really get few in

I think what you're our we expand, to some spacing maybe see think going some potentially can is I tighten going where is and areas as going see on up footprint well. to we're to

Brian Singer

GP&T need where to there or And follow-up your otherwise in you. the the any the talk either constraint gas Thank a Haynesville need can Marcellus long you midstream either which and the rig contracts? count could of my Great. you constraints zero regards how the or you flat? raise becomes Marcellus at renegotiate any keep or then with is to to natural Is rig both count any the keep in production to to at point on in want Haynesville and would

Doug Lawler

FT bit reasonable little I impact stayed constraint over of that grow a noted is XXXX think at zero as pretty at There as a you We at saw if have look where is don't rigs. the do volumes FT you No. the and here will the muted. I and fall, earlier, Brian. really we Haynesville would forever. will continue back to that rebound level, I to it economic sort than some of today. gas that rigs stay some more point is some zero time no to come It is expect would begin market at

terrible at and just long-term Haynesville, you much return. we not the are about flow As cash what are of about near-term they're the free think as just think about moment rates our in breakevens as to choosing we're

might long-term can $X. a prices need is of rate to more where here market access return not little And north there that things we stable, of in be be a bit at that do

some choose they we and fact can in well below wells $X to In might more Haynesville. drill be the

from the focus with departure it it gas Haynesville for $X the that and a free us stretch, on a in forever not on cash falling low this the So by immediate XXXX term. recognition in is to the but near-term sense that the is makes for so probably more in prompt flow any

fall that in I'll also XXXX. begins FT to little our starting a bit note

we've you MCF. cost per earlier costs about the do $X.XX Haynesville The or note gave I are think long-term all-in again in to the so transportation that pressure would profile And those see real, gathering for manageable. you what the that pretty it's year as but alone incorporated next

So we can and digest consider position into we we for can to are. XXXX about we XXXX as where we think how that get and want it

thing Great price that and production when capital Haynesville online a quickly. bring a get can bring of do back of course so relatively the about we to we is lot signal

that another for is but there does in XXXX. FT than smaller step penalty other a no a get slight So just little starting XXXX again there real and in the exists quite then while, down

and markets in amount all us we if worry as in-basin for So with flat the a of collapse the signal and as see that hand, confidence pricing eager we are more the in that Marcellus that our we the are would the from the we price grow there we relatively maintaining see would tremendous just we is current volumes capable always overrun on know a hurry. because we think prices about other we volumes can Marcellus a Marcellus volume

that looks what the demand that like with we try So we to supply just deliver. balance

Frank Patterson

Frank. color Brian, a you this I'll little Marcellus. on just give more is And

really a two kind probably cost rig maintain U.S. the a world to activation in it's think of lot laterals that so gas that -- of day basically the higher. efficiency capital and we us dramatic in of to X.X because Just to as three we X.X, bcf we're capital have changes program of longer allow a the drill lowest efficient. footprint seeing can the the it to draw We're in output even

to upgrading wider has dividend. spacing the and a completion also The huge paid spacing the -- spacing

that's with to. And gas our pretty if Marcellus. a can lever pleased So we're us pull allowed market the Nick we said as

while. forward three now going that of think just as a steady two so to of state And a right of rigs kind for

Brian Singer

you. Thank Great.

Operator

from with America. Bank comes question Leggate next go Please Doug of Our ahead.

Doug Leggate

I and Thanks the zero it follow-up questions. the What underlying my the decline Good on the like what Brian's same if I take to Thanks. just morning, with look Haynesville? for could would is on wonder you Doug, stabilize everybody. rigs ask Haynesville there? question taking

Doug Lawler

a as great And is is commodity tremendously it's know discretion. team and productivity good upon very, is has there the and there and a that our dependent the investment productive efficiency you Haynesville we capital asset So the question. prices. profile such job love around a at done And essentially what very

Nick think was going I XXXX decline as that at even were when look there direct significant we're GP&T said capital highlighted says as we GP&T obligation. not it well the a it the enough And that there to satisfy very we commitments look current to in

beyond volumes we as look maximize how out And those legacy those to satisfy commitments. XXXX so then continue into and we at look to we best will GP&T can

that Valley. at we Cotton in particularly in we has We have economic in the also that development of area Chesapeake there Cotton the here have not knowledge position continue to invested Haynesville excited that respect in to -- about opportunities a and a look the or horizon are for we actively future. other great is my acreage Valley an area can

make about sustainable it's the there margins that and something decisions So we're of I cash that a direct and free good continued with flow. investment best question. we'll driving the It's greatest priority not think really and the achieving capital that concerned

Doug Leggate

may. guided if Doug. by of Appreciate because in Bell you My going the couple areas? there the on just is terms about better unusual Brazos what's something I'm we're River. up a of RRC BB you've there is Frank, there Can productivity of what if and Or right the if wondering than are in was in dramatically like trend presentation talk just Frank towards? it the I see see up those? you call-out follow-up the answer, to in into X how here results starting wells a for those

Frank Patterson

question. X the a remember that's for thanks The Doug, X-well Bell Okay. pad.

that So you scale have to down.

validated deep the to So PVT get and that the that window that further extends completion had the wells. oil black work oil style was that We're thought. in did than still originally on down on we black optimum window. we that's well trying did analysis those the What validated

looks to so really back. got pad that a impressive, that's you So X-well but scale that

Doug Leggate

Right.

Frank Patterson

call. up highlighted the Turner. in a -- that It's It's that well got stout correct. the the an north that our window we the the last area in The of part to field. really RRC, in of On oil think the we we in spacing performance well is

graphic the window that window, peer basin. are performance exceeding demonstrate we've in in our within entire If the the the tried you oil oil average that, at, wells to look

that And time, that two of we're wells IPs the high really are in wells there last about those outperforming. talked and had really that to hanging the we highlighting, north

is in is there we Turner. and a a silty This that a This sandstone. not sandstone seeing expected. we're was And What is that is shale. the something variability

we're well. little high the return we're But even So drill of footprint, a see, the as that seeing bit with we of across to really rates mean variability. variability, going on

Doug Leggate

guys I and Understood, Thanks. the the quarter. clarification appreciate great, the for great,

Frank Patterson

Thank you.

Operator

ahead. comes Our Heikkinen Energy. from next with go Heikkinen question Please David

David Heikkinen

morning Good guys.

have or curious impact premium, Just the premium is in the the your Ford Gulf to Eagle on the if of Permian in Does Valley volumes contract, expectation? Brazos coast? you any realization, oil thoughts as expectation get

Doug Lawler

Yeah.

we same we that Dave do. simply our contraction. a that the there is at And curves the curve that, shows And So forward which the it certainly MEH all look forecast point. pricing for you is primary is way

economics. And our build so how we that's

oil, to of But expect there opportunity we today. market to don't sticky. some we premium, continues the to the that export U.S. the tells is forecast beyond that anything be As potentially for us what think

David Heikkinen

$XX GP&T, should you or asset Haynesville. do talked rate run as Just then, the each for a GP&T, the extra that's kind you color be And fine. $X.XX What through XXXX? into million of helpful. think That's Okay. for

Doug Lawler

mix so function current the we are, will always It's rate function rates today a forward. function it's what yeah, what -- going everywhere also but run the that a not of just a or see the of

refine we as XXXX XXXX, we budget It guidance. higher, could into it and we so, where our refine more a going specific it be lower. should into around little be going be allocation But today. And could capital little a we everybody see would give

done I a run pretty themselves job, step We'll would good work on, rate. we about continue we've to things may that place, think us. feel new have good done would other of pretty changes other our we I say, or to that renegotiations contracts today. although, present getting we theory now, But for until In in put

David Heikkinen

Okay. Thanks, guys.

Operator

Our Charles go next Rice. question from ahead. Meade with Please Johnson comes

Charles Meade

team Frank morning, the and rest and Good there. Nick and Doug of

Doug Lawler

Charles. morning, Good

Charles Meade

to trying to one I'd about, of earlier like your black validated how wells? answers were you out complete figure oil you you're the still that to you. up pick Bell talking on an way of to window. your the question Thank right pad that about those view talked And,

completion you I'm vary And pad? four how for on recipe? zone not, you it those your wells, did to iterating way, landing that across should try you we curious, your, right as you're iterate that And the and/or triangulate to look on if

Frank Patterson

Yeah.

the that already some just with were more that had I took wells the think we When already by we exposure drilled its going previous asset, drilled complete to been come and over Charles. to have operator. more

get the What at much has look now thing So fantastic do you and away. design, the we're in looking get, sand done as as up. was to count to our done that. in to said, put commentary. zones. team our actual The I at doing successfully the we're down We're stated a landing job, is, how starting logistics stage and we first we We've started wanted --

in reduced well as on putting pump amount of on both We've us which helps flow as the back the surface. the the times in wells, handling the We're water. fluid

cuts, we're going so, back. just This to over And on a evolve time. seeing flow faster oil lot is

that think And more increase, I We land you're how the complete productivity haven't an and completed as exactly we're that going physically where start in learn well, more about, many wells to and wells, treat yet. more wells. we we having to see as to all going the to

There is turn same just And you the them can't a lot of all knobs time. to turn. at

very, your of You have this work development. in very a to We're stage, way through. slowly nascent

the see And evolve I optimized, like pretty short design Texas, where think completion get spacing, South you're going the all a lot this thing we order. to in

Charles Meade

go Got XXXX helpful picture I a it, if back ask then, CapEx or that, could that's And question be from the Frank. Thanks a to bigger detail. perspective. ask and for different it may

-- cash arriving flows at you're I looks meaningful you least like me XXXX wonder get from it oil natural CapEx if looks towards about, the that, talk strip. another Because, total you it you're shifting are at how gas. guys choosing? could away outspend from at -- the But current you of that to level versus like

what Frank do to you your stack sense your to your the have the the could the maybe so, that would is be was perhaps development along position to and total thought at guys How you plan just makes about you two-level? that maybe key perhaps work to piece that of terms of up and arrive then about? pieces players talk do to lease And the talking process what optimize lines CapEx stack guys your next obligated together in hold

Nick Dell'Osso

have a level. to don't us really or Charles, particular an obligates so CapEx we capital that obligated or lease commitment expiration

have investments. have those flexibility we direct CapEx choose in our think and over that years, allocation and how where achieved we several program capital flexibility As tremendous the we we our past about we

that will greatest into is seen. that resulted we in development given the of our what the driven tremendous evaluate we of the value a over we we have decline, As to I and been margins optimize, how NAV each generate breakevens that lower we've And The rigorously particular capture, is given investments. capital we love we're amount how the program have think flexibility. great efficiencies the the that trying asset of free flow time, about, given any cash company

of some accomplished there results in that rate asset and highlighted and the Frank As of area change greater that efficiency. each capital the we've is detail, greater productivity

economics XXXX we the to projecting a and optimize the in investment window. how pricing we'll the best over two-year that to production evaluate one and so, of we're and outspend near-term and meaningful not And continue capital

We to hedging. at also continue look

achieve metrics. but provided we've meaningful we're the established confident guidance haven't there, to some for our continue strategic to We in our out And perform XXXX. ability hedges and

Charles Meade

that Doug. Thank you, for color

Frank Patterson

want we obviously about cash Charles where that would way to long-term there as be that we think that, is a which flow be Only to we free to add be to positive, sustainable. thing want is is in I

true, are those cash investments, very we get of And as a we And will we long that strong sustainable. make that continue that level be are to investments, today the will to flow as making returns. so is generating so can

costs If today, pressures then assets of that at will that certainly which have the a that some something have prices way noted all its at is extremely in diverse of economics. that that further, them low portfolio is have relook level that gas breakeven fall and we a Haynesville we much with flexibility as Doug the through

simple where make that if our drill. that, a as competitive are down. are It's in program to have value. continue earning If and be a sure that And choose our and and we will build it's to strength for able come that. us that we capital invest not, to doing rate every on well we return -- spend pick are We as will we pretty we great shareholder much capital we then of then

Charles Meade

it. Got Thanks.

Operator

question go And Research. ahead. from comes Please our Josh Silverstein Wolfe with next

Josh Silverstein

good morning guys. Thanks,

sustainable in guys cash XXXX? think will come Doug next expect on your do you from cash that flow negative there. build And Would to to free comments flow be last question wanted free guess I Just year. you

there spending of out I that's guess if $X.XX take roughly from put versus CapEx interest it some you doing, flat expense billion Just EBITDAX roughly year $X.XX this the QX. $XXX that of hold math of the the you million around

than be So, is comments. wanted outspend should less we to So, thinking I that those the just that? clarify

Frank Patterson

that of to amount tremendous being think in a obviously do flow are and efficiency positive have is capital our big Nick we of as allocation. outspend and continued our at wells next No, possible. highlighted, cash as in capital the year. Obviously, rate be provided as as best look, not thing towards not to to accomplished quickly the guidance our productivity we have improvement that that. -- just free are Sure flexibility absolutely because I of saying a definitely makes And change And for driving going look we be on pricing the Josh. and we we an impact going we're to year we've have what next

have and what is that, reiterate said our is in And he program. we great so flexibility the key I'll

to to opportunities long-term continue portfolio sales We can look asset capital further have at look continue for value. for and We'll to and our efficiency improve tremendous the we'll and how and best adjust assets. manage productivity we

flexibility And going time us the progress to in options we've made that forward. gives and up tremendous this point

company And best pursuing and we'll XXXX, at have. and think the stability as so, the possibly our just quickly I that be will as thing with rate look change to build program and portfolio in the of the that's that upon we positive XXXX tremendous in is we continue can today free that that to flow cash

Josh Silverstein

delever sales now, you to Got get want that. almost on it. Thanks for down EBITDA guys you get goal faster? right that is will asset double the through it to then target are that that. faster? leverage And to based growth Is the guys you just Or understanding where two times it's

Nick Dell'Osso

portfolio value-creation It's can our it but no and as as the both most quality that will makes there be what strength and possibly for question the of story, we that organically and sales potentially oil long-term rapid asset look expect that. the sense that and do assets growth we to to accelerate with the continue with from we can and we bigger that our opportunities and small will for monitor is

Josh Silverstein

Thanks guys.

Operator

Please go Harrison Kashy with from ahead. And our question comes next Simmons Energy.

Kashy Harrison

everyone. Good And morning question. my you for taking thank

your wondering XX from highlighted if just of release color one one economic Mid-Con and in years the I'm regions Ford, spacing just in Marcellus Eagle at inventory PRB, the assumptions. should press could think you inventory current across how the Brazos remained about we give the us So you Haynesville, including your on some Valley? the in the me. major years the Frank, quick

Frank Patterson

Kashy. Okay,

than core to what stated. breakeven the trying That's to inventory the were lot There $X.XX there locations. is more we So economic a describe of of is kind $X.XX the Marcellus. that's

inventory So that's to partial us. only a available

Brazos we're we getting -- In can and Valley talk just Valley. Brazos started. about Ford, Eagle

be to low exactly quite available a breakeven to we're window -- understand looks have large. us. to It trying locations the still lot We Today, breakeven the is. of how big

So many want inventory, rig it. rigs it desired. years multiple on and four you I could the you at have Brazos if at to depends throw say We program, how Valley so the we accelerate would really

us a rigs I operationally. is think run four good rate really for

have years on have runway lower and Ford to South there. Eagle Upper tag Texas, In will We Austin Chalk we or Eagle probably the in three which that. have the we four less then Ford, the

our more one probably assets. it's mature of So

Coast, in rig to Haynesville, we which low go And low In count, rig Gulf near doing to the just the be we inventory. term we count, a extend. have zero will if of to in going it's years

a available Mid-Con nice there is that a the discrete one of thing plays, locations if thousands there bunch we issue of is to Mid-Conference, to in lot it's with oily The Mid-Con. The not the about but wanted us, basin. large available is it's different a of us play, lever. the plays to is push is there that Mid-Con very

So is there there. opportunity lot of oil a

Powder, we have run Mowry X,XXX of then our very but locations. at available the probably current deployment, Then another rate is years that and Parkman, as across the rig us. forward. well be to move we is will similar then has formations Nio over the And Sussex Turner basically and few footprint entire to other the

assets in competitive our be our runway So will every portfolio. one single we that long of have in

Kashy Harrison

right. All you. from Thank me. That's it

Operator

with Dingmann Neal Please from go comes question next SunTrust. Our ahead.

Neal Dingmann

and fitting me morning just a Doug, for guys. Thanks one for Nick. in. Good quick you

done PRBs. about look all the a and returns how I talked the great growth, of your both you've and how so oil I'm for Brazos job You and accelerating good, looking know the

those decelerate lower increasing given the Brazos? strategy in wondering would deleveraging of mean, type and the that sorry, consist thinking how especially obviously to want these returns you two, potentially the getting I'm to I'm of even returns PRB and the in just I'm So sort the the leverage, balance just -- you plays? you want seeing you're and more potentially I activity of you're

Doug Lawler

potentially about we're this that Neal. balance indeed we are additional seeing. to that volatility us the opportunities and and for have excited Yeah, productivity at We're gains all given incurring sure we're to look accelerate, have encouraged the And very the this there cost, by and very but portfolio of those debt we that that through mindful how efficiency that just we're we in are manage it capturing. commodity capital

option increase can assets, to we development the we will not just or We targeted capture. react in plan constantly possibly And rigs type can there. but efficient the on that And on the opportunities. to two-month most so, evaluate oil. we're both one-month price going see We of we are particularly

exist We're And there. looking for greater issues it's we're gas, present long-term something the not the of that option, that's about. thinking on but macro making an adjustments at the because always that

Frank Patterson

Neal, this…

Neal Dingmann

And sorry. -- go Okay. then I’m ahead,

Frank Patterson

our this going sacrifice I’m before and we're that, I sorry. in assets. we've is to about think thing this spoken One think Frank. not Neal, to about efficiency

up and end completion want and DUCs capital. go you you if think, you drill So, is have the accelerate accelerate both align with do drilling But bunch and to two. wells what don't shallow to a of and

you expanding to be when play, So, match might think about the with in it rig one more up any grid. completion than

Neal Dingmann

And one. Frank. quick add, Great then one lastly just

a out Just rack of in that go what get the change West, Frank forward? on in the PRB plans trying that, and you're could test to without wine

Doug Lawler

there we might access buried to systems. the of entire Yeah. the other. Neal, two trying our actually sitting Frontier a on to two, of frac those top the way of appears we're in Turner of the the be each a kind and Western play between that And part it storage find have and

between which the from they're of different of deposited they're Frontier same kind it's and So, genetically the a Turner, cast basin. the combo just kind of ends

If additional of we're concept. probably side true testing it So, on racking you'll our the field. that works, see wine holds that west and

Neal Dingmann

thanks, good, guys. Very

Doug Lawler

Thank you.

Operator

Lawler the end over turn like to that's question-and-answer And I'd conference the any of to Doug back for session. closing remarks.

Doug Lawler

today. thank joining We appreciate operator. Yeah, us you, everyone

our and to throughout on Just to of assets. execute priorities reiterate see you'll once all our driving ahead, change continue Chesapeake

flat we double-digit capital XXXX production in by in record As oil that stated relatively to deliver look XXXX. and growth oil followed on mix a we oil expect the record production

our targeting and and decline another as double-digit through improve as GP&T be we XXXX be noted, production we continue gas in pricing. We cost. in will reducing cash we to forecasting our lower current activity at increase margins gas and And

today, have return approach and We with continue scale very and that of ability value diverse with the our with rate stated tremendous our the deliver to highest to confidence capital we've amount the have we building disciplined to portfolio our well-positioned momentum we're and a of on that in allocating shareholders. change opportunities, for

any out everyone you to And to don't time if Thank your hesitate questions have thank today. us. reach further you We please you. for

Operator

for you conference attending today's Thank The has presentation. now concluded.

You disconnect. now may

Expand Energy (EXE) 6 Aug 192019 Q2 Earnings call transcript