CPE - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Callon Petroleum Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please of company's website replay this event the on available be for will A one year.

I Investor ahead, turn Brewer, would the conference over to now to Director Relations. sir. of go Please like Mark

Mark Brewer

Financial Thank Ulm, this taking our time for you our Officer. the Dr. Joe are Operating Good our Gatto, you, and With Chief to Chief me Jeff Executive morning Officer; operator. call. thank everyone and conference Chief morning join Jim President Officer; and Balmer,

remarks, I prepared the presentation results to our referencing During we'd to earnings already. the presentation be afternoon yesterday our download if haven't we encourage posted you website, so everyone

find the page slides the Events our located can Investors and our within of Presentations www.callon.com. You section on at website

everyone remind to included to like review important cautionary disclaimers of I'd begin, slide we on today's statements, disclosures and and two three presentation. our Before

today's & some and Carrizo previously slides make Oil statements on plans forward-looking due differ these And periodic filings. to the well and materially will announced as as estimates factors SEC We that our noted Gas, results actual reference during our refer could in to of Inc. acquisition call

our facilitate non-GAAP also believe to We'll today, and comparisons peers. with which across some measures help periods we refer financial to

provide non-GAAP measure. the any a we For reference, nearest measures we to reconciliation corresponding GAAP

Appendix today's for find available reference on are which the may We the in presentation this release, the by these of both earnings to our You reconciliations slides press and in call. incorporate website.

for our we Following the prepared remarks, open Q&A. will call

over I'd that, to the like Joe with to Gatto. call And turn

Joseph Gatto

the to an company closed quarter management market everyone and as prudent today. And after us landscape. energy results strong we increasingly differentiate the necessary financial results, our Mark. market portfolio good decisions, released within morning second strategic operational performance discerning joining Thanks, always, which demonstrate Yesterday

efficiency optimal scale pruning flow free our have assets progressed towards of corporate advances the and non-core and development capital cash recent Our goals.

Callon and the base. accelerated be capital technical deep a and Carrizo. locations of inventory between well creative will We'll well be knowledge for of on highly these to combination goals Our compete further combined combined have a positioned achieving with timeline will that from advances capitalize

We from recycle growth metrics conversion and large position XX,XXX and one efficiency benefits translating cash of development combined ratios industry. balanced cycles, engine our for as Permian the improved future. the to highest impactful These basin key in very into approximately reinvestment Delaware will also scale be the will the have capital the pad net acres of to continues efficiency be

quarter expenses the and operations performance operating we in pricing, highlighted sequential X% Starting on by production our with slide gas also of day our quarter, growth nearly of lease the EBITDA Boe in we our second divested Despite quarter strength quarter. which production. X grow supported X,XXX able the a first natural in per NGL measurably reduction to challenging were a from is for which

annual our down ticked all Basin cumulative an dividend the of than costs. leverage and with of from of And the completed assets. the overall of Our in we redemption first preferred stock, Southern million Midland our closing of outstanding financing $X July, the our more sale reducing eliminating quarter

other per to field our for strong cost in coming results to D&C offsetting pad the Central capital continues with classic below Howard in performance relative with Our well activity. level improve our final $XXX County foot, efficiency past lateral and coupled

efficiency to of shifted cycle mega the two simultaneous the a focus first our times. quarter, and utilized completion which crews our pad, increased to operation completion we cash reduced the Towards of end of Delaware importantly

Carrizo strategic and merger. of we've a the benefit is a previously, made As increased within emphasized of use possible model entity is clear this larger

cost target required synergies Delaware per all we've foot than the XXXX in well available lateral cost ultimately that the was time project Delaware use the overall generate our the volumes mega able also we've was Our lower been for pad water first plan. execution system. to outlined an virtually combined D&C Callon-Carrizo of the this This delivered to recycled

effectively system barrels greatly sourcing like this our X.X per treated our enhancing volumes barrels million to capacity been and the area. We produced operations while of saltwater impact significantly used projects economics disposal. up This of recycling operations, of completion upgraded during has the to water current Delaware also handle environmental recently to in XX,XXX related the of in day, over doubling reducing the

You the drilling backlog we to provided of that complete with program, significant top in year. has running the of which the which second rigs the a ready five to begin on can through our of us locations, half six work see started slide year will

very on dedicated the and now pad, one our having second basin be the still XXXX our the Midland series across enter half With released of various areas single running four has the that will is placed plenty of in crew that wells We have the we we on temporary of some completed efficiently crew while seven with through in third later second backlog will work crew quarter. rigs mega crew production Delaware second a working and will front. a been DUC and asset our in inventory on dedicated

gains due concepts our dedicated a primarily forecast, project sustained below was spending of larger solid and efficiency to from capital utilization crew. completion Our operational

the backlog out a our were of half over us after for by activity of capital sets the to the remain level operational with DUC below or spend stepping second million. XXXX second first $XX quarter the XXXX. first in previous budget down second $XXX beat the in year at of CapEx in range building expectations half handily to quarter up similar result, The of a level the As million quarter

a with with progress model, corporate model development and second cash Carrizo. standalone track On enhanced reductions you combination can a chart as half cash that flow the is see used our steady capital that margins Callon our highlight generation basis, to bottom on to our the free and on to structural occur be will and in still combine expanded inefficient strong

a the improving transaction each on advances with cash six backdrop We revisit multizone cash firmly investors value capital by generating flow, that reduce provides of February our this return in laid we of key create over those we on believe will inventory. on model of our free optimization to initiatives significant out sustainable beyond. the to our that Carrizo time; that focusing the in flow goals back invested, for core areas our free our with started leverage cash and good recently XXXX year focusing and using and how Slide four developmental optimizes value portfolio the announced

which, of complementary with deliver to a for leading invested. Both asset and foundation to on quality these scope development the teams coupled come. provides contribute companies improved and larger of scale capital consistent high two our operating of to will returns Combination on goals model sector scale years bases improve have margins many

a position to broader Ford across return in more advancement core maintenance full that will Utilizing the capital operations XXXX, under the footprint. our we organically concepts cash continued To base asset to capital clear to other fund Permian of Delaware a see combined excess mode mature of development and support industries. in and XX% field path Permian on point, SIMOPS the Eagle invested comparing favorably the

flow roughly to more and price increasing efficient allocation $XX capital strong Permian XXXX cash in reducing will beyond. cash generation with flow machine development an in our investment direct This XXXX for to framework breakeven

a improve immediate in consistently stated acreage efforts. use cash non-core As be This coupled we greatly meaningful free for infrastructure opportunity cash the clear advance have accelerated path capital set to free of to efforts monetization with our modernization near will a will in opportunity our flow a future. organic deleveraging flow structure expanded water

As the part improved of outlook. cash free dramatically flow

timeline our a goals. deleveraging We to capital positioned achieving be of will shareholder after other also returns evaluate on shorter

development value By One to and the two we these of is one final that passage to other at vehicle Carrizo pending aspects near-term the that creating without acquisition our on the long-term effectively important target expense most time. optimize compete our less high-grade combined efficient future lower inventory. environment behind the a companies after of commodity ability can zones left point merging need transaction a of are the the of are of for zones in of price development

simultaneous on cash as multiple and we breakeven inventory costs basis life free also drive flow $XX we employing of preserve the reduce for portfolio, development zones. our a cycle consistent and operations below times broadly price will your the across By quality

Slide seven in provides combined entity the high-level view a areas. activity of our focus

combined of the black underpin We a on basis SEC enterprise is a two PDP per benefits double well-established base capital premier US reserves contribution is will flow enjoy shale maturing base the and XX% above This approaching currently will digit reserve only with year-end Despite the the of this XXXX. reduce for regions, cash of day and growth value in forma robust at XXX,XXX XX%. pro production company just intensity. targets PV-XX above the which current production position oil strong Boe of

the of return elements critical is of both of intrinsic inventory that drives value high the the drilling table. the breadth bring combination companies the to One that

in compete operational of for here locations fully cost infrastructure the the of shown within factoring is from loaded synergies and above of eight, slide costs, top with takeaway solid the core each the portfolio reductions without IRRs capital. the we've complement On areas key discussed. economics well full The contributes but we've all drilling, XX%, and that completion for

the complexity have delineated the and within these to value best multiple both understand addition, from In Carrizo requirements and to zones areas. Permian Callon maximize

in southern and to in data of Turning and results southern differences from and wide footprint. We in quality available zone using proximity to to have reference apples assessment in varying apples clear basin close slide landing the put to well, sources due show pits. publicly together productivity in sources of vintages the and Delaware well well a comparison Delaware combined nine, and very base picture, acreage data our seen variations concise the to we an

right on their map distribution left results, the most focused You down plot, can regard currently the primary operator. distribution on the Wolfcamp information of the have on This as of as results the plot in part in since as that a from well which in well is both for A the distills cumulative see basin. operators each shown this in PXX to chart a summary this result we group zone bottom the quadrant,

designs. you Callon and the excludes operators using years, After completion past prior completed mistakenly some in which often to the to over Carrizo owners, scribed in have this amongst prominent that names plotting more results the two PXX relative been analysis of current favorably older can the The top results, were are see five the region acreage and competing typically both operator industry.

position. extensive of level areas comfort, with high The incorporate we summary data, proprietary a with a cohesive combining core into results well Delaware us well work diligent then own are public established align data our of two providing

to Jeff. like would I turn the point, to this call At over

Jeffrey Balmer

concepts Thanks, Joe. achievable slide we In these of contribute XX, of at in shareholders our synergies of into we've tried On we've set that some to the the $XXX previous rate run clear to should our to million. examples quantified simplify of a total believe viability illuminate outlined areas number that upside our million presentation, annual we highly $XXX goals will for for acquisition ourselves. We significant form synergies. the

achieving combination. On year our exactly We to combined synergy in From run targeting between a ourselves out that numbers roughly this annual and the what XX% in is year targeted million a don't denotes have the in low give comfortable somewhere annual $XX with and achievements G&A. feel savings, end the total XXXX. perspective, the specific operational And broken credit drives of for we XX% ranges those the of goal the front synergies which our rate we within in cut of G&A at calculate all of for achieving how XX% first we one.

we From new improvement development a are the and sustained under a a in model. use completion drilling perspective, costs targeting of Delaware X% development

X% a on broader This to our and recovery assets, for improvement we impacts, production. reduces mitigates from of offset times focus production for uptime scale pad as accounting larger operations HVP the in we're and restore shortens frac developments. effects Additionally, Permian activity

and potential our both is I'll the shortly, Permian. these development areas see as expanded across we of As synergy cover higher model

in efficiency you operations. worth XX, target first our surpassed slide that completed we been see can very using to stated that development our has to achieve recently Flipping simultaneous those just XXXX. pad this activated with D&C noting costs for the we incremental completion that we've for there It's mega previously been one been a Delaware synergies accomplished dedicated the already throughout we utilize to project, believe have to second being this of would crews if two crew upside benefits consistently able

efficiency Rag deployment level indicative and hand the achievement most gain synergies of recent of from the that the viability pad the us is as levels about perspective of consistent And right from in consistency. shift this comes activity on in XXXX, in and our operational upper expect measurably D&C talk lower you You've plan you cost heard And Run efficiency chart. expected for to in this project seen continued savings left XXXX. reduction larger we the that Much see will chart can hand drive in is cost which of and shipping and XXXX to our improvements development. program

generate savings is smaller can While pad structural uptime, larger roughly going significant value, single projects million offset across to in asset uplift project location X% the are reduced in sizes; first reduce than a asset ability another value which with D&C be moving downtime base incremental Permian $XX larger an rather field by across driver year. from the increase through to production activity area, a a of about in projects in will our accomplished frac geographic concentrating impacts with be

increase enhanced the to due impact production to be total synergy impact in this margins the of combined operating company. increasing cash We Permian leading ultimate is expect operational of the preserved X% see this will to that flow our The to overtime incremental production. X%

the And to that, call to with hand I'd Jim. like over

James Ulm

Thanks, Jeff.

we As our cash of flow has philosophy not forward, protecting changed. move

collars a and XXXX coupled have use floor of strategies barrel. day appropriate of swaps, is with point that safeguarded. continue around way in diversification cash a three XX,XXX of realizations that underlying we cover We and business to barrels far, price flows the ensure a to $XX adequately a commodity those value employed with Thus combination hedging

expectation positions that in of locking production. for oil will have we As continue the of hedges the to past, XX% the progresses as to we account add in with our roughly year XX%

a pricing first delivery agreement flows, our export local upon and cover oil part in to we strategy sold the new are incremental quarter see second these which our being physical our other for XXXX. continued added do growth diversify barrels, rely volumes oil complexes. markets but XXXX As refinery Much our like of to of control have will agreements, not into movement,

manner to page applying a organic operational of Ranger noncore we manage Along generation. benefits the cash our strategic business property we XX, monetize have can with Southern Midland in you goals that debt proceeds to advanced have towards to shareholders our by flow as XX% the allow those continuing shift while the to and that did continued in the assets On these the initiatives, of opportunistically like reduction, reap will free and business Basin, see preferred stock. seeing redemption our we our our also reducing financing costs sustainable with

leverage enhancing from continue credit a We footprint. assets expect and to noncore additional see to in monetize reduction XXXX combined opportunity the meaningful activities

reduce by our cost seen of benefit by base. opportunities debt our will combined to credit progress, placed also capital, for improving, credit longer our recently Moody's we were watch will We've which shareholder the our on ultimately positive agencies recognize S&P. upgraded credit metrics and With look and term

to cash beyond meaningful As per tangible XXXX our flow and structure become is dropping transformation forward prospects WTI $XX we barrel, reality. below very see capital a and for breakeven our look

With that, the back turn Joe. I'd to to like call

Joseph Gatto

supply remain asset the Thanks Carrizo, our level to contribute free the our like guideposts sector. a the Working in development as reiterate matures, necessity. the generate we of in flow a other Optimizing shale maximize of the to reduce sustainable critical combination goals for assets of supply. can the paramount of low goals Jim. shared announcement management business at there monetizing be don't returns our is organically I'd everyone model. prior team. the of not growing is the sustainably to costs year, that with to to beginning that the that Rationalizing corporate our provider for achievement driver a cost our for And a marginal cash is to and meaningfully business a is building critical industry it leverage and cost

mid-cap mandates clearly differentiated a advances gas creates investment of combination sector. each these oil in Our and and the

line remarks. Operator, open questions? conclude please that, going the prepared you would to With that's our for

Operator

first will comes begin today And and Please the go We Daoud our ahead. [Operator Gabe answer session. question from Cowen. now question with instructions]

Gabe Daoud

Hey. everyone. good Joe. Good morning, And morning,

Joseph Gatto

Hey Gabe.

Gabe Daoud

the at a how the out on synergies? guess some guess could I talk those pad, that bodes much, with there your if the be you Run starting all, that little guess, kind potentially synergies transaction? how maybe that entertaining you've upside synergy bit the well maybe I Joe, I to Could confidence D&C of to out guess, laid side? Rag about initial you, shapes targets I And just capturing related that for laid just the Carrizo

Joseph Gatto

start the But I'll we turn and for this of yes, out certainly before, operations intensive get Basin, extremely Midland in capital it then put and over employed this But seen plan Gabe. with we've his bit endeavor. well a less the Yes, and together And I'll underlying by the bodes thesis if views. a with Jeff, transaction. little that that encouraged to right, the Carrizo was simultaneous we've you we're remember,

little and So a animal of business same getting the bit capital it's is very different token, you're intensive unlocking meaningful. Delaware. a prize by the in But efficient more more by the

that some will from think we're in I we see first where talk mega-pad about very as pleased even additional are Delaware. So it, the Jeff upside on we

Jeffrey Balmer

the and to of thing I covered the from achieve. on majority coming Absolutely. operationally with a being savings of out that of consistent have able nice The encouraged program they the getting we And we overall course. also initially. it's financial go very resource that both thoughtful hand-in-hand, development is, timing was that with the perspective, were and results about and

development consequences trying suffering and of pad the hit of indicative Callon The Rag we home type to to within individual Run program opposed So coming then and even the be from we'll then as drilling that Carrizo the with perspective, enhanced addition development the out of have assets. the back. kind scheduled run independently significantly of of wells, was a more

far So the top performance extremely so with bottom, happy setup. that I'm to with

Gabe Daoud

back then in great guess XQ just And should a Callon XQ? Thanks think -- XXXX we guys color. split trajectory follow-up, of Jeff. thinking just sense It's terms of us maybe just production maybe the How you of I give CapEx? for about Can in standalone. that and about half

Joseph Gatto

thoughts level high some you give I'll Gabe, on that. Yes,

obviously, third per the Going we're production, off close July relatively you asset really into very quarter, wells the Ranger started which And month, in was mature sale, as from online X,XXX the unlocking the the given right. late to scale kick day Boe quarter. in third we're no losing to with recall. mid until in what that in towards, really and is building we Run Rag the program Permian now towards really seeing Delaware is we've But turning large This starting been focus. development broader

So activity relative couple will a or basis a third some all a and XX%. the On gas. down add that percentage points be an the the were back impacts, out on you XX% Because Ranger basis, close second so or up doing -- Boe basis to that, on the Ranger oil close quarter probably -- assets an oil on to of quarter, Boe better taking ended right? than

those -- quarter, oil the pad, very back wells is levels the We to the a second do the that quarter late we've see in growth for of third Rag in towards quarter. had Run in does we fourth coming the pad the quarter cut. us strong Midland up seven end with set a continuing about with and moving ramp What to higher a third talked but back strong profile quarter seen that production up

Gabe Daoud

guys. Thanks, Thanks, Great. helpful. Good job. Joe, that's

Joseph Gatto

Thanks.

Operator

Please ahead. our Derrick Stifel. go question And from Whitfield with comes next

Derrick Whitfield

a Good and and strong morning quarter congrats update. all on

Joseph Gatto

Thanks Derrick.

Derrick Whitfield

free flow much Perhaps referencing comments cash cost how you to flow for breakeven on your versus do cash your attribute improvement base of decline page Joe, six, synergies? in lower

Joseph Gatto

to a client We combined on up an profiles. picking improvement of are the PDP bit

look standalone, post bit base. about as the PDP overall asset little do mature As on of not combined base as we talked XX%. here component than going around a come a at But, the Callon we've and majority of that the we small more Ranger sit well. better We'll costs just asset this the to that a from synergies, at part but is

Derrick Whitfield

it. then Joe Makes for Got yourself sense. Jeff. or And perhaps

marketing permitted of Delaware As you back your pro about basis. deck, I acquisition, the recall capacity barrels saltwater a have on XXX,XXX forma from disposal in

environment of you is one support access price and monetizing to how given much is at question, future? what PowerPoint, some reasonable level, that a the on the four those consider that you're if your your of foreseeable Assuming I page if assets present? the of on required of operations having And tack valuation approaching activity over would could additional

Joseph Gatto

Yeah.

great downs, on what In mindful we a be capacity utilized of that be But the pads. does without in depending monetize. that peak And latent specifics, of have on we a some water of cadence by being of volumes getting amount will to terms terms be ups larger unused capacity, present system. to or got because that of going -- is to fair bringing of we in the there'll a lot the be said, some there opportunity and think system

destiny couple redundancy, control to And table we've about, own money as of a in those we to reliable, lot years move and interconnect with footprint spent brings a our Carrizo a that's terms though, combined last the enhanced to to allowing be volumes. only system water the systems. that's of As us what building having to talked of going we

value and footprint. going opportunity only that get there's to route, water with not but to sure is operational And, to to us people's to the simply we potential an monetization want control in we are So, combined allow attention, be level to do do we of business. the value the an We're investment increased have while that business, looking we think preserving unlock. we're at going that a make significant put the run that's

Derrick Whitfield

helpful. Very sense. makes That for your Thanks time.

Joseph Gatto

Thanks Derrick.

Operator

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

Neal Dingmann

there's you, these or spacing of Permian. the to scrutiny tighter Good just morning, days a know, question on all. for think curious obviously first around Jeff, just and Joe, the lot I my

view potentially only pads this comments around, in is if the your the investor tighter -- So with changed question multi lower my your pricing. just with relatively has with of zone but environment, not

Jeffrey Balmer

is tighter, like think, Generally you that we're comments a we're to aligned a going target, well squeeze what really more, the doing and single good geology at, speaking, in XXX a companies those is little done of might currently our areas where in you've past, spacing, are plus you some I bit we bit what XXX zone I drivers might with overlaying there's you've Jeff. or our might where too doing, future be if in the significantly one is we've seen that from more, Permian, seen better kind for can about you're the This of I you use tight, or and zones, would pretty to we're other think be the point. a be bit make your in what aligned is underlying And thoughtful the going and approach, realizations. areas the suggest value instance in XXX range. be think going the where little starting on we're little There a than really if only good, and say, companies.

position basis to a well to on up be do forward. acreage going Our very set continual is that able

Generally comes when parent aligned have and the in the maintain in a wells testing coming next to still in the and you're variable we comments that while well. that So and there's speaking, stalking we of the on do course come child to spacing spacing of with majority some variable time are much very setting then out. opportunity

Neal Dingmann

operational of as answers, detail, multi as it And sort months, as I'm as next or anything larger more wondering pads think In any far just just you or in rigs these out thoughts playing check. bringing just businesses just is closes, I might how’re until to wondering less acquisition Great normal? few the spreads. far or plans, my Jeff. double I or I differently, the do you then the know want the question, just regards but Joe

Joseph Gatto

of Yeah. to we're for No, to the rest block and going continue year. tackle the

Neal Dingmann

guys. thanks, good, Very

Operator

question next go Brian ahead. our Downey And comes with Citigroup. from Please

Brian Downey

on morning. Seemed and in color you into you that the throughout quarter. any see questions. I have remainder Good impacting optimization LOE like if of what the for how was you found versus the heading that the original Thanks that project, wondering really taking year? additional project, the second Delaware production expectations helped costs on

Joseph Gatto

project with contract that partnership. operational completed, relative impact. to teams to Yes, we And I'm has transparent achieve. been hands the did. we've It declare consistency able the field very you that in satisfied been know, the the off and that, on to Spot were

in work So those we to were able to methodically bring all through projects.

the So we're It's it's up. to teams shout -- a in shape a that field. operational for our Thanks and in bringing very out now. right in good the feather cap

Brian Downey

synergies that the asset, guess potential versus the of scale other road potential? see you you're the X% how that production Great. the or what see some what And do guideposts further then in quoted give is quoted could I'm I'm at us you deck? to equal? production simply expand Carrizo that correlates synergies uptime down you the of with to that curious if you any production, X%, getting uptime similar in differentiating uplift optimization potential I the maybe for looking Is

Joseph Gatto

Yes. Those bashing and really reducing X% numbers, X% from Brian that of benefit the to time. structural and recovery a downtime are frac

when they're any are simple incremental around expect very We that incremental in to primary that that base. lift to not quantified in combined there's around heads there and benefits again nothing we collective program around put be not would things change that certainly in synergy have X% asset X% other a outlined like specific But our there. uplift, or So optimization any to developed best and opportunities going artificial we together that's how do things taking that. like just structural practices we from

Brian Downey

it. helpful. That's That's

Operator

Barclays. next William go question the Thompson Please And comes ahead. with from

William Thompson

Hey, good morning, guys.

And point looking non-producing. uplift So reserves is any you was of try shows your at the give about maybe at Jeff, to developed of reserve XX-K, production your given crude mitigating develop ballpark much reporting your of producing X% regarding it synergy the hits? offset to oil not as how for classified target, frac can us a

So, turned being in be wells I believe some related of this line. completed might but to not

sense trying are we on today the get a So to where opportunity and is? where

Mark Brewer

Hey, in coughing well, this is Jeff is and step Mark there.

maintenance, not PD&P over be look it's quick, When simply certain completed need is that real portfolio certainly whatever waiting to available or of pipe. the the work a offline this at is stuff, there's in field the So we stuff of percentage downtime that behind it productive always stuff is.

either attributable proactively frac that is be hours is So frac protect to affected against what in offset is a portion bashing of shut to partners that and to been activity by restored. blatantly has what or obviously or

as we program with to or also back rather that areas, multiple the pads we get proactively than into up about perspective, time talk dispersed reduce be tightening having necessary the have from a from going So online. the smaller affected believe planning we're hitting extent concentrated aerial and more to route able wells a to projects, less either those larger impact

in. time because cycle have is going we're to opportunity the addition, times shut to the component how of tighter long the productivity of set In reduce that

William Thompson

a be benefit spend -- two crews Any crews spot you're sure fleets, like spend make And you're to helpful? mechanic think through be was SimOps. correctly. like Can pad you sounds That's fracs deeper fracs. It seems able dedicated color And system some would sorry, pad. maybe the having I I to like excuse there minute helpful and two thinking deliver you me going Mark, thanks. from on versus doing it per ops, about then per running time

Joseph Gatto

Great. a Yes, fantastic that's question.

we've of through my career. proud and something entire that been And very with that team I've I'm got this the

to the success aspect find that is it with coming of and crews you'll whether that it's it's of the the forward. multiple Starting And something critical the rigs emergency or in of operations safety or crews, get on so in items terrific logistics location, front frac to to what's who's the even crews and coming and traffic charge plan. out up are address place. patterns Those and drill down the having

by wells. they're two with the one going you've hit basis, are be independent the side on do west Generally we're that six come And a on be drilling fairly would drilling relatively outline we getting is with them got instance, to a pad arms, speaking, could if wells -- side, side. a system we rigs good what drilling you drilling in kind would on of of side baseball. would One east similar for if

We coffee to from discussions stage that any the every that at rig morning, morning. out so mouth wells in one the learnings operational tend are literally we kickoff of meetings word our have the

that on have Our are, share in mud where drillers on the what can flows, shallow what anything learnings consideration. bit water together side systems and finding we're we get our words,

board So those side. operational you'll and that drilling. the enhanced side, they're doing across on when And almost our are when are see the independent drilling by rigs side performance,

benefits where the off get knows up Everybody of on going also wells you the location. next same being location where work multiple they're rig Then that drilling morning. is show to to the

move opposed their multiple frac off, with the you doing frac again if tasks, impressive to run a drilling, when well. again, a it's chance you the crews on be crews. bring exact up thing. we it's out When we and finished two moving as rigs locations are location, starting had to And repetitive You're in same drilling at different

Generally safety on we protocols in been operational frac be have have the speaking, dedicated shape understand working and used boarded going place. better each that you in to you're with the other, setup, crews if on are that to have fully

to they time think being protocols with were full Schlumberger, in That us. the But and job Rag did pad, a second sticking that that efficiencies. need I safety believe solid the there in time, with. on working the synergies with came brought much were testament and for us your we said, If see you we it's additional done. which you'll they would taking the pro of more time working course, crew to again, be often, have a absolutely all going what we and Run a in exactly and would we company familiar through increased And forma very forward

to zipper you out come to upon are creates the they out point. complex then crews, bring least reduce already and frac, we are far crews fracture think competing an that's move when off, the how multiple fracture preset. And in, it And depending the apart are, in the in drill more drill bring system. locations at a finished, where plugs, knock wellhead facilities notionally excellent out We

everything reasonable go. in So a get how tie ready operations. of of just we couple the back to outline a in that's and days we flow simultaneous But the perform

William Thompson

Helpful. Thank you.

Operator

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

Kashy Harrison

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

Joseph Gatto

Kashy. morning, Good

Kashy Harrison

Yeah, good morning.

So maybe question a Joe. for

time, macro tweak around, the just you. global what broader it now, a the very uncertain the at economy, feels have and right concerns given trade policy looking like just So

about are And hedging strategy and so I protect are prices to just Carrizo you how down crude to of the you asset how going with event in a crude go do just downturn? the price, going the the and acquisition, are management like associated in what guys wondering case was risk thinking you

Joseph Gatto

Yeah.

well level standpoint Let talked But Jim. a me hedging as with from base asset a as management of perspective, quality turn that. management flexibility about and within it operational over perspective, assets have the and start physical I'll risk you with then management. that But from the starts from risk we've and you financial risk overall to have high both an the and

portfolio a things times commodities combined of us in terms of and as cycle that. well as lot the different gives like across optionality So

as talk to your So combined there's lot specific entity. about that Jim a optionality we we let risk management. have how I'll think more question, a But about

Jeffrey Balmer

Yeah.

just to and come XX% most be I behind range. in would somewhere laid the think we'll I of Joe XX% it out. listen, of say kind

Couple weeks increase at be to you which now, XXXX which at barrel about months. I continue year this of and As is coming I over a right barrel would end basis, looking that day did expect ago on at $XX mentioned lower we of a look our it we the time for will that position. a range, will to swap a that earlier pro the as we're in layer forma

And is months. risk things coming management the The the been we've talking most is primary important flow business free about the the of sustainable we support one to objectives have. the goal cash of the free over flow, cash

it we basis together help mitigate basis, cohesive that differential at very So to program put at on will it an look look will us we we a individual a on it will and at look will continue that closely, will to risk. continue benchmark

Kashy Harrison

seven, valuation, that And you my GDP think more $XX, highlight helpful. wondering through us on [ph] if you look then budget I you conservative prices, the valuation follow-up that say help $XX page have my status, pro Got higher approved forma out like it. question would sensitivity if just was what available? That’s at SEC tag. price

Joseph Gatto

that I have while but that you Midland there in look is higher benchmark the point back 'XX don’t pricing I for out embedded would was $X. at the if differential

from at it's look it I what fine-tuning that price have off. just you with price were realized [ph]. if careful a TI obviously too again, now not a -- where price today. to versus the don't realized is. that take realized positive basis be But are you minus And looking So probably to far differentials Midland to at have benchmark on versus swinging the $X we there are versus

Kashy Harrison

it for you me. very helpful. that’s That’s Thank

Operator

Tudor, And and go our next Pickering Please Panjwani question comes ahead. Sameer from from Holt.

Sameer Panjwani

morning. good guys, Hey,

Joseph Gatto

Sameer. morning, Good

Jeffrey Balmer

Good morning, Sameer.

Sameer Panjwani

have these are them you any the frac one is little upside some your of have using in and things to peers fleets, You electric about to talked reductions of have bit using cost test synergies started been a near-term? plans and

Joseph Gatto

them We are yet. They certainly not have used interesting.

been have them. investigating We

makes of I that in of think the are investment an opportunity the with will we something it's taking the we pro forma to of partnership, that that needed company the a certainly but maintain company longevity look that become the at. simply upfront because more size

Sameer Panjwani

use think question versus prioritizing Okay. at things circling lower would preliminary commodity a we guess growth of free And a that cash be generate the back prices. That's about how put and just Is free sense was get prices to lower barrel out? then free I helpful. look levels an to $XX to down lower? earlier And expect flow about fair there I'm or trying to you you flow activity to how via flow cash should cash should budget

Joseph Gatto

breakeven and that driving focal price point Certainly is to for below a down right. us big $XX

tangible the As I something providers obviously very meaningful is benefit maturing that way so way combined landscape being we critical, very to entity. said in low-cost a from in a that

In pricing flow to forward are you'll and that bit already have the cash continue terms trajectory. up combined cash spoken little something I think basis, free a cycles from volumes giving these of we we we of that us. bit on obviously, is flow free entities, for of through we as But think Callon higher navigate how a we see production standalone growth, that, a move as about about versus had to

Sameer Panjwani

you. Thank Okay.

Operator

go And ahead. our Please with next Palmer. from Parks question Noel comes Coker

Noel Parks

you Can hear me?

Joseph Gatto

Noel. go here we Yes, can Please you ahead.

Noel Parks

an you to drilling Okay. year in Great. increase the over did any or have starting participation operated I on was wondering, past the two prior of deal?

Joseph Gatto

no. Nothing of known,

Noel Parks

changes interested that on easier far with significantly? the combined swaps, positions? going as position, get there land acreage with of Okay. I Does are And negative I guess was also your or as to any positive deal at the other be consolidation looking

Joseph Gatto

to continue will have footprint County, [indiscernible] are Well, through most the trades think footprint to with core monetization or we for eastern like on and and expanded tremendously. that Ward prospective around is a either opportunity core or substantial, continue certainly that In set our beneficial. we continuous areas footprint expanded up done we've up

opportunities monetizations. about be you more going think thesis to not because trades, overlaying, it's model. not efficient, acreage, noncore And do But it's is larger to if it's good yes, there's some the necessarily here do more development because

or single buck. And our get for model be great if section so right a in had large putting be a might right model and the bang that area, might not us you the here on there a for that

well continued to asset trades lengthen should some see laterals. as as overall continue and So, pruning optimizing of to core we up our base

Noel Parks

guess housekeeping question. Great. And -- looking at -- if there the the I just

the going stream accounting Looking at two forward, a use mix? accounting for three companies product to are combined the going you whether the stream made decision versus

Jeffrey Balmer

would the ultimate is to hope very with good I And what we're that I say is. path. would back What our near decision down be in future making progress moving

Operator

our concludes I'd over question-and-answer like closing to conference this remark. And turn Gatto Joseph any back session. to for the

Joseph Gatto

know on going this morning. a for calls Thank you. I And everyone lot joining again, in. of thanks, there's

again. look but to questions up move any follow we the as and the reach time course the appreciate year. updates out in of again, please So along forward Thanks and

Operator

is presentation. one attending Thank website. company available on be concluded. will A for conference of now The event this today's replay year you for the

your this disconnect wonderful line And time. have now a at may You day.

Callon Petroleum (CPE) 7 Aug 192019 Q2 Earnings call transcript