CPE - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the Callon Petroleum Company’s Second Quarter 2020 Financial and Operating Results Conference Call. All participants will be in listen-only mode.

As a reminder, this call is being webcast and a replay of the call will be archived on the company’s website for approximately one year. I would now like to turn the call over to Mark Brewer, Director of Investor Relations, for opening remarks. Please go ahead, sir.

Mark Brewer

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

During our the presentation posted we website. be afternoon our earnings to results yesterday remarks, prepared we’ll referencing

the encourage download you already. presentation I So to haven’t if everyone

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

statements, everyone SEC today’s and Before important call disclaimers these some we cautionary like materially review and X and of to remind our plans. included X to forward-looking could on differ begin, slides in presentation. due Slide on estimates filings. today’s results that refer disclosures our the I’d to noted periodic Actual make statements and during We’ll factors

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

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

the may our website. in of on these available You find release, are which appendix reconciliations earnings to press our slides both and presentation the in

Following to the over the Q&A. call Joe our to turn Joe? Gatto. call that, I’d remarks, prepared we’ll With open like for

Joseph Gatto

Thanks, Mark.

importantly, quarter impressive ahead of for daily rapid targets and amidst free posted the was cash declines. debt quarters stage of of and was cash realization Callon and And for meaningful free setting Synergy routines. the flow very numbers team operating environment for Development change challenging commodity Our work flow a our second future a in costs reduction. positive, schedule. are ahead

with continued just the to the production year, to in a Boe an just show quarter, day million. under per operational XXX,XXX X% impact its to on CapEx sequential $XX operational company, combined gain second strong start of Our as

dropped the expense having year. new on XX wells of lease more despite beginning production addition, our since placed than operating the quarter-over-quarter, In

and were a in costs, our $X.XX operating Boe right-size leadership compensation plus of with optionality a low With cash an capitalized total combined per we and Boe, the of cost have the our respect quarter. were aggregate, reached reductions the an Boe to that provides and G&A, cash for per all-time capital to for organization G&A scaled team to per forecast total for and focus Boe In entire $X.XX of reflection balanced under operating Board the yet development of proactive structure $X.XX per of changes our organization in the expense costs of Slide second benefits all-in opportunities of inclusive portfolio we’ve another Directors, G&A model lowering and the future. allocation. we’ve degree the the created X, Flipping high of made

outlook inventory larger-scale the $XX $XX we on ability pivot projects barrel, While generate based tools IRRs intensity provides enjoy to of deep per asset across us profiles flows strong environment. low-price and levels cycles savings capital. for have delivered, were able production durable in with our structural to the and returns rate, This combined our associated flow well while maintaining to of with volatile and with markets flexibility, we cost base sustained cash varying underpins mature to navigate cash a conversion as base a capital we cash reinvestment generation, the the on added reduce production and

federal Texas, of are no and our we Irving, in to operating lands. areas all Importantly, have core exposure

that diversified occur several we’ve hedge point pricing to also natural and base Within a seen in recent disruptions optionality or pricing provide of point exposure Texas, benefit years. dislocations on the unforeseen and off-take from occasions State against we

team embrace in radically the different Moving certainly shift This to Slide has here. and to gears outlook. X, a year few very our a comments sector forced

and conditions, including completion detailed response activities to in During the drilling quarter. rapidly during undertaking were we complete we initiatives our market the second in call, changing first halt quarter a

roughly second-half for production annual the the inventory be million $XXX DUC As plan the similar in per initiatives. average investments free All part to generate our six for flow we estimate and full-time be average wells to after that this will rigs remainder annual for first calls volumes uncompleted with period XXXX, in the on fourth and during quarter cash XXXX across we the we capital plan that we to daily of to to of crew utilize WTI a of facility XXXX. Eagle outlook projected monetization investment, in plan operational stage and few quarters, Permian, the the We sit maintenance XXXX, our have and proceeds $XXX inventory dovetails today, with focus returned barrel approximately level Ford setting drilled over flat later year. one an rate $XX levels made exit the month, Beginning plan to for XX expected volumes at our be a development complement currently modified million. of million activity, from for for of reduced This have approximately two average $XXX XXXX. per a expenditures working to of over months a repayment XXXX day drilling which Boe approximately completion we XXX,XXX and capital with activity dedicated of as three with line here asset credit this through of of the potential

can continue usage our have X, our governance expound recycling we streamlining sustainability determined the our policies. we’ve been compensation sustainability to and we the our premiered costs and and safety and to On same focused that corporate capacity see pace, portion on water our Last are to for changes also improving not down quantify that we to of year, ESG driving efforts metrics, and been raise practices. at if meaningful While organization, website sure Slide make you constantly the bar faster. on

partnership the over time. for baseline and reporting with set as new will month, publish a practices in sustainability investors formal which our we disclosures, report, Next our advanced are our first will initiatives

Moving been to has about to across right-size said the X, burden the need G&A much the industry. Slide

our reduction structure in firmly affected are consolidation that We Carrizo. the meaningful cost with aligned with a through and transaction sentiment

momentum costs on this of without payroll, and our reductions over implemented maintained projected ultimately, our plans initiatives. and the Jeff that to realizations, largely $XX further operations. going XXXX I’m left-hand measures nature At chart inclusive G&A non-payroll cost expect and Callon’s changes to and future over first-half of XXXX. impeding drive this are represent development The they’re to cash have a related discuss point, These capitalized structural reduction, structure. of of adjustments strategic execute endure, front to we to the ability but to in leading longer-term our million call to costs We to synergy variety captures turn several in

Jeff Balmer

Good everybody. Great. morning, Thanks, Joe.

focus increased coming million we’re sustainability. workovers, quarter. Our to opportunities that right XX% costs, are improvement to X inclusive driving of helping team achieve also changes already, XXXX, identify down And, expanded Slide hard working has quarterly $XX the LOE, the pro base, rate at of asset now. course, on second environmental in is for our meaningful of mentioned some initiatives part across while run forma and in as Joe Total the on made roughly over from in been we’ve the and down

we management takes come expansion of in-house pumps these right-hand disposal course, upper field vendor drivers: portion electric of financially, contribute like field then, we’ve that and partnerships. which overall, In changes, process; savings slide, account benefit workover things planning optimization but management those then So network; the impacts from of well. only our lower of and submersible call environmental as oversight, optimization, primary five from our towards improved compressor push the our and just to electrification; really which ESPs; and a shared chemical improved water not expanding some timing, our impact direct into analytics, the company the

time, in a and reduction truly so efficiencies we is work a Slide past performance. foot, XX%. beyond over for models improved phenomenal. being made the our area, are same from our an in months continue and roughly XX, and increasing are the to progress those we And investors gain create efficiency Costs to close lateral development well the claim in to practices. completion savings result savings, development. $XXX scale the drilling communities improvements XX really driving per better Delaware and is well down design multi-pad-based uptick we this structural to that understanding of On Callon, we’ve by win-win-win how simply of in. where long-term At the turn, complemented were that simple and the a multi-well, The These, the can

Midland, of Eagle from the from course, on seen majority employ drilling improved extent, second-half completions have well costs and design practices Delaware, these the we’ve to we our year. changes. and beneficial practices some will vendors of of the And, come gains vast While of some in Ford softening

four-well are Slide of Delaware in that that that each the the the some slide, the as I XX, for presentation. Delaware. no Delaware, cost things But rate performance XX, Strong during of right-hand has that the can have consistent six. progress foot next Reeves XX% some the this close slide lateral of earlier a captures that original efficiency partially of the of completion we’ve and in Basin asset to improvements continued significantly choke outperformed the and in The three simply showcase our mentioned on in project, capital nine-well as area per ahead to quarter June The Midland behind the think, on one the and wraps And shown offset performed our same the lies areas, and we’ve referred are on brought instance, Dorothy which Wolfcamp that focus project, WildHorse that in improvement in in we primary wells note been new development well On it still quarter at lower Clair primary County despite areas past see slides. on Basin, wells the figure. par that And actually a Midland to in in may in the XXXX the this the That Sansom from is in we’ve greatest robust bound the chart, that A the surprise. seven-well Slide pad Delaware the we’re process before. the made the operation should more using having helps the reflecting the wells improvements quite to the the area, then you against modifications performing from well modifications and in and $XXX production multiple in this recent previous the Dunkin/Horton/Wright change the Houston offsets. with the see we second have Midland limited come in spacy even the project of earlier bound placed we’ve this of unbounded can Basin. of management design in not pad or Crowley-St. in was On our But The you reductions. and offset that development. drivers changes had is our B portion slide up partially improvement

to So turn I’m to going Jim. things over

James Ulm

Thank and you very Jeff, everyone. morning, good much,

You desired. the prices could the left be commodity during to something quarter say second

oil war realizations pandemic price oil The down operating revenues the in evident unhedged were Our XX%. duplicative economies global and quarter. the an of for that globe across was shutdown the our impact

falling of impact the since during used quarter price a the fixed hedge always have standpoint, $XXX second our restructure MEH-related ended an million some in Fortunately, Eagle pricing of with that up Ford settlement rolled helps and almost book to cash agreements. hedges strong quarter some in a From back our but able into the hedge we prices. and we during contracts marketing to mitigate have March maintained the those gained we’re

leave additional not with decision be the quarter the buyers, quarter to volumes the those Our of holding have minimize any shut-ins to during the otherwise benefit second imbalances that year. commodity which did prices would during with us needed with of second-half fulfilled

Slide on shown As XX. is Page on the

WTI we oil rebound roughly As benchmark. has likely realizations the both XX% quarter, that and to look forward improved we are pricing to believe Waha and NGL north into third of

of it swaps shows some we us to the two-way into back the $XX year. page, participate in in barrel Slide next recently a allowing upside On XXXX to oil second-half of our the XX, converted collars,

actively also in layering for XXXX. have positions We begun

have natural positions Although extending we and on hedges prices ethane. and consequently, believe further, could that our oil gas for rise focused

capital more MEH-based new of XXXX and $XXX million know the and positions to associated earlier, quarters. working the with in are it, the instruments, borrowings below path credit normalization we compare described our reduced and to see is our shifting Joe you deal second-half you the free forecast cash as nearly methodically six hedging Slide XXXX along as oil in over exposure firm our will we that, term If On our transportation next chart facility mentioned – a XX balance, XXXX. begin now we This, with into of deals. utilizing flow Brent

continue perspective as various opportunities dollar flow we guidance have, have expect updating expense that to per note further provides provides number derived parties We the opportunity and with we have final of for hedging our Between on unit and our I an cash versus program, Page our position. an liquidity that measures. this monetization guidance in cost to generation, our are expectations, better at to which this ample shifted a engage we basis reinstituting annual the of operating our quarter. guidance rates improve and of look a to we update monetizations different to believe on free majority on slide shown reduce categories, providing leverage absolute run candidates. improvements, as have interest XX, cost Please our

While XX provide it’s operational too average to of Mboe per a day. capital production XX plans the to million for full XXXX, preliminary our of for expectations point bit of $XXX toward range daily early

would early While generate drive over continuing should levels Joe. balances call production the portion XXXX quarter activity production mild trajectory we XXXX while to throughout year. a full-year point, back from to next the fourth that expectations, our flow turn the cash to year, this declines expect At in until now free our with in like I of

Joseph Gatto

Thanks, Jim.

get recognize, to has combined very success success. our a endure to changed to been backdrop integration has at a a team Q&A, few in command a wanted outlook as company the just time we against been But second it’s worked as Callon, our that year. our provide but we the earlier people proved also here our extremely take the months for charted whole. hard Before completely I to and a process, our since evidence be Results course of newly tangible only difficult nation in we not early

continue for partners Q&A. efforts shareholders With to like the These that, South employees, and of aligned Houston, period open to necessary Cole, what’s as and the outlook squarely communities the will We of Callon’s Texas. and we our are Midland do ongoing I’d to industry. the of with navigate protect this improving for interests uncertainty line

Operator

question-and-answer And will go come Thank you, and today our Heffern with session. Brad first Instructions] we RBC will question now Markets. begin from [Operator the capital Please ahead.

Brad Heffern

questions. question across Hey, to a good morning, everyone. start just Thanks for taking with capital allocation wanted the I on the areas. off

the lot So there flat more the and areas. the well terms Ford, Delaware you the but of made some costs Midland a in the in of progress costs stayed than Eagle and other have in

going could have changes, allocation how Ford, about capital larger just past? of So other if that sort Eagle you the curious maybe portion if to and we think the we than in to a see areas the

Joseph Gatto

get larger-scale facilities anecdote started let into Carrizo and the and and take Ford. really lot into of great tangible a Eagle level They combined high a well. going central where in with utilizing from as great gotten we think, me ways, structure Jeff’s compelling a Brad, development, Ford, manufacturing start But here of processing Permian, there a mode wanted Eagle example the had we of cost entity. firmly into guess, had the I moved in to its I perspective Yes. very out and

very cycle in overall, of scheme projects, practices the as – to as terms drive I some talked But So a our of mix that it will talked capital capital things within to well intensity. allocation costs of we cash that about with there continue down Jeff best conversion well fits about. and

Ford So coming the more quarters. the some the big that is we some the Ford year, of earlier puzzle. Eagle And a saw we this we going part into for the Eagle certainly capital continue shifted into expect the Delaware of weakness and to from actually

Brad Heffern

I then, And the Okay, borrowing great. guess, base. on

is but any of like of higher redetermination? the it there about seems lower going thinking DUC the for Any be from then the time, likely expectations so. or fall same two the – standpoint thoughts of things interplay? on PDP give I’m just about based price to base are be could sort at can it the those theoretically, sort So, the plan, how you

Joseph Gatto

Jim?

James Ulm

to and yes, late if adequate Yes. an on you. take deleveraging runway was did in extremely liquidity of And in during I’ll April. appropriate try that we to period of kind heightened plans spring we back you that – redetermination really then I’ll to, want volatility the on I’ll pitch and The it focus a execute we that had had. the

that As XX% saw we show their of greater than oil-weighted the redetermination, on borrowing base. back in over kind of a decline statistics look borrowers XX%

as on that probably that too think, it’s into day make in So, we early look your the April what that to was late through went address November. specifically, happen in I a crude question little XQ to negative. bit went We and for prediction a might

now make I to we mentioned, as And I real So into visible for say, that redetermination, for there flow the you. heading positives prediction sustainability, have absolute post-merger of I’m the that a the banks XXXX. generation some an will reluctant recognize debt. we’re Joe establishing free But will group. Rising in cash path are The think, will of already have think months helpful successes see in us. bank price and show to the multiple differentials, to improvements synergy and record starting be basis normalized the the cost commodity to operational realizations matter, to track improvement prices will bank I

would I kind as be actively there the through kind has we you and And some prepared of last redetermination. was to – in Joe, should the redetermination. that, dealt in been give that are is of Hopefully, call during that? benefit talked that any sector well. for XXXX thing also that XXXX. would add We The volatility of broader we’ll hedging upcoming a the with the lot first-half of say anything

Joseph Gatto

just quick point. think I one Yes,

process. you end to brought of involved the up report, have know that went as the that. when one included the reserve don’t on that, take a that they’re do early-time come we that into sort the at We for amount get of while first think, wells at reserve specifically I of with But on end brought redetermination our performance. of the volumes PDP quarter, the after thing quarter. as in fair you wells consideration into and typically, first they with get well We a in report we risk

reduction activity So, is equally with “Well, PDP It’s outlook, combined up lot brought that.” as in take that not reduced points But we’ve are all to a bit a might less, taken as as those going say, important. maybe to be and factors. have you Jim simple as of a it but

Brad Heffern

Okay. Thank you.

Operator

And our Please ahead. Cowen. come will Daoud next Gabe with question from go

Gabe Daoud

the all morning, thus good maybe XXXX. Thanks start for operational Hey, color the million $XXX I with far. hoping guys. we in was for could CapEx

curious, contemplate capital maintenance then guys that how during I number you does plan Just year? change that throughout down that And you drawing XXXX? number many – guess, how then I XXXX move throughout does the guess, and DUCs as

Joseph Gatto

want there? kick to you Jeff, us off

Jeff Balmer

the focused will, majority of Sure. XXXX of we the on the hand amount have in inventory right now. on part, back-half DUC The that reducing be of program

half Permian. got in the XX we’ve DUCs, about XX then do split and half in – so Ford So Eagle the about we have

working we here it’s the DUC three off keep the an a month to together one going then hit although working some build for continue rigs. XXXX, of crew, or be into part, And modest we’ll we’re quickly. about both to, drilling up relatively I most we’ll completion inventory. and from going we’ll and to to number of drilling able average with to the next The so, projects a When and, that least resume be the put up at be inventory be basins. in we’ll So one operations – those one say, two

Gabe Daoud

on there helpful. market that the proceeds process, That’s provide follow-up. this more a or either any maybe that guys are of on point Thanks, expected guess, is even an then asset just at you And color, just the hitting assets Joe, on sales, number? timing Jeff. maybe I kind can

Joseph Gatto

market. put months. this, into over talked Yes. last them the Again, for you right an I buckets like In about few this assets really the two need environment as we

And So on completely mostly JV really necessarily as who to energy-focused, a base investor we’ve without yield is looking been yield not structure, as mineral for type a focused override yield. maybe appealing world well water structures. in

buyers, few few free last a of we’ve cash So are was it been it’s in flow really value discussions there. the to quite and some compelling. because of these we maintenance It with the now, staying in mean, the the could maintaining months see plan a where I outlook and some progressing you potential I have proposition and And helps structures. months, these power given deliver in terms those over the obviously, in of execute our capital program, tough wherewithal your underlying

Overall, that’s quite pinpoint It’s a I think monetization of year and I making there. progress broadly. to million came target we’ve asset to we discussions So kept this million on for proceeds we’re with $XXX $XXX hard going. resonated timing, into more think those good well but

still that number. We’re on focused

path I good towards still think, have we it. a

some going Delaware play and some bit your We assets They’re probably are the in time interest Ford. more also sales more monitoring non-core to well, Eagle working classic out. a little non-op of assets, as to take

quickly and out force XXXX done spring Midland bidders our of in XXXX. pause, the position ranger happened touch were in but in not that anything through we And well. think the Things that We’re lead time. kept as very get and hit package in recovered, to going market. assets in as prices something a the with we those of move with Basin were your late going December in then about we for extremely XXXX. But to were Southern I call And

a Yes. I be ways has think it, about right. So of to it as lot

Gabe Daoud

Got it. Thanks, Joe.

Joseph Gatto

Yes.

Operator

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

Neal Dingmann

debt. you question, around or morning, your Good first probably all. just it’s Jim is Joe for My

a You guys around job. you But doing certainly hit have are guys nice this.

probably the asset on need prepared that cash doing mentioned, improving last the maybe monetization. mentioned will you a bigger free boost, flow remarks you’d the some just maybe about something as organic about If comment

So now end my credit of the would more year or be for you towards opened bonds Do think the Jim. you question do for market your you the do that or – believe the another side is would be you would refinancing by as certainly or you look maturities? transaction sort of just of but again credit good have some that type decrease it on don’t appears market mean, I that a into I pricing, your of all would? think

Joseph Gatto

ahead, Go Jim.

James Ulm

Yes.

the I I is in lead think kind nearest of first would Neal, our maturity XXXX. is with, point the

And so, bond obviously, watched carefully in we as down have the traded quarter. prices second

We improved. them commodity watched up materially as also prices trade

up on of starting to high-level add to you reduce be see and open Joe, how the RBL, transactions going would And want kind quarter. think, flow again, described. here the points to our through do that? You’re to any with other focus generally third in free I cash to start transactions, selected we is leverage Joe the

Joseph Gatto

opportunities work has things a a have I months Neal, in think, that investigating and pretty – from continue has to again, we there’s private capital a it we’re both there deal of in been we markets opportunities expanded everything probability I our success, great doesn’t and it see as characterize hard. moved And high-level, but the highest quite of and bit. couple that that there mean last out this public – have

terms the been and that. there’s what think deliver we’ve that plan And of falling, base. certainly of to able asset you go-forward signs and show I here overlay help only think I today So on in

Neal Dingmann

Very good.

or like question, pad that able Second are to to Joe, the mentioned constraint given a think economics, a you are plans. I for job. maintenance obviously, you forecast optimal still on the Jeff, to achieve great you’re you around be I’m what you doing for just of would operational CapEx, wondering, somewhat have

impact I’m tell Does sort optimal by the facing. you’re all again, through. you design? wondering, return, is that most industry thinking the that You improvements you rational that what all the the just spending margins, the of on that just and pad went can

Jeff Balmer

unchanged. pretty – actually That development Yes. outstanding much has question, but that’s an remained our philosophy

So anywhere Delaware at development to where and Midland laterally. we you that larger, the multiple still a large in vertically have in committed – full-scale both least, targets, the are and

We combined to the – into and areas some very very with have zones. gives two that that co-developed may be forecasting, immediately of highly models the that other beneficial information need extremely our we’ve interesting predictive insight technical and had not some some we geologic us

at majority you it zones, so, you necessarily wait the needs the you it’s in more flexibility be give of to choose Normally, allows either out us certain it not – of vast some to you’re a And and if but least, have the everything it get is back to standard. bit time, does beneficial which if little when there flexibility. first additional come

to optimizing our of portfolio optimize, So each XXXX from which have we that the what sticks program profitability far and as put the both guns drilling in we’ve been recovery back-half and and the units as into XXXX, able to do really is together the a on for development the program there.

given a our the parent-child us put of types stalking doing redouble completion this in to as and of more we we efforts opportunity programs spacing has and So there’s we bit correct break, little and much wells place of relationship. what clearly drilling that tremendous the how and can can on ascertain weren’t where even

in but than I were what months at it we a commitment before, better detriment even tremendous just we what it continued progress we’ve ago. were as renewed areas, a I a see don’t but those to So make doing couple we of all. doing – to as see really

Neal Dingmann

Great details. Thanks, doctor.

Operator

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

Derrick Whitfield

Perhaps the a should and improvements update. or side Jeff, Joe price all, Page great capital how you Good with durability that Thanks. on oil normalized outlined cost think of in beginning the morning, XX your environment? on cost about we

Jeff Balmer

oil And oil the back kind kind of if now? I of question? there it saying where with in hangs think up goes ballpark or change costs if for that right you the that are these is Is

Derrick Whitfield

Jeff, way. it this Yes. frame me let

XXXX for – let’s just synergy think take then the target Permian between now market? spread you structural when the of versus really and and XXXX, your So much how is your assuming about, Eagle Ford the for

Jeff Balmer

Great.

But me you we’ve the Okay. you we been thanks is, the well, cost have were, clarification. structural. give the it that if that Yep, for seen let improvements of the think thing about first. about answer on side majority The where nice short

of into some had, really, there have sand such are that we’ve of the and the to where then in come down But as partnerships some from cost things, that seen in two vendor the XXXX. some we as efficiencies, in fuel there’s it, ticket pumping, some their remained drivers ancillary of changes We reduction practices a day rates, big the year the XXXX some come the which began have best items, and lot. just D&C such extent, their the and pressure a design similar primary finished are relatively the things large-scale year their

line XX, able So place. indicator blue been a to that, good put that changes pretty Page on of quarter we’ve is structural that first in

our money. The same just second-half doing again, vendor which the of things in portion changes better are price majority for XXXX we better But relative the of those be and or down, incorporates getting reductions structural additional to partners. a less have drop opportunities well would of to that

Derrick Whitfield

the go-forward Delaware staying tacked Delaware. then, Great. versus one just areas Are can just do they, to of co-development That’s representative What Page performing well. on results? unbounded outperformance in with maybe very with on the previous the Jeff, Both you And you your and on basis? view, what you are your respective your strong XX. Midland helpful. a attain attribute perhaps projects those And in exceptionally

Jeff Balmer

is all that But and they’re good equal. Yes. again, not are That strongly billion-dollar created Certainly, that’s right? – I geologic very areas representative. question, these rock the in believe

what then we course, of done at was look with independently, zones advantage But legacy opportunistic the technical multiple development we each of multiple took at we Carrizo highly six, – when use work at especially looking of very a when does from one scenario some look development everywhere. flow program, size call that fit units. each We we excellent So which so microseismic. you’re we on the all, assessment data not had

nine within And learnings propagate the relation new the development rock how the to us appropriate wells. spacing the at the And and that to cost clarity ago. to we wells months put and look proved – coupled certainty Dorothy stacking six performance of this on on in be, exceptionally the that able how we in three or results and the project do So – what a less high and good we into Sansom. to that even and profitability with going side, we the fracs reduction and means in leverage has that, have essentially, been were are it go the a and other able Delaware months were existing much degree with the gave take ago, of the

us that. to is to that, continue repeat subset. perhaps have to a definitely an So that opportunity It’s minor

we and put that that project, very are captured, wells, some different Dunkin/Horton/Wright XX Basin, And and WildHorse on, XX for Delaware a actually we’ve So items like proven or in side. the encouraging the project, very information out obviously, gone into both set not costs but basin. drilled a and or it’s certainly place similar the the XX the were also it’s that’s Midland there of the production

which the Wolfcamp well, [ph], wells is nine-well bounded new on And is of wells, if side the so these an we that if that And a into partially meaning, B place. for put we that Wolfcamp purpose which a is, other proximal one B program. some – well-performing wells, were of line, that’s extremely able we thing But think well. about we make the that had where red existing again, AQ-XXH Dunkin fit you you look is had interesting development some at to, program, bounded, parent development unit

able what is this representative do and be I the up our It that, But that sure, I’m of the as representative with it guarantee so. the a is of as everywhere? and I were technology hope wouldn’t performance. that we’ll probably D&C? group in, put to group again, in neck But learnings consistently that so, the efforts and far far. it my absolutely all REs And stick have out improving along goals geos well marrying to is it our completions

Derrick Whitfield

That’s guys. helpful, Jeff. Well done,

Jeff Balmer

Derrick. Thanks,

Operator

And go come Brian Please Downey the will ahead. with next Citigroup. question from

Brian Downey

getting the assuming market credit into get the A&D you there’s for I’m believe Is of Difficulty] what the Good follow-up [Technical there’s there guess, currently large one potential package, the laid a the the some monetization on valuation questions. and can in external list morning, facility? value if curious a I baked credit where your you delta and you on taking you’re between questions. positive but that’s asset within anything out, thanks in Joe, anything, particular, very [ph]

Joseph Gatto

only outcome. inflow environment, to this Again, also credit but of type of it’s going infrastructure certainly the on think, and I pinned proceeds, will enhancing structures be the not give in a Yes. of the water override any any

Brian Downey

the curious they about the anything Got it. the there’s Difficulty] spent front next capital costs we on just I guess, on underappreciated of those lot think LOE And as you’ve that could into year. then, if [Technical that a and additional time we in talking Jeff, XXXX? undertaken be I’m

Jeff Balmer

little to glad My phone bit. was answer I’m the question. cutting And a out

what operating been So to how drop then asking I’ll that. So expenses about with does XXXX? down that you’re we’ve the and I that able go believe translate is, how into

Brian Downey

mean, I ESPs for like there’s year? or chemicals Yes, or anything if that next anything

Jeff Balmer

and together Yep. Yes, operational is into of and going right. to really maintain in very really – and able we XXXX new are a the example Those the expense – strong XXXX. will great. being will this to exactly forward And – together coming be terrific back-half they committing you’re be company. teams assimilating That two of

whether out It all rod the lift lift, in, gas So on best a things? of the side remarkable. how in capital pump how wells, flowing should kinds we’re natural or drilling we wells practices or those it’s whether managements we best on put wells flow, chemical tubulars the practices really or it’s is and when back

the think really having then us things to essentially from to extent of a happen. months make these some to combining to If of been having companies everybody the and the couple COVID-XX, separate from commitment of circumstances a try it’s you wonderful in to together December

leading got So pure we’ve ESP runtimes of over a year.

diesel-generated think we on course, to We can if year the in we that, about if those of them, runtime, which, for ESG to care the So some take the submersible very the that pumps well up matches average going water. pumps put looking them, over from a All solid with we’re these as where run wells. our ability well of operating goals low it and down electrification, working dropping have expense you of our not of getting and extremely an having – to rid wells as extremely be the in shut to the not company on you power, larger-scale and our look helps level, consistent. and water of then some the down sustainability that of simultaneously has, you operating expense it’s improved and from cost field the move recycling having And an to capacities consistent production, perspective. them at be items we’re and spend XXXX over. should very, monitor at

Brian Downey

Great. I appreciate it.

Operator

Instructions] question Will the next ahead. Please And from Thompson [Operator will Barclays. come with go

Will Thompson

behind good Jim. is you. sounds the like Maybe capital marketing for morning. It Hey, impact of

be assume a in sure, should with crew in cash CapEx CapEx XQ? to we more make to Just line

James Ulm

little second detail that position, drop revenues into We been very on Yes. capital good go quarter, rapid bit because our March. commodity focused saw working in the Thanks, I’ll net quickly and focused of a clearly, Obviously. Will, impacted prices we that’s a here. question. very in we’ve

appropriately program. lag and to short-term into if that safely reacted us in early shutdown, that May. a also fall We There was by that to reducing you took and will, our capital

lag us that through. that, second we’re working for quarter timing issue that created in the So

liabilities. the July, prices we look that was has we seen And the call. effect minus differentials synergy your anticipate from and increase, and due XQ probably pretty in of that third on improved of materially lower we the points late of into realized The higher in that our of evident talked XX% saw such. couple June. XXXX, we’ve oil second-half and to us at current plans other in in And have of do the a the throughout realizing May. that pivot seeing XXXX. prices, this XXXX costs A benefits the a that’s completion and high-level As compounding unwind a XX% or development and quarter, really plus April July, gas point, We’ve the you of achievements decrease current where realized prices. we And to we’re the assets modified given and working capital. mentioned, by in more about higher receipts we were We on February the quick payments we saw versus both to second-half

numbers. semiannual less the liabilities sensitive of are to XX were levels. in note accrete The drilling and Some the senior activity interest to June payments

wrapping have over due treatment are also negative the to we amount working June And XX. in capital one-time accounting $XX for some That You numbers the capital I non-cash merger a leases then at also working said, million non-cash. which ARO, probably of operating were as up was payments.

That RBL current than impacted it, be receivables reduced the add So else don’t if into it’s activity I the look that. ties I you of at just flow by assets versus picture Joe, the throughout have current different all will to ability the balance the liabilities, free know cash on as reduce comment the anything remainder levels. to I we much think, year. and a positively think, increasing and

Joseph Gatto

the detail free of But flow flow quarter the you Yes. align, cash past a as there. and similar summary, we things. cash good versus lot think get actual going in free There’s cash – here, to accrued CapEx and the are seeing doing I second start cash accrued

Will Thompson

improving Okay. in you want some what That’s And to correct terms then me color. I’m guys they XXXX. want interrupt helpful But seem in hedging, that do really a I to – it comments strip wrong. is exposure of your guess, if

you you XXXX? exposure in base do plays how understand the and kind much terms me a getting help to how just want then how of coverage role balance curve forward borrowing of improving So in

James Ulm

answer. complement the hedge I’ll have greater within XX% question. tried Historically, great Joe help then we than hedged Yes, been can to start year. calendar and a have and

XXXX, flow into of looked on supporting we generation. free cash increased we kind importance an As saw

of with probably April, gas natural work earlier oil and our we started sooner. weren’t in liked you’ll We And we We We levels NGL timeframe. to get two-thirds really where was. way us target still into see hedge So XXXX. on I starting XXXX. then the comfortable to and an started position. May We WTI think looked

the and level. MEH $XX in brands So we up to paused closer improvement. We waited on saw move

some hedges the to then that and allow within swaps in the XX We’d in the an we collars WTI level by doing So XX impactful there. several breakthrough And cost in $XX, range, XX for those range started price we participation. is us. weeks, put saw XX to last

to and, be And be to again, the the the year. to by third closer really our within quarter – so how of traditional hedged, back XX% the the goal level moves end XX% on will market depending

focus is think, accretive price we’ve hedged, and belief I my levels it be And participation. that, on at collars those that bank likely we’ll for two-way swaps to cases. price will

Joe I’ll and any see there add? other if So has color to pause

Joseph Gatto

Again, a level, looking Yes, that is a We’ve protect detail. flow. we’re compelling. lot high free good flat, cash again, a from $XX laid to of plan quite out

leverage of lot So to the upside. we have a

open upside, and we we So free want can. where flow protect to cash some up

the back on months paper, date hedging from how benefits. to redetermination fact look look “Well, of huge get But but We of the say, at benefit.” a redetermination. it this the do cases, spring think key to As it’s But about base matter is borrowing to roll policy. the relates a six and typically bank you driver the our our recent be of we consideration, banks going not forward it’s

of only was the – November for was point. at got credit we past it hedging XXXX So that

a some – for in can’t be driver. it there be is cash It So, more flows philosophical impact the free terms of there, protecting to long-term. but sole key has

Will Thompson

All Thank right. you.

Operator

the any conclude closing turn And to session. to our remarks. I’d like back Gatto will for question-and-answer this Joe over conference

Joseph Gatto

updating everyone, few you day. Thanks, to next Cole. look progress great Have a we’ll for the joining, and over months. you, on forward Thank our

Operator

has the conference attending now And presentation. you concluded. for Thank today’s

time. may your at You now disconnect lines this

Callon Petroleum (CPE) 5 Aug 202020 Q2 Earnings call transcript