Qep Resources (QEP) 29 Oct 202020 Q3 Earnings call transcript

Good morning everyone. This is Will Kent of QEP again. We're going to get moving as people are dialing in. Thank you and for joining us this morning a little bit late for our Third Quarter 2020 Results Conference Call. With me today are Tim Cutt, President and Chief Executive Officer; Bill Buese, Chief Financial Officer and Treasurer; and Joe Redman, Vice President of Energy.

along so copies go which of with financial done qepres.com our contains not presentation our obtain slide to our results you've already, materials. to please website tables with If supporting the with press release we'll EBITDA In adjusted cash measures including to our flow. and free earnings release certain EBITDA today's use non-GAAP is which conference referred filings call, in as and SEC comparable GAAP SEC measures measure the These the are and to earnings filings. most reconciled release in

refer numerous forward-looking actual control. making of call of We filings. remind materially and In our We disclaimer our SEC be more our addition over statement that, beyond earnings forward-looking and these for many statements. turn I'll to everyone release that of results to from our we'll which With discussion Tim. are reasons, the differ everyone business could our robust a facing forward-looking in our statements variety

thanks will in is again I'll This performance. for begin the apologies patience. and call. the hear with you and able Will be and for recording. Good joining overview quarter our and operational Thanks third thank your of morning people to an so recorded dial

principle volume We while We on focus delivering to value free cash unprecedented remain significant generating down these are continue holding pay firm over this debt. focused on to costs, through times. and lowering to flow

on brought the East of result Permian, well being to declined brought to Bill XXXX the in In net to forward as Wilson over discuss of deck. Nine DSUs turn online. pad wells quarter nine in look two as shown wells quarter, call wells wells during Early as deck completing curves brought expected also day. Production wells the the and online are IR update, financial during on the XX barrels third Wilson the we limited outperforming as XXXX perform I'll XXXX. performance. delivering Following our of third slide non-operated my our and quarter on continues pad are new the on and four slide of oil we X,XXX type IR to remaining now per their the the shown both approximately online were Disco a

running operations month. Permian in the currently earlier are two this completions resume and We rigs

the million guidance Given increased with the during Production the we of additional third fourth greater expected production midpoint the Permian, with during quarter begin production along leading increase quarter in the in a our growth performance production from oil barrels the rate than oil to building exit quarter the million the the in XX.XX to an to Wilson us fourth activity to expect XX,XXX during of along for allows XX.XX XXXX. of barrels day.

team and efficiency. continues also cost completions Our to on drilling both and improve

IR and peer we drilling XXXX. wells and the of delivered a from As exceeding per XX cost to you deck, Permian quarter and of $XXX can cost in and the in the see than completed during We less our foot completed first a during X,XXX improve feet foot completion leading. are year an pace lateral three at $XXX day remains of which anticipate fourth average were budgeting a quarters slide drilled the at

activity as an $XXX increased from a $XXX workover industry result was million in deck. Through LOE timeframe in lowered demonstrated and in primarily of been returning XXXX million. BOE. per compared in capital is have the BOE XXXX $X.XX with IR on shut-ins as wells expense deck the three G&A same is LOE Permian below on production. focus our slide quarter per the to the stimulated deck. business XX come to full XX% capital slide in performance spend the slide per G&A the approximately day up the I In of as to $X per approximately the year well at seen improvement for on as for remaining on down of the expected of spent completion finish to outlook IR BOE XX Our will and efficiency, terms continues the IR quarters XXXX. on of our feet full current we of now above in demonstrated as XX outlook to less average continued XXXX first discuss briefly to

new pad our XX focused County Disco we we the will the where XXXX four program wells. Although the completing on complete plan Wilson, in development wells be Permian anticipate to remaining Line in primarily net the the of area

cash program and barrel. relatively to expect of price WTI this maintain flow flat approximately production free We at per delivered positive $XX

costs, more to in during In than Although expected $XXX the flow $XXX additional increase announcement at deliver new and cash million have XXXX wells XXXX XXXX, complete of forecast development to And million as a improvement our million expect than result generate in the $XXX not is earlier. receivable. to we we to in approximately in in lower free drill positive the base, from and we adjusted flow free more flow cash XXXX. of tax in did cost an $XXX inefficiency to capital summary, WTI we lowered cash spend given of XXXX capital discussed continue of expect and our continuous $XX our and to to expected free efficiencies have million expect related

liquidity development while be acreage, developer activity We while to results. ability to in move County well through to Line we as third will a we the of are unprecedented our recent demonstrates believe core well-positioned quarter turn along I things continuing Bill this Our low-cost outstanding our demand, now to delivering pay results in discuss normal. to with reduction information position. financial to on call debt the gradually to look forward returning down

you everyone. about improvements updating Q&A. on you position, guidance, Thanks providing results third details sheet this some spend XXXX balance finally, and I'll call our time to the my quarter good including Tim for morning liquidity and and with our morning the our opening

on I receipt million million the announcing $XXX.X items highlight the of of On noteworthy quarter press AMT to XXXX. have we that of that second those redemption of quarter. credit couple which interest we a us remaining refund, before we our updates, $XXX the we notice wanted had the However, outstanding left We notes. August since included fewer XXst, completion announced issued income. XXXX during release for of $X.X which third announced that September of million a with announced we followed of notes announcement the August senior our senior XXth, had providing that than the On XXth, redemption, with

asset additional $XX million AMT our from approximately receivable quarter of we is is within to an as an on a credit next received carried income tax refunds of Finally, yesterday, additional we sheet be the reported expected that which during the XX million and current months. balance recognized $XX

and our of cash should on hand line We earlier us continued improving creating free flow allow strengthening refund execute of balance hand as sheet with our along our value is refund our additional anticipated XXXX the notes for the redeem continue are with than repeat cash to pleased to allowed time of shareholders our expected. million to receipt liquidity. through cash receivables the receive ahead our AMT notes to The coupled the the of $XXX on outstanding generation us plan and remaining AMT

despite We another ongoing the results. quarter strong third results our of market financial to delivered quarter challenges. industry and now Turning

second provided generated quarter, the of flow net flow by $X and in the of compared cash generated improvement we XXXX. of activities reported $XX.X million with we a During operating the free free quarter million cash $XXX.X million, cash million $XX.X of

$X quarter, in we prices. was in generated loss to quarters in quarter; We primarily the returning million for second $XX in third XXXX million the of derivative workover of by in expense the and adjusted primarily million. to the million of reported outspend both in with million also have $XX quarter million offset driven free of derivative combined in and three largely million a to million EBITDA, second quarter. The $X.X during expense. our to levels decrease $XX driven free million first, compared second accrued $XX realized capital largely third net million a net with a and equally activity more driven million by total costs. was second of adjusted in $XX net in compared A of $XXX primarily loss in a decrease the sales $XXX.X increase more quarter. operating $XX million a $XXX improvement tied two in an in losses by flow a the first $XXX first XXXX, activity The interest Combined significant compared the partially transportation of million by an with quarter. We oil LOE a In D&A of typical now decrease completion peer-leading generated net was by EBITDA the expenditures, higher cash decrease the d third The by were to $XXX was the quarter, the which $XXX impacted in up during and realized increase compared flow. million, $XXX the quarter the than loss decrease million generated reduction and in third commodity NGL $XX factors; three $XXX.X decrease million increase a due the driven quarter nearly increase quarters our cash million improvement which gains drilling during $XX in increase was as important increase and and expense was million a

decrease plan. Finally, G&A more deferred decreased quarter-over-quarter, our million mark-to-market due the $X than expense of to adjustment a compensation primarily by in

the per enter million XXXX. of and swap oil to currently totaling continue into the we for contracts $XX.XX during an X.X of of price at barrel average hold contracts We commodity derivative barrels remainder quarter

For for contracts at contracts $XX and barrels by an XXX,XXX totaling the our on million details of at derivative XXXX, barrels price swap Please see totaling XX.X additional we hold costless $XX.XX $XX.XX average portfolio. a XX-Q collar. approximately currently color

and our to credit gross balance million no equity quarter, $X.X billion. sheet. cash $X.X under outstanding had approximately approximately total hand. of borrowings Turning shareholders' Total the and the approximately on were third billion. letters end total $XX credit our was $X.X of We was million facility, outstanding billion $X.X briefly At assets of debt of

junior and front, borrow million to indebtedness could $XXX remain million liquidity to estimate under in we quarter of that end we covenants. financial at the guaranteed compliance still facility up up On our our with and credit incur $XXX.X

XX notes deck. With You during those notes of mentioned redeemed liability side I our the the liquidity XXXX outstanding. find senior IR about than more balance either XXXX our earlier, notes repurchased as sheet more the of $XXX have the the million of to on $X.X quarter. can details remaining slide regard In $XXX of of billion or our million now redeemed approximately senior we leaving we

have we $XXX XXXX, repaid January since that debt. outstanding see more of can you than now XX, slide on shown As million

operating approximately The provided for Tim lease of to guidance decrease the $XX Moving other shared results expense, have just of earlier, while yesterday's transportation to guidance This additional per our guidance. related our in million cost call we finally, as midpoint current our for other guidance guidance, our the on G&A BOE from fluctuates in to total will the the market for decrease oil earnings our of see already as questions. million quarter I'll per QEP $X.XX per $X.XX updated expectations processing $XX.X guidance couple per $X.XX expense XXXX year. expense $X With guidance prior midpoint BOE release, a at midpoint, stock reflect updated is balance company's now updated and represents the so which for and is production open quick a our at that stock of as deferred up details of cost midpoint guidance BOE. general of And our $X.XX capital adjusted investment provide compensation changes. which quarter updates. for XXXX on with XXXX guidance. for for price BOE is the and The the lifting this midpoint, the well guidance. million release Please share-based a was from of prior I

Thank you.

be now you. [Operator a We Thank conducting question-and-answer will Instructions] session

comes Arun JPMorgan. question. of question line first the with from proceed with Our Please your Jayaram

CapEx was the guys. of maintenance take of decision good of I growth. your previous to kind outlook was go your wondering We mid- a Hey, morning, if do I kind more note of think that could single-digit Tim, you versus you to – mode more a down did maybe address expectations.

a what activity Yes. the we're on the of the the that? How to exit to look a down, math. – to Part barrel we changed just at haven't we the sure enough flat up delivering lot appropriate started do bit with a cash. XX,XXX just the you focusing amount if It end doing completion year-on-year. that was we consistency math, more year make rate. do a XXX,XXX of barrels, We crews going the goes got We're about We're cost a day XXXX needed. lot. earlier the getting volume And whole our we with math we're on deliver of little

value really over volume. is a So it

And it to didn't and don't try draw a see a in until we so year-on-year the volume need we to we – price. but grow flat see growth

So I hope that helps.

helpful. That's

or replicate well Thoughts asset of follow-up it XXXX Just think you say? next the level year maybe on development. is county to productivity net we we've about Tim, about productivity, University good on And my ability the program early the well some to line seen pretty XX of this wells. too talked the as

it's in the fields. there's as formations you little of a through say early can changes as all think I to geological work imagine you these

next little a been I bit We and that interference things of little in think but bringing it are as it's think replicate the risked have consistent positive throughout, but right in mean We've real I against so move has we We wells. from That a a spacing to I change with drilled so Wolfcamp somewhat the we and replicate. bit. moved lot, all a down Dean see And general no the little online the XXXX But geology. surprise. carbonates. a a we're wells tells us alter try be I you'll south early will to previously that. the say hope to obviously away wells do

But as But in of we'll So the we go kind have same results. to. alter to update us to these there. yes, performance need gives rock We'll year, to continue the to we as continue see good guys. we hopefully, the continue

Great. Thanks a lot.

Arun. Thanks,

with question. next Our Instructions] Please Stifel. the with line from proceed [Operator comes question your Derrick of Whitfield

Thanks and good morning, all.

Hi, Derrick.

to Perhaps out. Tim you for start

Your at on charts team clearly enablers the industry your deck. the to different Page key and In as XX what frac view a is one of efficiency? your the are by to operating level two efficiency of your evidenced XX IR relative

he's All accountable right. all got We Joe and good Redman for delivering here things. these

So over to turn I'm that going him. to question

we've that's course and completion to of you. Thank time drive over morning. that our I disciplines. right. you've All seen Good that both down would on say drilling the Actually happening continued costs.

the goal cost hole and our is TD selections more to we drilling well continued we've optimize quickly. we that at trips get motor the of bit number out As look there reduce to and assembly bottom which in of the the really so to

down we've And at do And wells simultaneous one-time continued So front, phase. operation. we've there on the is make improving pot then some our at that on we're cost we are a which efficiently move through frac is of as guys two technology of the you wells that work with pumping to that on and efficiencies. with as where driving completions front our we drilling shared then to advances we thing look continuing key before,

recall period. fracking within frac the then picked quiet Tim of you earlier over coming efficiencies and record got to use mentioned, track we new We our period back back actually in up a in and very, XX-hour shut for month As back very just hit prepare activity plan a a this team days. we crew down lateral few quickly March a that in back on as mile

month. in this Here

job. So the has done team a great

have there And great we often on which is been driving the seen after month done as over again has XXXX cost the on just job around we XX%. XX% eliminating driving cost. just us which downtime we a we has rolling But eliminating time on efficiency running something do lowers same keeping an as get And done gets pump designs down team frac this Our continue we pump And focusing wells. and can historically use as the pump more up and averaged we to quickly. efficiency have back time is focus the we average efficiency, measure downtime. there everything

Thanks a updating quarter your Bill as your organic Great. cash your address detail. XXXX and And there deck for path outstanding profile low that price a for utilization and a now operational my guidance, to Is follow-up mid-XXs XXXX your for view? to notes, of our free model in flow assuming after to at assessment reasonable the credit your facility. be appears perhaps your Bill. a and

Hey, as to flexibility continue And have that take coupled Derrick, now is there sitting of our prices improved. across is we believe which the is $XXX our this we XXXX. striving day much under path Mr. that. between to generate to mean, Cutt, a stands that. and That's our that we front with to again But credit today possible but flow maturities. for We're debt I it don't of facility is as frankly the mind we're generate important care to possibility goal of every address free million topic, then I the do to daily. gentleman a free quite talk me that generation, as it cash goal. about our know and going with that our address certainly September cash to

and think there is something is there. success on to path And So one that keenly point a it. it we our focused on is number at list are this I

Great thanks update helpful. time. guys, and Very your for

like comments. questions to time. at now for floor over further no closing turn back I this have the we Cutt, would you Mr. to

focus on paying for debt. Thank we'll confusion Apologies the call. taking see hope the I our of again to much. very But you down down, at All costs beginning right. continue the that you

time. And price it can we tackling cost give biggest blocking I more have during this the reduction. best like to not really believe relying last comes is to did call to the I and we thank recovery. We're want do we on difficult to thing again organization. The possibly doing Just when our

is how organization. They're and to, to we're company you're guys super You this fashion run a delivering. can to up to you the remote out our single special safely and the field the standpoint need proud into imagine organization work of They're everything a an stressful every taking things in appreciate day. employee from shout showing and

that I the So with we'll call. think end

Ladies and today's gentlemen, conclude does this teleconference.

time. and this Thank your participation You lines day. may at you a your for wonderful disconnect have