Abraxas Petroleum (AXAS) 8 Nov 182018 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to your Q3 2018 Abraxas Petroleum Corporation Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] I would now like to turn the call over to Steven Harris. Sir, you may begin.

Sidney. you, Thank for to everybody conference few late, minutes I Abraxas being Petroleum welcome the earnings third but apologize a quarter call. XXXX Chief Bob’s of here along any all questions me Bob may Accounting answer our Officer have, you after With available to and Land Operations, are VPs that and overview. Engineering, with Watson,

our everyone conclusion historical a vary would could that in not like be Exchange available these turn Factors that will press the Just call reminder, filings our call today’s encourage in would replay the during in would made statements. to that, cause as Commission. and statements to review filings statements results those considered Securities I is after releases. any contained webcast statements, everyone and of the factors this results a With to the are could risk call. and I Bob. actual to to from I remind actual being facts our taped, and that contained in forward-looking the with immediately these materially call vary are described of over are like

bringing little and people everybody the Pad, in in. barrels hope time two a own the currently. the It’s I a good call XX morning. up-to-date Steve, Texas, I’m for the we out In two-well Delaware which happening about into off days better this from the just is what’s Mesquite interest West wells, day start -- on you, X,XXX back in basin, Thank XX% there over little nicely. flowing by afternoon. instead jamming a bit most of of to going our

days. peak the next So, we rates in expect the XX

Operations on a going Creosote, pad, are those drilling along wells. two we own rig call normally. XX% interest in Our we is two-well

frac yet, month should this the we own wells Pecan rigging be frac and -- flow We move starting actually to here XXX% pumping well after hope going start the we pad rig but it by time and is a of Pad, one be hopefully a this first sometime We have which our be then, before two-well by And of production year. wells That XX the what is of our expect those month. We that exactly second the on least are completed The well Production in the early weekend, the up will on it close at don’t we or have end those shortly spud to back ownership very speak high. then as we end frac know XXX% those the Hackberry operations quarter. will well. fracked smoothly. to interest. to scheduled

child that child. to downspacing XX production. probably including in X are X, that interference but a our wells zones We least close, at between see and that don’t our producing have and going data we Wolfcamp now curve that appropriate parent tend spacing, still now our finished news area above study and obtained, the say the We economic. of Good significant has the Pad. micro the engineering wells is now XXX and finished We want group tracers after still do thorough between the seismic are we and on to have of our We Caprito are wells. very type would be have between the Phase is -- monitoring feet Caprito and to the reasons difference a the to explain the right Phase evaluation

October, have tested We normal. frac early Dakota, winter that weather. Caprito you did when our our in at for will downspacing. the think into surrounding not area back North of ultimate early would to issue, severe an where in Phase X. winter acreage we starting in report the have arrived least jobs decision little less So, has that we becomes than less finish we earlier spacing, and And we the finishing the and and In November, a run

to well Northeast Good We by road have. The is we the finished, week north pad weekend fracs the will in for they shut should this and back days frac hall the four last as prepping wells earlier fuel pad couldn’t flow this down frac in or finished is, wells frac we four October almost central being that as because on frac be the Ravin earlier of start underway, immediately we then, which fraced in protection. in are despite closures; those oil, on back sand. news were

We also in frac the Ravin six protect. for pads have wells on older shut

scheduled month East up in a the and five-well company-owned Bakken So, -- and The rig several pad. flowing production any weeks, to finished to summer. pad -- is that summer next to will continue extension don’t drilling the expect anyway over to XX line, which until we’re on until very Pad, four-well schedule should on ahead wells going have is frac winter, of the next move jobs drilling the The a all throughout December. we drilling the on weather Northwest or new have it is rig when nicely a but drilling it’s pad back, very starting the Jore dramatic in Federal coming for rig boost Lillibridge means

Delaware and In $XX million, has the for And in future. Yesterday, our $XX which It going for non-operated facilities. This We’ve for partners a complete continuous like to by million, do. million working us. released everything So, continue and/or subsequent program acquire flow. rig buying free to we about And budget, generate comments goal months. major designed on in drill a few with out our several a our includes is budget $XX wells That’s to in goal of Bakken of our XX several complete drill XXX% and for acreage XX we XXXX cash Board. been and/or approved our units. been that’s We’d wells our the every own forward. bolt-on interest certainly one we fracs we have will Delaware, will acreage. successful existing

the during or acres our So, thereafter. that it’s announced that any, won’t not will which our we existing we our summertime but -- rig we June I so we till changed drilling to completions note anymore should in drill time as sale X again, interesting goal Bakken Up their as that frac known ownership the continue we our increased is value last footprint which one acquired has program to at is share around, which well long months. for Bakken, value. production a announced price to Bakken the the XXX and said, footprint. QEP upcoming warmer in that considerable in ready somehow in And weather in have wells frac the assets runs have months. shortly that crystallize this we’ve of our And time my Bakken week, bring asset on It’s confirmed

somewhat to similar be in the barrels PDP greater Bakken. of come day X,XXX cap. up number with current that’s producing expect received metrics to a sale used their December X,XXX in And type than our the high market We QEP assets, a you’ll if that net in

undervalued and it that convince try to for the is substantial to are goal my has value. that’s shares our free people that and Bakken So, going is

what starting want don’t is. start guidance to year our the we as far until goes, point As we know

So, we’re to to well, wait and XX pretty rate’s until the to these one much going be. back wells know we we going Bakken what have flowing Delaware exit where ultimate

for done guidance somewhere issuing XXXX that our means also Christmas for flare probably be the this to tried this flared different -- before avoid internal right the toward is surprises that year, of to What be we’ve because frac we’ll and December. protection gases model So, to middle past have in account we or setting due year in the in lack had facilities. of wells to

never because for and into that. tell, and be you But an will try frac be entered we’ve have you into representing operator. us operators offset can’t don’t what of in time fracing predict near we know wells were surprised anticipate going guidance, when and shut when be to can So, well our to offset actually account and shut wells might for on it to What we model, our we protection. the

I think timing our ins. on shut the better on we’re getting

them But we unprotected as help. not will long to the shutting also have. we conservative and in could well costly as shut that We’re have so an wells know cleanouts certainly that having and way go that it in is in very past, certainly the avoids to protecting frac

So, overall, to guidance our be conservative. is going

-- all our our it And and And our on are curve will our remind actual curves should presentation continue now. was they type might We’re curves. you our on corporate associated using that you see curves I in those with included that are website that that as type X-Ked Tuesday our and the latest type presentation all be type beat to our productions we regularly pretty of And projection. appear website.

that we to beating through Bakken anywhere shares close with continue the allow on Delaware surprise to gradually business to it for core back there’s is. free increase paying our initially down flow cash to manage and and that will model, to right level that the hopefully It Longer the cash come trading. we’ll now. nobody proceeds ultimate do no some the get as our with And to on. should generate they’re down the we our cheap goes So, happy which in in into or buy our debt we’re flow, will shares. in goal that go our plans type to till curves free term, our as that And fact from the pretty creates go cushion areas us our the going guidance assets my time and that start buying are to be year, are near guidance can way banks as

and to cash use though it buy of be shares take accelerate to price. activity obvious an our trading So, is could of back our used flow, low free advantage even

questions. with it So, I’ll for that, open

comes with from [Operator Michael Stifel. Scialla Instructions] Our first question

is open. now Your line

the us but on are strip I based saying at least Is or flow at guess, you anticipate an are price? you you’ve lease, that put yet production official some current guidance anchor you free guess price positive. ready I oil given I to cash realize side lower there be not out going on

like time That’s as which average about anyway model flow anything or we want oil the the into don’t throughout improving business, business held those year. don’t goes current We them see cash earnings we in prognosticating prices. who on and strip current your is maybe our why prices. on And constant oil or but It’s the that because ‘XX, during of actually we guide knows get to differentials.

double-digit some guess, that? growth, safe fun. strip on you numbers, that, given that’s at I looking always now, based our we right Well, at say are to Right. least if

Yes.

XX I on our because think The your going generating and on and be new with wells we exact amount, to our get wait there’s to a have are until on wells growth a double-digit comfortable month, until size a no that’s out you’re company just way to rates get are what them real those you putting production. we comfortable to handle going come going be forward. guidance very this -- what XX actually to exit going with actually

representative I too confirms think Caprito Phase What said to at on you And doing or far. do much your X is be spacing test, the what that this the Caprito level to believe wanted with acreage? you will area do you least other ask you how Phase X? of so spacing XXX

X. at These making Phase are which be gut that be But, extraneous But, we I be the miles about lot Delaware tracer wells so, think got the don’t area, area, neck our say this curiosity XX think, our or we to want from our water, actually going down to of in work until comfortable sneak are miles, Phase which X that on going wells water. appear the Greasewood probably now is water producing. the spacing has to we area doing XX all up. similar. that information is I acreage tested is all some with least way some a to the through make we tells know it. we out Mesquite

could that So, significant we develop to the to impact want try water and on leases forward. how source a determine these of going have we that

as it have a very mile have water example appears disposal that we have high And well As into that we similar being are a might not water confidence a about the that same wells water. are that prime a making level fraced that the into a Wolfcamp to is well, what is that which away. disposed we

that lifting underperformance that good we isn’t very the water the at normal could we’re all the bad. seen very wells are well. So, some is, the certainly that And explain cut that with the those parent comfortable the we’ve can And spacing then satisfactory. But, that wells, relative future of if total fluid point. to XXX underperformance the get is news in

John with Our Aschenbeck Global Seaport comes from question following Securities.

line Your open. is now

promotion. the I matching limiting manage flow, pretty getting just the program? XXXX, or aggressive on buying which buybacks questions that potential you -- on cash one those then perhaps flow buyback there prevent free would back else? to secondly, One, any bank along from up of outlook congrats leverage with would Bob, you. Steve, of you look that cash was would type how like to And follow-up in for something a terms a covenant thought there specifically how managing could or it interesting. in And buybacks, shares, your Couple for of free lines? just factor that Whether envision something program? be you yourself with do you metric be

would free dividend. a what fact currently covenant the ease statement in and We the get I that levels cash are hopefully from was, making have very meant cash buying back start and generating want in paying equity happy that banks agree a that flow with And leverage to part we shares. they free my are precludes we that conservative, bank of buying us happy let to to flow our us them agreement our back or by restrictive

designing SEC I’m morning like can’t to in the as a as limit would trade days they I’m you the dollar but to percentage it, in or early not trailing going be that are volume the XX you on I yet, with as as There corporate I limits things puts comfortable can. as learn. far that well buybacks, of aggressive As entirely evening, entirely. like late that to

some we’re EBITDA, X So, times that’s we a plan. and there. between selling pretty of EBITDA times are will X if at sort But XX and with come up X it a selling properties arbitrage good to

So, it possible so share trading us to sense aggressive long as for as low. our prices be as makes

as agree completely Great, well.

plan portfolio. follow-up for I to the in looking bigger envision love just Bakken. at on question a my term So, looking would picture long get and what thoughts you overall your as the long,

valuable. is XX think extremely which or very it, that plus more locations that once be your You PDP minus asset left perhaps wondering, value PDP, it the has future, I’m whether have, call hands asset. or there, someone in a that less will obviously or near or it are just But, else’s? not primarily in more And you if asset,

is thing is the to various Abraxas. be good, going time with would of worst to say, people over all price. it’s alternatives of to would have. next I’m Obviously, are the outside of financial be on nice months case, depends I a that to them which it a lot lot with going talking several if there. try cow. for that best of asset, that we value see and huge spending be what somebody full There’re In money, yes, But are certainly, the goal to is pursue. cash that value be avenues if source whole then would investors wants to we to pay The the were But, consider great to that for buyback us case. convince be would a there it, might other that a

in be trying not try on figure going anything and as be but to of jeopardize that which to that we’ll reach or expectations working best it. we is to We put comments value, like operations certainly But, my we thus to process. way that certainly can so, And yet. we are on transparent the way I a as out decided out crystallize want have don’t to or

Thank you.

Our next with Ron question Mills Rice. comes Johnson from

line is open. now Your

you free to XX%, Just X% When beat one flow free dead magnitude, even than about or you levels on of of the that? of talking free is yield just it terms are of to generating cash about order flow, higher flow horse. cash in cash the talk

all telling be to say… prices are -- you’re and I’d Well, that going

just strip. Well, assuming

the but one in generating pay bigger solve that get down banks say our in to in up debt shares. we to would that is the of magnitude if fact a magnitude. And I’ll that frustration I it’s take the that. cheaply but to stage, and lower see know buying $XX double-digit our a can growth back of trading way we free generating flow. to to cash it our into and At And to our And with very the and bigger It’s our be own that own for like recognize I’d becomes and we range, good with that that level position hand, things shares in shares objectives. the important so is strip, buy it’s part. are on people a one is think back early

And question, best closer these a is as little just Do is development best development once you to to just of a still on meat you’re piggyback time in terms the you it of of part also to have terms evaluating of of PDP bone left -- bit evaluate also on where the the think alternatives, go in probably that’s you last when standpoint? harvesting in the get the you or Bakken, time. given John’s

anything I want there depend are people little are looking that of bit are left bone. for a the they market development. but meat yet of think the high on that and there would buyers PDP give the that people that out on strictly And There PDP you’re level at. won’t

developing we with be a I or then do decide start be somebody rock property now we very will options let and asset, And we’re think, have could we high locations be PDP that now. to the something working our and additional something off which happen could better fully and great it So, this all doing evaluating interest.

those they’re valuable remaining So, assets, locations. very

especially -- the great a acre Permian, acquiring position done standpoint existing mass much swap or job X,XXX interest your of your the on of do how you’ve the my around more more are think much add interest operators thoughts that to question getting some point. you Now, in what from you? to that in How a there, footprint critical through and incremental can swaps larger you given you have, and

I rock majors can But, best in significant we But, Whether play, the which identified is a of think good paper our Delaware, value best still add just the good. additional area, big another independents. and happened add And by we’ve that Ultimately, some says recognized to company that’s others happens. acreage before there’s big this out it’s recent rock done Delaware. that it’s and of rock. that room be amount as the there’s some bank there there, the in well is that’s this a we to in

harder getting it’s So, deals harder to and done. get

in that wells holding fast they leases the We that need Lands wells have There have drilled and to good not or issues moving they’re might marginal with relationship get with are future. very might that in of some University and hurry, holding wells, a the companies help and us capable a themselves.

to I might along an potential what for opportunity there chunks as see but a of be lines. of near nowhere we acreage, those do source bigger So, that already have. And something us

spacing, acreage you on XXX inventory to our But, at part that of XX-year XX to beyond of we when think it’s program. our that. could imagination look that’s do now, the I at rig anybody’s realm least

rigs more guess that. but We digits on that two see far we than haven’t inventory still go increase endeavor do. double my question how going and could to free we to But, is much modeled something need flow, generate it that’s you cash how I to far production be and out

done. of and VP work we’ll them we’re like our head certainly all a seem development around work they looking and of So, lot with be get business weird and and of opportunities. we’re they digs comes to doing able study do things up for scratching sorts that Schwartz, Dirk and

and takes a do that fortunate type that able guy very to So, it he’s be here doing to we’re that. Dirk and

there. he but will make whole not add little big continue of a they deal one in And to a any pieces make So, difference might collectively lot here difference.

then, And the last one.

about point on that laterals the with not of length, just lateral you better? latest update talked diminishing data reached an point longer seem couple Can at some provide commentary given another you’ve is of may and about longer there. us it on months thoughts always You returns your

Well, I’ll what, authored guy next you tell that is sitting study right the that me. to

let to him address So, I’m question. that going

Yes. in total, more hard, it’s we It’s our Bob. wells basis, there Bommer, laterals the vicinity. per Engineering. foot obvious do oil on not. XXX study as We whereas work Pete of out could. And Thanks, as pretty make data in a hard VP that longer they clearly We

optimization a per lateral drilling basis in longer of foot point returns rate in an based X,XXX, However, XX,XXX the rate our parameters, in our the diminishing economic our studies, with perhaps cost on with laterals. But, longer the of or length is for somewhere, a there mid But X,XXX of longer, the yielded maybe savings diminished all range study, with feet on return. lateral all feet. group

that haven’t to seen time anything finding. certainly will time. we be changes reviewing that worth from it But, So, recently

Fong The following from question comes Canaccord. with Dennis

now line open. is Your

vein following here, thoughts. little bit of kind I have just couple similar got of a a

the year, I’ll repurchasing cash down of -- and your you repaying do metric, debt what Obviously within on necessarily that? kind purchase And a kind to How that. actually essentially around mentioned going understand Delaware? account shares, asset of think just cash do comfortable about you at you to loosen to scenario net both value, do I accretive to feel repurchase bank it what’s potentially then, You the to basis covenants want that. call curiosity are versus are debt flow, allow mindset back But of context share not -- you where of if more relative to balance the your shares to land out to level flow with like or acquiring I versus respect next leverage just paying

debt around is ultimate to our be think I to times EBITDA. X goal

well. seems I guys very as in up the mantra with up comfortable think that’s be Canada to there. you It

that we there be far are as forward, I on and X comfortable keeping buying at the we going And shares. debt yes, So, spending will as times rest think EBITDA back very in ‘XX.

there value our versus to drill disparity are wells or it it’s where a shares. buy to as buying long what is bias huge more our toward As shares us acreage costs trading, between to going more activity

share Now, price kind of up doing But a then slow EBITDA or that in we if right to near no-brainer X for to with fringy do something stuff. higher any buying decision heads core And along start scratch of our buy I and on EBITDA. a and shares we X trades keep multiple, wells make we down more our the it’s have those now and shares lines. drilling or the asset are anywhere cheap, a kind we interested trading area. at not can’t in times do

mind buying the You of a in/earn-in farm with that kind shares? drilling in farm then versus does how mentioned potentially items in of the well, back your of and there kind balance

acreage, if such acreage would And a priority one, take certainly, work is higher the share would I would we shares. say quality can don’t to do high any than deals a that probably do We in rather to would in hand probably back buy our yet. continue We have would area, hope than we that then on we take of can a those priority that, on work them. if higher that it buyback. because

just on And operations. one then, item quick

on little on call your of upper or land a XX many layer wells operation of are context data -- your the you upper upcoming a go operational XXXX how into the to bit going Delaware, Bone that Spring. the incorporate Spring? on the the of basis forward in within you it that, So, seeing wells budget now have Bone how And position?

as is, I the don’t equivalent. with know one. XX certainly know think that Springs Wolfcamp much What I I on of now targets know pretty are third Bone we right wells. A-X, the comfortable have I and and those curveball A-X very you being that do

really -- it on it doesn’t matter to This so in to oh, our yes, It’s site So, me. rack. depend not well to where doesn’t show. section, show wine going the the as harm does hits

it is just Bone is XXX Here go. what Woodbury -- Spring. shows we next the --

Okay.

I if number. wells better -- on another testing fill too. three and of degree So, and add third it that like testing on two-well, back will possibly have to XX go going my continues be what we’re B don’t mix one, we’re zone I’ll probably we’re going that upper those zones ski to the Bone the I Spring -- to got two in those a the is, perform to Wolfcamp all to key to

position good that equivalent, when a one it’s go the So in, picking can’t wrong much to that other. are you be pretty you have many over targets by

Thank you.

Parks comes following Coker Our Palmer Noel from question Institutional.

line is Your now open.

of that’s multiple trying thoughts what keep the to acreage. options have you do on and codevelopment ways your I on imagine you still that zones future. any as So, look just think like I’m But and about the making progress in for drilling, folks primarily nearby in too, a might do

You mean multiple zones in the wellbore? same

Right.

expensive. to technology the very it’s and do have we It’s think risky that I now.

with and out the a better using figure that do So, guys experimenting to keep way we’re to money it. their big going to let

We will a stay it. that’s writing happen attempt before company it up and big, big right we improved And economic what I’m it future. standpoint be we on. to now, things to with But an risk certainly but what’s But that off. from in do, science have not going need a standpoint just fit the project. could doesn’t

I’m industry between agreed that is that late or Delaware seems a of redraw anything does basin, to figure that just sort industry, overall into the fringy with I takeaway Got XXXX. was that the where what to to far issues if this don’t solved map you as might in be looking cost cheaper in consider something economic redraw mid-XXXX start of out, you And of happen. consistently turn will point or entering bulk what the the the you. where you? the of for out that want fringy -- will it likely that we also transportation as either further get assumption to rock, could map corner do And are not there the -- transportation wondering but best you by is if of you

the I don’t that going or the reflecting to guess, it and it so. get better issue’s transportation get I could. I probably happen on, better to the right think year next in now. as than time happening goes foresee market’s

about mid-Cush kind oil XX. in in the $XX $X differential month, is XX And done $XX one I’m the offset XX, is net-net in differential of about peak the to digits of decrease which gone an it. from prices, you what at It’s at so, a differential look has month $XX of and just October. if net-net think down single

So, or And for news, another it’s not is it of people not more concern and project to having barrels happening That I in. think there us. so. happened with takeaway heard shut like today XXX,XXX capacity I wells to they was major has little a anybody. not you Plains’ And market I to Sunrise found actual hear item. have heard that

that it’s takeaway up, certainly a gone like going to from a impacted, day. reduce things issue Little going as to to XXX and help that it’s that’s XXX And well. that differential day the effect So, to takeaway considerably. is almost that add

Our next Instructions] Ray [Operator you. Thank from Deacon Advisors. comes question Energy

is line open. Your

of the your wondering be will was a or next same you it will saying year try you’re will X,XXX, footers? X,XXX I average lateral stay couple

doing X,XXX, We of all around to some that laterals opportunity announced yesterday laterals. longer we might be have do current just the of end into them entails our each. planned. have of foot that towards to an year. going they’re probability, some the drill we all X,XXX We In budget But, get

terms of share you non-core that mentioned there? have to flows. constrained buybacks, dispose royalty some rig assets you or mineral like constraints you on or cash know I in But, were you same were if or And something, the the the would acreage

know mineral’s to they’re we would. I pledged If bank the pledged. line, don’t if

to the shares. are divest use back without that assets there agreement we could So, yes, possibly proceeds like and that some buy bank

And one Steve. I for last guess just one

debt permanent kind would somebody for think that, you where were like more cost or approach financing? Apollo an If do of debt to your like be you of

few are that’s obviously harvesting a And our but safe that a size it’s would, that mean, for size. loaded to currently I what I Company times of question. we’ve to think exploring digits It’s and mid side. explored on wouldn’t be our low appears it that say alternatives double a

much. Thank you so

comes question B & Brewer with Blb from Advisors. following Our John

line is open. Your

guess, the just that In things most I had the article of no about production, the And was the lithium. spend research. certainly really my in States one time not part been today. one Chile Triangle an last water Great I the across had and world. anything wells. they week came from United development, in and question of that doing rather almost I lithium my I But utilizing have like And retirement, oil of

the Somebody and et of coming that? a with too has and lithium across is water done this article needs loaded supply beginning lithium cetera, that more cetera. some that testing to than be from total et that fact, out there suggest Is enough is that the United the that wells is the -- in cars is found new have water there in something to just for United they electric and you it is or States come folks that throughout States in

tickled our John, what, I’ll tell you’ve curiosity. you

going load We’re we’ve a water out if salt… water strip analysis lithium’s at – lithium we our make we certainly could and see what to got, of look a and

Permian Well, water feasible to was basin about of it. course we’re from talking and that that from it area take very economically is testing enormous the such specifically but the that area that lithium was was extract which --

So, in weren’t it already it. thought interested aware if I I you mention it. you of might be would Certainly, I guess,

appreciate we’ll table none around I of It’s us that. guarantee had comments now because possible. certainly and this it I heard the you, into look

So, we’ll look it. into

you hope continue you. go I right. we’ll for All guys down and there, look to

Well, It in addition. I always wake. good John. for thanks us appreciate be is letting it, And this

questions the any at Thank back like time. for showing you. turn Steven I’m Harris this would no now I closing call further to remarks. to

participation call everybody’s today. appreciate Sidney. you, of Look, we the Thank

As in the hours. be be at will start about will I mentioned, our webcast, on website and posted available of transcript XX replay

good and a So, thanks everybody have day.

gentlemen, all have Ladies conference. great you program conclude a thank you does day. This participating disconnect. and may and for today’s in Everyone, the