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FANG Diamondback Energy

Participants
Adam Lawlis Vice President, Investor Relations
Travis Stice Chief Executive Officer
Kaes Van't Hof Chief Financial Officer
Neal Dingmann SunTrust Robinson Humphrey
Brian Singer Goldman Sachs
Derrick Whitfield Stifel
Tim Rezvan Oppenheimer
Jeff Grampp Northland Securities
Ryan Todd Simmons Energy
Drew Venker Morgan Stanley
Asit Sen Bank of America
Jeoffrey Lambujon Tudor Pickering Holt Company
David Deckelbaum Cowen
Jason Wangler Imperial Capital
Betty Jiang Credit Suisse
Richard Tullis Capital One Securities
Charles Meade Johnson Rice
Biju Perincheril Susquehanna
Scott Hanold RBC Capital Markets
Leo Mariani KeyBanc
Michael Hall Heikkinen Energy
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the Diamondback Energy Third Quarter 2019 Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Adam Lawlis, Vice President, Investor Relations. the begin may you call. Sir,

Adam Lawlis

Good Thank Energy's welcome Diamondback and quarter you, XXXX Annie. third conference to morning, call.

Diamondback’s today During our Kaes which on presentation, an Van't updated Representing call today, we can will Hof, CFO. be CEO; Travis Stice, are: reference investor website. and Diamondback found

During call, caution future objectives, performance may these businesses. We in the make from relating forward-looking results of SEC. materially forward-looking that filings statements plans, this those the of a company's operations, that these conference you indicated actual in with due to financial differ variety statements participants could certain factors. factors are condition, results to can the the concerning Information be found and company's

with earnings GAAP in the be found we issued release can appropriate certain addition, In make reconciliations reference measures our will afternoon. to yesterday The non-GAAP measures.

I Stice. to will call turn now over Travis the

Travis Stice

Diamondback's and conditions, reflect in jump we review in Adam, and welcome you, are on with Thank challenging quarter but to I'll Normally, need today. earnings to right feel the quarter, the milestones call. key where third the I market

remains And negative downward to towards count flow energy lending tighter The search continue free now wide. frozen the rig for of XX% well this decidedly performing cash that sector sentiment even year. US face in is over capital markets, down commodity we Investor expect prices year-over-year. the fairly with trajectory conditions and

production growth potentially to demand expectations As a and recalibrate US may of result of expect numbers all prices support which on these conditions, XXXX pending pressure growth lower, US we growth. for oil production need continued

cost plan that's excess an focused for XXXX many call today. on for conditions spending, XXXX on plan of address structure Diamondback and focused on low presented all been of capital, which cost and to capital flat-to-down in of are returns has these framework years investment our capital efficient with believe market strategies We a

Diamondback's concern There structure ability Energen acquisition XXXX scale whether could our strategies. industry-leading Late and with for people. the we to out acquisition twice the tremendous was deliver and on last year, the plans was our question double a upcoming on and surrounding maintain year. we laid efficiency company fundamental the integrate capital The cost

consistently of to while shareholders the grow set significant production, we We to and operational shift for ambitious production to also efficiencies. returning and capital spoke continuing execution on growth targets

realized even Since a then, shareholders Energen transaction, closed transaction synergies transparently we've the document synergy ahead on value since to our of schedule our progress. every greater delivering from exceeded and creating add quarterly scorecard expectations own our of a synergy the to updated

entity, and We taken over have midstream high-growth successfully our $XXX million Rattler, midstream high-margin a subsidiary. proceeds public, raising creating in

grow-and-prune mineral to while down Diamondback from properties by our Energen Viper, consideration. receiving Diamondback conventional Viper's We've exposure strategy in executed dropped assets have on cash of legacy increasing divesting to gross for and proceeds stock million. and We Energen $XXX

execution We over recycle to to continue as and demonstrating cost Diamondback's measures efficiency machine. strength the with Energen than operational realize the efficiencies well acquisition, industry have such and cost prior XX% in ratio realized leading lower of Diamondback's average today

cost We've corporate during are a execution on of things accomplished the while set reflect performance XXXX. considering and measures. remarkable delivering Diamondback's still on objectives I These

of the understand caused on In several events monitors a to number quarter which anomalous had that as impact complex. underperform basis, held we of market this for have quarterly as events we follow transparent is we our performance as accountable to the is path forward. business why Our the a that our these and/or and possible of We been metrics expectations.

barrels due change the platform in to in production After Diamondback's Basin strategy third X,XXX quarters But course assets of effective the oil July growing Central per let performance low declined me our a X, be for Diamondback. significantly XXXX. margin year, of oil of clear, from day none requires this two quarter or first of the the at sale correction

quarterly production Glasscock were in five oil production XX%. The the closing drilled cut XX this the Energen County XX DUCs since effect, below begin wells Without grew, production prior the oil Reeves considering which but County, two wells Diamondback's and completed of merger, of drove our in with in declined. to completion down or rather cuts Vermejo areas area of oil these

wells completed completed These the XX XX% over XX% of the wells wells fourth of versus first quarter. and completed total will gross of wells the quarter the XX% half in in year in made of up the that be third the

our forecasting the accountable completions dramatic not offset for provide did we were from strong While guidance. reminder we production, while the during impact are another quarter quarterly

Howard highest of combination half or the and over in our the leasehold west portions quarter. operators frac day County, both cut the our of most east in activity cut active oil gross and and fields, per one to Specifically of production of oil during offset barrels Diamondback of XX,XXX

is going multi-well into model conservatively we to mode. levels, production we current Taking plan the continue with more consideration primarily development be operators with along pad of forward, impacts full to we'll in frac all impact County completion field expect While expected large and Basin from to particularly the significant this economics in significant expect in quarter Midland this fourth to where due of fourth to the quarter Howard activity X% there's grow in rig XXXX frac production the to third oil but impact the area. quarter still offset over be

our growth was goal production to to with our oil budget together XXXX, maximize putting XXXX, framework capital weighted in more a plan similar as getting within ahead Looking less.

and lateral to than net grow to more XXXX. result, footage oil complete a XX% As we year-over-year production XX% XX% over expect

and our dividend flow $XXX cash and our have over pre-dividend importantly, of budget free base cover million above we $XX assumes $XX at oil. budget Most oil

flow, XX% barrel assumptions and XXXX around now almost prices. last have down price assumes $XX realized cash gas May Our our per which commodity weakened communication XXXX NGLs, from free $X.XX since

cut growth combination Regardless plan and of free achieving capital differential the industry-leading cash cash XXXX. for are the growth and reflects in efficiency flow responsibly use commodity further, and prices We optimal we've the be program we and committed Should capital operating multiple XXXX. flow of in decline, free capital an to our price flow significant rally, plan accelerate free commodity prepared to like excess in to capital commodity assumptions, cash yield prices debt. reduce If past. times return we believe just this act to we will offering done

continuing in future, and just we fundamentally first, when of miss done start as have reexamine a XXXX that hits related led third are; from how oil to forward the third conservatively biggest for the we expectations oil assumptions be external like are We've production quarter to and the miss the concern one, magnitude year a internal production how we full in of for modeled those a more in experienced that we've trend. quarter, street confident of are in the our can out quarter. The such a in third the and the performance. result, experienced Well, third there's the two, quarter versus miss quarter operator result, this as is we control, accounted to not lessons the learned particularly the that guidance. our issues And experienced offset the frac this the as third the expectations

not production down the including operational amount These Full modeled average of enough challenges, increased field of not throughout development are on XXXX. Midland by Diamondback, conservatively water Basin which problems. reservoir course the the operators, in was year,

the co-development productive we increased across in we we expect in particularly more Second, of in to the began that have amount Midland XXXX which zones zones, increase and XXXX, Basin.

per in inventory strategy the lower present life, expected some areas, pad. extends developed value and net to oil While allocation production decision generates year maximize is this capital this first

estimated Second Our Spring the our holds our in zones on co-development. more the these have Lower In Mill, Third of lesser as plan, to Delaware exposure A and Bone to to to other XXXX, development prior well, value such as Spraberry Wolfcamp zone the development benefit the Midland XXXX this XXXX along Jo true where performance increasing was particular predominantly carrying Spraberry. development plan the in and This into net improved Middle we and A. the for Wolfcamp primary we're present Basin well B zones, extent a and focused due Wolfcamp Basin with and the

reservoir issue, a a Again, not this well is mix problem.

we're than mix. high and the wells volume percentage to production flush high cut corporate wells on in adding drill, previous mix years, basis, oil fewer the new Lastly, which XXXX oil a lowers also

XXXX our in see guiding to address this that can we're to oil-only guide You now confusion.

XXXX. by to account cost our oil execution based taking lower decline structure will development expectation XXXX While oil translate these assumptions to better capital consensus, slightly modeling than capital added our rate XX% strategy be an oil over changes per in drilling and due as in in XXXX into and efficiency relative lower after overall of to improvements measured production XXXX barrel spend production

expected Our a incorporates levels. in which current here decline from capital forecast for service basin wide costs, today's XXXX pending activity should reduction

this capital actively the production capital the structure industry, reiterating unchanged. and double-digit inflection margin at of As strong cash activity a Diamondback flow all is that returning a grow in value cost and course oil is while the I'm lowest remains result yield and a to presented not the an structure a point and for Diamondback to Today business. shareholders. growth, data maintaining and cash single-digit highest Comfortable free proposition efficiency the correction mid or here, poised the in

questions. With operator these line complete, the comments for please open

Operator

Dingmann. [SunTrust line Robinson first Your the Instructions] open. Humphrey] Your [Operator question comes is Neal line from of

Travis Stice

Neal. morning, Good

Neal Dingmann

morning. Good

production total how that this those suggests cash guidance spreads and OFS guide, the generating and could to specifically, assumed around and would around potential assumptions baked there? in costs in free My question $XX X% about oil XX% speak is to kind assume what rigs on the growth midpoint XXXX of million yield. I of risk Your of all still then while you XX% and these hit you some the you and number flow

Travis Stice

Yeah.

answer what I'll just in The baked reverse. saw we in costs, quarter. third we in OFS So the actually

going next flow continues out level for slow expect down activity in see cost to to as year. to service again and reductions to is cash we a tailwind So Permian, our continue the generation actually free provide here

we specifically took And you we severe across means is what year hits on hit wells that was frac more that I in the a XXXX. end that think more this up actually risking last modeled aggressively with longer. than that did more

details go-forward the how takes of of long the When some and But of the adjusted once you order we've our even reflect talked about, for impacted in we've when third like kind extended down that third in been of And it quarter the to at things to production time-to-peak watered the a extended what co-development that how we've we've a recover look also to assumptions zones on basis well seen that it's out. of time. the the quarter. also some

remarks And re-examine the the have of that have in did you we really on single your miss said magnitude we're prepared we've looking after was every we - a done that to you increase when and single I hertz look made we've at I But assumption sub-pumps - frac. quarter, the rate we're in that. thing my every to like done. third in mean, down daily

We've really fundamental a broke the down part. business into

in you did we've can done to your you you've hit to able So those we your I with so that place. forecast sure the like think the in put third future stub assumption and that quarter, adjust when toe to got make we be numbers

and that in think it completion cadence, we be of function to of the high probably will probably a slowing low hit of more if is reflect end, I year. getting to saving And rig a and maybe activity. end end couple is – completed order cadence drilled and the the of our during the down the a function money going guidance of low probably some wells guidance

Neal Dingmann

mean, your And little deck, remarks you lastly, zones going part this it. in could you in about co-development Got X up you that will in particularly consider strategy? then overall forward? talked I in Midland speak this And to the the prepared and this about impact a a increased shift it. the and we Delaware. on Got the get top M&A between your should bit Slide

Travis Stice

with that laid how think structure we read-through to can. M&A. to years. cost believe for is the these of fundamentally than way reflect a a we acquiring can right function there's the our the our more efficient others several that thing strategy does I it and execution under future. does it high do about and that is co-development that's We we out don't any low-cost, operator But M&A the reflect assets do – is believe next these – think

Neal Dingmann

Thanks for details. good. the Very

Operator

We the of Goldman do Brian from Singer have line Sachs. another question from

Your is line open.

Brian Singer

Great. you. Thank morning. Good

Travis Stice

Brian. Hey,

Brian Singer

on follow-up mentioned. a To the comments couple of you

how that this impact then frac First, mentioned year year? well, not color a can that you've reservoir for bit you a seen and add next hit relates issue. relative more you're on you what as And little forecasting the to

to to a to impact when on declining at So you an how the how back levels wells before negative get the that – both when goes hit we or rate to see that they get the leads respond, side production or happens can if that talk and away, they the back they the decline what leads evolving were that how in how about production quickly basins?

Travis Stice

Yes as forecasting so in individual at specific, the done field. looked XXXX, we've we've each

And so gone returning to number back takes once to get zero of then it we've of production. the And starts modeled it back oil, and of number historically oil. of days peak the production days

were it production takes in of extended that our the number get areas. it And plus we've elements, done forecast number to that XXXX. of for the in back zero produced both those peak days And to of that each of days two the

what do they return to production. we've again, seen peak is Now,

why so these with respect that make the to remains conservatively that It's the and I not now delivery a brackets. modeled issue that's of it's And EUR has comment the unchanged. more the been because EUR, the area reservoir curve

Adam Lawlis

case of Traditionally, say the was pads a for been of we've this difficult And pads. because brackets that, modeling of QX on size Howard long completed time in Trail, offset Spanish QX I'd Brian County well right? Yes. sorry in us, extraordinarily – four top the or we've in

hit on-site even frac a and what the for completed we So significant that's there's spread pad than so of a us expected. and east higher months X.X XX-well was originally that

about XXXX a for day. that Howard about a by field, gross day County barrels which XX,XXX of net the quarter, So was hit on a field whole oil basis particular the barrels is net

Travis Stice

we've to I'll that that for been frac confident drill look add years, you impact of Spanish hits seen are over doing that because five in the just Brian. now of at to first their experience, When and we've what in of forecast. seen you multiple time And back some been each these it, they Spanish full recovery. Drill hit time it's just hit not have but the times, returned previous we've wells

Brian Singer

the the scenario about I where in and the is at what lower oil and investing And or for risk at earlier there upside you this, to think the you that as think end you range, scenario Thanks. midpoint would but Great. you're And a But end we CapEx answered the the the if at about be CapEx if what assume essentially, the of of of CapEx you up is let's question, that the kind - the scenario the XXXX, see would you what the to the partially be of the highlighted range. both guidance, your would and at think range. guidance the that guidance production higher your the downside end midpoint CapEx put production if of up? do production

Travis Stice

the CapEx poor more to at the in midpoint the got we've oil and year, aggressively then guide, next And of to guidance quarter, not those addressed well spend right not expecting forward that low the that you've certainly same us more the to that you've or CapEx at we're have believe the form or in of Yes, coming of got now. performance something, third we've have the the guided things impacted we direction all. conservatively point

activity. end low the said, of lower is a I As more the function of total guide

Brian Singer

Great. Thank you.

Operator

another from have do of Derrick We line question Whitfield Stifel. the from

Your line open. is

Derrick Whitfield

Good Thanks. morning, all.

Travis Stice

Derrick. morning, Good Hi.

Derrick Whitfield

look quarters outsized there for as next GlassCock any and Vermejo the Perhaps that program, have Kaes, or activity XXXX capital at Travis we year? in are

Travis Stice

of we the the quarter third think year. we've learned again, in Yes, this what saw I quarters,

more place Vermejo reflects of County a GlassCock the that guide steady basis. a we guidance so on wells and put quarter-over-quarter in And

Derrick Whitfield

Great. your How And my slide look breakeven? prices, cash XXXX. slide follow-up, perhaps for at for this X, resilient of base assuming in XXXX lower referencing lower asset terms flow is in quite your would growth

Travis Stice

same tailwinds I is into tailwinds XX% see be grow. year, going XX% think at would it activity throughout the declining would XXXX, year. We've lot a to Yes, you feel like mean, don't Derrick, activity, right? upon going year. next have all We on I some I for still next to got particularly mean, the year oil better cash flow realizations we but XX%, level, dependent growth. In LOE would that's grow the side LOE the of where still

ground So lower grow, that a dollar to growth. to to but make spend all supports breakeven in we that as the don't continue back continue every we fund

Adam Lawlis

add, it's since up just Derrick, want to you bar, at oil brought slide I $XXX. look $XX X. the you a And When

flow the $XXX a that that's in that million of in we at my last had away cash barrel now at lost said NGLs $XX worth I our scenario. prepared million to $XXX remarks, right But we $XX communication, cash about barrel, communicated free from originally relative of free flow of and oil. a deterioration As $X went us

Derrick Whitfield

Great. Thanks guys. for time, your

Operator

question the Rezvan We do Tim have line from Oppenheimer. another of from

Your open. line is

Tim Rezvan

Travis. question, the best Good lost September. COO year, subsidiary Energen I organizations another in the In had the an and ipo-ed closed morning, which perhaps is suited they've organization its last for Diamondback's Folks. acquisition,

I the to? organization guess is G&A. should lean with know complexity? lean? investors Diamondback itself saw to miss like that be the your right question you QX we running is wanted Are focus you organization too a an about on there's organization's I on laser is sized Travis that But And last and complexity night execute when my prided that's the concerned

Travis Stice

quarter we're looks of to or and business. that's to I've day. said And aspect result short. every simple. said staff a function of intend say And around either complexity to you still we probably do in part think DNA. we're our is call, and last is earnings investors, to across the intend of organizationally, XXX our And of what we XXX third to that Complexity what every the I'm stand I we of people one I What No. adequately I people look simplify the complex it. here And organization fundamental But me that's that people our make that's was short. lack probably two not to somewhere going do expect complexity; own and to

Tim Rezvan

year I thanks about you goes in you it controlled follow-up down? guess Okay, leave zones from more of cuts comments, that. Or And and development. a for my other I'll But issue? it because about flow your why Can pad zones. oil oil your talked Thanks. okay. as is well that Is mix back issue one a in prepared talk there.

Travis Stice

Yeah. No, down or does oil when delivery zones. year-over-year those four-zone a different you development, a the Middle the on which a goes because in development into type historically basis A than Spraberry, Spraberry a Jo the Wolfcamp dose a well we've heavier it had Lower has add Mill curve two or oil of

a So four-zone Jo in when at Middle the added corresponding and I've Spraberry, see you you where for the relative look the the oil Mill impact.

Tim Rezvan

Okay. Thank you.

Operator

Securities] have line another We open. is Grampp. question from of line Your [Northland do the Jeff

Jeff Grampp

guys. Hi,

Travis Stice

morning Hi, good Jeff.

Jeff Grampp

the Delaware already was the your low XXXX budgeted end cost at wondering, well like I looks are of costs it QX there.

what Just lower? budget wondering, that it think I do fair think mix embedded well in is wise QX XXXX.? drove some you is there's Or that to that for assuming a are maybe guys consideration guess conservatism you - maybe

Adam Lawlis

is in perspective. DC&E Jeff, the of cheapest Yeah, Basin a three Vermejo Delaware the from the fields

continue that's the Vermejo low really to some to today, the relative cost to relative not come the of Vermejo of side. a we guide. So wells efficiencies. for get XXXX quarter, where percentage service number that from certainly quarter have the expect higher and more But looks as third we see are to third lot rolling through Travis said, to reductions But guiding through a capital is deflation some continue which we to in why did we're

Travis Stice

well-by-well And Yeah, of more improving through of the that listen the wells cost I as on go our prepared recovery. operations be for a we in quarterly were proud process driving I quarter. couldn't focus focus, normal this review we out contributed and quarter, of organization do laser-like the continued where analysis

a in spectacularly is DNA I'll daily our place something of part it's basis. monitor that almost and on So

Jeff Grampp

those Got it. thanks comments. Understood. And for

guys just my talk Diamondback growth for about question Just for for Travis. in and the a scenarios? growth follow-up And just versus trade-offs how kind types XXXX slower bigger evaluated of flow those more evaluating of potential growth? you is fund the XX% buyback the maybe picture you kind right cash Can of to dividend and to free why trade-offs maybe of XX% of you

Travis Stice

had not trying to believe basis. flow this Yes, sustainable free has a we're have cash a a that business to balance and kind it's precise on of calculus we but we presented we is model go-forward granted

you're And the plan. then so, had impact cash your development out and flow to XXXX if we of going lower greater growth years in

So of of end balance the terms in is lowest cash in executor appropriate believe of free what which still the we presented the we've capable was out best machine the that is guide. of the XXXX generation listen, is there believe sustaining grow. time flow Diamondback maintaining and I struck anybody same at And we've what this that that's cost kind but upper should at done the an production of and growth. And producer

Jeff Grampp

All right. and remarks trends prepared appreciate the Understood Travis.

Travis Stice

Thanks, bet. Jeff. You

Operator

the Our line Ryan from Todd Simmons of from next Energy. question

line open. is Your

Ryan Todd

do way Does even shift design one towards operating you more the have Maybe construction thanks. in the follow-up costs? or the co-development, that impact co-development on Good, on approach facility, any more strategy. or you

Travis Stice

the really. all we for not like though wells higher the it. to guide? that possibly whether higher Third that's in is to in XXXX still year-over-year, I that be the have that design quarter-over-quarter bone, a Delaware percentage expect Second accounted water could only facility not our the of But a and we'll thing adjust of facilities operating Springs – but but added cost we've predisposition cut have and Bone, co-development my decline that cost Yes, would if of impact part

Adam Lawlis

Yes is mix the wells the size Ryan pad changing, the within been pad changing. of

So overall your facility similar. size is and spend

in one-time the term. roll gas LOE through over in more expenses and we infrastructure budget. that XXXX, projects XXXX in Those long have are lift do help Now should our

Ryan Todd

I Thanks. next you maybe cash. helpful. cash just use year. great. mean, free significant a question increase And on That's have flow of a in guys Okay, then

about I buybacks of terms In dividend versus cash of this use can for priorities about the But asked of time. all you specifically know you like get talk free cash use you variable excess balance all of there? at growth? of in than a base do you entertained distribution How a dividend the And ever idea look have at a buyback? the rather

Adam Lawlis

I the and And you our look that a return go-forward we form go what had in think and of basis. what at if previous back about is that's on the to form primary shareholders we've communications of do dividend. to that's an intended increasing

The And considered. something don't you There's can variable really distribution addressed to we always free not increase a lot as and believe do those want of something going flow. – we we're in the that potential that's basis said, we've buyback dividend on with that's each We the form share to to what go-forward do. complicate a of we've for overly the intend we not cash business.

Ryan Todd

thanks, Travis. Okay,

Operator

question have Drew line from of Morgan We another from do Stanley. the Venker

open. is Your line

Drew Venker

everyone. Hi,

on Just one assuming of a for what had XXXX XXXX, compare base follow-up, sense if guidance for one us can production you're XXXX? in downtime could the simple how very that for your give to the you original much assumed terms, And hoping guidance? you

Travis Stice

data put within is of X%, additional have, the the percentage X% traditionally, for right? the on only I same as Drew. offset assume production, downtime but via that total, we the you we that mean, has we the well stayed base of single-digit Yes, perimeter the we've about of new online, risked a downtime your top number of you're not completed production. are wells So shut certain base risking a production time. What ahead getting wells in high

but you for on certain certain that, risk you're to well So a your watered of the of time. that that's in need of diameter period a a within or well out traditional being any completing risking place, stays top parameter certain

Drew Venker

that out thinking that impact shut-in I Okay. impact presumably, incorrectly? could operators am that or production offset you on But still your or watering wells from new about base have would

Travis Stice

and us between offset communication is important. Yes, operators

not that's also in via I close we impact important. are and those we where where particularly we're each that conservatism. guys to think all the fields, And operating. there's some model Basin, Midland other, But really big know

a We We account. that have view schedules. month their into into frac take six

happened have on what out larger going offset forward is piece we us and you operators, water time we're the those out originally than pad expected, watering there. fields think conservative a of had a in on here for very longer I period where therefore,

Drew Venker

Okay.

Travis Stice

just probably that to our we've And data go-forward analytics more believe mean analytics-driven that data on previously for wrap predictabilities the plan so decisions the think I I we've got up. in that effect. any we've increase accounted in year's than submitted. we've got can more we visibility; now plan, this plan

Drew Venker

as pretty of range throughout that? affect give there? out cadence that XXXX? about to, If sizes do transition Thanks on and Is cadence wide for there XXXX Understood. overall you growth could will guess color project of and that, the just the bigger I Travis. I the a timing think on more projects think about average, you some how you think

Travis Stice

I'd there's is we co-development Drew. still Midland much, Project project well the X, within X too wells not right? Basin, X, pads, more zones. but type much. Yes, say changing size of changing, So isn't do between the

perspective, in production consistent quarter And through we from big going a consistently get in and assessment. there's lumpy are growth. production pop and half not the growth growth so of first that to It's to be growth fourth And the back a grow going to quarter fairly XXXX.

Drew Venker

you is still for year, growth second the And half XXXX? consistent do of in similar the then think

Travis Stice

Yes.

Drew Venker

Thanks.

Operator

line America. from from another Asit the have We of Sen Bank of question

Your is line open.

Asit Sen

assuming in sequential Thanks Could Kaes that hits in XQ. impact good broadly for morning. to XQ? that in the the you you're Thanks, growth provided details on the you quantify of frac the frac X% quantify

Travis Stice

model any XX% X% about we out being at watered total given traditionally, Asit our time. production of Yeah,

frac back. that bottom as you stuff gross XX,XXX watering coming I fourth think small Spanish and out from the Today our field's full as as will Midland basis, trail total Pecos. in in the pretty hit But and is through you QX lower in especially say I'd Howard as think but was areas back overall get consistent a Basin. day to are such QX up to barrels on development County other it about a XX, XXXX quarter, of you than the an production, percentage of in be year

Asit Sen

results And - the peers bone are your showing of great. then spring. strong third Okay, some in have

complete have would it of incremental X, wondering number any on exactly couldn't completions if on be to zone. out you estimation slide that any the you're but good? the figure I rough thoughts and zone Just planning in

Travis Stice

we're area. excited about think Vermejo Yeah, I the in it area and the ReWard

asset, Pecos into we're bone you spring and County our the more second excited As bone get third spring. the about

not excited about the while contrary probably prevalent. portion Vermejo the Pecos then of area, Wolfcamp second the Pecos bone - the and our So secondary that's is on on And A. eastern the in bone western the ReWard second portion zone the where bone the is particularly area third we're or behind as in

Asit Sen

a lot. Thanks

Operator

do Holt from have Pickering Company. line another We question Tudor Jeoffrey of Lambujon from the

line Your is open.

Jeoffrey Lambujon

Good my morning. taking Thanks for questions.

Just a co-development. few follow-ups on

Spraberry at side of Wolfcamp First Middle we one bone, is the third the zones Midland and B, second Jo Mill, the the on and number beyond? and that wells like on the as XXXX's look next the percentage a total to mix? how year, as percent forward as And that is does side and change compared you Delaware the for look XXXX how the to wells bone, of

Travis Stice

Delaware A take in XX% of development XX% the the I'll going impact XXXX. to less XXXX, Wolfcamp in because Basin it's or in of an let's almost Jeff the so to say Yeah, was closer XXXX Delaware first

move in has the XXXX Midland versus the actually In Basin happened XXXX. XXXX, big

XXXX in to and Lower we're XXXX take closer Spraberry. A the A Wolfcamp you XX% and if Spraberry Wolfcamp and to versus closer XX% XX% and XX% Lower to XXXX, probably XXXX the or So

Jeoffrey Lambujon

we should And quick expect just Okay. to that. follow-up - a

as expect co-developments? on should percentage decreasing time continue we continue progressing So that over you to

Travis Stice

it think don't I will decrease.

the believe made getting we shift I zones think Basin. all we and has the been Midland are what be economic once in the at to

Jeoffrey Lambujon

just Wolfcamp historically B more And how the example look early in you it. you've zones, productivity for Wolfcamp additional versus can on Again on lower at Got the then detail these and what and the A? seen as you Spraberry Spraberry time the compares. give Middle the

Travis Stice

Yes.

clean to longer up. the clearly, So takes very Middle Spraberry

you Lower Wolfcamp They we Wolfcamp early highly in a have production zones are, profile is the the and between but the not B Jo strong. but two Spraberry. Wolfcamp where And have do and less versus A just as Middle as the the good production is time A B, Mill the the still A similar between the So Wolfcamp so Spraberry economic.

have time high A. early as the you what So in just Wolfcamp you production high see as not

Jeoffrey Lambujon

Thank you.

Operator

We line from Cowen. from do David Deckelbaum have another of question the

is line Your open.

David Deckelbaum

questions morning, Kaes. for taking guys. and Thanks my Travis Good

Travis Stice

You bet, David.

David Deckelbaum

get was I hoping color. to some

talked XXXX the lot a about You guidance.

be for And think prices. the NGL to going is free out the taking net to cash is laid benefit just place? on you where add you that year? One this two, Carlyle lower of wells more You JV the Can what accounted Diamondback $XXX million being to XX color cash development that projection XX drilled. the

Travis Stice

Yes David.

our Pecos Diamondback the XXXX. So elected of is half in same which count, to portion Southeast this of that count, the about of the that, year have the corner out is first County Carlyle of ranch total where asset. wells JV in of well well the total a Pedro our north that's Carlyle drill the northern and is XX portion significant X% XXXX

And estimate that We the of production XXX% And have then more for but also of to we're $XX Slide we cash XXXX on the actually in X. million free presenting produces account that capital. flow. JV at XXX%

XX% the XX% And the XX% putting certain for So capital we're met, of production. the of up are of thresholds we will return production. after control

David Deckelbaum

Okay.

that's So helpful.

this hoping of a XXXX. The lot that question made like that terms structure similar XXXX your flat? was I down. just some guide. you're of investments that other in infrastructure had holding free have sounds cost in It The coming you year all cash you you're LOE just in I a guess that effect current assuming to Is margins pay off will headway

Travis Stice

No. I of help dimes the we're and to LOE into side. the XXXX Dave see another think couple into fourth on here quarter of going

modeling is forward. we're So $X of cash. kind LOE every million mid-Xs going But for of counts cent $X.XX free

and tailwinds see even permanent XXXX some benefits in place. some we'll into So infrastructure some get as there's certainly we

David Deckelbaum

Appreciate the color, guys.

Travis Stice

Thanks, David.

Operator

Jason Capital. Wangler line another from from the have We question of Imperial

is line open. Your

Jason Wangler

guys. morning, Good

Just question. had one

something about initiatives. XXXX. that more normal Is you think cash that other reducing kind facility credit into savings? come business on is equation? asset flow and look alongside talked does that Where of of you at debt free the something As you that's that Or of sales the the the kind about course

Travis Stice

point like revolver we're feel Jason, the a got we Yes, we've to where comfortable.

behind a base it. borrowing significant have We

of We borrowing had properties, base which forma haven't pro even added a base borrowing the billion. Energen $X billion, so to is closer $X.X

look company to point, our things at our and But our certainly, would and run leverage we leverage we that really margin profile out revolver other absolute term hope We're its borrowings company about but trying debt. growth reduce what and at investment-grade be metrics our absolute zero from we comes. feel to to comfortable that an like and an basis, the And like. time

Jason Wangler

you. I Thank appreciate it.

Travis Stice

you, Thank Jason.

Operator

of the Suisse. Betty from question Our line Jiang from Credit

open. line Your is

Betty Jiang

Thank comments range QX, if us about through type where was XXXX. you showing you. wondering on could in be growth give I could morning. the appreciate oil some steady of earlier production Good cadence your XXXX. production I

Travis Stice

exit XXXX. to we teens exit-to-exit the year versus hoping mid QX I'm Betty. high Yeah, in the

Betty Jiang

XXXX, sort level in it. And QX, then, will the XXXs. low Got be the of

will to QX? that probably in for – So close us mid, XXXs put

Travis Stice

I mean, to a is top of Yeah. going very think QX, look we think, that. XXXX, I on rate like what describe to and growth accurately we tried

Betty Jiang

then, be on for Or it buyback you you it that. is would flow price thinking cash buyback, forward, Thank going actions? year? the more are opportunistic, through quarterly Great. guys the sort on peso the free And of depending would how follow about follow-up pretty cadence likely

Travis Stice

the aggressive flow a within long being on will in over revolver the and it free be an Yeah. But free here I based neutral. little certainly buying on more to term, think, Primarily the term. cash near we framework. flow back cash it's opportunity focused stock be have

Betty Jiang

me. sense. Got all That’s it. Makes for Thanks.

Travis Stice

Betty. you, Thank

Operator

of Securities. We have Tullis One the Richard another Capital from from question line

is line Your open.

Richard Tullis

Thanks. Good morning.

Travis Stice

Good morning, Rich.

Richard Tullis

Travis, this XP acquisitions? the over you when several Does look oil guess, closer next trending see to for move half you percent first mix couple were, years do How where the number? oil in the XXXX, it's down mix say, a you year. from the of of at it additional projected the I assuming reserve no

Travis Stice

more move of we'll kind the oil I this growth modeled to Yeah. the of that on I Ultimately, a couple years, number. yield see years. steady got next XP what and you'll of for at balance - and cut activity kind of we've But go-forward a think, closer pace think, of you'll

Adam Lawlis

yearly basis. On a

Travis Stice

a Yeah. basis. On yearly

Richard Tullis

planned sounds Okay. how saw prospect, many Thank had you. the XXXX? And just you in drilling lastly, it to what like shifting wells your like past might thoughts there? appraisal quarter. some on And you What are the for be over line

Travis Stice

Yeah. or what of appraisal any We like didn't of - results well we quarter, planned certainly this and we've year, think this half back disclose year. but half we saw another we I got next back

Richard Tullis

Okay. That’s Thank all me. All right. you. for

Operator

question from from the Charles line Meade We Rice. have Johnson another of

open. is Your line

Charles Meade

Good morning. lot Travis, have you guys already team, of a you and ground this covered your morning.

I have of ones. quick just a I think, couple

on the that one, the my Vermejo Is that has think at of that's relatively of understanding one one still case? I been or most a also there portfolio. it's First the I area, guess top best a of been - has Or here, least that's your but anything- areas that understand the your attractive at

Travis Stice

case. the Still

Charles Meade

the this service about And you. then is picture bigger maybe Thank environment. Okay. question Travis a second

talking other well. from about prices their You lot in doing service and are certainly sick a But model you business that of - looking in with a service outside costs. deflation a like looks stock very the see not and this operators that's

time the something want that do you to And is of anything or you you'd - thoughts this on? guys any guys ever share you did thinking viability your service - have that So, your talking about partners? spend

Travis Stice

are look being Yes, important prosecuting I to business upstream need facing maybe development believe plan myself also the don't are go-forward do we sector. and with They basis. much our vitally are perform applied on But as to I as service headwinds concern viability well. a us that the they're to that I availability. the sector partners E&P guys

There harsh could be try sector the with to our than that and OFS big pressure their is why to and sector guys. And more we gets transparent business plans that they partners understand some that's make be elements sure understand plans. under of some we the put service our of open

Charles Meade

Thanks Travis.

Travis Stice

bet. You Thanks Charles.

Operator

Susquehanna. Perincheril have Biju of We question the line from another from

open. is line Your

Biju Perincheril

looking at And about how thanks. morning. when frac how that? Hi a quickly vintage Travis the well between at the Good what formations? and those recover, just there that on is of should hits the we when well - you the can relationship look producing wells impact, think

Travis Stice

is vintage relevant proximity. think don't I the It's indicator. No, just

well, that back comes is the to we're then from job certain it in and shut early frac if after So, you're the particular a within we amount lateral of feet complete. well days XX producing five

Adam Lawlis

- Trail or five frac five rates. - we've got our over the down see Spanish former that we've you I And got last in or wells decline earlier, mentioned the Yes, with recovery through frac times reserve I think years. the then hit wells into the and hit what as we been six have auditors, go to six back you see

operations. the having proximity in do with injected being the really of waters just frac where offending it vintage, the So, the to has do to

Biju Perincheril

Got And mix. the other it. just on then going back to oil the question

that could the but CapEx doing, impact of in we understand the on $X.X press better in what release, you're Not referenced wells case where that out? maintenance the mode billion on, that's scenario. coming if fresh you've you're if So, line the mix that's the oil sort

Adam Lawlis

Yes.

decline - decline XX% is So, decline base base year. XX%, next oil is BOE XX%.

a a into So, went full percentage went if into little lower if oil you mode bit you or see of decline. will maintenance you

you into an we went you perspective of estimate X% percentage If mode, X.X%. oil a maintenance lose kind from

Biju Perincheril

that's helpful. Okay, very Thank you.

Travis Stice

Biju. Thank you,

Operator

from Hanold Scott We Markets. have another line question RBC the Capital of from

is open. Your line

Scott Hanold

Real appreciate Thanks, quickly. it.

was quarter, delta? County you miscommunication the wells hits it of amount at back the go those to for Just plan to Howard there was the step between for kind took and you you? look time in of Or was to it the fracking area. you how frac that third online it close in that When the any non-op to and back was get just

Travis Stice

our best And wells, of Yeah. to I was adjacent I it in issues took XX some get They producers but if oil or in not, XX the months pumping wells immediately out know that to a they think X.X country. the ground had to long operational time be water fracked, don't completed.

Scott Hanold

Yes.

when understand they're between So to to to you? be fracking all close how at my - in there issues going that to point to going them the and they're having? be and work you close with they're does I keeping touch was is to where trying communication is, guess operationally you I get when Or they're that to constant to

Travis Stice

- Yeah the across - those with the specifically developed pad operators, communications physically Howard that big lease to basin, have and good all adjacent again was is line. the was County we that in

the so scenarios, And as development good from our away more they they're east to continue further their producers. moving

we of we a think So more on good maintain all models communication operators them. basis we again go-forward - do with offset because we've and to our conservative the got that think same

them treat we to want So like treated. we be

Scott Hanold

Is the you the GoR this Okay. merger. That's mix follow-up what in the the changed Energen my - prior has anything the you since in than good at that expected hear. - with to time? Has of would any release about press is the point how different mentioned Energen And oil the with assets? closing - of have talking

Travis Stice

expected. just what No. we've - it's It's

Scott Hanold

you. Thank Okay.

Operator

from KeyBanc. question another of line the have from We Mariani Leo

open. is line Your

Leo Mariani

normally guys beat want be hi offset dead here a and quarter? to don't kind on you But I three two lost quarter hoping production standard deviation of, few Would able quantify the horse what issue of you quarters? third I shut-ins. would Was have was slightly a event brackets what think in the time’s guys. it look this Yeah, to you quarter, versus to two relative to third on in at differently. you seen or prior like

Travis Stice

this quarter. net expected quarter. standard oil XX% the an barrels probably so times or amount, closer watered to XX% XX% I for additional the that. was out production I'd good We to Yeah, it's was X,XXX, into model two of gross the traditionally what going say that X,XXX and out of estimate than deviation

Leo Mariani

some And past from that you talked you think lot guys costs you you you a that zones kind philosophically, Obviously, little of talk here co-development. your the helpful. gives Maybe you of over the moving in just to that's in hurt about bit, can longer returns about had a perspective? doing how there? maybe about think more talk more maybe just XXXX. that save but Do a just returns years maybe about Okay, in term, that trade-offs and just NPV

Travis Stice

which increasing on you actually these let's believe most haven't a of Yeah, return. the they've see just modeled good We degradation offset net one, out. catch believe now is based we've way you zones of about of some fact that's talk turned value. we're been potential I present germain rate But the we of that the really because if surprised don't how

seen think catch to six work. to them We've you're If going you if now, years going come that and them. get in just don't you that's back five not to

concurrently in in them using I think assets doing the County, not it. of and set did make they data of this kind zones Energen then came Martin – legacy us degradation seeing a strategy. and involving And beneath zone Energen back and to did that lot of development

Leo Mariani

you. Thank

Operator

question comes Energy. Heikkinen from Hall from next Michael of line the Our

is open. line Your

Michael Hall

Thanks.

the out the word kind guess Is is reservoir right Just the maybe the the well I hit even going a you parents Or have after but primary degradation on out those that come in or to was it if coming I bit. of degradation? reservoirs performance, parent not again it ask, maybe it it. something is secondary little has that

Travis Stice

in well return. or a Mill is Michael, the seeing. that versus probably to with Howard trying we're Spraberry, let's of – rate Joe A to yes, XX% return That's Middle which probably a XX% delta which I it of compare is said rate earlier that co-developing XX% XXX% to if you're Wolfcamp County,

seen to really oil And made a is when we've that co-development XXXX highest the now when in were return XXXX rate trying basis. to right that and do singularly on free develop return, go-forward the prices the of we the believe highest fall of and the zones. Obviously, rate is back zones decision we've strategy and we

Michael Hall

suffer if correct. right? sounds that use the Tier not it's Okay. reservoirs that Tier of kind Is And It come or and it. X like you lose reservoirs too a late. back the those for it's X Yes that's

Travis Stice

wouldn't lose I I say Yes you mean it. can that's correct.

significant in try and zones. you degradation years you'll If use have back the seven come get five, it – when to you secondary just or seven

Michael Hall

just Okay. the back San circling JV. Pedro That's then quickly helpful. on And

right – to just X.X think sorry in I So as XXXX, shy is X.X. year, opposed it to that of is this actual to to CapEx X.X% the mean, X.X net

Just trying to the actual look how impact cash will like understand for XXXX

Travis Stice

Yes.

cash net really, CapEx million production $XX $XXX you get of less less or flow. probably So but million it's so of net

getting more flow $XX you're of basis to So $XX flow. on a free million free cash cash million

Michael Hall

Yes, okay.

guide but the that is – right? production net. Is So

Travis Stice

growth capital for guidance guidance the production growth. production is and also The

Michael Hall

All it. right. you. Got Okay. Thank

Operator

over this further now turn Mr. the no Travis Stice, I call to will time. are the There questions back CEO. at Sir?

Travis Stice

everyone Thanks participating again call. to today's in

week. any have contact please the us provided. all you We're office information in the rest If contact this using of questions the

Operator

concludes Thank conference everyone. today's for call you us. joining This

good a day. have You