Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Permian assets contributed approximately 50% of quarterly revenue and 75% of cash flow.
- Volumes in the Permian are expected to increase sequentially for the sixth consecutive quarter.
- The company remains well positioned to deliver meaningful volume and cash flow growth in 2025.
- Ongoing business development efforts in new areas are supported by a strong liquidity position.
- Recent development in the Permian is expected to contribute to incremental volume growth in the third quarter.
Negative Points
- Natural declines and continued curtailments in Pennsylvania resulted in decreased revenues and volumes for the quarter.
- The 12-month natural gas strip has continued to deteriorate over the summer.
- Gathering revenues will continue to come down until curtailments are lifted.
- Uncertainty on additional development in the Permian until the operator sale process is completed.
- Upstream cash flow from the Marcellus is expected to trough in Q2, Q3 based on the current forward strip.
Q & A Highlights
Q: Can you provide more details on the expected volume growth in the Permian Basin for the third quarter?
A: (Jason Stabell, CEO) We anticipate sequential volume growth in the Permian for the sixth consecutive quarter. This growth is driven by the ongoing development activities and the recent completion of several wells. Despite some wells being offline for part of the second quarter, we expect a significant increase in production in the third quarter.
Q: What is the status of the operator sale process in Ector County?
A: (Andrew Williamson, CFO) The sale process of our operator in Ector County is ongoing, and we expect to provide an update before the end of the year. This sale is a potential catalyst for our business, and we are eager to see the outcome.
Q: How are the natural gas price trends affecting your operations in Pennsylvania?
A: (Jason Stabell, CEO) The 12-month natural gas strip has deteriorated over the summer, leading to decreased revenues and volumes due to natural declines and curtailments. However, we remain highly leveraged to a rebound in natural gas prices, which could significantly uplift our net production.
Q: Can you elaborate on the new rate regime for the gas gathering system?
A: (Andrew Williamson, CFO) We executed a new gathering agreement in May, which provides clarity on the rate regime going forward. While gathering revenues will continue to decline until curtailments are lifted, we are confident in the long-term viability of the asset and its ability to underwrite most of our dividend.
Q: What are the prospects for new development opportunities in Canada?
A: (Andrew Williamson, CFO) We have been actively looking at new opportunities in Canada and see several potentially attractive prospects. Our strong liquidity position and improving cash flow profile allow us to comfortably deploy capital in these new areas.
Q: How is the recent development in the Permian Basin progressing?
A: (Henry Clanton, COO) Flowback operations began in July on the seventh horizontal well in the Pradera Fuego project. Early productivity results are meeting predrill expectations, and we expect peak production in August. This development is contributing to meaningful growth in production from the project.
Q: What are the implications of the recent spacing test results in the Permian Basin?
A: (Henry Clanton, COO) Recent spacing tests by leading operators indicate initial pad development of up to four wells per section, which minimizes potential parent-child risks. This is an increase over our previous spacing guidance and allows for a thoughtfully planned full field development.
Q: How is the evaluation of the Woodford interval progressing?
A: (Henry Clanton, COO) Evaluation efforts continue on the Woodford interval. Recent core analysis demonstrates high organic content and thermal maturity similar to the Barnett. The thickness of the interval and offset well performance suggest it is worthy of further appraisal.
Q: What is the outlook for upstream cash flow from the Marcellus?
A: (Andrew Williamson, CFO) We expect upstream cash flow from the Marcellus to trough in Q2 and Q3 this year based on the current forward strip. As curtailed and pending volumes come online, we anticipate an improvement in cash flow.
Q: How is the company's borrowing base and liquidity position?
A: (Andrew Williamson, CFO) Our borrowing base was recently redetermined higher to $45 million, with lender commitments at the same amount. This increase includes our Texas production and reflects our strong liquidity position, despite temporary challenges in the Marcellus.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
