Earnings Labs

Battalion Oil Corporation (BATL)

Q3 2016 Earnings Call· Thu, Nov 10, 2016

$3.73

+0.73%

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Transcript

Operator

Operator

Good day, ladies and gentlemen and welcome to the Halcón Resources 3Q 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. I would now like to introduce your host for today's conference call, Mr. Mark Mize, EVP, CFO and Treasurer. You may begin, sir. Mark J. Mize - Halcón Resources Corp.: Okay. Good morning. This conference call contains forward-looking statements. For a detailed description of the disclaimer, see our earnings release issued yesterday and posted on our website. We've also updated our investor presentation for the third quarter, with certain other items and you can access that presentation on the website as well. Production for the third quarter averaged 34,185 barrels of oil equivalent per day, which was net of approximately 7,000 Boe a day. Have operated production voluntarily shut in during the quarter, if this production had been online for the full quarter, we would have averaged over 40,000 Boe a day and we expect production to be at the high end of our previously provided guidance range of 37,000 to 39,000 for the full year. Our realized third quarter oil differential of 89% of NYMEX was a 2% improvement over the second quarter and was driven by better differentials in the Williston Basin. LOE expense was $5.17 per Boe in the third quarter versus $5.20 per Boe in the second quarter of this year and LOE per Boe continued its downward trend in the quarter. It would have been $4.29 if the shut-in production had been online. Workover expense was $2.66 per Boe in the third quarter versus $2.42 in the second quarter and our workover expense has been increased in 2016 as we've increased our efforts to install…

Operator

Operator

Our first question comes from Brian Corales with Howard Weil.

Brian Michael Corales - Howard Weil

Analyst

Good morning, guys. Floyd, you kind of touched on, I guess, the enhanced completions and different techniques used in the Bakken. Can you maybe comment on have sand concentrations increased or have you all tested diverters? Can you maybe elaborate a little bit? Floyd C. Wilson - Halcón Resources Corp.: Yes. And it's yes to both of your thoughts there. I would say between 2013 and the beginning of 2016, most of our frac jobs have been in the 400, maybe a few 500 pound per linear foot range. We have been running diverters and we have been using higher sand concentrations 700 pounds, 800 pounds. We're seeing some dramatic changes, but as is our normal pattern, we like to see quite a few months of production to see if we're really on a different track rather than just a slight acceleration on the front part of the decline curve. But some of our great offset operators in these areas are using some of the same current steps and having good success. So, yes, we're looking at those and employing those as we speak.

Brian Michael Corales - Howard Weil

Analyst

And the Williams County, the Southeast area you're completing, I'm assuming are you all testing some of those as well? Floyd C. Wilson - Halcón Resources Corp.: It would be idiotic if we weren't.

Brian Michael Corales - Howard Weil

Analyst

Fair enough. And then one on – in El Halcón, I guess with what you have seen, I mean would you kind of just maybe do a test pad or I guess a test run for some of the new completion things that you're seeing from neighbors? Floyd C. Wilson - Halcón Resources Corp.: I'm actually quite anxious to do that. We don't have a plan for that right now. We're taking our cue from the strip and right now it's not that exciting to drill out and test things. And I don't believe that growth is quite the mode that we want to be in right now. We'll do it when we do it like always. We won't talk about it. We'll just do it and make sure we have results. And then when we report them on a quarterly – at some quarter when they're mature enough to even suggest there's something new there. But I can tell you that the early evidence from several months of production on some of the people that do have rigs running there are quite attractive. You're finding that the IPs are not necessarily a lot higher but the 90-day decline rates are much lower. And if that holds even longer, you've got quite a – actually it's s step change in economics for that area. You could take wells up by 20%, 30%, 40% in times depending on what area that you're in. So, it's quite an interesting thing. But we're still thinking that the oil price needs to be a little bit higher to really commit. As you know Brian, when you're drilling in these kinds of areas, wherever they are in these shale plays, you have to commit for some length of time, rigs and frac and personnel to do a good job. And we're not quite ready to do that yet. But we're doing all the analytical work hour by hour and it looks very, very interesting.

Brian Michael Corales - Howard Weil

Analyst

All right. Thank you.

Operator

Operator

Our next question comes from Tarek Hamid with JPMorgan.

Tarek Hamid - JPMorgan Securities LLC

Analyst · JPMorgan.

Good morning. Can you talk a little bit – you talk about potential acquisitions. Can you maybe talk a little bit about sort of the size what you're seeing in the Williston Basin and sort of your initial thoughts on how you think about financing acquisitions over time? Floyd C. Wilson - Halcón Resources Corp.: Sure. We don't have a plan. We have seen transactions happening around us in the several hundred million dollar range up to a billion and maybe a little bit more. Given our current situation, we can undertake a transaction of any of those sizes that I just mentioned. We would largely finance it with equity as we stand today. But I don't want to front run anything. We're just – we're acquisitive. We've got a great setup to either publicly or privately add capital as needed. And we're quite focused on maintaining our property quality which is quite high. We don't have any shitty properties anywhere, so we're going to make sure that we continue that pattern.

Tarek Hamid - JPMorgan Securities LLC

Analyst · JPMorgan.

Got it. And then just on service cost, as you look at – sort of going back into Williams, next year are you seeing any inflation at all versus kind of what you saw in Fort Berthold in 2016 or are rates generally staying relatively constant? Floyd C. Wilson - Halcón Resources Corp.: There's a lot of talk about a higher cost. We haven't exactly seen it yet. There's talk about higher frac cost and we're using some great smaller providers up there right today. And we don't really anticipate some huge movement quickly. Now, I think if the oil price went up, you're going to find that there'll be much more pressure than there is today. The larger providers have, of course, talking up the higher cost and you can't blame them, where they've been for the past couple of years. It's been a difficult place to be in business. Probably, more than what would go on with a somewhat higher cost, you probably should keep focusing on what operators like ourselves and others are doing with efficiencies and completions. And I think we just drilled out a 10-well pad. We do all these pads. We do all the wells at once. We frac them at once, we complete them at once. I think we drilled out a 10-well pad in two weeks, drilled out the plugs and got the wells cleaned up. All 10 wells in two weeks. A year ago, for most operators that could take you a week to do one well sometimes. So, everyone and ourselves, we're working really hard on getting more bang for the buck and it has been really effective. So, as costs go up, and they will if the price goes up and I certainly hope prices go up, you'll find that these efficiencies will stick with us and that we'll probably have a better reward ratio than we had at similar prices in the past, just because of experience and application of that experience to the new wells that you're drilling.

Tarek Hamid - JPMorgan Securities LLC

Analyst · JPMorgan.

Got it. Well, thank you. That's very helpful.

Operator

Operator

Your next question comes from David Epstein with Cowen. David Epstein - Cowen & Co. LLC: Guys, I didn't hear if you mentioned this. But in addition to your five well pad that you have in the presentation generating 60% IRRs, recognizing of course that's not your standard Williams acreage, how many more wells do you think might be of that quality? Floyd C. Wilson - Halcón Resources Corp.: You know, I don't have that exact number, but I do – I can say that we have well over 100 wells that earn in the 30% to 60% IRR range at the current strip. And that's quite a few and if the strip was just a little bit higher, we can add another couple of hundred wells. So, there's quite a few good targets up there and we have a lot on Fort Berthold. Williams County, as you go west, of course, it gets dim in terms of high water cut and the zone's thinner and et cetera, et cetera. But as you move to the east, it's quite good. And we think it's overlooked by almost everybody that looks at oil and gas companies. There are some very good properties that's not right in the heart of the field. So, yeah, you might not have million barrel wells up there, but I promise you, we can drill 800,000 to 900,000 barrel wells up there. And so we don't have an exact answer to your question. But there's quite a few locations up there. David Epstein - Cowen & Co. LLC: I appreciate that. And one other question. It's sort of a tough question, so feel free to pass on it. Just sort of comparing your acreage to the transactions, the recent big transaction of what Oasis bought from SM.…

Operator

Operator

Floyd C. Wilson - Halcón Resources Corp.: Hey, operator, I think we've been on here enough and if anybody has something they want to travel back to, just give us a call. Thank you.

Operator

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.