Saturday, August 8, 2015

CLR's 2Q15 Earnings Transcript -- August 8, 2015

Link here.

This is not an investment site. Do not make any investment or financial decisions based on what you read here or think you may have read here. In a long note like this, there will be factual and typographical errors. In addition, it is often difficult to sort out facts from opinions (either from me or the source). If this information is important to you, go to the source.

A little bit on finances first and opening comments
  • on track to align CAPEX with cash flow
  • production this quarter hit a record, and cash costs such as G&A and LOE came in significantly below guidance (EOG said something similar regarding LOE)
  • increased production guidance for 2015 (though we find out later, that it will decrease 2H)
  • officially adding STACK to CLR's portfolio of world class assets
  • defined as base of the Woodford to the top of Meramac, approximately 700 to 1,200 feet thick at depths of 9,000 to 17,000 feet ((similar to depths of the Bakken to the Red River wells in North Dakota)
  • first STACK well: impressive flow rate of 2,076 boepd
  • 136,400 net acres; 60% held-by-production
  • Woodford and Springer completions
  • drilling efficiencies still being studies; too early too comment
  • one-third of production from the SCOOP was crude oil
  • one-third of our 460,000 net acres of leasehold in SCOOP is prospective for dual zone development, where the Woodford is greater than 225-feet thick (compare with 40 feet for the middle Bakken)
Drilling program
  • Bakken: 10 (could be cut by 2 if pricing necessitates)
  • SCOOP: 10
  • Northwest Cana: 4
  • STACK: 1
Cost reductions
  • about 20% at mid-year compared to year end 2014; mostly due to service sector (differs from EOG's comments); mostly on the completion side
  • At $50 WTI, CLR would outspend cash flow by $150 - $200 million during 2H15; this is without the benefit of additional cost reductions;
  • drilling time reduced from average of 17.6 days to 16.6 days (quarter-over-quarter); seven sub-14-day wells drilled in the second quarter
  • enhanced slick water and hybrid completions
  • targeting an average of 800K EURs per well compared to an average EUR of 550,000 boe for 2014; 45% increase in EUR; along with well cost reductions, essentially cuts 2015 Bakken finding and development costs in half compared to 2014
  • for every dollar spent in the Bakken in 2015, we are getting 80% more reserves than we did in 2014
  • ten years of drilling inventory at 775K boe, averaging 15 rigs (note: CLR is at 10 rigs now and could cut to 8)
  • slick water hybrid completions continue to deliver initial 90-day production rate uplifts of 50% and 40% respectively compared with offset legacy completions in Williams and McKenzie Ccounties
  • projecting another 25% to 45% in our EUR for these enhanced completions
Harold Hamm comments:
Oil supply and demand will re-balance. In terms of the supply rebalancing coming out of this paradigm shift we're watching several key factors. The US oil production growth curve is turning over, so the primary source of the world's supply growth will not be there in the last half of 2015 nor 2016, given all the rigs the industry has laid down. Secondly, we're not seeing enough supply growth worldwide to offset the natural declines in production. OPEC has announced plans to reduce production beginning in September, and we think that may be the first of many.
Finally, we're seeing meaningful world demand growth led by low oil prices which will be rebalancing. This energy paradigm shift will have profound long-term consequences worldwide, starting with US crude exports ban being lifted so America can finally compete freely in world energy markets and receive the full value for our oil in contrast to Brent selling at a 10% premium today and 20% for much of the last four years. US oil exports simply make too much sense economically, especially as this administration moves to lift restrictions on our Iranian oil exports.

Stealth Plays

September 6, 2011, Encore
January, 2012, conference
September 21, 2014, CLR-Springer
October 12, 2012, SCOOP

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