Wednesday, February 17, 2021

CLR -- 4Q20 --Transcript -- Q& A -- SeekingAlpha

Other links before we get to the transcript:

Link here to the transcript.

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First, Q&A:

  • further bolt-ons? Not targeting anything currently.
  • monetization of the water "division? Not done simply because it made more sense to keep it;
  • current CAPEX based on $52 oil; would you move into 2022 strat plan if WTI appreciates significantly more? Probably not; use extra cash to pay off debt; bringing the dividend back;
  • oil / gas mix? Mentions the Long Creek project -- a big project we've got up in Bakken. And that's a more long life type of project from the development side of things. And you'll see a lot of the production coming on in '22 from the '21 CapEx spend; 56 wells; 85% interest in the projects; two rigs committed to this one project; 20% of the wells will be brought on in 2021; 50% in 2022; and 30% in 2023; so it's a big, big project; a lot of logistics being orchestrated there, but it's going to be extremely efficient operation, given the concentrated position that we have and the plans we have to handle all the water, oil, gas, all it takes a while for all this oil to get on when you have these projects that are at this scale; there is also some of the best rock in the basin; great to get back to drilling this one;
  • dividend question again? CRL focused on debt first, before dividend;
  • Powder River, what did your competitors not see? CLR already familiar with this geology;
  • sustainability? before the Powder River acquisitioin, CLR had enough inventory to sustain a 5% compounded annual growth for the next ten years; inventory not an issue; CLR's only problem: deciding at what pace to grow;
  • permits in Powder River Basin? reiterates, 96 permits in hand, federal permits;

Production:

  • delivered better-than-expected production;
  • captured 98.3% of produced gas 
  • guidance one year ago: 155,000 to 165,000 bbls per day; produced 160,500
  • guidance one year ago: 800 to 820 million cubic feet per day; in fact, produced 837.5 million cfpd

Takeaway

  • DAPL: only 3,500 bopd on DAPL contracted
  • if DAPL is shut down, corporate-wide differentials would see an impact of $1 to $2 a bbl

Financials:

  • free cash flow, 2020: $275 million (compare that to United Airlines)
  • remember: crude oil went negative during 2020
  • huge impact of Covid-19
  • exceeded free cash flow guidance for full year 2020
  • does anyone notice how often they talk about free cash flow, just saying
  • fifth straight year of free cash flow
  • guidance a year ago: $200 million;
  • in fact, 40% better: $275 million
  • all in wells were reduced by 13% in the Bakken; 6% in Oklahoma
  • guidance: CAPEX at $1.2; in fact, came in at $1.16 billion 
  • production expense: $3.27 vs guidance of $3.50 to $3.75

Guidance:

  • projecting sixth consecutive year of positive cash flow
  • projecting $1 billion FCT with $52 WTI
  • targeting $1 billion of debt reduction to about $4.5 billion at end of 2021
  • ultimate long-term total debt target is $2 billion to $3 billion
  • expect to deliver 3% to 4% total production growth in 2021

Powder River Basin:

  • 130,000 net acres and approx 9,000 boepd; 80% oil
  • multiple stacked reservoirs
  • adds over 400 million boe of net un-risked resource potential to CLR's portfolio
  • basin is in early stage of development; 

Drilling guidance:

  • $1.1 billion for drilling and completion;
  • Bakken: 60%
  • Oklahoma: 35%
  • Powder River Basin: 5%
  • eleven rigs
  • Bakken: 5 - 6
  • Oklahoma: 4
  • Powder River Basin: 1 - 2
  • goal
  • complete 139 net operated and 12 net non-operated wells in 2021; exit the year with 135 wells in progress

Miscellaneous:

  • mentioned American Gulf Coast Select (AGCS or AGS)
  • phase 1 of AGS completed last year, establishing the benchmark
  • phase 2: established a Houston-based area centric delivery point for Gulf Coast bbls

The DAPL:

Our strategic marketing effort continues to deliver positive momentum in 2021. To date, approximately 360 million cubic feet of our 2021 natural gas is hedged with the midpoint of swaps and collars at about $2.97. With respect to oil, an additional 10,000 barrels per day of firm takeaway capacity has been added from the Bakken to Cushing, with no dilution of our differentials under any DAPL scenario.

Even though, we only have about 3,500 barrels a day of firm transportation on DAPL, it is a critical piece of American energy infrastructure, supported by numerous states that has aided in our nation's energy independence and security. The line has been operating safely for the last four years, and once fully adjudicated, we expect DAPL to be a long-term transportation option out of the basin, but we have prepared for multiple scenarios.

If, in fact, it does shut down, we'd expect our corporate-wide differentials to be adversely impacted by $1 to $2 a barrel. If DAPL does not shut down, we'd expect our differentials to be on the more favorable side of our guidance. Lastly, we are committed to our strong ESG stewardship and will publish 2020 ESG report around midyear 2021.

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