Amplify Energy Corp. (AMPY) Q2 2018 Earnings Report, Transcript and Summary

Good morning, and welcome to the Midstates Petroleum Second Quarter Earnings Conference Call. My name is Leeway, and I will be facilitating the audio portion of today's interactive broadcast. [Operator Instructions]At this time, I would like to turn the conference over to Mr. Jason McGlynn. You may begin your conference.

Thank you, Leeway. Good morning, everyone, and welcome to Midstates Petroleum's second quarter 2018 earnings conference call. Joining me on the call today is David Sambrooks, our President and Chief Executive Officer. In today's call, David will begin with an overview of our operational and financial highlights. I will then provide additional details on our operations and financials. And finally, David will make some closing comments, and we will take your questions. Before we get started, let me read our safe harbor statement. This conference call contains forward-looking statements and assumptions, which are subject to risks and uncertainties, and actual results may differ materially from those projected in these forward-looking statements. Please refer to Midstates' Form 10-Q that will be filed on Monday with the SEC for a discussion of these risks. Also, please note that any non-GAAP financial measures discussed on this call are defined and reconciled to the most directly comparable GAAP measure in the table in yesterday's earnings release. Now I'll turn the call over to David for his comments.

Thanks, Jason, and good morning, everyone. Thank you for joining us today, and thank you for your interest in Midstates. We performed well during the second quarter. Our production was approximately 20,600 BOE per day, with 17,200 BOE per day coming from our Miss Lime assets. Our Miss Lime production increased 11% from the first quarter due to a highly successful enhanced workover program that I'll review more briefly. Also, we generated approximately $27 million of adjusted EBITDA, and our capital expense and capital items were in line with our budget expectations. We are measurably executing on our market-focused strategy by enhancing our investment returns, cutting costs and improving efficiencies throughout the organization. We closed the sale of our Anadarko Basin producing properties at the end of May, with net proceeds of approximately $54 million, while retaining our Northwest STACK position to exploit later. And we paid down our RBL by another $50 million, bringing our total RBL paydowns this year to $100 million. I'm very pleased with our efforts to-date to reduce costs and further enhance our competitive margins. Moving to our operational performance during the quarter, I'll start out with exciting news in our base production optimization program, and then provide a bit of color on our drilling and completion design optimization program. At the end of last year and early this year, we fully evaluated our opportunities to enhance our base production. And in the first quarter, we initiated a large well workover program. At its peak, we ran a 10-workover rig program during the second quarter, and we have performed over 180 workovers thus far in 2018. This workover program led to a boost in production from these wells of approximately 2,100 BOE per day. The workover program consisted of 2 main components: first, a focus on extending downhole pump run life; and second, efforts to increase well productivity through wellbore cleanouts and restimulations. On the -- extending the run life effort, our target is to double the average run life of our downhole pumps. Success on this front will mean less wells going offline during the year, thus, lowered average yearly workover expenses. Secondarily, less downhole failures will lead to reduced production downtime, increasing average yearly production. Since the results of extending run life play out over a year or more, it's too early to quantify our results on this effort. But early time, we're experiencing a lower downhole failure rate than -- prior to the program implementation. On increasing well productivity, we have achieved impressive success. Our wellbore cleanouts and restimulations have shown immediate results, and are mainly responsible for the 2,100-BOE-per-day workover production increase we have achieved. In total, this enhanced workover program has been highly economic, with very short payout periods. So a great use of capital. The enhanced workover program is largely completed this time. And we're currently down to only running 1 workover rig in the field, so we'll now see capital and expenses come down in the second half of the year as a result. Next, I'd like to update you on our drill and complete program. In the first quarter, as we prior talked about, we sought to increase IPs and EURs of our wells, with high-intensity frac designs that also increase well costs. We have some success improving type curves, but not to the extent needed to make economics on the incremental costs. Since that time, in the second quarter, we've moved to improving individual well returns with a more focused and lower cost completion, and are finding minimal impacts to type curves. We're now seeing early economic success in the strategy of reducing drilling completion costs to optimize well returns. And the big step in this strategy, in the second quarter, was the drilling of 2 2-mile laterals and completing them with focused fracs. Operationally, these wells were very successful. We are able to target the wells as we have on our 1-mile wells, and we drilled the extra lateral lane quickly and efficiently. Spud rig release on these 2 2-milers averaged 24 days or 12 days per mile compared to our average 1-mile spud to rig release time of 16 days. Also, the 2-mile laterals compared to 1-mile laterals have cost savings from reduced facility costs and pipe costs. Coupled with the focused completions, our first 2 2-milers averaged approximately $3.6 million total drilling complete cost or approximately $1.8 million per 1-mile lateral. This resulting per mile cost is significantly less than the average cost of our 2017 1-mile laterals of $3.2 million. We also achieved the average initial rates of 950 BOE per day per well, with 36% of that being oil, which is a 1.5x to 2.0x offset of the single 1-mile -- offset single 1-mile wells. Our study of 2-mile lateral results in the greater Mississippian Lime play gave us confidence that we could achieve approximately a 1.5x initial rate enhancement over a 1-mile lateral, but we also expect to get approximately a 2x uplift in EUR. And early results from our 2 wells are bearing this out. We believe this combination is significantly lower per well costs and attractive meaningful economic improvements over the 1-mile well results. With our success in the second quarter, we are moving ahead with 2 additional 2-mile laterals in the third quarter. In summary, we are on budget in guidance, and achieving substantial cost reductions in LOE, G&A and CapEx. With the success of our enhanced workover program in the second quarter, we saw a significant production increase quarter-over-quarter, and are forecasting reduced expenses and downtime going forward. Our drill and complete program is showing some exciting economic uplift through the successful execution of 2-mile laterals and reduced drilling and completion costs. All of these points puts Midstates on firm footing as we move forward. We're accomplishing our goals of reducing expenses and improving investment returns, while further improving our already excellent balance sheet. Finally, we continue to remain interested in SandRidge, and we are participating in their process. And as part of this process, we cannot comment on that further at this time. With that, I'll turn it back over to Jason.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions. Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

1Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Thank you, David. I'll begin with a discussion of the company's operational highlights, and follow up with earnings and costs for the second quarter. I'll then provide an update on our capital investments and finish up with a discussion on our balance sheet and 2018 guidance. As David mentioned, we achieved average daily production of 20,584 BOE per day during the second quarter of 2018, up from 19,235 BOE per day in the first quarter. We grew our production on our Mississippian Lime properties to 17,202 BOE per day, an 11% increase from 15,518 BOE per day in the first quarter of 2018. The production mix from our Mississippian Lime assets during the second quarter was 28% oil, 23% NGLs and 49% natural gas, roughly in line with the previous quarters. For earnings, we had a net loss of $1.5 million or $0.06 per share in the second quarter, which included an impact of $7.8 million noncash charge related to the company's commodity derivatives contracts. We generated adjusted EBITDA of $27 million in the second quarter, down slightly from $29.7 million in the first quarter. This decrease from the first quarter was primarily due to do the company's increased workover activity as part of its base production optimization program. Turning to expenses. Second quarter adjusted cash operating expenses, which include LOE, production taxes and cash G&A, but exclude restructuring and advisory costs and employee severance costs, totaled $23.1 million or $13.05 per BOE, up from $21.4 million or $12.37 per BOE in the first quarter of 2018. The increased quarter-over-quarter was primarily due to the company's increased workover activity during the second quarter. Our lease operating and workover expenses for the second quarter combined totaled $17 million or $9.57 per BOE, up from $14 million -- $14.8 million or $8.56 per BOE in the prior quarter. Again, this increased quarter-over-quarter was primarily due to our increased workover activity. Specifically, in the second quarter, our average expense workover cost was $3.12 per BOE compared to the first quarter of 2018 of $1.73 per BOE. Severance and other taxes were down this quarter to 28 -- 2-point -- sorry, $2.8 million or $1.57 per BOE compared to $2.9 million or $1.65 per BOE in the first quarter of 2018. This is primarily due to the divestiture of our Anadarko-producing properties, which has a slightly higher effective tax rate than our Miss Lime assets. With respect to adjusted cash G&A, which is a measure of cash G&A before any capitalization to oil and gas properties, and excludes noncash compensation and certain nonrecurring items, the second quarter totaled $4 million or $2.24 per BOE compared to $4.4 million or $2.52 per BOE in the first quarter of 2018. The decrease quarter-over-quarter was primarily due to lower employee expenses in the second quarter of 2018. Operational CapEx for the quarter was approximately $39.2 million, with nearly all of these coming from our Mississippian Lime assets, where we've spud 4 development wells, including the 2 extended laterals, and brought 8 wells online, including the 2 extended lateral wells. Our average new well costs in the second quarter of 2018 trended lower to approximately $2.8 million per 1-mile lateral and, as David mentioned earlier, approximately $1.8 million per mile on the 2-mile laterals. On to the balance sheet. At the end of the second quarter of 2018, we had approximately $6.3 million in cash and net debt of approximately $21.8 million. Liquidity at the end of the quarter was approximately $146.3 million, consisting of $6.3 million in cash and $140 million of availability on our RBL facility. As David mentioned earlier, we made a $50 million paydown to the RBL in March with cash on hand, and a subsequent $50 million paid down in June after the closing of our Anadarko-producing property sales. This $100 million we paid down to the RBL should reduce our annualized interest expense by approximately $6 million per year. Additionally, during the quarter, the company's borrowing base under its revolving credit facilities was reaffirmed at $170 million, consisting solely of the Mississippian Lime assets. The next scheduled borrowing base redetermination will occur on or about October 1, 2018. Finally, I'll finish up with our updated 2018 guidance. We have tightened our operational CapEx guidance to between $100 million and $110 million, and expect production to between 16,500 BOE per day to 17,500 BOE per day. For pricing differentials, we expect to realize $0.70 per barrel off WTI per oil, approximately $1.35 per Mcf off Henry Hub for gas and we expect to realize approximately 40% of NYMEX WTI for per barrel NGLs. This quarter, we have also updated our guidance breakdown to break out lease operating expenses and workover expenses separately, giving our increase in workover activity during the last quarter. On the per-BOE expense items, we are providing the following ranges: lease operating between $5 and $5.50 per BOE; expense workover between $2 and $2.25 per BOE; severance and other taxes between $1.50 and $1.70 per BOE; and adjusted cash G&A to between $2.60 and $2.90 per BOE. With that, I'll turn the call back over to David for a couple of closing comments, and then we'll take your questions.

Well, thank you for everybody's interest today. It was an exciting quarter for Midstates. We think we are materially performing on our strategy, and seeing that success playing out. And we look forward to taking your questions.

Operator, we are now ready for questions.

[Operator Instructions] And we have our first question from the line of Bill McDougall.

I have a group of questions. First of all, where do you see the biggest opportunity for expense reduction going forward?

Bill, this is David. I think the biggest that we're going to see in the second half compared to the first half of the year is in the expense workovers. The workovers that we conducted during the first half of the year were a combination of capital workovers and expense workovers. And like I mentioned, we're running 10 rigs. Those -- both of those categories are elevated with good success on the economic outcome. And what we forecast for the rest of the year is probably about a 2-workover rig program to maintain production, which is far down from the first half of the year. So I think we're going to see that, the biggest component of kind of second half over first half expense reduction. And then I think the other categories are -- we've actually kind of achieved a lot of the expense reductions. And I think what you're going to see is those run rates, for the rest of the year, pointing to that kind of the reduced expense rates. So G&A would be a good example of that. We've seen it come down from the first of the year when we made the organizational changes. And as that runs out, that run rate will kind of show lower kind of quarter-over-quarter results.

So that reference in the release about lower expenses in the second half was specific to the enhanced workover program being complete and then, secondarily, just the run rate benefit of the reduction you already made earlier in the year?

Yes, I think that's right. That's right.

Okay, that's helpful. And let's come back to the enhanced workovers. Was that program available to you because the properties have been neglected in the past? Or is this something that you would anticipate having an opportunity to repeat at some point in the future?

Yes. So I guess, what I would call it was really kind of just an increased focus on our part to look at the overall procedures on base production. So we've kind of attacked all different areas of the company over the last, call it, 9 months. And the quickest returns that you get in, in E&P world really are around your base production. So we just had a really increased focus. I think that there was plenty being done before in terms of base maintenance. I think the -- probably, the newer -- there were 2 newer things that we brought to the equation. One was really just changing the procedure on, call it, simply pump replacements, with the methodology to try to extend run times. And like I mentioned earlier, that plays out a little -- over a little bit longer time. But that's a gift that kind of keeps on giving. If we can get the reduced failure rates, we'll keep production up and expenses down. I think the second piece was something that hadn't been done much before. And we -- which was doing the restimulation efforts, cleanout of the laterals and restimulations. And it was something that we assumed or expected would enhance production, and I think we were really pleasantly surprised. So I think what we've done with -- I mean, the 180 workovers we did was a bit slug. We've operated approximately 400 wells. So that's a pretty big percentage of our opportunity set that we went through. We're continuing to look at further workover opportunities. But as you can imagine, we kind of hit the most attractive first, and then that kind of declined. So we're being much more focused on what we want to attack. So I think that -- I don't anticipate that we'll have the same level of workovers as we look forward. The goal really is to have lower workovers because we have longer run times. But now we're into the phase of kind of evaluating our producing. We have wells that have been online and continuing to perform to see if there's opportunities to go back and enhance production on those. So I think that's probably the next phase.

And have you gone far enough down that evaluation to have some perspective as to whether there is an opportunity or not, even though you're not quantifying it yet?

Yes, I think we have. I mean, we have identified some wells to go and see if we can enhance with restimulations. We've done a little bit of that already. So I would call that kind of underway. I think it's probably a program of size that's more aimed at trying to decrease decline rate of your base production. I don't think it's going to be kind of dramatic in terms of the number of opportunities. But certainly, we hope we get some significant cases of individual well enhancement. And we'll communicate that as we move forward.

That's helpful, David. And if you don't object, I would like to ask a few more questions. First of all, relative to your 2-mile laterals that you're endeavoring upon, how many frac stages do you have per mile? And how does that compare to the 1-mile laterals? A - David Sambrooks Did you -- Bill, it cut out just a little bit. Did you say stages per 2-mile?

Yes. Frac stages per mile on the 2-mile, and then how does that compare to the original 1-mile laterals.

Okay, yes. I would say it's with still a little bit of discovery on our part on optimization around the 2-mile laterals. Historically, our 1-mile laterals, the most common completion that we've done is a 17-stage completion. So on one of the 2-mile laterals, we basically just doubled that. So we were at 34 stages. We are testing lower-stage counts on 1-mile laterals right now. And one of the 2-mile laterals, we pumped a completion that was 10 stages per 1-mile or a 20-stage completion. So I think what we're going to be -- we'll be seeing from the additional 1-mile wells that we're doing now through the end of the year and the 2-mile wells, there'll probably be some experimentation around the -- kind of the optimum frac size on those. So we're still kind of in early day -- I mean, with a lot of knowledge from the 1-miles, but we're still evaluating on optimization on the 2-mile laterals.

That's quite helpful. And then lastly, what are you anticipating for third quarter production relative to the fact that your second quarter average doesn't take into account a full quarter's worth of the enhanced workover program? And I assume you exited the quarter at a higher rate than the average?

Well, we don't. Yes, we don't give out quarterly guidance. So we're not going to give you a specific number there. But I think you're -- yes. I mean, I think your points are valid. The results from the workover program were pretty much largely seen in the second quarter, but as you said, more towards the end of that and the first of that. So I think it's just going to be a combination of the natural kind of reservoir effects of base decline versus kind of a full run rate on the enhanced workover wells, and then adding in the drill and complete. So I mean, we feel comfortable with the guidance. We saw -- we tightened up the range on that from 16,500 to 17,500. We feel really good about achieving that for full year. So obviously, you can start kind of deducting quarters and calculating potentials for the remainders. But I think we're positive about where production is in our guidance. A - William McDougall Absolutely. So I am going to push back just a little tiny bit. What did you exit the second quarter for your run rate? Is that something you're willing to share? A – David Sambrooks: Well, currently -- yes, correct. I'll just say, our current rate right now is about 17,800 BOE per day.

And we have the next question from the line of Amer Tiwana. Q – Unidentified Analyst: A couple of questions. First, any activity in the Northwest STACK that you can comment on? And two, we haven't heard much from you on that front. Is that because you're waiting for the outcome on the SandRidge process, and you'll make a determination after that? And just generally speaking, what is your strategy with respect to that basin?

Right. Yes, I'd say we don't really have much to report on that right now. It's the same -- we're kind of in the same spot we were last quarter, where our strategy with that is to watch the activity around us. There's a lot going on in the area. So every quarter, we kind of see something additional. I reviewed kind of the technical basis across those properties last quarter in some detail. So we continue to review the opportunity and watch as kind of more wells come on the map. And I can't comment specifically about SandRidge. But as you know, and we've announced or acknowledged, we're in that process. And so they have some complementary assets in that same area. So I would say we're continuing to follow the play pretty closely, but do not have any immediate plans to capitalize or to drill any wells there right now, but still kind of wait and see mode. Q – Unidentified Analyst: Sure. And my next question is, in terms of the gas price realizations, and, obviously, that's going to be a significant negative here in terms of the basis, what are you guys are seeing? Is there anything in particular that's hitting you hard there? Or -- and going forward, what are the positives or negatives that we can sort of look to? A - Jason McGlynn Yes. Thanks, Amer. I'll take that question. The biggest piece of it is we're just experiencing the PPL blowout from NYMEX HENRY HUB that happened starting at the end of January that kind of persisted through the first half of the year. The good news is that basis diff has contracted over the last month or so, and not back to the historical norms, but definitely a significant contraction from where it was earlier this year. So hopefully pricing gets a little bit better for us on the realization side of it. It's obviously some stuff -- things we're moderating on a go-forward basis. And we'll anticipate a little bit more forward guidance on that as we move forward just to see exactly where that is. And we're looking at some different options of what we can do there, but nothing to report at this point in time. Operator [Operator Instructions] Your next question comes from the line of David Beard. Q –Indented Analyst: A bunch of good questions previously, so I'll focus in on these 2-mile laterals. It just seems when I look at the cost metrics, the eyepiece, that this is a step-up in your IRRs. Just would you agree with that? Or how would you characterize just the influence on IRRs as it relates going to 2-miles? A - David Sambrooks Yes. No, no doubt that's is correct. We see kind of enhanced economic returns to these 2-miles. I mean, it's -- there's 2 components there that play into it. One, very strongly on the cost side. And clearly, on a per 1-mile basis, we're -- this is going to be as cheap as we can get. It's really good compared to the 1-mile basis. So that's a big head start and kind of economic enhancement. The other side, which, frankly, it's very early times on, so we're a little bit cautious, but so what do you get out of the wells? I mean, are you getting a full kind of 2x in terms of the type curve? Are you getting type curve that maybe it's 2x over time, but maybe you don't get a full 2x of initial rate? Those are the things that we'll have to get a little bit more data on. We didn't go into -- we went into this with a good amount of analysis around those issues. And like I stated, from 2-mile laterals in the greater Miss Lime area, we see a pre-reliable 2x on EUR. So that's good. We see probably, on average, about all the -- the data is a little more scattered on this, about a 1.5x on initial rate. And our 2 2-milers, we're just at initial rate right now. And when we compare those to the offset wells, we're kind of in that 1.5 to 2.0 range. So it kind of checkmarks on expectations so far. And yes, I mean, I think we'll do the combined cost reductions. And kind of what we're seeing on expectations on rates, it's definitely going to be or we expect it to be a step-up in economic return over the 1-milers. Q –Indented Analyst: Good. And would you care to share or take a guess at IRRs assuming normal basis differentials for oil and gas? A - David Sambrooks If you'd give us a little more time on that, we'd really appreciate it. We think -- yes, we called these the first steps right now. And so we have -- we've obviously kind of real-time with the initial rates at our first looks at that. And that gives us confidence in the discussion just previously that we think the economics are enhanced. But it's really variable with early time. And so we don't think we can give you any reliable guidance on that. We do think with the additional work that we're going to do, that kind of by year-end, we should have enough data to be more descriptive of that. I might add that we didn't speak much about it, but the same applications on the 2-mile laterals were executing on the 1-mile laterals, where we're trying to get that cost basis down through more focused completions. So we think we'll have a collection of, call them, new-generation 1-mile and 2-mile laterals by the end of the year that should give us enough data to be a little bit more descriptive on that. Q –Indented Analyst: Again, kind of early time, but I'll give some description around that question. I guess, maybe obviously, but our inventory that we have right now is going to be a combination of kind of 2-miles and 1-miles. I mean, the 2-mile lateral inventory's going to be a subset of our total. There's just some areas, like in the core in Tacoma that's more fully developed, where we're not going to have the lanes for 2-mile laterals. But then when you go South into our Carmen area or the western extension area that we did the initial testing in about a year ago, those areas we're going to have much more availability for the 2-mile lanes. Our view right now is we're going to be doing both as we move forward. We probably are going to, at least from our early results, have a prior organization towards 2-mile laterals. So as we build our 2019 budget, I think you'll see both in there, but I think we will be emphasizing the 2-mile laterals as much as possible. Q –Indented Analyst: Great. That's helpful. And if I could squeeze another one in and shift subjects over to just hedging, hedging philosophy. You do have a strong balance sheet, which may be -- would mitigate the needs for hedging. Going forward, I mean, you've got your book set as it is, what is your thought to hedging out in '19 and '20, given you could argue you don't need to hedge with a strong balance sheet? David Sambrooks\: Yes, yes. I mean, I think it's always a kind of healthy debate with our board. And the point that you made is that there are -- there's a view that we definitely have a lot of flexibility given our very clean balance sheet. I think that -- I don't think we're overly aggressive in terms of hedging. And I think of the way I always look at it is your hedge kind of more in the near term versus long term. So in terms of kind of exposure to the price market over a longer time frame, we will always have that. And I think what we're more trying to do with the hedging is kind of protect the cash flows to be able to kind of execute the program that we have for the year and kind of looking out a year. So I think we'll continue to -- I imagine that the schedule will go on with the board, but I think we'll continue to have a hedging program similar to what we do now in the go-forward.

And there are no further questions at this time. Presenters, you may continue.

Well, thanks, everybody, for your attention today. You know where we are. If you have any further questions, give us a call. We look forward to talking to you soon. Thank you very much. Operator hank you, presenters, and thank you, ladies and gentlemen. This concludes today's conference call. We appreciate your participation. You may now disconnect.++