Battalion Oil Corporation (BATL) Q1 2016 Earnings Report, Transcript and Summary

Mark J. Mize - Chief Financial Officer, Treasurer & Executive VP Floyd C. Wilson - Chairman & Chief Executive Officer

Good day, ladies and gentlemen, and welcome to the Halcón Resources First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Mark Mize, Executive Vice President, Chief Financial Officer and Treasurer. Sir, you may begin. Mark J. Mize - Chief Financial Officer, Treasurer & Executive VP: Okay. Thank you and good morning. This conference call contains forward-looking statements. For a detailed description of our disclaimer, see our earnings release issued yesterday and posted to our website. We've also updated our investor presentation for certain items, including some minor changes to our 2016 guidance, which has also been posted to our website. Production for the first quarter averaged 39,527 barrels of oil equivalent a day, which is down about 4% from our fourth quarter levels, as we've scaled down drilling and completions and are now only running one rig in the Bakken. We're still guiding for our full year 2016 production range of 37,000 Boe to 39,000 Boe a day. On the operating cost side, LOE plus workover expense was $7.89 in the first quarter, versus $8.36 per Boe in the fourth quarter, representing right out about a 6% quarter-over-quarter decline. Given the cost improvements that we've experienced, we reduced the full year 2016 LOE plus workover cost guidance to $9, versus the previous guidance of $8 to $10. And then after adjusting for some selected items, cash G&A expense was $4.52 per Boe in the first quarter. We still expect cash G&A for 2016 to be within our previously indicated $3 to $5 guidance range for the year. Taxes other than income came in at just over $2 per Boe for the quarter. And gathering, transportation and other, after adjusting for a few selected items, came in at $2.23 per BOE, both of which are in line with full year guidance ranges. Overall, total operating cost adjusted were just over $16.50 per Boe in the first quarter, versus $17.08 in the fourth quarter of last year. With respect to D&C CapEx, we incurred right out $52 million during this quarter. Our 2016 guidance range of $140 million to $160 million is still a good estimate. We expect first quarter to be the heaviest period of D&C spending in 2016, considering we were running two-plus rigs on average for much of the quarter. Regarding hedges, we realized a net gain of settled derivative contracts of $108 million. The mark-to-market value of our hedge portfolio today is right at about $220 million. For the remaining nine months of 2016, we have approximately 25,300 barrels per day of oil hedged at an average price of about $80.50. And as we always do, we'll just continue to monitor the strip to see if any opportunities come up later in, in our additional positions. We did end the quarter with $564 million of liquidity, which consisted of cash on hand plus undrawn capacity on our revolver with a current borrowing base of $700 million, which, by the way is at the upper end of the previously indicated range of $650 million to $700 million. Finally, from a balance sheet perspective, early in the first quarter, we did make some repurchases of about $100 million of our senior unsecured notes for right out about $10 million in cash. We have postponed any additional debt repurchases at this time, while we continue to explore more comprehensive balance sheet restructuring transactions. And with that, I'll turn the call over to Floyd. Floyd C. Wilson - Chairman & Chief Executive Officer: Thanks, Mark. Couple of comments on operations and a quick update on our efforts to lighten up our balance sheet. We're not going to have a Q&A session today. But if you have any questions, just reach out and find us and we'll answer them. We're running one rig up in the Williston Basin. We're flexible in running that rig or not? If prices stay in low, we probably wouldn't be running it, except it's been on a multi-well pad and efficiency says to continue at least until we're done with that pad. So we'll evaluate that as we move forward and as we continue to watch the hedge market – the futures market, I should say. We're looking for another place to start hedging. And we're not quite there, but it's looking interesting. Our costs in the Williston Basin are down to just over $6 million per well. Our average wells are going to put out in excess of 900,000 barrels of oil equivalent in Fort Berthold, which is where we're running a rig. So it's very economic at today's price. And, of course, with our hedges, it's okay as well. We paused drilling at El Halcón simply because we can't. We have a huge asset there. It's a wonderful asset. We have over 500 operating locations and it can be very economic, almost where the strip is now. So we're going to maintain that great position there. We may add rigs depending on how our efforts go in this balance sheet business. We may reduce rigs. We can go either way. We've got a very experienced operational staff. Efficiencies across all of our operations and in the back office are being driven by all of the fine people that work here. These actions are companywide. We're reducing, of course, field costs and we're reducing internal cost as well. So we feel very good about where we are operationally speaking today. We expect strangely that operations and efficiencies and, more importantly, effectiveness of our completions will continue to improve, even though we're basically at the top of anyone's game right now. We continue to find areas where experience and a slightly different approach yields a better profile; and we'll continue to do that. Mark mentioned that we have acquired some of our outstanding debt during the quarter. I can't remember the exact numbers, kind of $100 million or thereabouts. We're talking to all of our stakeholders on a more comprehensive balance sheet effort. And these are, as you might expect, challenging discussions, but very direct; in that, unlike some companies, we're very liquid and we have an awesome set of assets to upgrade. While we're encouraged, we don't have anything to say about that at this moment. We just have options that a company in our position sometimes would not have; and we, of course, didn't plan on $30 oil or $40 oil, but we do have that. So there's no timetable for all of this. We'll continue to operate the company in an appropriate manner. We'll drop rigs or add rigs when it's right, we'll add hedges when it's right. And we'll continue to cut cost, whether it's through efficiencies or increasing productivity on the wells or just the general cost cutting. We are in a position now where we are curtailing both rigs; and we're not especially rushing to complete wells. And once we've IP'ed wells, we may not be rushing to produce them at their fullest. There's no hidden message there, just that we're maintaining optionality for the future. With that, I think no point in me summarizing all of that. If you think of something we didn't cover, just give us a call. And hope to be able to speak with all of you directly or in another call someday soon with a report on what the other activities that we're doing. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.