Ladies and gentlemen, thank you for standing by. Welcome to the Contango Oil & Gas Company Third Quarter Results. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to turn the conference over to our host, President and CEO, Wilkie Colyer. Please go ahead.

Thanks. Before we begin, I want to remind everybody that the earnings press release and the related discussion this morning may contain forward-looking statements, as defined by the Securities and Exchange Commission, which may include comments and assumptions concerning Contango's strategic plans, expectations and objective for future operations. Such statements are based on assumptions we believe to be appropriate under the circumstances. However, those statements are just estimates, are not guarantees of future performance or results and therefore should be considered in that context. Good morning, and welcome to Contango's third quarter 2018 earnings call. My name is Wilkie Colyer, and I've been with the company and the President and CEO role since August of this year. I think it's safe to assume that everyone has had time to read through yesterday's press release, so you will learn that it is not my style to read the information already provided, but instead to provide strategic color and strategic thought around those results. As many of you know, I took over as President and CEO after my former boss and partner, John Goff, became the largest shareholder of the company acquiring just under 19% of the outstanding shares from the largest shareholder in June of this year. So why do we invest in Contango? The reasons are straightforward. We felt that the company was undervalued relative to the intrinsic value of its assets, and the platform as a public company is very attractive and available in an industry undergoing dramatic change. While the expense structure was far out of line relative to the size of the current asset base, we feel that's a fixable problem. Goff Capital has had a lot of success investing in companies, we believe, are undervalued in industries experiencing various levels of distress, with energy being our…

[Operator Instructions]. And our first question comes from the line of Brad Heffern from RBC Capital Markets.

I guess, starting with the Permian, can you talk about how long you anticipate the pause there to go on for and when the Ripper 2H might eventually be completed?

Sure. So we're pausing there in Q4. So that's sort of been decided. And then we're still putting together plans for 2019. But I would say, currently, we're focused on making sure that we drill any lease obligation wells that we have, which are only a couple next year, I believe three net wells, and then the Ripper State, the lease obligations there that we have to complete that well by March of 2020. So as we -- it'll be some time between now and then and we're still sort of making that determination.

Okay. Got it. And then on the Gulf, as far as the new reserve estimate goes, can you give that out? I saw the 75 or so at year-end '17. Do you know what that moved to?

Well I don't know the exact number. We've rolled off production, obviously, since first of the year. And we had basically a drop in recover -- net recoverable reserves of about 10 or 11 Bcf. So it's going to be in the 60, 65 range, we see it.

Yes. The PDP is $97 million, $98 million from the Gulf, PDP PV-10.

Yes, yes. From PV-10, yes.

And that's at strip.

Our next question comes from the line of Neal Dingmann with SunTrust.

Comments about the strategic alternatives -- I guess, my question is around the strategic alternatives. Can you talk about just how you and Joe view the quarterly spend, given the other activities you have going on? Do you just -- is it something you just want to maintain a steady-state? Or do you really want to pull back on spending until you decide which you all are going to do?

Quarterly spend in terms of CapEx?

Yes, sir. Just the CapEx, obviously, mostly in the Permian, obviously.

Yes. No. I mean, I think it certainly got to be not totally pulling back. We want to maintain our position out there because we think it's a great asset. But certainly, we're not going to be without spending cash flow by any material amount. So that's kind of how I think about it as we go forward.

Okay. And then plans there, will you test additional zones? I mean, obviously, that latest well not only had, as you said, the flat decline, I mean, the 1,000 a day with almost 80% oil. Obviously looks like a great well in that General Paxton. So I guess, my question is in that play. The focus is in mostly Wolfcamp A and B. Will that continue to be the focus? Or will you continue to test other things?

Yes. At this time, it will be. But we certainly think that the Bone Springs is very interesting. Diamondbacks drilled a couple of shorter laterals pretty close to our acreage with great results there. And so it's certainly inventory that we have and that we like holding onto. And I'd just point out that the lease obligation wells that we're drilling in the Wolfcamp A and B generally hold all zones above it. So by drilling these lease obligation wells, we HBP those Bone Springs zones that we can drill at a future date.

Okay. And then if I can sneak one last one, just on the Gulf. I saw you had the impairment expense. Can you just talk how you view -- I mean, I totally agree with you. It certainly held the cash cow to have. How do you sort of see the decline? Or what -- how do you sort of view this cash cow playing out and continue to be just as strong for the next couple of years? Or maybe any color you could give around how you all view it?

Sure. Again, I mean, it -- the goal of the compression was to slow down the production declines. And thus far, that looks encouraging. If this thing can be a 10% decliner, and we can hedge out that price risk by hedging our gas production, we just view it as a stream of cash flows and sort of nothing more, nothing less. There's not incremental wells we have any plans to drill there. And so it's just -- its cash flow, and that's how we think about it.

Our next question is from Ron Mills with Johnson Rice.

Given the -- I think it's a General Paxton well that shut down to the southeast, a little bit lower pressure. Can you talk a little bit how you completed that well? Is this the completion -- do you think some of the completion changes are driving the better than cash flows' results? Or just a little bit more commentary in terms of what you did on that well and what you like, what you think is driving the strong performance?

Well, from a completion perspective, we've been pretty consistent in our completion techniques now for the last 4, 5 wells. So we did not do anything strategically different on the General Paxton. I think it just -- it's the location. We're -- we've moved kind of 2, 3 miles kind of to the east and a little bit south of our existing wells to date. So it's a little bit of an outlier. And we just had better performance overall, better oil cuts. There's some pretty good wells offset to us, et cetera. So we just think it's going to be a good area over there.

Okay. And then similar question. In terms of the Fighting Ace, I know you've had pretty variable results in the most kind of -- where you've drilled most of your wells. When you do a look back, including that Fighting Ace up there, are you starting to triangulate on some of the characteristics of the wells that have performed better versus the ones that have come in a little bit below expectations to help as you formulate your 2019 and '20 programs?

Yes. I think that's fair to say. I mean, if you look at the well results we've had to date, we've sort of finally drilled across all of our acreage. And that gives us a lot of confidence in our ability to sort of go back in and drill wells at really attractive returns and avoid some that are sort of below par. So no, I mean, we think it's just like anywhere else. There's a learning curve. And so we've sort of moved up the learning curve here out at Pecos County and are excited that we're largely passing the bat.

And finally, just a follow-up to Neal's question on the strategic alternatives. Is the Intrepid engagement, is it to evaluate the sales you've talked about? Is it all-encompassing in terms of total strategic alternatives in terms of corporate-type transactions? Or is it more focused on asset sales and advising you through this -- the cost reduction and organization restructuring, if you will? And from a timing standpoint, is it -- do you have any kind of expectation of when you hope to get through that process?

No, but no concrete timing expectations that I can share with you right now. As far as what the scope of the project is and what the scope of our job is, it encompasses anything that we think might be beneficial to shareholders. So just think about it that way.

And our last question is coming from the line of Mike Kelly with Seaport Global.

Wilkie, really great opening comments there. I just wanted to get really some high-level question to you. And it's just how do you and John Goff think about the overall intrinsic value of the company? I'd just be curious on how maybe your sum of the parts framework and how big of an opportunity you think Contango can ultimately be versus roughly the $250 million enterprise value that the company is still -- is currently reflected.

Sure. I mean, look, as I said in my prepared comments, I mean, the -- we think this can be a pretty interesting platform through which to make energy investments in the future. But again, we're -- we are shareholders, first and foremost, so we're looking for whatever the best outcome is for shareholders. So we certainly think there's a -- there's trades that are discount to intrinsic value. And we think reason a big for that is because of sort of a bloated cost structure. So we think removing that bloated cost structure will help the market more accurately reflect the value of our assets. And again, we'll take what the market gives us. But as I mentioned, right now, the A&D market is fairly sluggish. So using this as a platform could be an attractive option.

Got it. Okay. Appreciate that. And you did -- you kind of rattled off some of the assets that you think may be underappreciated, that could also be better suited in somebody else's hands. Is there anything, if you look across the portfolio, where you really see that the current market isn't giving any credit? Wall Street's given no credit for it in your portfolio, but I think maybe to industries, it should be worth quite a bit more? Just kind of curious on kind of those bigger delta-type bomb that we could see in the portfolio.

Yes, sure. I mean, again, clearly, there are assets that we have that we think are -- they're better suited in other's hands, and particularly some of these where we've drilled very few wells, but HBP-ed the acreage, so that we haven't sort of blend through a bunch of the inventory. And so that kind of stuff's valuable in the right hands and in the right A&D market. So we're evaluating those options. But I like I said, we're not -- we're going to be smart sellers of assets, and we're not going to sell stuff. I don't want to paint myself in a box and say we're going to sell X, Y and Z because then everybody knows that. So we'll sell at the right prices in the right environment.

We do have a follow-up from Ron Mills.

Wilkie, just a follow-up on Mike's question. Especially post-Gulf of Mexico breakdowns and the Eaglebine breakdowns, do you have an updated PV-10 and -- for the assets? And of that, do you have a breakdown between PDP and total approved?

We'd show at year-end.

Yes, we'll have that at year-end.

And there are no other questions in queue. Please continue.

All right. Well, if that's it, I appreciate everyone's time, everyone's interest in the company and look forward to getting back to work over here. So again, thanks for your time and look forward to talking to you again next quarter. Bye.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference Service. You may now disconnect.