MRO
#That's okay, we'll give you an out today, <UNK>.
It is a question.
When I think about the capacity and execution capacity question I think of it really in two buckets, <UNK>.
One is the internal capacity and competencies.
And I think <UNK> and I have both addressed, that we've been very thoughtful in our approach there to ensure that we preserve the internal capabilities and capacities needed to get back into growth mode when we do get that constructive pricing.
We've done that through redeployment, everything from special projects to field leadership roles, to displacement of contractors, so that we do retain those essential skill sets that will be required when we get back into a growth mode.
Externally it is a little bit more complicated in that the service sector has been a bit decimated, at least on the labor side, from this correction.
I do think what we will modulate some of that is just many companies will still be in either balance sheet repair or will just simply not have the cash flows or the wherewithal to get back on a very fast ramp.
So, I do think that the ramp will be self moderated in some ways once we get on it.
But I think maintaining those strong relationships with our key service providers, which we have been able to do during the downturn, that's very important.
We are going to leverage those relationships when the bell rings again to get back into growth mode.
Yes, sure, <UNK>.
Let me maybe address it this way.
When we talk about getting to the maintenance capital and getting back on a growth mode, you really have to talk about it from a common starting point ---+ where are you starting that discussion.
So if I fast forward to the end of this year based on our current plan, and I look at where my resource plays will be exiting at the end of this year, and I think about what type of capital program will not only flatten but will actually start growing sequentially in 2017, based on what we know today ---+ and, again, this is not a budget outlook ---+ we would probably place that capital program in the resource plays in the $1.3 billion to $1.4 billion.
And, again, that's not just getting us back to flat, that's actually starting sequential growth again in 2017.
That's a ballpark number.
It is one that I think will continue to improve.
<UNK> did a great job describing some of the secular efficiencies that we're already creating in the business.
The Eagle Ford is a great example of that because we're still operating at scale there.
And as we take those efficiencies forward we expect that that number will even have some downward and constructive pressure on it.
Sure, <UNK>, this is <UNK>.
I'm happy to address that.
I'm pleased that you noticed that, actually.
The Bakken team has done a really effective job of managing that production base over the last year at lower and lower activity.
One of the key things is we had lower activity and they've been very focused on the base business, the production efficiency, or up time is really rising.
And that's been a focus of theirs not just the last year but the last couple of years, and they've really improved there.
I think probably more important than that in driving that flattening decline profile you see is that we've made a material shift in our completion practices over the last year and a half.
And the wells from 2015 are among the best we've ever developed and put online.
The declines from those continue to flatten, so that group is a big part of driving that flatter profile.
Those completion practices with more fluid volume, higher density profit loading, more stages, have all been beneficial, and we continue that.
We certainly sit today at lower activity, we have less opportunity to demonstrate that.
But we look forward to the future.
There's enormous commodity price leverage in the Bakken.
When we get back to activity there we expect to be able to deliver even better wells in the future than we have in the past, just building on that.
I think we even look forward to saying in the second quarter earnings being able to talk about the results from the Clark's Creek pad in West Myrmidon where we will have pumped what we view is our most sophisticated, most aggressive stimulations to date in the Bakken, and we expect those results to be compelling.
The way I would address that is going back to my earlier comments around what 2017 might look like in a more constructive environment as we get back on a flat and even a sequential increase or growth in the US resource play.
We are setting today at right around seven rigs across all the resource plays.
We've got five rigs running in the Eagle Ford, two rigs running in Oklahoma.
As we think about that notional budget out in 2017 in the resource plays, that $1.3 billion to $1.4 billion we talked about, that type of spend in 2017 would likely see us ramping into rig activity that would probably be close to double where we are today.
So, we absolutely have the capacity internally, and we feel that the vendor and service community could support it, as well, if that scenario did in fact play out ---+ and, again, this is not a 2017 budget discussion ---+ but if that scenario did play out we would comfortably be able to ramp into that level of activity.
I think what we are saying is that as we look at a reasonable plan under a constructive pricing scenario, that's a type of ramp-up that we think would be supportable with all the other constraints that we may have around cash flows, et cetera.
So, we would be very comfortable.
I wouldn't want to portray that as a peak that we think we could get to, we just think that's a realistic scenario to think about.
Hey, <UNK>, this is JR.
You've probably seen from the materials that we put out last night that we have increased our hedge book.
I think we've done that really for the purpose of protecting at least some level of our cash flows that in turn supports the balance sheet.
When I look at the second half of 2016 we've got now positions in the aggregate of about a little bit less than 60,000 barrels a day of crude production.
Those are done through either straight two-way collars or through three-ways.
When I look at an average floor price, it is around, call it, $49 to $50 average floor price, with a sold put on the bottom of that of right around $40.
So, it does put, again, I think, a floor underneath at least a portion of our production, just to give us assurance with regard from a cash flow standpoint.
Really nothing at this point in time beyond the 2016 timeframe, <UNK>.
We don't have anything hard and fast, <UNK>, but I would tell you anything north of say, half of our crude production we would likely not do, at least at this point in time.
Again, what we're trying to do is at least put some level of support under the cash flows but still allow our shareholders an opportunity to participate in as much of that upside as possible against the use of the collars and the three-ways.
Yes, <UNK>, I'm actually glad you asked.
I've seen the brief write-ups earlier this morning and, needless to say <UNK> and Zach have been responding to a lot of questions from folks.
And to be honest, first and foremost ---+ I think you were somewhat alluding to it ---+ it is really predominately driven by the macro conditions in the first quarter, being a substantial reduction in realized prices on a CNC basis, about 25%.
And of course the volumetric implications, as well.
But when I then just look at more the micro granular level, there is an item, to use the vernacular of some of the reports this morning, the amount of the deferred taxes in the first quarter, the deferred tax benefit in the first quarter, might have been lower as compared to what many people were assuming it to be.
And, unfortunately, it is really just the methodology we are using for inter-period tax allocation.
So, how we allocate taxes, we anticipate for the full year how we allocate them on a quarterly basis.
Honestly, that coupled with a couple other nonrecurring items likely accounts for close to $0.07 or $0.08 per share on a cash flow basis.
So, I think, unfortunately, when you are always looking at working cash flow before working capital you're going to get some anomalies there.
We always try, of course we're managing total cash flow, and look at it on an after working capital basis.
And when I do that, we did have an additional anomaly in there.
We had some nonqualified pension payments that we paid in the first quarter that relates to our late 2015 workforce reduction.
And as every company has in the first quarter, we also had the prior-year's incentive compensation payment.
So all of those items actually add together to get us back another, as I said, $0.07 to $0.08 in the aggregate to cash flow per share.
