WPX
#Thank you.
That's only for a 1 mile lateral.
Okay.
(laughter)
Yes, I think, obviously, every basin, every stack of rocks is going to be a little bit different.
In the Williston basin, I think we may ---+ for current commodity price, lateral design, everything we are doing, we may have seen that point of diminishing returns.
As I mentioned, we drilled or we completed some with 10 million pounds, some was 6 million pounds.
And remember, it's so many other things than just how much sand we're putting in the ground.
But how do we put that sand in the ground, the techniques that we use ---+ and how does that translate for the cost into value.
Specifically in the Delaware, I also mentioned it is relatively early in its operational maturity cycle.
And so we do ---+ we have peer companies that have tested well over 3,000 pounds, nearly 4,000 pounds per foot.
And we're watching that very closely.
We've been to 2,000 and even 2,500 pounds per foot in some of our wells.
And we're watching those.
I can tell you, you kind of have to jump to the other side and know that at some point you're going to kind of miss in front, and then kind of have to back off a little bit.
We are prepared to do that.
At the same time we want to understand ---+ you know, water cost is a big, big, big driver.
And so how much water and fluid does it take to put that sand away.
And sometimes that can really be the driver of that point of diminishing returns.
Yes, we get that question a lot.
And it's a really good question, and it's one that's a little tough to answer, because so many times it's a combination of somewhere in between.
What I try and point to and really be thoughtful around is things like just drilling wells in half or 40% of the time that we were drilling before.
Obviously, those are structural changes that ---+ we're going to hang on to those great ideas and continue to improve from there.
So those things I see not so much affected by inflation.
Certainly, on the stimulation side, the rate that we are being charged today on stimulation ---+ certainly in a steady-state or an inflationary market, those costs have to come up for our suppliers and service companies to survive.
And so we will see some inflation on some of those.
I would say overall, where we are at today ---+ and we've done some internal work that says okay, yes, in a steady-state $50 or $60 or $70 oil, how much inflation do we see in each of these components.
Summing that up, I would say if you take the starting point of $100 oil, where we were, to where we are at today, and then you reply back and get back to $100 oil, I would say we give back maybe a third to 40% of what we've gained during that period ---+ give that back in terms of inflation and just higher costs with the vendors.
We've about 60,000, 65,000 in the Stateline, 60,000 in the Stateline area.
And we think all of that is X/Y capable.
So we're pretty fired up about that.
I would say it's more than that, but it gets a little bit spottier as you go to the North.
We have some lower working interest.
And to be honest, we just haven't focused the team on that acreage very much.
The Stateline is so deep and so much to work there.
That's where the disproportionate share of our capital and G&A, since they are technical time, is being devoted.
Well, yes, if you think about our leverage, we talked about 2.5 ---+ 2 to 2.5 turns when we laid our original strategy out.
Obviously, with our pullback, I think every, every company has had to step back and look at what the target is.
That being said, I certainly think that we can ---+ we wanted to represent what we could do with our assets.
Basically, in layman's terms, just drill our way into a capital structure, if you will, just because of our ---+ just unbelievable quality of our assets.
So we've got to balance that versus additional asset sales.
I would say that asset sales are much lower on my priority list than they were 12 months ago, as we started our deleveraging.
You've seen commodity prices come back up.
You've seen us execute.
And so I think now we have got time to step back and really contemplate and make sure that we ---+ the next moves we make are the ones that need to be made for the long term and not get too fixated on a ---+ with the short-term outlook.
Yes.
And I think if you go back and you look at the returns that we were generating in this lower commodity price environment in the post ---+ the months after the RKI acquisition, the returns now in comparison to those ---+ we can delever, if you will, through the drill bit; whereas at those old returns, we weren't going to be able to.
And that's why we were so focused on the asset sales.
Now we have kind of flipped that around.
And given the asset sales, and the amount of debt that we've been able to take down, and what we've got remaining on the balance sheet, I think the returns that <UNK>'s team has driven to have given us the opportunity to delever consistent with what our acquisition economics were, which was to basically grow the production.
Well, I think we've talked about was ---+ well, at strip ---+ let me think through that.
I mean, we always model internally here, <UNK>.
I know you look at it as strip pricing.
We have a tendency to recognize our well positioned hedges that we have.
And so if you looked at 2016 outspend, I still think that when we talked about adding another rig, maybe even knocking down a few DUCs, you're still only $100 million to $175 million of outspend for 2016.
And so that would have ---+ doing that, you're going to start seeing a pretty nice uplift in 2017 cash flows, because it will have the full-year impact of that.
I think what you have to look at is our capital guidance is still $350 million to $450 million.
So I don't know if it's our outspend has necessarily ticked up in relationship to what we had originally guided to.
I think most importantly is as you think about 2017, even at a strip pricing, you have to create ---+ as <UNK> mentioned earlier, the activity that we've got planned for the back half of 2016 is going to create that much more cash flows in 2017.
So the outspend for 2017, just as a result of what we're doing this year, is going to decrease.
I think the next question is: what are commodity prices going to look like as we start planning for 2017.
And that will probably drive, more importantly, what our capital level will be next year.
Okay, well, thank you very much for joining us today.
We appreciate your continued interest in WPX and look forward to next quarter's call.
We'll see a lot of you out on the road.
Take care.
