Heard on The Call: Bonanza Creek Energy
Bonanza Creek Energy is presenting at the EnerCom Conference on Wednesday, August 22nd in Denver.
Bonanza Creek Energy Inc. reported Q2 results today and elaborated on its DJ Basin operations during the company’s Q2 2018 earnings call held August 9. Excerpts from the call are below.
- Second quarter sales volumes averaged 18.0 MBoe per day including the negative effects of a prior-period adjustment of 0.6 Mboe per day related to non-operated wells
- Rapidly improving well performance yields over 1,000 economic drilling locations in Wattenberg
- Well head pressures effectively managed via Rocky Mountain Infrastructure’s (“RMI”) multiple third-party gas processing optionality
- Second quarter GAAP net income of $4.9 million, or $0.24 per diluted share; Adjusted net income(1)of $24.2 million, or $1.18 per diluted share
Q: My question has to do to a 1,000 locations you guys have talked about and I think this is the first time you actually openly speak about. Firstly, are those net locations? And then secondarily, could you give us a little insight as to what that would translate into if you were to be drilling more extended reach laterals?
Bonanza Creek President and CEO Eric Greager: It is the first time we’ve indicated because we needed to complete the resource assessment that we started when I first came on-board in April. And that resource assessment, if you’ve been through these before, it starts with that fundamental understanding of the resource itself.
As you work your way through the resource across the acreage position, combine it with what you understand about spacing, stacking, stimulation design, and the latest application of well performance initiatives, you roll all of that together and that has yielded the 1,000-plus locations. They are – and I want to point out, we’ve stated in our press release and elsewhere, these are SRL equivalents. That’s our measure to keep things clear on that.
And the other point of clarification, I think, I need to make is that they are gross locations and that provides some opportunity for us as we continue to develop the resource and continue to drive and apply more cutting-edge subsurface engineering and development. There’s an opportunity to continue to grow this, but I wanted to qualify, A, they’re gross; and B, they are SRL equivalents.
Q: What is the net equivalent?
President and CEO Eric Greager: Because these are SRL equivalents, I don’t know that we have released the net working interest on all of those leases, Irene. We’re going to take a little bit more time and continue working on that. But it’s – our working interest is large on much of our contiguous acreage and all of these wells are sticked in our contiguous acreage, meaning we didn’t stick up scattered acreage that kind of sat at all by itself.
So, there is upside potential with additional acreage that will be sticked up. We wanted to stick with the more contiguous acreage position, one, because we better understand the continuous resource potential; and two, because we wanted to get this information out as quickly as possible.
Q: Of these locations, how many are Niobraras? And do you have some Codells in there and maybe a little bit on spacing and EURs?
President and CEO Eric Greager: Yeah. It’s – I think EURs are kind of in the same space as net working interest although we’ll be able to guide on net working interest relatively quickly. EURs is something that evolves over time, and that’s something that you can expect to get periodic guidance on. I think what we intend to do going forward here is when we finish our assessment throughout 2018 for the well performance and we move into our budget season for 2019, we’ll begin to lean in and start providing our type curves to help model the business and the programs for 2019. And then each year, you can expect to get new type curves that indicate our best guess. But the thing about given EURs and type curve performance for the longer run is it – it fails really to recognize the upside potential that we continue to drive into the business. And I think there’s a significant amount of upside potential yet to come in terms of how we intend to develop our resource over time.
Q: And also the split between Niobrara and Codell?
President and CEO Eric Greager: Yeah. I think you can look at the Niobrara and Codell. You can look back on our current distribution between Niobrara and Codell and that’s going to represent itself largely proportionately going forward. So, if it turns out to be a typical 6-well pad for example has 1 Codell and 5 Niobrara and perhaps 2 benches, then I think you can expect that same distribution over time. But the thing that you got to keep in mind is, we’re going to continue to optimize every pad going forward with the very best information we have in terms of spacing, stacking and stimulation design, and the interdependencies of those. And I think what you’ll see in the well performance that we’re releasing this quarter is even in a period as short as a quarter, you can create some substantial uplift in well performance, and we certainly don’t anticipate that growth slowing down over time.
The Oil and Gas Conference®
Bonanza Creek Energy Inc. is presenting at EnerCom’s The Oil & Gas Conference® at the Denver Downtown Westin Hotel, Denver, Colo. Aug. 19-22, 2018. EnerCom expects to have more than 80 presenting oil and gas companies and more than 2000 financial professionals attending this year’s conference.
To learn more about the conference and presenter schedule please visit the conference website here.
