Crescent Energy Co

NYSE:CRGY

Earnings Call Transcript 2019-Q2

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Contango Oil & Gas Company Second Quarter Earnings Conference Call. [Operator Instructions]. Also as a reminder, today's teleconference is being recorded.

At this time, I'll turn the call over to your host, President and CEO, Mr. Wilkie Colyer. Please go ahead.

[Wilkie Colyer, President, CEO & Director]

Thank you. Good morning and welcome to Contango's Second Quarter 2019 Earnings Call. My name is Wilkie Colyer, and I'm the President and CEO of Contango. I hope everyone has had time to read through yesterday's earnings press release, including the cautionary statements regarding forward-looking information and non-GAAP measures that apply to statements on this call. Those cautionary statements and information regarding non-GAAP measures are available on our website. I'll avoid repeating what's in the press release and move on to color around our progress at the company since our last update in early May.

During our last call, we had just TD-ed our first well -- Yes. I'm sorry, Sean, did we just interrupt the call?

[Operator]

No. Sir, you're still live. Please proceed.

[Wilkie Colyer, President, CEO & Director]

We have now finished drilling our third well in that area, the Old Ironside 1H. From this most recent well, we executed a successful proof-of-concept for our new casing program, which demonstrated our ability to reduce drilling costs in excess of 15%. The new design incorporates a smaller hole size, which uses less mud and cement fluids, less steel and has faster penetration rates at the bit.

On this last point, the Old Ironside 1H was our fastest spud-to-TD time to date at 18.6 days, and that's in spite of about 35 hours of downtime drilling that well. Importantly, we do not expect the slimmer hole design to have any negative effects on performance.

Completion operations have commenced on the 2 wells in our Bullseye area, starting with the Ripper State 2H well, which was recently completed in the Wolfcamp B formation and has just started flowing back. The second completion in Bullseye is the American Hornet 1H, targeting the Wolfcamp A. This well is undergoing completion operations as we speak with flowback expected late in the third quarter.

We will then move the crew to Northeast Bullseye and expect to begin completing wells in that area towards the end of this quarter. Once our drilling program for this year has concluded, we will have 0 lease obligation wells to drill in 2020 in our north -- in our Bullseye and Northeast Bullseye areas. This Northeast Bullseye acreage high grades our inventory from a geologic perspective. And through discussions with our reserve engineers, we would expect it to add reserves to our portfolio at year-end, both from a barrels and present value perspective. Currently, we have 0 reserves booked on this acreage.

Moving on to our offshore operations. We were impacted by some downtime during Q2 due to compressor issues, which forced us to run at a reduced rate. We estimate the net impact to production during the quarter was about 200 million cubic feet equivalent or 2.2 million cubic feet equivalent per day.

On the other hand, we are pleased to report that we experienced minimal downtime of roughly 2.5 days in July as a result of Hurricane Barry. Our offshore platform allowed us the ability to operate remotely after evacuating the crew, which salvaged about two days of uptime.

Neither the compressor issues in Q2 or the hurricane had any impact on our offshore results. As you know, we have been in discussions with our current lenders and others regarding a financing or replacement of our existing credit facility, which matures on October 1 of this year. While we have nothing to share at the moment, we remain confident that we will be able to refinance the credit facility prior to the maturity date.

Thank you for your time today and for your interest in Contango. With that, I'm ready to open up the line for questions.

[Wilkie Colyer, President, CEO & Director]

All right. Well, if there are no questions, I appreciate everybody's time and interest. And if you have any follow-up questions, you know where to find us. Thanks, again, and have a great day.

[Operator]

Thank you very much. And that does conclude your conference for today. We do thank you for your participation and for using AT&T conferencing service. You may now disconnect.