DENVER, Aug. 06, 2018 (GLOBE NEWSWIRE) — Centennial Resource Development, Inc. (“Centennial” or the “Company”) (NASDAQ: CDEV) today announced financial and operational results for the second quarter 2018 and updated 2018 operational targets.
Financial and Operational Highlights:
- Increased daily equivalent production 6 percent quarter-over-quarter and 94 percent year-over-year
- Reported successful Third Bone Spring Sand result in Reeves County, Texas
- Announced strong well results from multiple intervals in Southern Delaware Basin, including most productive wells to date
- Executed firm sales agreement for significant portion of crude oil production
- Secured firm transportation agreements for natural gas production through 2021
- Delivered unit costs at or below low-end of full-year guidance ranges
- Reported drilling and completion capital expenditures approximately 10% below prior quarter
Second quarter net income increased 206 percent to $63.5 million, or $0.24 per diluted share, compared to $20.8 million, or $0.09 per diluted share, in the prior year period.
Average daily crude oil production increased 79 percent in the second quarter and 125 percent for the first half of 2018 compared to prior year periods.
“As evidenced by our results, we continue to deliver some of the best wells in Reeves County and remain on track to achieve our full-year production targets with lower unit costs. These strong operational reports were somewhat offset by the impact of the timing of completions in addition to higher than anticipated volumes shut-in by offset frac jobs. With approximately half of our second quarter completions coming online in June, the production impact from these wells was only minimal during the quarter,” said Mark G. Papa, Chairman and Chief Executive Officer.
NGL volumes increased 50% to 12,389 Bbls/d compared to the first quarter 2018 and accounted for 22% of total equivalent volumes compared to 15% in the prior quarter. The increase was attributable to the Company’s primary gas processor shifting to ethane recovery during the quarter and extracting additional liquids from the gas stream to provide enhanced economics for a portion of our production.
“The change to ethane recovery was solely an economic decision, and we recognized higher revenue as a result,” Papa said. “The increase in NGL volumes increased our overall equivalent production causing oil as a percentage of total production to decline quarter-over-quarter, but had no effect on actual oil volumes.”
Centennial’s operational shift to multi-well pad development in the Delaware Basin has yielded positive results while driving efficiencies and increasing economic returns. In Reeves County, Centennial posted robust results from the Third Bone Spring Sand, Upper Wolfcamp A, Lower Wolfcamp A and Wolfcamp C intervals.
“In our second full year of operations, we have made the shift from drilling one-off wells to a full development program. During the second quarter, ninety percent of wells completed were on multi-well pads, reflecting the transition to more efficient, higher return operations. The long-term economic benefits from this development mode will offset any short-term irregular production trends,” Papa said.
The Red Rock A Unit T09H and U04H (74% WI) were drilled using a stacked, staggered pattern in the Third Bone Spring Sand and Upper Wolfcamp A intervals, respectively, with effective 10,900 foot laterals. The Red Rock A Unit T09H achieved an initial 30-day production rate of 1,578 Boe/d, with 1,143 Bbls/d of oil. The Red Rock A Unit U04H reported an initial 30-day production rate of 1,268 Boe/d, with 940 Bbls/d of oil.
“The Red Rock A Unit wells prove the viability of simultaneously pairing the Third Bone Spring Sand and Upper Wolfcamp A intervals. The Unit T09H was a key well, it was our second successful Third Bone Spring Sand test and our first co-development test of another interval,” Papa said. “We have organically added a new, high rate of return play on a portion of our Reeves County acreage with the success of our drilling program. We plan to test the Third Bone Spring Sand in other areas throughout the year and expect this interval to play a larger role in Centennial’s 2019 development program.”
The CWI Long A U31H, B U40H and C U49H (64% WI) were drilled in the Upper Wolfcamp A interval with approximate 9,850-foot laterals. These wells achieved initial 30-day production rates of 2,158 Boe/d (78% oil), 2,899 Boe/d (78% oil) and 2,278 Boe/d (78% oil), respectively. The three-well pad delivered an average initial 30-day oil production rate of 194 Bbls/d per 1,000 foot of lateral per well.
“The CWI Long pad represents our best and most productive wells drilled to date. Combined, these wells have produced over 200,000 barrels of oil during their first forty days on production,” Papa said.
On the Company’s Miramar acreage, the Ninja 4-50 49 2H, 3H, 4H and 5H (89% WI) were drilled on a four-well pad targeting the Lower Wolfcamp A, Upper Wolfcamp A, Wolfcamp C and Upper Wolfcamp A intervals, respectively. Drilled with an average extended lateral length of 9,800 feet, the wells delivered an average initial 30-day production rate of 1,878 Boe/d (58% oil) per well. During its initial 60-day production period, the pad produced over 225,000 barrels of oil.
Targeting the Upper Wolfcamp A zone, the Balmorhea State G 8H, H 9H and I 10H (100% WI) wells were drilled with average 6,150 foot effective laterals. Each well began production at an average initial 30-day production rate of 1,337 Boe/d (77% oil) per well, or 166 Bbls/d of oil per 1,000 foot of lateral.
“Notably, all of our highlighted wells this quarter commenced production in mid-May or June and, therefore, had only a minor impact on second quarter production,” Papa said. “Given these robust results, we feel confident headed into the second half of the year.”
Total capital expenditures incurred for the quarter were $203.2 million compared to $169.6 million in the prior year period. During the second quarter, drilling and completion capital expenditures incurred were approximately $162.7 million. Centennial’s facilities, infrastructure, land and other capital totaled approximately $40.5 million during the quarter.
Midstream and Marketing Update
Centennial recently entered into a firm sales agreement for a significant portion of its oil production with a large diversified crude oil purchaser. Utilizing the buyer’s existing firm transport capacity out of the Basin, the six-year agreement provides for firm gross sales of 20,000 Bbls/d beginning in January 2019, increasing to 30,000 Bbls/d in 2020 for the remainder of the agreement.
“This agreement secures flow assurance for a large portion of our crude oil volumes. Additionally, it provides access to Brent-weighted pricing in 2020, enabling us to diversify our pricing portfolio longer term,” Papa said. “We are working with other major marketers and expect to execute similar contracts within the next few months. Our goal is to secure transportation for essentially all of our future crude oil production.”
Centennial also finalized transportation agreements for all of its expected associated natural gas production. Through firm transportation and sales agreements, Centennial has ensured flow assurance both to the Waha Hub and out of the Permian Basin through the end of 2021.
“We expect natural gas egress will become a significant issue in the Permian Basin by early 2019. These transportation agreements not only provide flow assurance for our natural gas, but also enable Centennial to recognize the economic value of our natural gas and NGL streams,” Papa said.
Updated 2018 Operational Targets
Based on recent operational results, Centennial lowered its full-year 2018 guidance ranges for LOE, Cash G&A, GP&T and DD&A on a per unit basis. As a result of ethane recovery and anticipated further extraction of additional NGLs from the natural gas stream, the Company adjusted its full-year 2018 total equivalent production target as illustrated in the Appendix to this press release.
“Centennial delivered second quarter unit costs either below or at the low-end of our full-year guidance ranges. We have the confidence to lower our total unit cost for the second consecutive year,” Papa said. “Overall, our operations team continues to do an outstanding job driving down costs and keeping drilling and completion costs in-line, even in light of the current inflationary oilfield service cost environment in the Permian Basin.”
(For a summary table of Centennial’s updated 2018 operational guidance, please see the Appendix to this press release.)
Capital Structure and Liquidity
As of June 30, 2018, Centennial had $43 million in cash on hand and $430 million of long-term debt, inclusive of $30 million outstanding under its revolving credit facility and $400 million of senior unsecured notes. Total liquidity was approximately $612 million, including the impact of letters of credit.
As of August 6, 2018, Centennial had no fixed-price crude oil hedges. For the period July to December 2018, Centennial’s crude oil basis hedges represent approximately 23% of its expected crude oil production (using the mid-point of guidance) at a weighted average price of $(2.38) per barrel. For 2019, Centennial has 8,030 Bbls/d of crude oil basis hedges in place at a weighted average price of $(6.88) per barrel. During the quarter, Centennial entered into additional natural gas swap and basis hedges effective 2019. (For a summary table of Centennial’s derivative contracts as of August 1, 2018, please see the Appendix to this press release.)
Quarterly Report on Form 10-Q
Centennial’s financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the three months ended June 30, 2018, which is expected be filed with the U.S. Securities and Exchange Commission (“SEC”) on August 6, 2018.
Conference Call and Webcast
Centennial will host an investor conference call on Tuesday, August 7, 2018 at 8:00 a.m. Mountain (10:00 a.m. Eastern) to discuss second quarter 2018 operating and financial results. Interested parties may join the webcast by visiting Centennial’s website at www.cdevinc.com and clicking on the webcast link or by dialing (800) 789-3525, or (442) 268-1041 for international calls, (Conference ID: 7818579) at least 15 minutes prior to the start of the call. A replay of the call will be available on Centennial’s website or by phone at (855) 859-2056 (Conference ID: 7818579) for a 14-day period following the call.
About Centennial Resource Development, Inc.
Centennial Resource Development, Inc. is an independent oil and natural gas company focused on the development of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin. The Company’s assets and operations, which are held and conducted through Centennial Resource Production, LLC, are concentrated in the Delaware Basin, a sub-basin of the Permian Basin. For additional information about the Company, please visit www.cdevinc.com.