Penn Virginia Corporation
Q1 2021 Earnings Call Transcript

Published:

  • Operator:
    Good afternoon, and welcome to the Penn Virginia First Quarter 2021 Earnings Conference Call. . Please note this event is being recorded. I would now like to turn the conference over to the company for the prepared remarks. Please go ahead.
  • Clay Jeansonne:
    Thank you, and good afternoon, everyone. We appreciate your participation in today's call. I'm Clay Jeansonne, Director of Investor Relations, and I'm joined this afternoon by Darrin Henke, Penn Virginia's President and CEO; Rusty Kelley, our Senior Vice President and CFO; Julia Gwaltney, our Senior Vice President, Development. Prior to getting started, I'd like to remind you we will discuss non-GAAP measures on this call. Definitions and reconciliations of these measures to the most comparable GAAP measure are provided in our first quarter earnings press release issued this afternoon, which can be found on our website at www.pennvirginia.com.
  • Darrin Henke:
    Thanks, Clay. We very much appreciate everyone joining us for today's call. Once again, our team delivered solid performance in the quarter, delivering on our commitment to driving down capital costs, increasing operational efficiencies and generating free cash flow. On the production front, we beat on oil by selling 16,324 barrels per day, which exceeded the high end of our guidance of 16,200 barrels of oil per day. Our strong sales volume for the quarter were largely due to the outperformance of wells brought online during the period, which benefited from our advanced completion designs, coupled with drilling improvements. Volumes for the quarter were also less impacted by the February winter storm that we previously anticipated, largely due to the outstanding efforts of the Penn Virginia operational team. We have seen significant improvements in results from our drilling program. The wells we spud in 2020 are outperforming their D&M projections by 13%. The wells that have been turned in line in 2021 are performing even better. Their combined IP-30 results are outperforming D&M projections by over 20%. On Page 8 of the presentation, we provide highlights of some of the great wells we have drilled and their results. Our strong well performance to date provided us the confidence to raise our full year 2021 production guidance by more than 6%, while still maintaining our previous target on capital expenditures. Looking at expenses for the first quarter, we posted adjusted direct operating expenses of $13.55 per BOE. This low operating expense typifies our lean cost structure and culture of cost containment. Put simply, we will continue to leave no stone unturned to find ways to improve the operating performance of our business. For the remainder of the year, we expect our direct operating expenses per BOE to trend lower.
  • Operator:
    . And our first question will come from Neal Dingmann of Truist.
  • Neal Dingmann:
    Nice quarter. Darrin, my first question, I like that Slide 8 you all have, it really shows the deep inventory, so my question is around that deep inventory. I know kind of the next 80 or so wells you have planned certainly seems like there's high confidence there. Could you talk -- again, without obviously going into too much detail, but it talks about here that even of your 500 locations, you all have the confidence that 2/3 of these are estimated to have sort of that 55%-plus IRR at $55. And so I'm just wondering, is that all -- looking at that slide, is that all kind of in that general area? I'm just wondering how far out, if I would draw the circle, I mean is the confidence continuing? And is this all just -- I guess my second part of that is really just this year, next year, would you consider most of this now just sort of pure development activity.
  • Darrin Henke:
    Yes. The -- We do have a great inventory, and I appreciate you acknowledging that. The -- when you think about where these wells will be drilled, they're really all across our acreage. The longer laterals generate better returns. And so we can have longer laterals. Where they show up on our acreage, generally, they rise to the top.
  • Neal Dingmann:
    Okay. Okay. And then just lastly, just looking at cost, maybe for you or Rusty, it looks like to -- for us that the costs had gone down a little bit. I'm just wondering, based on sort of assumptions, not only OFS, but just again, just ops cost in general. I'm wondering if you could talk a little bit about that, kind of what expectations are for at least the remainder of the year for that.
  • Darrin Henke:
    Yes. So relative to well costs, we're working to drill our wells from existing pads to utilize existing facilities where we can to put as many wells onto 1 pad as we can and to drill the longest laterals that we can. So those are all things that we're tweaking to improve and lower the cost of the total wells relative to the lateral lengths that we complete. So from an inflationary standpoint, we didn't really see any direct inflationary pressure in the first quarter. And by and large, in the second quarter, we're overcoming what little inflationary pressures we see out there with efficiencies in our drilling and completion program.
  • Operator:
    . This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Henke for any closing remarks.
  • Darrin Henke:
    We thank everyone for participating in the call today. We're a company that's focused on cash-on-cash returns. We've got a great balance sheet, and we intend to maintain the strength of that balance sheet. We absolutely are interested in looking at M&A opportunities this year. And we will be looking for accretive opportunities to grow the company, and stay tuned. So thanks again for participating in the call.
  • Operator:
    The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

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