Good morning. My name is Denise, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Q1 2016 Earnings Release and Operations Update for Oasis Petroleum. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions.
Please note this event is being recorded. I will now turn the call over to Michael Liu, Oasis Petroleum's CFO to begin the conference. Thank you, Mr. Liu. You may begin your conference.
Thank you, Denise. Good morning, everyone. This is Michael Liu. Today, we are reporting our Q1 2016 financial and operational results. We're delighted to have you on our call.
I'm joined today by Tommy News and Taylor Reid as well as other members of the team. Please be advised that our remarks, including the answers to your questions, include statements that we believe to be forward looking statements within the meaning of the Private Securities Litigation Reform Act. These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently disclosed in our earnings release and conference call. Those risks include, among others, matters that we have described in our earnings release as well as in our filings with the Securities and Exchange Commission, including our annual report on Form 10 ks and our quarterly reports on Form 10 Q. We disclaim any obligation to update these forward looking statements.
During this conference call, we will also make references to adjusted EBITDA, which is a non GAAP financial measure. Reconciliations of adjusted EBITDA to the applicable GAAP measures can be found in our earnings release and on our website. We plan on filing our 10 Q today following this call. We will also reference our current investor presentation, which you can find on the homepage of our website. With that, I will turn the call over to Tommy.
Good morning, everyone, and thanks for joining our call today. The Oasis team continued its momentum and delivered strong results as we entered 2016. We completed 15 gross or 12.8 net operated wells during the quarter, all on our core Williston acreage while producing over 50,000 barrels of oil equivalent per day as a company for the 6th straight quarter. Operating costs were basically flat compared to what we achieved in the 4th quarter of 2015 and well costs are in line with our $6,500,000 expectations as we remain confident in both our type curves and completion designs. Through the team's hard work, we see tangible path towards reducing well cost by another 5% to 10%, and we continue to experiment with the latest industry completion technologies.
We were cash flow positive again this quarter, including $35,000,000 of midstream capital and have now generated $177,000,000 of positive cash flow over the past 4 quarters. All of this combines to give Oasis substantial opportunity to further build upon the capital efficiency gains we've seen over the past year. OMS had another quarter of record results, moving 78% of our produced water volumes through our system to our disposal wells, generating almost $20,000,000 of adjusted EBITDA. Our increased utilization of OMS continues to have significant impact on our LOE and operating margins. As both Taylor and Michael will talk about in greater detail, our activity in the second quarter and beyond is now highly concentrated in our Wild Basin acreage.
Our 2016 Indian Hills completion program is now largely complete and our internal frac crew is transitioning to Wild Basin. We expect to bring wells online in Wild Basin in the second half of this year as our midstream infrastructure build out remains on schedule and on budget. As we look forward, we remain focused on continuing our track record of solid execution and working to further improve our capital efficiency, all while continuing to retain optionality around acceleration and maintaining the ability to be opportunistic. With that, I'll turn the call over to Taylor.
Thanks, Tommy. It was another great quarter for Oasis and a strong start to 2016. All of our first quarter completions were high intensity fracs within the quarter. We are seeing very strong results from high intensity wells and continue to see performance in line with our updated type curves for high intensity fracs is depicted on Slide 11 of our presentation. As a reminder, our core inventory is depicted on the map on Page 9 of our presentation.
As you can see, we have over 600 locations remaining in the core, which translates to over 13 years of drilling at the current pace. The returns depicted at the bottom of Slide 11 demonstrate the solid returns for these projects in the quarter. And as prices have moved up over the past few months, we are approaching levels that make much of our extended core acreage economic as well. We completed 15 wells in the Q1 or about a third of our 2016 completions program with all of the activity located in Indian Hills. We will be wrapping up our activities in Indian Hills in the Q2.
And as Tommy mentioned, focusing our development program in Wild Basin for the remainder of the year. Wild Basin infrastructure build out is on track and we expect completion in the fall of this year. This should allow us to load the gas plant and other infrastructure at that time. Climate in Williston lends itself to a spring and summer construction season. So while we spent about $35,000,000 on the Wild Basin infrastructure project in the Q1, much of that was spent on progress payments from critical components.
The second and third quarters of the year will see the majority of on-site and in fuel construction. Contractors have been selected, materials have been ordered and all parts of the project are underway. If you look at Slide 12 of our presentation, you can see the steel walls of the crude storage tanks currently under construction and an updated picture of the gas plant. Our OMS budget for 2016 remains unchanged $140,000,000 As everybody knows, it was a relatively mild winter this year and we clearly saw the benefit of that in both our production and LOE results for the Q1. Production came in at 50,300 barrels of oil equivalent per day, generally in line with our production in the 4th quarter and above the high end of our full year 2016 guidance.
LOE was a similar story, coming in at $6.78 per BOE, slightly below our 4th quarter results and also ahead of our full year 2016 guidance. Both metrics were helped by the mild winter, which yielded less downtime on producing wells and allowed us to maximize our completion activities, all leading to increased production while maintaining an cost structure. Our Midstream Services business, OMS, also had another tremendous quarter, moving a record 78% of our gross operated volumes through our pipeline network in the first quarter, up from 75% for the second half of last year. We have also seen significant operating efficiencies within OMS as the business continues to be a significant contributor to the LOE improvements I just mentioned. As we look forward, we now expect full year LOE to be closer to the bottom end of our 7.75 to 8.50 full year range, while our production guidance for 2016 remains unchanged at 46,000 to 49,000 barrels of oil equivalent per day.
Our capital program for the year is proceeding as originally planned. Our well costs are currently coming in at the $6,500,000 estimate we provided in February. OWS again completed 100 percent of our wells in the quarter and that remains a plan for the balance of the year. Additionally, our drilling group was able to shave another day off their average cycle times in the Q1, yielding an average spud rig release of about 15.5 days. The team continues to drill new pace setter wells, which remain about 4 days ahead of that average.
In fact, we just released a rig on a Wild Basin well that took only 11 days from spud to rig release. Oasis continues to look for ways to reduce capital costs through regular communication with our vendors, continuing to improve drill times and completion efficiencies and optimizing how we utilize both OMS and OWS. We remain optimistic that if current conditions hold, there is a path to reducing well cost by another 5% to 10%. We are also testing new completion designs and technologies, including diverters, proppant suspension and high stage count and high proppant volume slickwater well, just to name a few. All results are early time, and we will continue to closely monitor the progress as we move forward.
At quarter end, we had 83 gross wells waiting on completion. We continue to view this set of drilled uncompleted wells as a strategic asset that provides us flexibility from a price recovery and operational standpoint, uniquely positioning Oasis to capitalize on a rebound. In closing, I want to commend the team for an outstanding Q1 and strong start to the New Year, and I once again challenge them to maintain the momentum. With that, I will now turn the
call over to Michael. Thanks, Taylor. The business continues to perform very well and we were again cash flow positive for the 4th consecutive quarter generating $10,000,000 of positive free cash flow. Given that WTI crude spot prices averaged around $33.50 per barrel for the quarter, that's a remarkable accomplishment for the team. Especially when you consider that we spent $35,000,000 of infrastructure capital in the quarter.
We continue to expect the business to be cash flow positive for the full year of 2016 and that estimate excludes our OMS infrastructure project, which we still expect to be able to fund externally. Oil realizations for the Q1 were in line with guidance and with the Q4 of 2015. As we've said previously, we are optimistic that the current $4 to $5 range on differentials is the new norm driven by the resilience we have seen from the rail market, increased pipeline capacity already in service and additional larger pipeline projects expected to come online in the next 12 months. Gas realizations remain challenged driven by both lower Henry Hub prices and by the continued oversupply in the NGL markets. G and A for the quarter was in line with our 2016 guidance and E and P G and A was a slight reduction compared to the Q4 of 2015.
As we have worked to become more efficient, we expect G and A to further reflect those efforts throughout the year, especially as reflected in E and P G and A per BOE metrics. And we expect total company G and A to come in at the lower end of our original guidance of $90,000,000 to $95,000,000 As a point of clarification, our clean EPS for the quarter was negative $0.18 per share, which includes a write off of $2,300,000 of a non cash debt financing cost. If you back out that write off, clean EPS was a negative $0.165 per share. In the Q1, given our undrawn revolver and our strong operational results generating positive free cash flow, we were able to repurchase an aggregate principal amount of $30,000,000 of our outstanding senior unsecured notes for a cost of $22,000,000 And all in year to date, we have repurchased $77,000,000 of senior notes for $56,000,000 resulting in a $20,000,000 reduction in outstanding debt and a net annual interest savings of more than $4,000,000 At the end of the quarter, we had only $65,000,000 outstanding on our revolving credit facility and total liquidity of $1,100,000,000 with our next borrowing base redetermination not scheduled until October of 2016.
To close, our team had another fantastic quarter. As we move forward, we will continue to focus on driving capital efficiency, balancing CapEx and production growth and preserving our strong liquidity position. Thanks everybody. And with that, I'll turn the call back over to Denise for questions.
Thank you, sir. We will now begin the question and answer session. And your first question will come from Neal Dingmann of SunTrust. Please go ahead.
Just on that Slide 3, Tommy, when you guys mentioned, I agree, it seems like more areas become certainly these prices more economic. How do you think about, I think, your Taylor's comment about the extended core becoming more economic? How do you kind of define that many more versus just sort of the core of the 3 key plays? I wonder how I should look at that?
Neil, do you want to? Well, we addressed that, Neil, if you look on Page 9, the inventory slide, and we break out the core, extended core and Fairway. And the core we've talked about, $30 plus depending on where you are, very economic and resilient at low pricing. Then the extended core, with the EURs being a little lower, dollars 5.75 to $750 MBOE range, your breakeven at $45,000,000 plus. So as you get to $45,000,000 certainly into the $50,000,000 range, those things start looking pretty
interesting. Got it. Got it. Okay, great slide there. And then sort of just 2 on to that would be my last 2.
Tommy, your thoughts, you guys have been great about continuing the positive free cash flow. Is that even if prices tick up a bit, is that still going to be when you and Michael think about it, is that still the sort of strategic plan or at some point, does it make sense to become a bit more aggressive on the spend?
Yes. That's one, Neil. We'll just have to kind of feel our way through it. We talk about free cash flow exclusive of OMS. And so we've done a really good job even with the OMS capital being free cash flow positive or at least neutral as we talked about.
And so I think first order is, is we kind of eat into that OMS capital. And so if you think about it, kind of first order of business is outside of external financing, if you set that aside for a minute, is being free cash flow positive on total capital. Now that's as we go through the 2nd and third quarter, that's going to be more of a challenge as we get closer to completion on that facility. But I think that's absent external financing, I think that's a reasonable goal in the near term.
Got it. And then just lastly on M and A, looking at that Slide 9 that Taylor pointed out, I mean, how do you think about Tommy just sort of blocking things up? I guess, two questions. One, your thoughts or do you have intentions of adding more or blocking that up? And I guess I just haven't heard of much in the way of Bakken deals recently.
Any color you can give on how things are trading in that area?
Yes. We've actually done a few deals all the way back into the Q4 of last year where we continued to consolidate in our core blocks, some of that some straight purchases and again still within our cash flow and then some of that trades with some of the usual suspects. And as we go into Wild Basin, we have a bit of a lower working interest there than what you've seen historically. So it provides us an opportunity to kind of core up a little bit. And like I say, in a number of those cases, we're trading non op acreage out.
I mean, we're consolidating with the usual suspects. And we've done that for a long time, but even more so here over the last
two quarters. Got it. Got it. Thanks so much. Nice quarter, guys.
Thanks.
The next question will come from Brad Carpenter of Cantor Fitzgerald. Please go ahead.
Hey, good morning guys and thanks for taking my questions. Just a few quick ones from me. I guess we could touch on just Wild Basin quickly. Back on the Q3 call, I think it was you said that by year end 2017, the infrastructure should be running at nearly full capacity by then and that the asset can generate around $60,000,000 run rate for EBITDA. I guess 2 part question is, is that still a good number to use to help us build a standalone value for the asset?
And then I was hoping to get your thoughts on external financing and potential timing around that for the asset.
Yes. I think what we said at the end on the Q3 was is that a $60,000,000 EBITDA run rate and then once the plant is up and running and as we get into the end of 2017, that effectively doubles, right, Michael?
Yes. So on all the infrastructure, we had $66,000,000 of EBITDA last year. If we analyze the Q1 of this year, it's closer to $80,000,000 So the guys are doing a great job of continuing to grow that business and use that asset to its fullest and we expect them to continue to do that. As you think about Wild Basin that you asked about Brad, you're right on that. It's going to be kind of more foolish in terms of capacity going into the Q4 of 2017 and the Q1 of 2018.
With that, we were talking about $60,000,000 of EBITDA and it could do potentially a little bit above that as well. But that's a good number to start with for now.
Okay, great. Thanks. And then, if you wouldn't mind, do you have any thoughts around the potential for external financing for the asset and any potential timing on that?
No. We kind of said that we still think that we can that we're going to be able to fund that externally, but we've got other than that we can't really comment on timing of the process.
Okay. All right. Great. Thanks and nice quarter, guys.
Thanks. Our next question will come from Michael Rowe of TPH. Please go ahead.
Hi, good morning.
Good morning.
So I guess back to the question about the extended core, you show that there's sort of a $45 plus per barrel breakeven price. So how do you think about the trade off between achieving those returns versus outspending cash flow potentially and taking on some debt to do that. So I guess where I'm going with this is, what's kind of a price where you feel like you can get an adequate return on capital while also not adding on more debt than you're comfortable with?
Yes. That seems like that's the question of the quarter is what price point the increase activity. And it's a simple question, but not necessarily a simple answer because as you know there's a lot of moving parts. But similar to what you've heard from other operators, you start thinking about that in the $50 to $60 range. And as Taylor has mentioned, that's where that extended core really starts to come into the window.
But you're always weighing that off the very attractive economics against outspending your cash flow. So while the economics in the core are really attractive in that range, 40% to 50%, At $50 there's a number of things that we have to consider as we go further and that's we can start drawing down the DUC inventory. We've got to take a look at availability and cost of services. And as cost of service start to move up as activity picks up, cash flow balance and overall capital allocation. So not to mention the condition of the macro market and the trajectory of the forward curve.
So we'll just have to feel our way. I mean, I think it's a little bit early to start laying out commitments of we'll do exactly this at this price point. I think that's going to be a bit misleading. And I think we just have to feel our way through this as we go. And it's not just price, but it's surety of price whether that's a view or through hedging.
But I think it's a little bit earlier to start being very specific about a plan when the market is as volatile as it is.
Sure. That makes sense. I appreciate that. And I guess my follow-up question is you spent about $48,000,000 on the E and P business in the Q1 and on D and C specifically about $37,000,000 So I was just wondering if you could help us think about the rate of E and P spending from here through the rest of the year given the fact that you went through nearly 1 third of your budgeted full year completions during the Q1?
So first with the completion count, we did do 15 in the Q1. And so that leaves us around 30 for the balance of the year. And we expect that at this point, we think about it being pretty evenly dispersed about 30 a quarter for the remaining quarters for the year. When you think about the 15 completions and trying to line up completion count and then having proportioned amount of capital spend, keep in mind, you got to think about carry in and carry out. So when you come in over the year, it may not those 15 wells may not represent full cost for a well.
It could some of those are partials because they're being carried in over the years. So you get a full well count, but not full cost in terms of capital. In terms of overall projection for the year, we continue to project to be at $400,000,000 of total capital with $200,000,000 of that being D and C Capital and $200,000,000 of it being OMS and the other capital.
Great. Thanks.
You bet.
Our next question will come from Mike Kelly of Seaport Global. Please go ahead.
Hey, guys. Good morning.
Good morning.
Kind of follow-up on that last question. I'm trying to get a sense for 2017. And I know there's a lot of variables in play here, but as it pertains specifically to the DUCs and once you have the infrastructure kind of online and ready to flow these things, how quickly can you work that down? And how should we think about, yes, just that DUC management there? And really what that means for your trajectory of production as you go through 2017?
So like we talked about, we've been keeping that DUC count has remained pretty flat, and we're at 83 currently. And when you look at the makeup of that well count, there's actually 60 about 65 of those wells are in the core and then the rest are in that extended fairway, so close to 20 in the extended fairway. We've got the ability to focus on those DUCs and do some incremental completions. And And as Tommy talked about, as we get into a price recovery, that's one of the things that we're going to look at and that's a pretty easy lever for us pull. We can we've got infrastructure in place for the most part
for
all those DUCs. So it's just a matter of lining up frac crew and fracking them and then getting them online. So something that we can do in pretty short order. It's just a matter of when we think the right time is in a price recovery.
I think the good news is having that deck inventory that we've got is that we can pull that lever as we see some price improvement and maybe not just stay flattish as we've talked about and we've done in the current world and staying within cash flow, but possibly kind of jump starting some growth at staying cash flow neutral.
And also when you think about it, keep in mind, there is always a cushion in that DUC inventory, which represents the cycle time with the completion rigs and the crews. So there's going to be 30 to 35 wells that you even if you start working them down, you're always going to have some backlog in there of 30 to 35 at this pace.
Got it. Appreciate that. And then follow-up question is just wanted to get your sense on all this enhanced completion work that's being done in the basin. You guys have been a leader on this front and have shown really good results here. I'm just curious what you're maybe the most excited about here going forward on this front?
And are we at the point here where there's still potential step changes to be seen? Or we just kind of incremental picks higher? And what this could ultimately do for returns in the core part of the basin?
Sure. As we talked about, high intensity fracs continue to just deliver fantastic results. And the average type curve for the wells as we're doing them right now is 10.50 MBOE. And then also we talk about in the presentation on Page 10 some of the things that we're testing. And it's very early time in some of these things that we're looking at, but diverters are certainly interesting.
We've worked with increasing the number of frac stages. It's still early time. And we're just starting to do some of these slickwater fracs with larger volumes. So 10,000,000 plus pounds of sand in a single well. So we're excited about the prospects for all these.
Are all of them going to work? Probably not. But I bet you end up with a handful of things that you'll implement going forward, but it's just going to take us some time to fully test that and then implement it in the program. Got it.
Thanks guys. You bet.
And our next question will come from Michael Hall of Heikkinen Energy Advisors. Please go ahead.
Thanks. Good morning. Congrats on the
solid quarter.
Good morning.
Just wondering if you could talk through a little bit more on the cost side of things, well cost side of things as it relates to the 5% to 10% additional savings you guys touched on, kind of just maybe a little more color on how you get there, line of sight on that? And then as a follow-up to that, what's your view on at this point, how much of the savings that you've delivered on relative to the 2014 peak will actually remain in a call it $65 type world?
Okay. So, yes, I know these are good questions. So the first one, the well cost, as we talked about, we're at $6,500,000 So we've made a big move down from that 10.6 that we came into 2015. And we think we'll get it down to 6.1% like you talked about. Now in terms of where that's going to come from, we think it'll be mixed in between really the completion bucket and the drilling bucket.
So both those we think will be able to continue to drive costs down. And like it's been in the past, Michael, we think it will be mix between service cost and efficiencies. The efficiencies continue to impress us. When we talked about drilling days, for example. We started 2014 at around 21 days.
We're now at about 15.5 days on average. And like we talked about, we've seen wells spud rig release in as little as 11 days. So that we think the efficiency side, we're going to continue to get gains. And then some contribution on the service cost side as well. When we look at it in aggregate, the from that 10.6 coming into 2015 to the 6.5 now, it's split pretty much evenly between efficiencies and then service cost reduction kind of fifty-fifty.
So if you do get into a price rebound and say you're in a $65 world, like Tommy talked about service cost increases, we're going to want to really watch. But if we can retain that 50% of those improvements from an efficiency standpoint, which we think we will be able to, it's going to put us in good shape. The other piece that you want to keep in mind is on the service cost side, the biggest reductions have been in the completion side of the business. And given the fact that we've got internal frac services, it gives us protection or a hedge against those increases. So we get coverage on really on two fronts, both efficiencies and then that frac side of the business.
Great. That's helpful. And I guess on the frac side, given you all have the your own internal capacity and maybe an interesting view on the basin as it relates to excess capacity in the basin currently? Like how many do you have any data or color around how many crews or spreads remain in the basin and what capacity utilization looks like these days?
Yes, Michael, I don't have the exact number of crews, but a good way to think about it is the equipment and then the people to operate the equipment. So there's plenty of equipment on the ground, quite a bit that's been idled. And you've actually seen, gosh, in the last quarter of last year and Q1 of this year, a few of these guys either leave the basin or go out of business. But even with the loss of that equipment, there's plenty of equipment on the ground. It's just the interesting thing is going to be the crews to run that equipment.
In a orderly progression of increasing capacity, I think we're going to be in good shape. People will be able to man that equipment. If everybody tries to pile on and pick up a bunch of crews real fast, which I think is not real likely, that could be more of a challenge.
Okay, great. That's helpful color. And I guess a couple of more on my end. One was just on the kind of getting back to the timing of well completions. If I'm reading this right, I think almost 45% of your net completions were in the Q1.
Should we expect kind of march down in working interest over the rest of the year?
Yes. So you're right, Joe. We're going to see some march down in working interest. And so and again, like we talked about on the gross completions, those will be spread out evenly at this point over the last three quarters.
Yes. Keep in mind that bulk of those completions in the Q1 were in Indian Hills where we've got that higher working interest. And as we move into Wild Basin that working interest goes down a bit.
Okay. Makes sense. And then last one on my end is, can you just remind me kind of how the I mean, you mentioned the OMS is being drives operating cost structure improvements. I guess, can you talk about how we should think about how much of the improvement has been driven by LMS and kind of how that would look in a monetization or as you call it external financing scenario, like how that level of a cost item might be impacted?
Yes. I'll let Michael touch on the second part of that question. But if you go back and of course a bit of a different price environment, WTI price environment, but if you go back and look when we did the acquisition back in 2013, remember our per barrel LOE cost went up to $10 plus $10.50 maybe even $11 during that time period because we brought in one, our infrastructure was immature and we brought a bunch of production in that was basically had very little infrastructure. And so you've seen that come down. Now some of it driven by service costs, but you've seen it come down from $10.50 to $11 down to the $8 range.
So I mean at a high level, if you're just looking at what the impact would be of not having that, It's pretty significant. Yes. It's a couple
of dollars impact from the OMS side. And in terms of how will it look in an external financing situation, obviously, we don't it kind of depends on how that financing comes in. So there could be a number of different ways and we don't have we can't really talk about any clarity on that right now.
Okay, fair enough.
But we're also not looking at a full monetization there. So you still won't get a lot of that benefit.
Okay, great.
Thanks guys. Thanks.
The next question will come from Ron Mills of Johnson Rice. Please go ahead.
A lot has been asked. Just a couple of questions on the DUCs versus activity. And what's the impact of the OWS has on that? In other words, if you complete 10 wells a month, is that just utilizing one of your 2 spreads? Or how flexible how much flexibility does that second spread offer you?
Yes. Ron, we do have some additional flexibility in the crew that we're running for kind of the rest of the year. We do have a little bit of incremental capacity. And then like you mentioned, we do have equipment for a second frac spread. When we decide to go into more activity level, we'll actually have that ability as well.
But right now, we do have some incremental capacity that we could continue to use OWS.
Okay. And then not to delay, but the DUC versus activity thought process, but is there some sort of break point where you think putting another rig back to work is preferable over DUCs? Or do you think that the DUCs may be a better entree into increased activity?
Yes. I think it's when you're focused on cash flow and cash flow neutrality, I think you're always going to go to the lower cost alternative, which is going to be the DUCs. I mean, that's going to be your first order of business, right? I mean, it's especially if you think that you might be in an improving price situation.
Great. It makes sense. And then maybe for you, Michael, on OMS, the increase in EBITDA run rate to $19,500,000 what were some of the drivers behind that? And are those sustainable to it sounds like they were more sustainable as you talked about kind of an $80,000,000 annual run rate?
Yes. I think that so a couple of things. One, the team just did a very good job of continuing to leverage large infrastructure position on the saltwater side and continuing to connect a higher and higher volume of water across that side of the business, which drove very good strong financial performance. We do think that we hope that they can continue to do so and carry that throughout the year. And then with Wild Basin coming on in the second half of the year, you're going to start to some incremental cash flow or EBITDA from that business towards the end of the year.
Keep in mind that as we do more of these high intensity fracs, your liquid loads are greater. And so you probably get more flow back as well. So as
you think about the slickwater jobs, we've talked about slickwater jobs being 4 times the amount of fluids that you're pumping down versus our old base jobs. And so as you recover some of that load, that's going to come back to you early time.
In the past too, you talked about testing slickwater and about testing higher proppant loading. It sounds like one of the options now is combining the 2. Are there any other industry results or have you started the process kind of I'm assuming that comes at a higher cost, so therefore expectation of improved EURs?
No, yes, you're right. It is combined the 2. So it's taken a slickwater job and just making it a bigger job with higher prop loads, like I said, £10,000,000 plus, definitely comes with a higher cost. But we're hopeful we're going to see commensurate increase in production in EUR, which is still early
time. And the increased EURs you
came out with, those are exclusive of the list of the new 4 or 5 things you're testing, correct? That's just that's primarily the increased proppant loading?
Correct. Yes, the 10.50 EURs are the old high intensity fracs.
The next question will come from Gail Nicholson of KLR Group. Please go ahead.
Good morning. Just a quick question. So White Wells and Wild Basin, are those the only high intensity wells completions to date that you brought online in Wild Basin?
That's correct. Those we've got 3 wells, 1 Bakken well and 2, 3 Forks wells. And those were the only ones that we tested with high intensity fracs that we've got on production. But all of the activity right now is with those high intensity fracs and we'll be bringing on those wells later on this year.
There are other operators, Gail, there are other operators in the area that have done high intensity completion. So we got a lot of confidence in what we're going to be able to get out of those fracs.
I guess I was curious, did those wells have outperformed kind of the core high intensity type curve that you put out? Do you think that's a one off in that DSU of the white DSU? Or do you think that is a potential repeatability across the entire Lal Basin area?
So we're excited by the results in those wells and our hope is that we're going to see repeatability of that kind of performance as we frac these other wells. And that's why we've come in and done these scientistity fracs and then are experimenting with some even larger jobs to see if we can get even improved results from what we're seeing there.
Great. And then looking at the further improvements that you continue to achieve on a quarterly basis on that spud to rig release, what's the biggest driver there? I mean, is it just pad drilling, less mow time or employee personnel on the rigs? Can you quantify that?
So one of the things you talked about is certainly important, which is the personnel side of the business, getting the right guys focused on the right things on the rig. One of the other ones is equipment and really good quality control has helped us to stay on bottom. So less trips during the drilling of these wells. Some of the best ones we've done have been where we're drilling our full lateral with one trip. And so just focusing on all the key things we need to do in the drilling operations and improving that through having the right people there and then really good QC on the equipment.
Okay, great. Thank you.
Thanks.
Our next question will come from John Nelson of Goldman Sachs. Please go ahead.
Good morning and appreciate the thoughtful responses to the DUC questions that have come up. I'm curious as we think about 2017, are there a minimum number or an optimal number of Wild Basin wells that you guys would like to get down just from the standpoint of filling that nat gas capacity nat gas processing plant capacity as we try and think about the wedge for the number of DUC completions you might get after?
Yes. We've got the program will continue to run-in 2017, 2 rigs there and keep a completion crew busy. When you get further out in time, you're not going to need once the plan is loaded, need as many completions to do that as you're seeing in 2016, 2017. It's really kind of 2018 and beyond where you begin to see a little bit of reduction to keep the plant loaded. And that's 80,000,000 cubic feet per day plant by design.
Yes. And John, one other thing. One way to think about a 2017 program is, if you had around the same amount of D and C capital this year, call it in that $200,000,000 ish range, You can probably in this price environment, that could be a likely scenario. Most of your activity is going to be in Wild Basin for 2017 to do exactly what you're talking about, which is load the infrastructure and get it to where the Q4 and in 2018, you're at more capacity in that infrastructure. That will keep overall production relatively flat for the company.
And so that's kind of a, call it, base level program at that $40 to $45 oil price. And then I think around the DUCs, as Tommy and Taylor have been kind of talking about on the call, is around that potential for acceleration someday is that you can use those DUCs as very low cost inventory to bring forward some of that activity level, very capital efficient dollars to spend for us.
That's very helpful and very clear. I appreciate that. Just on the OMS potential monetization, would you consider hiving off any of that to
put towards the DUCs?
Or is that earmarked more for debt repayment or to keep on the balance sheet?
We'll see where we are on that OMS. Obviously, as Tommy mentioned, we're doing our guys are doing such a good job on the capital efficiency side. The price has oil has rebounded a little bit. So we're able to generate more and more cash flow and actually be cash flow positive, taking into account OMS. And so if we can continue to do that, we'll just have to see where that capital goes.
Obviously, capital at the or cash at the end of the day is a bit fungible. So it's still going to take all those other things that we've been talking about in terms of forward look at oil prices and capital efficiency and all those other things to figure out acceleration. But you're right, if we get capital in, it'll just continue to bolster our already strong liquidity position and balance sheet.
That's fair. And then just one house keeping for me. Taylor, in your earlier comment about sort of industry labor, I think you made the comment that you think the industry can handle it if we see kind of an orderly ramp. Just curious, I know it's not a quantified number, but what is your characterization of orderly? Is it 5 rigs a quarter, 10 rigs a quarter, 20 rigs a quarter?
Just general thought. Not what we'll go to, just what an orderly ramp is.
Yes. So certainly not at the pace that we saw coming down. If you're having to support that, it's going to be a challenge. And what is the amount of being hard to say, 10%, something like that, 20%. So we're just going to have to see.
But as long as it's not doubling capacity in a year, something that's more orderly 10%, 20% range or a little higher, I think it can be supportive, but we'll see.
Yes. On the way down, if you just think about it, we were close to 200 and we've gone to 25. So you were about 20 rigs a quarter on the way down. So just like what Taylor said, if you go to 20 rigs a quarter on the way up, things are going to get a bit dicey. But I can't imagine going to be that way coming out the backside.
It's probably going to be more in the 5 range or so a quarter.
That's very helpful. Thanks guys. I'll let somebody else hop on.
Our next question will come from David Deckelbaum of KeyBanc. Please go ahead.
Good morning, Tommy, Michael and Taylor. Thanks for taking all the questions today. Taylor, I was hoping maybe you could walk through again, it wasn't clear on as you go through Wild Basin, understand the density theoretically, but how are you guys going to be drilling through Wild Basin on sort of a unit by unit design currently in terms of how many are you going to start with just Millbocken wells and putting 4 or 5 down per section and then coming back to do 3 Forks? Are you going to do a full sort of development suite all at once?
So we're actually doing full development. We talk about this as corridor development. We'll start at kind of the southern south to southwestern portion of Wild Basin and drill out as we go. We're drilling out full spacing units. And we're putting all the wells at this point in the Bakken in the first bench of the Three Forks.
So no lower benches at this point. We feel like we can drain the full Three Forks section with those wells just in the Bakken in the first batch. And then the density, we will perfect that as we go.
Okay. That's helpful. And Michael, I know you had mentioned earlier about the Wild Basin mid capacity getting sort of full at the end of next year. As you go into 2018, conceivably, you would have some build outs. I guess and backing into your sort of $200,000,000 program, if you had sort of like a similar $35,000,000 to $40,000,000 gross well program to fill Wild Basin.
I guess, how quickly could you expand the infrastructure there in 'eighteen to satisfy perhaps 50% more wells on sort of an annual basis if you did have another financing partner in there towards the end of next year, beginning of 'eighteen. Once you got things broken, how quickly could we expect to see some sort of expansion there?
Yes. David, we could certainly expand the infrastructure in Wild Basin or what we also could do is go to areas outside of Wild Basin. We've got great returns kind of throughout the core and extended core and even into our fairway acreage with what our guys have been able to do on the cost side as well as on the EUR side. Really all 500,000 acres starting to get to be very cost resilient. So we just need to at that point weigh is it better to spend infrastructure dollars in Wild Basin and continue to increase that capacity or spend the capital to basically keep it at more of a capacity level and continue to grow it grow for us outside of that area.
So there's a lot of things to balance there, but we're looking at all of them.
So I guess like if we're in an intermediate environment or $50, $60 oil, it's not materially better than that, you would be sort of maxed out at Wild Basin, so your incremental growth capital would be just another area as the core. Is that fair?
That's right.
Okay. And then the last one I had, I just I know in talking about all of the different high intensity completions and some of the benefits, we've seen those uplifts in EURs. Obviously, this quarter, you guys showed the best improvement in Montana. Is that would you sort of boil that down to just 100% sand slickwater with the prop and loading there? And I guess, as you look like across the areas, it seems like Montana has been the one that showed the most continued improvement.
Is that one of the areas there or the area that you would be most excited about in terms of improvement over time just considering perhaps some of the favorable royalty environments there and other factors?
So you're talking about the slide where we're showing Montana at 625? Yes. So it's 625 MBOE and really had good performance. And those wells are they're all high intensity. It's a mixture of slickwater and the high volume prop jobs that we talked about in the past.
So we're excited about that area given where the well costs are. We think in Montana, we can drive costs lower than these the $6,500,000 high intensity numbers that we talk about. We have substantially lower costs there. And so that's a great example of that extended fairway acreage that as you're getting into the 50, starts looking pretty interesting.
That's all helpful. Thanks guys.
Thanks.
The next question will be from John Freeman of Raymond James. Please go ahead.
Hi, guys. Just one remaining question for me. When I look at the efficiency gains you've got where you're talking about now we've got some wells on spud rig release like 11 days. When I think about like in a normalized environment, what we're not trying to maintain DUCs or anything, what would be kind of the proper kind of rig count or rigs to frac spread ratio we should use?
So right now it's close to about 2.5 rigs per frac spread. As Michael talked about, we've got 2 rigs running. We've got a little extra capacity with the frac crews. So a good number right now is probably more like 2.5 rigs per spread.
But would that be I guess, what I'm trying to get at is that would that ratio allow you to draw down basically your DUCs? Like if does that allow you to keep up with the number of wells you're bringing online?
Yes. That ratio, that would be balanced. So you have 2.5 rigs and 1 spread, you're completing all the wells that you're drilling, so your DUC backlog is staying the same.
Perfect. That's all I had. Nice quarter, guys.
Thanks, John.
And the next question will come from John Wolf of Jefferies. Please go ahead.
Good morning, guys. Good morning. Question on the pipeline outlet. Can you maybe give a little more color on how much of benefit I mean, it sounds
like you're talking about absolute differentials
of $4 to $5 not percentages, just one clarification. But I was wondering how much of the benefit has come from just the overall declines in the basin versus new pipeline capacity? And then maybe talk about some of that new pipeline capacity. And I'm pretty sure Oasis hasn't committed to anything too much directly, but if you could talk
to that, it'd be helpful.
Sure, John. Yes, I think it's a combination of everything. Obviously, everybody's seeing that the basin, the production numbers have come in a little bit from its peak. So that's certainly helpful. There's a lot of great transport out of the basin, both on rail and on pipe.
And that continues to expand with a number of pipeline projects that continue are going to continue to come on. Energy Transfer's DAPL line is certainly a very large one that should be coming on in the next 12 months, let's say. And so when that comes on, we think that you're going to continue to have a lot of really strong options on where to move the crude and how to move the crude, and that's just going to be good for all the producers in the basin overall. You're right that we have historically had very little of our production in long term agreements. That continues to be true.
We think that there's a lot of capacity. And when you're in a situation when there's more capacity than there is production, typically it's better for producers to be a little bit on the shorter term side rather than longer term side on contractual obligations. Okay.
And then the rail providers probably aren't liking this so much. Are they coming to the table a little bit more with
a little better pricing? Or are they flexible?
Yes. I think the rail guys have are continuing to do well. I mean a lot of them are still been strong or good partners for us and we continue to have a lot of dialogue. So think it's continuing to work on both fronts.
Got it. And your $45 has that come out of sort of an economic argument? Or is it a supply demand balancing? Or is it
is that cost transportation as you see it?
Yes. That's just where we've seen it for a little while now. And we think that unless there is a large move on the production side where it's going to drive a tightness in that capacity, we think it could stay there for a little while.
Thanks a lot. Very helpful.
Thanks.
And our next question will be from Jason Smith of Bank of America Merrill Lynch. Please go ahead.
Good morning, everyone. Congrats on the results. Thanks.
So just a quick follow-up
on the DUCs. You gave a lot of color on that. But just curious on the actual location of your DUCs. I mean, are they all within the core? Are they spread throughout your acreage?
And to your point earlier, I mean, is there infrastructure set up that you can bring essentially all of them on when you're ready? Or is there any infrastructure spend that has to go with bringing them on?
So there's is 83 DUCs like we talked about and 65 of those or about 80% are located in the core and we've got just under 20, about 18 wells that are outside the core, and they're in Red Bank and in Montana. So they're all within the extended fairway. Great to have that big percentage that's all in the core, that 80%. And then like we've talked about, fortunately, because these are all drilled in areas where we had development going on in the past, we've got good infrastructure in those areas, so we're well positioned. We don't need to do a bunch of infrastructure work.
We can frac the wells and bring them on production in pretty short order when the timing is right.
And outside the core, it varies a bit. Some of those Red Bank where we have good infrastructure. Montana, we probably need a little bit of infrastructure work for those, but and that's a pretty small population of wells.
Got it. Thanks.
And then just the last one for me is, you talked last quarter about Wild Basin being a bit gassier, you talked about being a bit deeper. So just
can you remind us what first of
all, what is the oil mix there? And I guess as we look into the rest of 2016 and into 2017, how should we think about that trajectory for the company as a whole?
So it is a big gas here in Wild Base And so the GORs are more in the 2,000 to 2,500 range in that area. Depending on where you are in the rest of the basin, you can be $750,000,000 to more like $1500,000,000 And so you are going to see a bit more gas as we bring those wells on. You can see a tick up in gas. But keep in mind, the overall productivity when you look at those wells from the few that we've done with high intensity fracs, they're just much bigger wells. And we talked about that in the presentation.
The 3 wells that are high intensity fracs relative to the base are really outperforming. So you can see on Page 11 the performance of the white wells.
Thanks guys. That's all for me. I appreciate the color and congrats again.
Great.
Thanks. And ladies and gentlemen, at this time, we will conclude the question and answer session. I would like to hand the conference back over to Tommy Nusz for closing remarks.
Thanks, Denise. The Oasis team continues to deliver positive results in spite of the current storm. We were free cash flow positive again in the Q1 of 2016, our 4th in a row, including the funding of OMS CapEx of $35,000,000 We continue to execute financially and operationally and we'll remain focused on improving our capital efficiency, while continuing to retain optionality around activity levels and all capital allocation alternatives. Thanks again for joining us today.
Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.