Greetings. Welcome to Gulfport Energy Corporation's Q1 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Jessica Antle, Manager, Investor Relations and Research. Ms. Wills, you may begin.
Thank you. Good morning. Welcome to Gulfport Energy Corporation's first quarter of 2019 earnings conference call. I am Jessica Antle, Director of Investor Relations. Speakers on today's call include David Wood, CEO and President, and Keri Crowell, CFO. In addition, with me today and available for the question and answer portion for the call are Donnie Moore, Chief Operating Officer, and Paul Heerwagen, Senior Vice President of Corporate Development and Strategy. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance, and business. We caution you that the actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC.
In addition, we may make reference to other non-GAAP measures. If this occurs, the appropriate reconciliations to the GAAP measures will be posted on our website. Yesterday afternoon, Gulfport reported first quarter 2019 net income of $62.2 million, or $0.38 per diluted share. These results contain several non-cash items, including an aggregate non-cash derivative gain of $4.8 million and a gain of $4.3 million in connection with Gulfport's interest in certain other equity investments. Comparable to analyst estimates, our adjusted net income for the first quarter of 2019, which excludes all the previous mentioned items, was $53.2 million or $0.33 per diluted share. An updated Gulfport presentation was posted yesterday evening to our website in conjunction with the earnings announcement. Please review at your leisure. At this time, I would like to turn the call over to Dave Wood, CEO of Gulfport Energy.
Thank you, Jessica. Thank you all for joining us on this morning's call. Gulfport is off to a strong start in 2019, beginning of the year active in our core asset areas and remaining on track to deliver on our previously announced 2019 capital budget, operational outlook, and commitment to free cash flow generation. For the first quarter of 2019, as announced alongside earnings yesterday evening, we reported approximately $53.2 million of adjusted net income on $315.8 million of adjusted oil and natural gas revenues and generated $206.8 million of adjusted EBITDA. Production averaged 1.26 billion cubic feet of gas equivalent per day for the first quarter, coming in as expected following a muted level of activity during the fourth quarter of 2018, and on a debt-adjusted per share basis, increasing approximately 2% over the fourth quarter of 2018.
As I mentioned, we started the year active on the ground, running on average 3.4 horizontal drilling rigs and 4.4 completion crews in total across our Utica Shale and SCOOP assets during the first quarter of 2019. This robust level of activity capitalized on our existing DUC inventory and will lead to an active turn-in-line schedule in the coming months as we expect to turn to sales in excess of 30 wells progressively throughout the second quarter of 2019. We forecast that this activity will result in strong quarter-over-quarter production growth and positioning us well as we continue to execute on our 2019 program and reaffirm our expectation that Gulfport's total net production will average in the range of 1.36-1.4 Bcfe per day for the full year of 2019.
I reiterate my comments from our February call that Gulfport remains committed to building an organization that is focused on capital discipline, cash flow generation, and a clearly communicated business plan. We remain disciplined to our 2019 capital program and reaffirm our previously announced 2019 capital spend, which will be funded entirely within cash flow and provide free cash flow generation in excess of $100 million. As planned, the 2019 capital program is heavily weighted to the first half of the year. Gulfport invested $255 million in D&C capital and $20 million in land capital during the first quarter of 2019. We estimate the bulk of the capital budget will be invested during the first half of the year, with spend decreasing in the third and fourth quarter, as a result, provide meaningful free cash flow generation during that time.
On the strategic front, we continue to simplify the portfolio through certain non-core asset monetizations. I am pleased to provide further details on a few of those divestitures today. We recently entered into an agreement to monetize a small footprint of Marcellus formation rights overlying a portion of our acreage in the Utica Shale. This transaction included assets that Gulfport did not have any future capital allocated to, nor do we include them in our long-term development plans for the Utica Shale. We currently expect the transaction to close during the second half of 2019. Consistent with our previous comments on our ongoing stock repurchase program, and taking into consideration the anticipated proceeds from this transaction, we repurchased approximately $30 million of Gulfport shares in the open market during the first quarter of 2019, reducing shares outstanding by approximately 2%.
Separate from this transaction, we are getting ready to launch a process to divest of certain water infrastructure assets Gulfport holds across our SCOOP position, including water handling and water recycling facilities. As a standalone entity, these assets would currently generate $10 million-$12 million in EBITDA per year, with substantial expected growth. We believe their meaningful value is not recognized in our stock price today. We plan to provide further details on the monetization process when appropriate. As we consider the use of proceeds from this transaction, it is important to note that these assets were not identified as a requirement of the non-core assets to fund our ongoing share repurchase program. We currently plan to allocate $50 million of the expected proceeds from this transaction towards debt reduction.
I reiterate that this transaction was not identified as a requirement of the non-core assets to fund our ongoing share repurchase program. We continue to plan to execute on our previously announced $400 million stock repurchase program to be funded through organically generated free cash flow during 2019 and the anticipated monetizations of other non-core assets of which we are actively pursuing today. Turning to our specific core areas, we started the year strong in the field and remain intently focused on cost discipline and delivering more with every dollar invested. We had a strong quarter on track with both the operational and capital budget, and doing so while continuing an unwavering commitment to efficient and safe operations. In the Utica, we spud six gross wells utilizing roughly 1.5 operated rigs during the quarter.
Our 2019 program focuses on maximizing lateral lengths and realizing economies of scale with our per-foot metrics. We experienced a solid quarter of progress at the drill bit. The wells in the first quarter had an average drill lateral length of 10,600 feet, and when normalizing to an 8,000-foot lateral, we averaged a spud to rig release of 17.7 days, down 9% over the full year 2018 results and the best quarter Gulfport has experienced to date in the play. I applaud the team as we have exceeded many of our previous drilling records during the quarter, drilling our longest lateral to date for Gulfport in the Utica at 16,385 feet and beating our previous vertical feet per day record. Overall, we had a strong quarter on the drilling front. We remain focused on continuous improvement and efficient, safe operations.
Turning to completions in the Utica Shale, we began the year very active, running three completion crews throughout the quarter and completing a heavy portion of the DUC backlog we carried into 2019. As of March 31st, we have completed 1,069 stages in total during 2019, which includes 25 wells completed and six wells in progress at the end of the quarter, representing 50% of our completion schedule for this year. This robust level of activity weights a heavy number of turn-in-line for the second and third quarters. As a result, we expect to see strong production growth out of the Utica during the middle of the year. In the SCOOP, we entered the year with strong momentum from the fourth quarter of 2018. We spud three gross Woodford wells and one Lower Sycamore well, utilizing two operated rigs during the quarter.
The wells released had an average lateral length of 8,000 feet. When normalized to a 7,500-foot lateral, the wells averaged a spud to rig release of 63.2 days during the first quarter, in line with our 2018 program average. When isolating the well spec to just the Woodford formation, the average spud to rig release totaled 47.4 days during the first quarter. Our drill days on the Lower Sycamore Well were improved by over 40% when compared to our Serenity well, which was spud in 2017 and also targeted the Lower Sycamore formation. These results exemplify our focus on identifying areas of improvements and striving for consistent, repeatable results out of the play. On the completion front, we averaged 1.3 completion crews during the quarter and completed 195 stages in total, which includes seven wells completed and two wells in progress at the end of the quarter.
Similar to the Utica, our activity to date will lead to a heavy number of turn-in-line weighted to the middle of 2019. In summary, our 2019 program is off to a strong start, and we continue to focus on controlling what is within our control and maximizing results with the core assets we have in the portfolio today. We are committed to disciplined capital allocation and will operate within cash flow, as we have discussed shifting the target from top-line production growth to leading bottom line debt-adjusted per share growth rates. We strongly believe this strategy is right not only for today, but for the future of Gulfport. With that, I will turn the call over to Keri for her comments.
Thank you, Dave, and good morning all. As announced in the earnings release yesterday evening, we reaffirm our full year 2019 capital budget and forecast to invest $565 million-$600 million across our assets, funded entirely within cash flow and bolstered by our hedged revenue stream. First quarter production averaged 1.26 billion cubic feet of gas equivalent per day, composed of 90% natural gas, 7% natural gas liquids, and 3% oil, and we continue to forecast our full year 2019 average daily production to be in the range of 1.36 billion-1.4 billion cubic feet per day. In addition, as Dave mentioned, we currently forecast to turn to sales 30 gross wells progressively throughout the second quarter of 2019 and expect to realize strong single-digit production growth for the quarter.
On the realizations front, our first quarter of 2019 realized natural gas price before the effect of hedges and including transportation costs settled approximately $0.46 per Mcf below the average NYMEX price, a 15% improvement over the first quarter of 2018, and narrower than the low end of the 2019 guidance range. Based upon our current firm portfolio, including both Utica and SCOOP, and utilizing current strip prices and basis marks for end markets reach, we reiterate our expectations for basis differentials to range from $0.49-$0.66 per Mcf off NYMEX monthly settled price for natural gas during 2019. Driven by the seasonality of natural gas and the markets we reach, we continue to expect our differential will settle at the wider end of the range during the second and third quarter and narrow into the fourth quarter of 2019.
Before the effect of hedges, our realized oil price came in at $1.80 off WTI, and we reiterate our expectation to realize approximately $3-$3.50 off WTI for oil. Turning to NGL, before the effect of hedges, our realized NGL price came in approximately 44% of WTI, and based upon these results and recent strip pricing, we expect pre-hedge NGL pricing to average 40%-45% of WTI for 2019. As many of our peers have mentioned, there has been a changing dynamic surrounding NGL prices recently, and while our expected realization when compared to the current strip oil price has temporarily weakened, on an absolute basis, our expected price per barrel has remained relatively unchanged.
Our realized prices continue to be supported by our hedge position, and our 2019 natural gas production is fully hedged at $2.83 per MMBtu, providing a high degree of certainty surrounding the cash flow profile for the 2019 program. During the first quarter of 2019, we took advantage of market conditions and added meaningfully to our 2019 and 2020 oil position, securing a large baseload of our anticipated production at approximately $60 per barrel. Maintaining a strong strategic hedging program is an important element to supporting the long-term development of our assets, and we will continue to opportunistically layer on additional hedges and basis swaps to provide line of sight to our realizations and cash flows.
For the first quarter of 2019, our realized prices and hedge position resulted in adjusted oil and gas revenues of $315.8 million, which is composed of approximately 79% natural gas revenues and 21% liquids, including 11% natural gas liquids and 10% oil. In terms of cash operating expenses, our per unit operating expense, which includes O&M, production tax, midstream gathering and processing, and G&A, totaled $0.96 per Mcfe during the first quarter of 2019, down 2% from the fourth quarter of 2018. I will now turn the call back over to Dave for closing remarks.
Thank you, Keri. Our 2019 plan demonstrates the low capital intensity of our core operations, highlighting the quality of these assets by delivering sustainable production with low capital requirements and all supported by a thoughtful hedging program aimed at underpinning our plan and goals. I will echo my comments from February. Our focus on capital discipline and cash flow generation goes beyond this calendar year, and we are committed to running Gulfport with a focus on enhancing shareholder returns going forward. This is further heightened by the board's decision to incorporate a free cash flow metric, as well as maintain a corporate-level return metric, return on average capital employed, all in our 2019 compensation metrics, measuring the value of every dollar we invest, balancing objectives to maximize the 2019 program, and demonstrating our commitment to Gulfport shareholders. This concludes our prepared remarks.
Thank you again for joining us for our call today, and we look forward to answering your questions. Operator, please open up the phone lines for questions from the participants.
Thank you
If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today comes from Neal Dingman of SunTrust. Please go ahead.
Morning. Dave, could you help me a little bit, I think I know talking to you and Paul, you've gone through this, but I just want to make sure I understand this better. Could you help me better reconcile how you're going to balance achieving the 1.4 Bcfe/day production average this year after hitting the 1.26 in 1Q? Again, I guess what I'm balancing or where I'm going with that, you basically have about $310 million left to spend the remainder of the year in order to stay within the low side of your CapEx. So I'm wondering how you balance this while also maybe repurchasing up to $370 million worth of your shares. I guess, my question would be maybe try to walk through, I assume it's the DUC count and the proceeds from the non-core that gets you there.
I just want to make sure I understand how you're thinking about basically achieving that on the production side and the repurchase side for the remainder of the year.
Yeah. Yeah, Neil, good morning. Our program for repurchasing was to use free cash flow from this year and also sale of non-core assets. We announced in the call that one of those non-core assets, done a small one, and used the proceeds for that to do the first of the buybacks. The intent was to conclude those sales through the 24-month period from the time we announced it. Some of it'll take place this year, and some will take place next year. The free cash flow generation is really the second half of this year, purchases from that will be heavily weighted into the second half. There's nothing in that causes me concern in terms of timing or progress. It's not necessarily the easiest thing to do to monetize some of these things, but they are actively being worked.
I feel good about trajectory and timing of the share repurchase. In terms of the second one on production, we took a hard look at where we are today for the rest of the year, feel good about the spend levels, and feel good about the overall year target. The spend early in the first quarter was faster. That was me whipping the teams here to try and get the stuff on as soon as possible. Donnie and his teams did a great job in beating that schedule. I feel pretty good about where we are.
Okay. Just one last one if I could, just on holding leases in the Utica. I'm just wondering, I know you have, I think some leases that come due, I think it's either this year or maybe more so next year. One, have you kind of already been working on holding those? I'm just wondering, is there much cost in, I don't know, either, being able to hold those, I guess, going forward?
Yeah. Hey, Neil, Paul. The budget we have this year for land spend is almost entirely associated with lease extensions, associated with exercising five-year kickers on leases coming to their primary terms here. As you'll recall, those were higher spends in prior years. It's sort of tapering off now as we have more and more of the acreage held and also as we've paid those extensions over the last several years. It's 40 this year, and we would expect it to continue to taper down next year.
Okay. Look for all the activity. Thanks, guys.
Thank you.
Neal, thank you.
The next question comes from Ron Mills of Johnson Rice & Company. Please go ahead.
Good morning. Just maybe a follow-up on part of Neal's questions. When we think about kind of completion cadence, Utica versus Scoop, and when we look at the remaining completions and particularly the second quarter, when you say 30+ turn-in-line, how are those split between Utica and the Scoop? The remaining, whatever that would be, call it 20 completions that would be left. Are those going to be fairly evenly split during the third and fourth quarter? Or are they going to be more weighted to one particular time?
Hey, Ron. Good morning. This is Donnie. Yeah, if you look at that first quarter, heavily weighted toward the Utica. Over 30 wells completed, roughly 25+ of those are in the Utica during the first quarter. Second quarter's still pretty heavily weighted toward the Utica. We've got two completion crews running there today. The rest of the year, it kind of trickles on down, and it's fairly split between the two.
Okay. That would also imply then that from a turn-in-line standpoint, really a lot of the growth here, particularly in the second quarter, is it fair to assume will be more gassy and then you end up adding more of the liquids production in the third quarter and fourth quarter? Just trying to think about our quarterly production cadence.
Yeah, that's absolutely right, Ron. Most of our turn-in-line that second quarter will be more of the dry gas Utica wells. We're excited about getting those online. A lot of activity in that first quarter to set us up for this.
Okay. You talked about, I think Keri mentioned strong single-digit sequential growth here in the second quarter. Would you expect something similar to that in the third quarter, or can it even be a little bit higher in the third quarter as you have a full quarter impact from that completion rush? How should we think about that longer outlook of production?
Yeah, I think that's a good way of looking at it. You've got over the second quarter, be pretty ratable as we bring on these new wells, and then you'll have a full quarter of those for 3Q. You'll see growth second to third quarter for sure.
Okay, great. Last, the non-production question. David, on the water sale, the $10 million-$12 million of EBITDA, I think you said that's current EBITDA run rate. It sounds like it's water handling and recycling. I don't know exactly what kind of leverage those assets have, but when we think about the kind of growth you're going to have here in the second and third quarters, how much leverage do you have on the EBITDA of those assets, and is that all Gulfport or are there third-party volumes?
It's primarily all Gulfport. They're pretty attractive assets, we think, and will be well received by the market. We were taking a deep dive through our business earlier in the year, identified those as being something that would be highly valued in the market, much more so than they're valued in our business. There is growth both from us and also potential third parties in that infrastructure. I think that $10 million-$12 million of standalone EBITDA could do substantially better being expanded, hence the attractiveness, I think, to third parties. The process is just getting kicked off. It'll be a this year piece of business, I believe. I'm happy to say that we're going to use some of the proceeds of that $50 million, which the overall sale will be a lot more than that, by the way, to address debt reduction.
Real happy about where that sits.
Great. Thank you very much.
Ron, thank you.
You're welcome.
The next question is from Jason Wangler of Imperial Capital. Please go ahead.
Good morning, all.
Good morning.
Morning. Wanted to ask, the hedge book, obviously, for 2019 looks very good. As you think about 2020, obviously, a little ways out, how do you think about the strategy of building that up as this year goes on and where you want to be from a longer-term perspective there?
Jason, that's kind of a key question, I think. We've been looking very closely, particularly at oil for this year and next year. As was mentioned in Keri's comments, we're pretty nicely covered for this year and now next year at around $60 for oil. I think the belief we have here is that oil is likely to trade back down, and so we wanted to reach into 2020 and get ourselves some coverage there. We can check that box. In terms of natural gas prices next year, I think we need a little longer look probably around the third quarter, has always been my view, before we get a good sense of where 2020 is. As I look back at the beginning of this year and where the general sentiment was for 2020, it was pretty negative.
I think today, regardless of where the strip has started to play, there's a little bit more green shoots of enthusiasm. I'm very curious to see if that's going to materialize. In the third quarter, we'll get a pretty good look, I think, in 2020, and then just like we did this year, we'll end up in a pretty full hedge position. We're a quarter away from getting comfortable on that.
Okay. That's helpful. Look forward to that. Obviously the $30 million sale, and then it looks like you repurchased a good amount of that in the first quarter. Is that just a timing situation where the money will be showing up a little bit later, but the $30 million was basically repurchased in the first quarter? Is that the way to think about that?
Yeah, Jason, that's exactly right. We actually used cash on hand to do it. These things, you never actually time them right. No one probably should time them where you wait for the proceeds before you act, but we felt pretty good about the sale, and we had cash on hand, so that's what we did. I wanted to try and do something every quarter. That's the goal anyway. That's where I set out to do this somewhat ratably. It's a very difficult thing to do it that way, but that was the intent. We're off to a good start, and we'll be doing more as the year goes on.
Okay. I just wanted to get confirmation. Thank you very much.
Yes, sir. Thank you.
The next question is from Tim Rezvan of Oppenheimer. Please go ahead.
Hey, good morning, folks. I'd like to follow up on Jason's question on the hedges. That was something we were asking about. The strip is at $2.70. Is 3Q sort of when, David, you kind of feel like you need to pull the trigger on something? Would you feel comfortable if you think the strip's not there, is kind of going unhedged into a 4Q period?
Yeah, Tim, I can do a few things. Predicting gas prices, I'm not that great at, I will tell you. I really want to get a look to see some of the impacts of the shoulder season going into winter. I think 260 is a soft bottom in general, $3 a hard cap. I kind of have that view. Where the year settles out, I think a lot of it will face on where storage is, et cetera. I think next year will look somewhat similar to this year. I'm thinking not a 270 number. I'm thinking better than that, 280 number. That's kind of my thought today. I reserve the fact that I could be wrong, and we'll take a look later in the year. I think directionally that's about where we're at.
Okay. Would you ever consider using any asset sale proceeds to get higher swaps than what the strip has given you?
That's a great intellectual thought. Today, is it on the table for us? No.
Okay. That's fair. Just one more on the asset sales side. It sounds like the closing for the water system may be around year-end. Just curious, why did you feel the need or want to publicly disclose it now? Was it to show the depth of the assets that you can monetize, or had the discussions reached a certain point, or was information starting to get out in the public domain? Just curious why you're rolling out this information like this.
Well, I guess the simple thing is you've got to roll it out sometime. We actually were taking a deep dive, as I mentioned earlier, in all of our assets. We're very keen on streamlining this business and getting us down to the core properties. This was one of the things that popped out. I took a look at it. I'm very familiar with how these assets value in the market. The market today seems to be pretty attractive for these assets. It made a lot of sense to us to take something that's valued at our multiple and put it with a market at something that's substantially higher multiple. It just made sense. I think I'm cognizant of where we are debt-wise. I think we're in a nice fairway here. Like in everything, it's a moving state.
Taking some of these proceeds here and helping our debt position, I thought was pretty smart thing to do. That's kind of the game. It wasn't any, "Gee, I need to make an announcement." It's just we recognize the quality of this. We recognize the market today and recognize the value uptick. That was really the decision process there.
Okay. Thank you for the comments.
You bet.
The next question is from John Ashenbeck of Seaport Global Securities. Please go ahead.
Good morning, everyone. Thanks for taking my questions.
Hey, John.
I wanted to follow up on the water assets, and I apologize if I missed this, but you mentioned the $10 million-$12 million a year of EBITDA with substantial growth. What do you think a good EBITDA run rate for those assets could be, say, at the end of the year when you're planning to wrap up the monetization? Thanks.
John, great question. I think I would defer that because I know we're going to have a lot of people in the data room looking at that, and have their own opinions of it, and I really would not like to color that. The way I look at it, this is a great add to somebody's system or position, and/or a great starter position for somebody. We're clearly going to be active using this system. Other people are as well. I think 10 to 12 is what I call a baseline. I think there's opportunity for pretty nice growth. To the comment by the end of the year, the data room here will be lighting up pretty quick. I expect that the process will be concluded well within this year.
Okay, great. Completely understand there. For my second one, I was wondering, how do you plan to allocate proceeds for future asset sales? You mentioned how you're planning to do that around the water assets, which was helpful, but just thinking of the strategy going forward between share repurchases, but also making sure that the balance sheet stays in check. I'm just wondering if there's a specific leverage metric you'd like to maintain, and then have additional proceeds go to repurchases, or perhaps you're just looking at it a different way. Thanks.
Yeah. John, we're nicely on track with what our program was laid out at the beginning of the year, which is a $400 million share repurchase, which includes 2019 free cash, and also the sale of certain non-core assets, one of which was the Marcellus, which we've already mentioned. We have a number of others that are all being worked, that I hope to be able to announce as the year moves on. I think that program is all working. This water asset that we've talked about was identified after we'd come up with that $400 million number and program. Really the use of those funds, I thought, was kind of appropriate to start targeting something like debt reduction. That's the game plan with that.
Okay. Got it. That's it for me. Thanks for the time.
Perfect. Thanks, John.
The next question is from Leo Mariani of KeyBank. Please go ahead.
Hey, Leo.
Hey, guys. Hey, how are you here? Just wanted to follow up a little bit on the sale of the SCOOP water assets here. Would you folks to see post the deal close here as soon as it gets done later this year to see some increase in your LOE out there in SCOOP as a result? Just trying to get a sense if that $10 million-$12 million of EBITDA that sort of comes out of the company some of that may result in a little higher LOE.
Yeah. Leo, the way we've had it in-house here is kind of charging ourselves market rates. That's where the deal will be struck. I wouldn't expect us to cut a deal that kind of hurts us. I'd be very disappointed in myself if we did that. The simple answer is no. I think we'd have market rates for this deal. I think there's pretty keen interest in it, we'll see what kind of price we get.
Okay. I guess with respect to the DUCs there in Utica, you obviously described it a pretty aggressive sort of completion schedule you've had there of late. Just trying to get a sense of how many DUCs in the Utica you guys plan to reduce the total by in 2019, and how many you think you'll have by the end of the year. Just trying to get a sense if you kind of deplete that whole DUC backlog this year.
Yeah. Usually, an ongoing business like ours will have some DUCs at the end of the year. For me, it's call it low 20s. We have about 40 DUCs to take care of this year, and that's the game plan. That's how we'll look at the end of the year. I think something in the low 20s.
Okay. Thanks very much.
You bet. Thanks.
The next question is from Marshall Carver of Heikkinen Energy Advisors. Please go ahead.
Yes, just a question on the EBITDA, the $10 million-$12 million of EBITDA impact. Is that all flowing through your LOE line item, or does some of it show up in another line item?
Yeah. Hey, Marshall, it's Paul. The system itself is a water reuse and recycling and distribution system. There are two components to that. One is a produced water aggregation system, the other is a flowback and frack sourcing system. Some of that will go to capital and some of that will go to LOE.
Do you have a ballpark split?
I don't off the top of my head here.
Okay. Thank you.
Thanks, Marshall.
The next question comes from Jeffrey Campbell of Tuohy Brothers. Please go ahead.
Good morning. First question was, I just wondered if there was any activity in South Louisiana during the quarter.
I hope so. We still own that asset, so they should be active. Yeah, it's one of the assets, non-core, that we're moving forward with. Hopefully we'll be able to announce something here along with other things later.
Okay. Well, that's some nice color. You mentioned that $50 million of the water sale was going to go to debt reduction. You also said that you think it's going to fetch far in excess of $50 million. I was just wondering, do we assume whatever went far above $50 million is going to go to the buyback, or do you want to keep some cash on the balance sheet? Just kind of wondering what you want to do there.
Yeah, no. As I hopefully was clear in my comments, none of the proceeds of the sale of the water asset is for the announced buyback program. The $50 million was just to say, hey, that's what we're going to use that $50 million for. We haven't made any decision on the proceeds above that. Once we get to know what that number is, we'll make a judgment call as to where that money should go. You've hit on one of the options for sure.
Okay, great. I appreciate that. If I could just sneak one last one in. I just wondered, what was the mix of the wells drilled and completed in the Utica? Really, I'm just asking, were there any wet wells drilled or is completed or is it all dry gas?
Yeah, Jeffrey, this is Donnie. Yeah, we drilled two wet wells in Utica. The rest are dry gas.
Okay, great. Thanks a lot.
Great.
Jeffrey, thank you.
The next question comes from Rehan Rashid of B. Riley FBR. Please go ahead.
Good morning. Thank you for taking my questions. Two quick ones. One, how much acreage was associated with that Marcellus rights sale? Second, just from a framework for 2020 capital allocation standpoint, operationally speaking, any early ideas on what kind of focus will be on the Utica and what kind of focus will be on your Scoop assets? Thank you.
Yeah, Rehan, it's not a very big footprint of Marcellus rights. A little bit bigger than my ranch, but not that big. The second question, can you repeat the second question, please?
Just maybe an early take on capital allocation for 2020. Have you seen maybe a better way to ask this is from your operational results so far, any kind of changes in our thoughts around what kind of capital allocation will be for 2020 between the two assets?
Yeah. I think that's a-
Potentially.
Yeah, that's a very fair question. We've been moving capital more towards the more liquids part of our portfolio, which is kind of in the SCOOP. Just in broad sense, I think that about 60% of our capital will go into SCOOP next year. We'll get a sense of what actually that is when we get a little bit of tighter handle on prices next year. That's directionally the ratio, about 50/50 this year.
Okay. Thank you.
The next question comes from Kashy Harrison of Simmons Piper Jaffray. Please go ahead.
Good morning. Thank you for taking my question.
Morning.
Since it hasn't come up yet, and it does seem to be the topic of the season, I was just wondering if you'd share your views on just M&A and what role you see yourself playing over the next several years, because any color would be helpful.
Yeah. It is very topical. We don't comment as a policy on M&A and what we're doing. I think, on a broad sense, basin consolidation and M&A is probably going to happen more in the future as we are at the bottom of the market. Our role and what we play in that, I think, is yet to be determined. That would be the way I would answer that.
Okay. Fair enough. Then, if I recall correctly, there were some Springer wells brought online last year. I was just wondering if y'all could provide an update on just how the Springer is performing relative to your internal expectations. That's it for me. Thank you.
Yeah. This is Donnie. Last year we brought some Sycamore well on, but not a Springer wells back in 2017. As far as the Springer goes, we're in a lot of non-operated wells on Springer, continue to like what we're seeing there. Really like the Woodford performance we're seeing on our home acreage as well. We're going to continue to watch that and see where it goes.
Yeah, I think priority-wise, Woodford, then lower Sycamore, is kind of where we're focused.
This concludes the Q&A period. I'll now turn the call over to David Wood for closing remarks.
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