Good day, and welcome to the First Quarter 2020 Western Midstream Partners Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Abby Dempsey, Investor Relations. Please go ahead, ma'am.
Thank you. I'm glad you could join us today for Western Midstream's Q1 2020 conference call. I'd like to remind you that today's call, the accompanying slide deck and last night's earnings release contain important disclosures regarding forward looking statements and non GAAP reconciliations. Please reference Western Midstream's Form 10Q and other public filings for a description of risk factors that could cause actual results to differ materially from what we discuss today. Relevant reference materials are posted on our website.
With me today are Michael Ure, our Chief Executive Officer Craig Collins, our Chief Operating Officer and Mike Pearl, our Chief Financial Officer. I now would like to turn the call over to Michael Ure.
Thank you, Abby, and good afternoon, everyone. I hope this call finds you and your families safe and healthy during these unprecedented times. I'd like to begin this call by thanking our employees for their continued focus, diligence and adaptability, all of which directly contributed to our truly outstanding Q1 results. Our first quarter results are indicative of the operational and financial outperformance that our employees and assets are capable of delivering in a normalized environment. Our Q1 results not only show the capabilities that exist within our best in class assets that we expect will deliver repeatable future successes when we reach the other side of this ongoing pandemic, but these results also improve our debt metrics and demonstrate our ability to generate meaningful positive free cash flow.
In light of the pandemic's effect on commodity prices and producer activity, we recently announced capital and other planned cost reductions that we fully expect to realize in 2020, accompanied by a 50% reduction to our quarterly distribution. We believe these announced measures ensure our near term financial health and allow us to emerge from the currently dislocated market opportunistically positioned with financial flexibility. The current market environment has forced us to re examine every aspect of our operations to identify incremental cost saving opportunities and pursue efficiencies that will improve our profitability as the sector and overall economy improves. In short, we are focused and committed to delivering improved results with fewer resources by adopting an entrepreneurial mentality that emphasizes broadening employee skill sets and areas of responsibility. As anticipated, establishing WES as a standalone midstream company has furthered cost efficiency realizations, and we have embraced the current environment to challenge our legacy corporate organizational structure and functions.
The realizable value attributable to past activities investments and the overall reliance on the talent and creativity of our focused employee base to continue identifying efficiencies and cost savings. The current environment is far from ideal, but opportunistic for WES in the sense that it allows and forces us to focus on improving every aspect of our operations and related corporate functions. This has elicited actionable plans that are imminently capable of delivering incremental cost efficiencies for years to come. Notwithstanding our unbridled enthusiasm for our Q1 results and anticipated cost savings initiatives, we recognize the pandemic's adverse effect on worldwide economic activity and the related disruption to the energy sector. We were in early, proactive and constructive contact with all of our customers, most of which communicated deferrals and cancellations of expected drilling campaigns.
Our customers continued to revise drilling and completion activities and curtailment plans, which is prompting us to take steps to protect and strengthen our financial wherewithal. We recently announced a 45% or more than a $400,000,000 reduction to our current year capital guidance, a $75,000,000 reduction to current year G and A and operating and maintenance costs and a 50% reduction to our quarterly per unit distribution. As a result of these actions and up to date producer communications, we anticipate 2020 adjusted EBITDA between $1,725,000,000 to $1,825,000,000 which we expect to result in meaningful 2020 free cash flow after distributions. This guidance reflects the best and current information we have at this time. We will continue monitoring producer activity levels and may adjust our 2020 guidance and future distribution levels based on incremental information that may be communicated to us by our customers in the upcoming months.
Today, we believe the strength of our Q1 results and the most recent customer provided activity level information support our revised 2020 guidance. Our revised guidance announced cost savings initiatives and reduced quarterly distributions position us to generate free cash flow after distributions so that we can prioritize leverage reduction and assume a financially offensive stance once the current market dislocation abates. With that, I'll turn the call over to Craig, who will discuss our Q1 operations and forecasted 2020 in basin activity and capital plans.
Thanks, Michael. First, I would like to congratulate our team for its recognition by the GPA Midstream Association for outstanding safety performance in 2019, where we were awarded 1st place in the Division 1 category for companies with greater than 1,000,000 reported man hours. A sincere thank you to our employees for continued dedication to safety. Operationally, gas throughput increased by approximately 150 1,000,000 cubic feet per day on a sequential quarter basis, representing a 3% increase. This increase was primarily driven by higher throughput from our DJ Basin complex and West Texas complex.
Also, the 2nd Latham train commenced operations during the Q1 And as a result of modifications that we made during construction and following performance testing, we expanded the processing capacity by 50,000,000 cubic feet per day for a total processing capacity of 250,000,000 cubic feet per day. As you may have noticed in our recently issued financials, we now disclose metrics attributable to water separately from crude and natural gas liquids for added transparency into our business as a result of the water business becoming an increasingly significant portion of our portfolio, our water throughput increased by approximately 105,000 barrels per day, representing an 18% sequential quarter increase. Our per barrel water disposal gross margin of $0.97 is consistent with the prior quarter. Our crude oil and natural gas liquids operated assets experienced a sequential quarter throughput increase of approximately 14,000 barrels per day, primarily as a result of increased throughput in West Texas. Annual cost of service rate redeterminations and increased Delaware Basin throughput supported an increase in our per barrel margin related to crude oil and natural gas liquid throughput from the prior quarter by $0.16 to $2.43 per barrel.
Additionally, the Front Range and Texas Express Pipeline expansions were placed into service at the beginning of April. Many of our customers already have taken steps to reduce drilling activity in the basins in which we operate. Accordingly, much of the originally forecasted growth for this year will not materialize. Notwithstanding, our capital asset and spending profile is scalable relative to and in response to fluctuations in producer activity. Our capital plan allows us to reduce well connect, compression and gathering capital rapidly and significantly in response to reduced in basin activity.
This demonstrates the versatility and flexibility offered by our asset portfolio and furthermore underscores the ongoing value attributable to our prior period investments into scalable backbone infrastructure assets located in premier U. S. Onshore basins. Should in basin activity ramp up in 2021 and beyond, we likewise meaningful incremental value by leveraging our existing backbone infrastructure to capitalize on intended economy of scale opportunities that are uniquely inherent our asset portfolio. We continue to build out the 4th North Loving ROTIF train with completion expected in Q4 2020.
This project is reflected in our most recent capital guidance. I will now turn the call over to Mike to discuss our first quarter financial results and our financial focus for 2020 and beyond.
Thanks, Craig. Yesterday, we reported an unequivocally outperforming quarter with adjusted EBITDA of $514,000,000 and free cash flow of $215,000,000 The 15% sequential quarter increase in adjusted EBITDA resulted from increased throughput across all products in the Delaware Basin and natural gas throughput in the DJ Basin. We believe that current broad based market dynamics dictate that all companies, energy sector and beyond, prioritize balance sheet strength, so that they are positioned to manage through cyclical downturns, including the existing and unpredictable pandemic fueled market dislocation that has turned all of our lives upside down. In light of evolving macroeconomic conditions and the current state of the sector, we have pivoted to focusing on free cash flow a financial performance indicator as opposed to the conventional MLP standard metrics of distributable cash flow and distribution coverage. These legacy sector metrics continue to carry comparability value for a distribution focused enterprise, but lose significance as compared to a market standard free cash flow metric that is more germane to a total return focused enterprise like WES that is positioned to withstand economic downturns and poised to be opportunistic at any stage of the business cycle.
Our recent distribution reduction was undertaken with a view toward becoming a sustainable free cash flow after distributions enterprise. Moreover, the recently announced distribution cut positions West to generate free cash flow after distributions as early as this year. Notably, if the currently applicable per unit distribution was in effect for Q1 2020, West would have been free cash flow positive after distribution. To date, capital investments have enabled our immediate shift to a free cash flow after distribution enterprise, which allows us to repay debt expeditiously so that we are able to capture future value from deploying financial resources to execute on highly accretive opportunities, whether acquisitive or corporate finance in nature. Returning to Q1 results, low commodity prices and reduced producer activity triggered the recognition of approximately $156,000,000 of asset impairments, primarily related to Chapita and a $441,000,000 goodwill impairment.
These non cash charges do not affect adjusted EBITDA or free cash flow. As we look past Q1 2020 and expanding on Michael's earlier commentary regarding the COVID-nineteen inspired WES retrospect, our $75,000,000 reduction to current year G and A and operating and maintenance costs are absolutely realizable. We have altogether stopped discretionary spending, travel and the like, suspended salary increases for all personnel for the remainder of this year and continue discovering ways to operate in a more cost efficient manner through the identification and elimination of non value added and non productive expenditures. As we continue executing on lowering our input costs, we recognize the importance, strength and sanctity of our current gathering and processing contract. The contractual protections provided to us through the operative provisions of these contracts are a key component to our free cash flow equation and we have no current expectation of renegotiating or amending these contracts in any manner that materially prejudices our ability to generate free cash flow after distributions over the long term.
Our highly successful bond offering earlier this year, largely undrawn $2,000,000,000 revolver, lack of near term debt maturities and our recent actions that reduced 2020 cash out flows by approximately $1,000,000,000 all contribute to our currently advantaged liquidity position. As we begin generating positive free cash flow after distributions, we will deploy excess cash to strengthen our balance sheet by reducing leverage. We continue to target leverage below 4.5 times by year end 2020 and below 4 times by year end 2021. These targets are necessarily aspirational as they are subject to the uncertain duration and severity of the ongoing economic downturn and related energy demand shock. Finally, restoring our investment grade credit ratings remains a priority for us and meaningfully reducing leverage aids in this endeavor.
I now will turn the call back over to Michael for concluding remarks.
We recognize the difficult times in our industry and in our communities. I nevertheless remain encouraged by our Q1 outperformance, which again we consider indicative of our capabilities in a normalized economic environment. I remain confident that WES and the industry as a whole will emerge from this downturn stronger than before. And for WES, that dictates a more efficient and cost effective business model, the achievability of which currently is being demonstrated by real time empirical evidence of cost savings and continued efforts by WES employees to improve overall efficiencies. In closing, I would like to thank our employees for their continued dedication and the frontline individuals in our communities that are working tirelessly to keep us and our families safe and healthy during this health crisis.
With that, I would like to open the line for questions.
Thank you. We will now begin the question and answer session. Today's first question comes from Shneur Gershuni with UBS. Please go ahead.
Hi, good afternoon, everyone. Glad to hear everyone is safe. Maybe to start off a little bit, your guidance isn't really down that much and I was from where it was when you last updated us, I was just wondering if you can remind us what percentage of the EBITDA is protected by MVCs or take or pay contracts?
Yes, Shneur, this is Craig. We've got 65% of our gas volumes are supported by MVCs and cost of service agreements and 78% of our liquids volumes are supported by cost of service and minimum volume commitment obligations. So we feel quite secure given those contracts and the veracity of those contracts. And we continue to look forward to working through this downturn that we're in and seeing volumes rebound with new development once that begins.
Great, perfect. And maybe as a follow-up on the guidance and then I have another one after that. The guidance kind of surprised me frankly to the upside. When I sort of put it into context in sort of listening to your one of your biggest customers being Oxy, where it sounds like they have 0 to very few rigs running right now. And when I think about wells having a decline rate by nature, is there a scenario where 2020, while it's being clearly a tough environment, but could that actually be the calm before the storm in 2021?
I mean, is there a huge DUC inventory that Oxy is sitting on that they can offset the decline rate later this year? I mean, I'm just trying to figure out how they catch up in 2021 to offset the decline rates if oil prices go up, if there are no rigs running. And so I'm trying to understand sequentially where we should be thinking about the balance of this year and is '21 a material risk to 2020?
Yes, Shneur, thanks for the question and actually appreciate the commentary around the positive surprise on the upside as it relates to our guidance. We also feel great about the Q1 and feel confident that we'll be able to adapt to the current environment. It's difficult to tell what 2021 is going to look like. We don't actually have guidance out in 2021 in light of the current environment as we sit today. And so I would hesitate to provide any specific guidance as it relates to the impact on the 2021.
I mean, if you're not able to provide guidance to 'twenty one, and I do appreciate that, but I'm saying the conditions for 'twenty one to be flat, down or up is going to be somewhat dependent on the inventory of drilled uncompleted wells that your key customers would have. I mean, if they're not drilling, obviously, they're not adding to that balance. So trying to understand what is the drilled uncompleted inventory today that could at least be used for us to be thinking about direction where 2021 could go?
Yes. This is Mike. The DUC inventories that sits today is contributing to what I think you characterized as somewhat of a lighter decline in terms of guidance. But if we don't see activity levels in the market improve throughout the balance of 2020, I think it is safe to say that you'll see a more pronounced decline in 2021.
Okay, fair enough. And then one last follow-up, The Sanchez bankruptcy, is there an impact on Western Gas and is that or Western Midstream rather? And is that baked into your guidance at this stage right now?
So Sanchez is a 25% working interest owner at Springfield of which we own 50.1 percent of. Springfield has individual contracts with all of the working interest owners. We're connected at the wellhead. So obviously, that's important as you want to continue to flow volumes there. We feel very strongly and have taken steps to preserve our rights related to that.
And so we have not actually forecasted any negative impact overall because of the dynamics that I just referenced.
All right, perfect. I've got some more questions, but I'll step back into the queue. Thanks, Shneur.
Our next question comes from Spiro Dounis with Credit Suisse. Please go ahead.
Hey, afternoon, everyone. I Wondering if you could walk us through the cadence for the rest of the year as you're thinking about volumes here and what customers have communicated to you. Imagine 2Q and 3Q be among the worst hit, But I guess what's being communicated or modeled so far about the ramp up into 4Q? And do you see any differences between our Delaware or DJ recover? Yes.
So as it relates to cadence, we have incorporated all of the feedback we've received up to this point into the guidance provided as it relates to any curtailments and activity levels, you would expect there to be and we do expect there to be an impact on EBITDA as you go through the year as a result of that limited activity and those curtailments. On the capital side, we would expect the capital in the second quarter to be relatively flat with the Q1. And the dynamic there is, as you may recall, it seems like forever ago, but at the beginning of the year, there was a very different perspective with regards to activity levels. We get ahead of our producing customers as it relates to that. And so at the time of COVID-nineteen and the OPEB plus meetings, a significant amount, the majority, in fact, of our current capital budget had already been spoken for at that point.
And so you would expect or we do expect 2nd quarter capital to be relatively similar to Q1 but trailing off meaningfully through the remainder of the year. As we go into 2021, obviously, we have greater flexibility in being able to modify that total CapEx spend if the continued conditions or the conditions continue. So we do expect and have received feedback with regards to curtailments that will impact Q2 and Q3. The current information that we have is that things will likely return back to a level of normalcy as you start into Q4.
Okay. Understood. And then just thinking about that exit rate and kind of going back to Shneur's question just a little bit here, but maybe asking in the context of your leverage target of 4 times, which, Mike, I think you pointed out was aspirational, which I think is sort of the right lever to kind of get to eventually. I guess we're struggling with is the cash flow side of that and maybe what customers have communicated to you to suggest that it seems like that's going to necessitate growth in 'twenty one versus 'twenty to get there. And so as we're thinking about that exit rate, that recovery in 4Q, to the extent that's driven purely by a reversal of shut ins, it sounds like to get to 4 times, I don't know if it was in your mouth, but just help me think about it.
To get to 4 times, you're going to have to see some sort of increase in actual activity to get there throughout 2021. Is that fair?
I think that excuse me, this
is Mike. I think that's a fair comment, but also doesn't take into account the potential for us to divest of non core assets to further reduce leverage and bring that ratio closer to 4. When I say non core, I mean anything outside of the DJ in Delaware, including equity investments.
Okay. That's that'll explain it. Thanks, everyone. Take care.
And tomorrow, I would again comment as it relates to the capital side, the increased flexibility into 2021 to be able to modify the capital program, have greater flexibility in modifying the capital program, bringing that CapEx down in the event that the activity levels don't return.
Appreciate the color. Thank you, gentlemen.
And our next question today comes from Jeremy Tonet of JPMorgan. Please go ahead.
Hi, good afternoon. Just wanted to kind of clarify a little bit around the guidance here. And would you be able to kind of share with us, I guess, what type of rig activity is embedded in your guidance, EBITDA guidance for the year here? And just the trajectory of the EBITDA guidance for the balance of the year, is it kind of like 2nd quarter is a bit lower than 1st and then 3rd is a bit lower and so on? Or just any kind of color on that shaping would be helpful as well.
Yes. So in regard to your first question, there's very little to no activity that's forecasted into 2020 as it relates to the guidance that is embedded here. Again, you have, as we talked about Q2 and Q3, you've got the impact of curtailments that might exist with Q4, I would call it, unless there's a return in activity level relatively flat with Q3. So step down a little bit into Q2 as it relates to Q1, step down maybe a little bit further in Q3 and then Q4 roughly relatively flat with Q3.
Got it. That's helpful. And just wanted to get a better sense, just for our own modeling purposes, if no wells are connected to your system, what type of PDP declines should we be modeling or thinking about, just trying to get a better feel on how to model it?
Greg, you want to take that?
Yes. I would say given the activity levels having already come down significantly, we're going to see the steepest decline over Q2 and Q3 and I would expect that decline to rest a bit during the Q4 and beyond as those wells come off their hyperbolic decline. So, frankly, it just varies based on the maturity of the developments by each of our customers. And so it's pretty difficult to state an average decline rate, but I would expect most of that to be showing up in Q2 and Q3 of this year.
Got it. That makes sense. I'll leave it there. Thanks for taking my question.
And our next question comes from Derek Walker with Bank of America. Please go ahead.
Hey, good afternoon. Thanks for taking my question. Just I want to get a better understanding of kind of the gross margin in natural gas segment. It looks like it was $1.16 meaningful step up from the prior quarter. So I just wanted to see how much of that is the annual rate redetermination from the cost of service contracts?
And should we think about that 116 number as sort of the run rate for the year?
Yes. Most of that increase in the gross margin on the gas side is attributable to the increase in volumes on a relative basis from the DJ and the Delaware Basins, given those are higher margin gas molecules than the balance of the portfolio, which is on decline. So I would say that the Q1 margin for gas is probably reflective of what we'd expect balance of the year as well.
Okay, great. And then as far as I know it's early days here, but as we do the next sort of annual rate determination and given sort of how you're thinking about things trending from a volume perspective, how should we think about that rate in 2021?
Yes. We redetermine the cost of service rates at the end of the year, redetermined annually. And those rates are based on a function of capital, OpEx and volumes, both actual volumes delivered as well as forecasted volumes and the associated capital that's required to support them going into the future. And so we'll work with the producers and update those cost of service models at the end of the year. But it would be premature to anticipate what those rates might look like.
Okay. And then maybe just a quick one on I think you brought Latham 2 on in the quarter. I guess what are you guys seeing on utilization now and sort of how do you what's kind of factored into your guidance?
Yes. Latham fits into our DJ complex of processing. And through the Q1, since that plant came online, it's effectively been full. It's obviously a highly efficient plant. And so we preferentially will keep those efficient plants loaded.
But it's been running at capacity. Both Latham 1 and 2 have been at capacity. And some of the less efficient plants is where we've sourced some of that gas from. But we have ample processing capacity available. And I think the upshot of the environment that in is from a capital standpoint, both in the DJ and the Delaware, we're well positioned for some time with respect to our processing capacity.
And so in terms of lumpy capital going forward, I think we're in pretty good shape and not having to expand processing capacity, which as we know is pretty significant chunks of capital. So we feel like our capital program going forward is very flexible and we can leverage that as activity levels change in the future.
Great. That's it for me. Thank you, guys. Appreciate the time.
Our next question today comes from Suneel Sabal with Seaport Global Securities. Please go ahead.
Yes. Hi. Good afternoon, everybody, and thanks for taking my question. I was just kind of curious if you could talk a little bit about more recent trends that you're seeing in Midland as well as Delaware as far as the gas to oil ratios are concerned for the producers that you serve and also produced water to oil ratios, are you seeing any significant changes in those trends as producers are modifying completions or shutting in wells?
No, we haven't seen any significant change in the complexion of that product mix across our producers. I would say over the next several months as volumes are curtailed, Clearly, we may see some shift in how that looks. But in terms of a shift based on completion designs and reservoir maturities, we haven't seen a material shift from where we've been.
Okay. And just a
clarification, Neil, that would be just Delaware to Delaware, right. We would not have insight into the
Midland side. Okay. Got it. And then on your guidance and then the MVCs, etcetera, are there any of your assets which are currently flowing below MVCs?
We have some contracts where the producers are below their MVCs and are paying deficiency payments. We have others, in fact, most of them, frankly, are flowing above their MVCs or have been flowing above their MVCs. So that continues to be a changing dynamic as you would expect in this environment. But we're continuing to monitor what producers' volume expectations will be in the near term and longer term.
Got it. And then one last one for me. Thanks for laying out your leverage expectations. I was just curious when you think about your different competing goals, especially if the recovery is slower than anticipated, How would you put distributions versus leverage reduction goal in terms of order of priority?
This is Mike. Our priority is leverage reduction, full stop. So if and to the extent, we don't see facts that comport with what we've put together in terms of our own expectations, then we'll need to revisit distributions at that point time. Now we're certainly not there. And I can tell you that a lot of analysis went into the financial information that we used to support the distribution cut that we did undertake.
But that doesn't mean that we can't be nimble if and to the extent we see the backdrop warn us to take further recommend taking further action.
Okay, got it.
I will leave it there. Thanks much for the color.
Our next question comes from Chris Tillett with Barclays. Please go ahead.
Hi, guys. Good afternoon. I guess first for me is, on the MVC and cost of service contracts, are there any noteworthy expirations on those contracts in the next few years or so?
No. Those are all longer term contracts that are averaging 8 to 10 years and remaining 10 or so. No near term expirations for those.
Okay. Thank you. And then maybe just to follow-up on some of the questions from earlier. Can you quantify in terms of EBITDA or operating income, what the level what percentage of earnings today are coming from NBC and cost of service contracts?
No, we don't have that available. No.
Okay. Okay. Well, I guess maybe sort of another way to think about it would be, are the margins that are charged under those contracts either on the gas or the liquid side materially different than the margins that are seen on the volumetric contracts?
Again, I would say, we would we don't talk specifics as it relates to individual contracts and specific contracts. So I'm afraid I can't really provide insight to you on that specific question.
Okay.
Understood. The contract is
obviously different that goes into the general question that you're asking there. So given we don't actually talk about individual or even company specific contracts, we would we just can't provide any real insight to respond to your question.
Our next question today is a follow-up from Shneur Gershuni with UBS. Please go ahead.
Sorry guys to come back in. I remember when these calls used to only take 15 minutes, and it's running longer than that. But I think in your response to Spiro's question, you talked about the decline rates would be bigger upfront into, let's say, 2Q and 3Q and then it would arrest. When you say arrest, are you saying it's a 0 decline rate? Or are you saying it's just falling from like a 20% decline rate to, let's say, an 8% or 10% decline rate.
Just trying to understand what you'd meant by that comment.
Yes. So what I meant by that, again, we were talking about cash flows there. And again, the dynamic that I was trying to highlight is that we do have dynamics that have been built into the model based on feedback received from all of our customers that relates to curtailments that would be taking place for the most effect into Q2 and Q3. And so we would expect a step down in EBITDA Q2 relative to Q1, potentially another step down into Q3, but that Q4 would potentially arrest that decline in part because we're not currently forecasting the curtailments to continue into that period, meaning we'll incur curtailments to continue into that period.
Okay. And I mean does that take into account Oxy's comments that I think they said something like 9% or 10% of their wells are shut in and it seemed ratable across the Permian DJ and international and that some of them would actually never come back. Is that sort of baked into that guidance assumption?
Yes. What's baked into the guidance is direct information that we've received from all of our customers, including Oxy.
Got it. Okay. And one final question just on the balance sheet. You did some debt buybacks this quarter. Is that a strategy you expect to continue pursuing?
If we see the price arbitrage that makes sense to us, the answer is absolutely. I think we're on record in several instances of commenting that we have no near term need to access the capital markets, which basically means in terms of 2021 2022 maturities, we plan to pay those off. So if we see an opportunity here in the near term to take those out for below par, we think it makes all the sense in the world to take it out early if we have the liquidity to do so rather than paying full boat, so to speak, at maturity.
And I would highlight, Shneur, as it relates to that, that again, the focus is on near term maturity that if you're repaying those below par, that it's actually liquidity enhancing overall.
No, I completely agree with that. Just wanted to clarify the strategy. Perfect. Thank you very much. That covers my follow ups.
Our next question is a follow-up from Jeremy Tonet with JPMorgan. Please go ahead.
Hi, thanks. Just a couple of cleanups here. The OpEx, I think came in a little light for the quarter, maybe versus expectations. And just wondering, is this ratable or is this some seasonal element here to lower O and M that we should be thinking about? Or does this have like kind of the cost savings that you guys were looking to achieve and that's kind of baked into this level?
Yes, Jeremy. We've identified a number of places where we can save costs for this year. And I would say that what you see in the Q1 OpEx is not particularly reflective of all those cost savings measures that we've identified. So we would expect to be able to save even more from the OpEx relative to the Q1 OpEx numbers that we've reported.
Got it. That's helpful. And then just want to think about the family relationship with Oxy here. Obviously, Oxy is under a bit more stress than they want to be. Is there room for kind of any level of deals with Oxy that could be win wins on both sides?
Just seeing if there's anything left on that front.
We're always willing to do win win transactions with any of our customers.
And I would just highlight that the interaction, the relationship overall with Oxy incredibly positive, very supportive across the board. So clearly, if there are win win transactions that work for both of us that we would absolutely engage in those interactions and would expect that we would have the same type of fulsome engagement that we received from OXY throughout and expect to have that continue.
That's helpful. That's it for me. Thanks.
And ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to Michael Yure, CEO, for any final remarks.
Thank you everyone for joining the call. I wanted to again reiterate just how excited we were for the incredible results that the team has been able to achieve. We have absolutely done a wonderful job in being able to adapt to this environment. So thank all of our team members and being able to do that. We wish everyone to continue to stay safe and expect better and brighter things into the future.
Thank you very much for joining the call.
Thank you. This concludes today's conference call. You may now disconnect your lines and have a wonderful day.