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Triangle Petroleum (NYSEMKT:TPLM)

Q4 2013 Earnings Call

May 01, 2013 10:30 am ET

Executives

Jonathan Samuels - Chief Executive Officer, President and Director

Justin J. Bliffen - Chief Financial Officer

Analysts

Jason A. Wangler - Wunderlich Securities Inc., Research Division

Stephen F. Berman - Canaccord Genuity, Research Division

Jared Lewis - Northland Capital Markets, Research Division

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Eli J. Kantor - Iberia Capital Partners, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Q4 Fiscal Year 2013 Triangle Petroleum Corporation Earnings Conference Call. My name is Matthew, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

And now I would like to turn the call over to Mr. Jonathan Samuels, President and Chief Executive Officer. Please proceed, sir.

Jonathan Samuels

Thank you, too. And good morning, everyone. Welcome to the Triangle Petroleum Fiscal 2013 Earnings Call. My name is Jon Samuels, President and CEO. And I'm joined today by our Chief Financial Officer, Justin Bliffen; our Principal Accounting Officer, Joe Feiten; and several other members of our team.

Today, we want to cover a number of topics. First of all, we want to provide you with a review of our fiscal 2013 progress and financial performance. Overall, we're really happy with what we, as a company, have received this past year. Sometimes, even we forget that, 1 year ago, we just started pulling back our first operated well. RockPile wasn't yet operational, and Caliber didn't yet exist. So when we look at the growth in revenue and reserves that we achieved this year, which is really our first year of operations, we're pleased with it. We'll get more of that topic in a minute.

Secondly, we want to provide some context around the delay in filing our 10-K and the changes to how we comp to RockPile. The good news is it's done and behind us. There's no cash impact and no changes to our past financial statements and we anticipate on a go-forward basis. We will talk more about that in a minute.

And the last topic we want to talk about, which we think is the most important, is a current operations update. Yesterday was the last day of our first quarter. And already, Q4 feels pretty far away given what we've done in the last 3 months. We've set some ambitious goals for ourselves as a company this year, and we're very pleased with the progress. We feel good about our guidance and feel like we're beginning to fire on all cylinders, where our table is set for rapid growth across all our business segments this year, and we're excited about it.

Before we get into that, I'd like to turn the call over to our CFO, Justin Bliffen, who's going to walk you through some of the highlights from fiscal '13.

Justin J. Bliffen

Good morning. I'll briefly run through the standalone business segment operated and financial results for fiscal year 2013 which ended January 31, 2013.

Triangle E&P, also known as Triangle USA, grew sales volumes 415% from 94.9 Mboe in fiscal year 2012 to 488.2 Mboe in fiscal year 2013. We increased proved reserves approximately 900% from 1.5 Mboe in fiscal year 2012 to 14.6 Mboe in '13.

On a standalone basis, the E&P business segment generated approximately $40 million of oil and gas sales and $25 million of adjusted EBITDA for fiscal year 2013. On a consolidated basis, we spent approximately $168 million, with $146 million being spent on operated and non-operated drilling and $23 million being spent on acreage acquisition. This CapEx number was, of course, reduced by $12 million due to income generated by RockPile, which will be discussed further later in the call.

It is worth noting the TUSA -- or Triangle USA credit facility was recently syndicated and has increased from $10 million to $110 million over the preceding 12 months.

RockPile Energy Services, our wholly owned subsidiary, commenced operations in July of 2012 and completed 17 total wells in approximately 500 stages. On a standalone basis, RockPile generated $57 million of revenue or $21 million on a consolidated breakdown -- and $10.5 million, rather, of standalone adjusted EBITDA for fiscal year 2013. This includes approximately $4 million of G&A costs spent before RockPile completed their first well this past year.

RockPile incurred CapEx of approximately $29 million on property and equipment. On the consolidated statement of operations in the press release, you will notice $6.3 million of other expense. This is related to noncash interest expense of $1.4 million for NGP notes discussed previously and unrealized derivative loss of $4.9 million.

Please reference our Form 10-K, note for segment reporting or reconciliation tables in our press release for additional details.

Thank you.

Jonathan Samuels

Thank you, Justin. I'd like to spend a couple of minutes now talking about the SEC review and the delay in our filing and the change in our RockPile accounting principle.

Now the SEC review process. It was normal course. You guys are aware, every public company is reviewed by the SEC every couple of years. Triangle is not special in that regard. Triangle was last reviewed in 2010, so we were due, and the timing of the latter. Frankly, this one wasn't great and we weren't able to resolve it before our 10-K was due, which is why we filed late. The good news is, it's behind us, and there's no outstanding comments or issues, so bill of health. And really, there are no direct consequences, real or otherwise, to filing for this extension.

So it was unpleasant. You guys didn't like the delay any more than we did, but it is behind us now. And really, there's no consequences for it.

Regarding the RockPile change in accounting. Really, the question here is, what do we do with RockPile income? It's a good problem to have. This is an expense that we would incur no matter what if we're drilling wells. It's just the question, do we pay that money to a subsidiary that shareholders own, or do we pay it to the third party?

So the question of what we do with the RockPile income, there's 2 choices for that. Either it goes on our income statement or it is a reduction of CapEx. There is a rule written in the early '80s that essentially says, if you're an E&P company and you own a service company, you can't recognize income for services that you provide to yourself. And as you guys know, we were not recognizing income for Triangle's working interest share with any wells that RockPile frac-ed. But we were recognizing income through non-operators and non consent interest in our unit. The real problem was the rule is silent on that. It was written in a time period that you didn't have some of the wells being drilled in North Dakota, with forced pooling on 1280 spacing. And it's just happened, so it's subject to interpretation.

We had our interpretation. Our auditors agreed with us. The SEC, we've gathered they had a different interpretation. Of course, we're going to comply with what they say, and so we have to restate our 10-Q. To us it's really not that big a deal. RockPile is recognizing this income, and we're realizing the cost savings regardless. And whether it's income on the income statement or a reduction in CapEx, it really doesn't change the thesis. The whole point of the vertically integrated model is to be the low-cost producer. And wherever it flows through, again, the cash in the bank account, that's what matters. So all things considered, we're fine with the outcome. It was unfortunate there was the delay.

We ran through a couple of numbers, but I thought it would be worth talking about because we certainly ask ourselves the question, "Is dealing with this RockPile accounting worth it?" And we went through our reserve report. If you actually developed all the wells in there, we -- by our math and today's, prices, we generated -- we spent over $1 billion frac-ing wells. So RockPile is a 15% margin. RockPile is going to save us $150 million. If it was a 20% margin, that's $200 million. This is, of course, over a number of years, but considering there's $29 million of equity invested in RockPile, to realize those sort of savings, it is meaningful and it is important to us and we believe in it. So it's really understanding if you were frustrated with the delay and frustrated with the change in accounting, but I think, if you spend the time to look at the issue and look at the numbers, you'll agree with our assessment that it is worth it. And so we're going to continue on with the path that we started on a couple of months ago.

Moving on to an operational update. Things are going really well. Our most recent production over the last 21 days has been 3,700 BOE a day, with total sold volumes of 3,200. The last 7 days, that number is closer to 4,000. The reason for the delta between the produced and the sold and why do we include that number: We are planning to commence operations at the Caliber gas plant in August, which at this point is not that far away. And we were talking about it last year when it's really far away. At this point, it's 4 months from now. So you're going to see that gap narrow. We're still in a phase of our business where you're going to -- where production is going to be lumpy. Please don't take 4,000 barrels a day and straight-line it or increase it because we're going to have time gaps between when we frac wells, we are still drilling multi-well pads. RockPile will go and frac 2 wells for us. They did so in the beginning of April. And they take a couple of weeks off and they're going to frac 2 more wells for us next week, and there'll be another break.

So this is one of the benefits of the capital raise we did a month or 2 ago with NGP. And going to a 3- to 4-rig program is it really increases the frequency that we're completing wells. That's going to smooth up the production profile and also result in a lot of efficiencies because our crews are going to be better utilized in North Dakota, which is an important part of it.

Today is May 1. It's the first day of our second quarter. We have about 21 operating wells producing today. In Q1, we got 5 wells. In Q2, we frac-ed 8 to 10. By the end of August, which is only 4 months away, we're going to be selling the majority, like, of our gas, as I mentioned. All that falls to the bottom line.

We're adding a fourth rig this summer to drill while the weather's good. We're anticipating 3 to 4 additional wells. Really, it's a result of efficiencies and costs coming down. There's no change in our CapEx to add that rig.

RockPile is just now receiving its second frac spread, and third-party activity remains strong. Their performance for Triangle and for others have been fantastic from a quality standpoint.

Caliber's on schedule with its build out. When this system is finished, we're going to substantially increase our efficiency, at the same time reduce our costs and increase cash flow. So things are on track.

Well, the most exciting parts to us internally here about our model, RockPile is in its third quarter of operations, caliber is really just starting its first, is we are picking what is either CapEx or LOE expense for everyone else, and we're converting it to cash flow and savings for us. And we think, when you get to Q3 and you see that flowing through our financial statements, it's going to be a powerful model. We're excited about it.

One of the most exciting things right now is we take a very long-term approach to this business, as you know. We were talking about next summer, last year, it was very far away. The time is here. We're going to frac 8 to 10 wells in the next 3 months. All Caliber business lines will be up, and RockPile is going to be running 2 spreads. So over the next 2 quarters, you're going to see some substantial growth as we move towards meeting our guidance.

We're excited. We need to continue to execute, and there's a lot to do. But as I've said before, the table is set and we have the team and the funding in place, and the growth is exciting.

I'd like to close out our prepared remarks by just reminding people about our core business strategy, and we are articulating what it is we're trying to accomplish here at Triangle. We're 100% focused on the Bakken, and we want to do the best job possible developing our assets in the Bakken. Our goal is to be the low-cost producer in North Dakota. That brings a lot of challenges: weather, lack of infrastructure and, in general, a very tough operating environment, from people, housing, flooding, you name it. You guys have read about it, it's a tough way to do business. We take a very long-term approach at this space and in our asset base. And for us, being the low-cost producer means owning and controlling key parts of our value chain.

So as you look at us, which means understanding our vertically-integrated model, i.e. RockPile and Caliber, keep in mind what we're trying to do. We want our E&P business to have reserves at the lowest possible cost per barrel and firmly believe RockPile and Caliber are key components to achieving our goal. Over a 5-year development time frame, we really are converting hundreds of millions of dollars of expense, either CapEx to drill and complete wells or lease operating expenses and the cash flow that we can reinvest in our drilling program. Over time, it's going to make a big difference to reserves, production and cash flow on a per-share basis. So we think we'll drive stock improvements over the long term.

So we appreciate your patience and your interest. Please dive in, call us, ask questions. We want to help you understand the accounting. We want to help you understand where we're going. And we think, the more you get to know the story, the more you're going to be excited about what's going to happen over the next couple of quarters because we grew revenues from $8 million or $9 million in 2011 to $95 million last year, and it's going to go from $95 million to over $300 million, and the funding is in place for it.

So we're excited for what's going to happen this year. We know we need to execute, and we are solely focused on that objective. With that, I'll turn the call back to the operator and take questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Jason Wangler from Wunderlich Securities.

Jason A. Wangler - Wunderlich Securities Inc., Research Division

Just on RockPile, just going forward and understanding how the accounting works. And I sure -- I'm sure each quarter is going to be different. Is there kind of a rule of thumb or something you can give us an estimate on? As far as even the first quarter of $24 million to $26 million, how much of that works? Is it a percentage basis is -- with you guys versus third parties? Just to kind of give us an idea for modeling purposes on the income statement.

Jonathan Samuels

Yes, I'm going to let Justin answer that question. He's closer to those numbers.

Justin J. Bliffen

Yes. I wish I could tell you that there is a solid rule of thumb. The reality is, it depends. It depends on the -- to what -- how many Triangle USA jobs are being completed, how many third-party jobs are being completed, what the working interest of the Triangle respective jobs are, and what kind of jobs they are, whether -- for us, all of our completions are more or less a similar design in cost structure, whereas in the third party, there's a wide range of everything from a small re-frac to another 23,000 total measured depth, 30-plus-stage horizontal fracs, plug-and-perf, ceramics, et cetera. So unfortunately, no. But that's -- that number that we spoke to is a standalone guidance number. Obviously, it's been -- that will be apparent on our standalone financials, which we will be making available to the public via our website. But what you will see on the intersegment breakdown table takes into account the TUSA and other eliminations -- excuse me, the Triangle USA and other eliminations. So...

Jonathan Samuels

I think, in Q1, the midpoint of our guidance is $25 million of revenue. For RockPile, I believe that's about $20 million from Triangle-operated wells and $5 million from third-party wells.

Jason A. Wangler - Wunderlich Securities Inc., Research Division

Okay. And maybe just to maybe a little -- asked in a different way. For the second quarter, you talked about 12 to 15 wells for RockPile and you're looking at 8 to 10 wells for Triangle. Would all of those be done by RockPile?

Jonathan Samuels

Yes, right now, RockPile is doing all of Triangle's work. And we see that continuing on a go-forward basis. Now I think the most helpful way for you guys to model it, and we can brainstorm about ways to be more helpful and give you guys more information to help model, understand exactly what you're asking is, I mean, RockPile fracs cost between $4 million and $5 million, depending on where the well is. So when you look at the full year guidance for RockPile, you know how many wells Triangle's planning to complete. We've announced that and $4 million to $5 million per well. We don't say the Triangle, sort of balance is going to be third parties. And then really, what we're going to see is the majority of RockPile income is not going to be in the Triangle income statement. And really, the only, from our perspective, unfortunate aspect as the accounting is over -- that RockPile G&A is still there. So if you look at this quarter, you have RockPile G&A, you don't have any income to offset it. To get [indiscernible] impact, our CapEx declined by the same amount. But understand where that's why you're asking that. And I hope that's helpful, but we can talk real soon...

Jason A. Wangler - Wunderlich Securities Inc., Research Division

No, it is. And it's helpful that you did break it out, obviously, with the 2 standalone businesses because that obviously is much more impactful. And then just last thing, just with RockPile, the second crew, when do you think that they'll start ramping up and start frac-ing some wells?

Jonathan Samuels

I think, pretty soon here, May or June. I think July is the target for 24-hour operations.

Operator

Your next question comes from the line of Steve Berman from Canaccord Genuity.

Stephen F. Berman - Canaccord Genuity, Research Division

Just a couple of housekeeping things first. In your February ops update, you gave preliminary Q4 numbers of 2,250 Boepd for production, 1,950 Boepd for sold volumes. There's a number in the 10-K of 2,099, which was called production, but I came up with the same 2,099, but it seemed to be the volume numbers. So I just want to get down to the bottom of what the 2,099 BOE a day is. Is it volumes, or is it production?

Jonathan Samuels

It's total sold volumes. So production was higher, but what we report in the K is what we sold.

Stephen F. Berman - Canaccord Genuity, Research Division

Okay. And then in your press release, Jon, you said -- you predicted Q1 was -- production was 2,550 BOE a day. What does that translate into in terms of sold volumes?

Jonathan Samuels

That's a sold whole number.

Stephen F. Berman - Canaccord Genuity, Research Division

That is a sold number?

Jonathan Samuels

Both. I mean, you should have -- it should specify. Yes, that's -- 2,550 BOE a day is our estimate for actual sold volumes in Q1. Trying to help you guys out. I don't -- the only reason we put the produced number above was just again to illustrate the fact that, well, without a doubt, when it comes on, it will be a step-up in production the same day it's set.

Stephen F. Berman - Canaccord Genuity, Research Division

That 3,700 Boepd number is more like an exit rate for the quarter, as opposed to the 2,550 Boepd, which is an average amount.

Jonathan Samuels

The 2,550 Boepd is the actual average for [indiscernible].

Stephen F. Berman - Canaccord Genuity, Research Division

Right. So actually, the 2,550 Boepd now compares to the 3,200 Boepd kind of exit rate, so...

Jonathan Samuels

Yes, yes. And that's what I was sort of alluding to in the prepared remarks is that, this is going to go away as we add rigs, but right now, we frac wells, and then there's a gap between when we frac the next wells. And during that time, your production's declining. Start 2 wells and production jumps up, then it declines. As we get to our course update, spacing is going to stop, and RockPile is literally going to move from 1 pad to another, to another, to another and not have these rigs, which is why we added the second frac spread so they can serve as service the third-party demand, but that's why you cannot see that delta.

Stephen F. Berman - Canaccord Genuity, Research Division

Okay. But in terms of -- when do we get to the point where you're only reporting one number? Because I -- in August, we'll we start to see all these wells hooked up, and hopefully, that...

Jonathan Samuels

So that's when it's operational.

Stephen F. Berman - Canaccord Genuity, Research Division

Okay. And then Justin, you may have touched on this a little bit, but in -- the reported EPS for the -- for Q4 was a $0.20 loss, but there's, I guess things caused some -- there is derivative loss and these start-up costs. What would the adjusted EPS number be? Because I keep coming up with different numbers for that.

Justin J. Bliffen

It should be approximately minus $0.04. But that's taking out the noncash derivatives, loss in derivatives, stock-based comp and, yes, essentially those 2 items.

Stephen F. Berman - Canaccord Genuity, Research Division

Okay. And those start-up costs, too, was that...

Justin J. Bliffen

We did not subtract those.

Stephen F. Berman - Canaccord Genuity, Research Division

You did not, okay. And then last question, then I would let someone else go. What -- your most recent wells for the drilling complete course, what are they running?

Justin J. Bliffen

On an [indiscernible] basis, they're around 11 million in McKenzie County; 1 million to 1.3 million less in Williams County.

Operator

You're next question comes from the line of Jared Lewis from Northland Securities.

Jared Lewis - Northland Capital Markets, Research Division

On RockPile, just looking at the K, on the G&A, there's an 11.8 million. Can you just guide what onetime is, and what we can think about that number going forward?

Jonathan Samuels

Yes. So, if you look at that number, RockPile spent just around $4 million in G&A before they frac-ed a well. So when we put out our adjusted EBITDA internally, we exclude that because we're trying to get a sense of what are they actually generating on a per-quarter basis. So that cost will be ongoing. What really is not going to happen again was there was a start-up cash bonus program for RockPile guys, and the simple way to put it is they knocked it out of the park and it's a bonus that a shareholder should be happy given the performance. That's not going to happen again. So...

Jared Lewis - Northland Capital Markets, Research Division

Okay, so we won't see that with the second group coming online?

Jonathan Samuels

No.

Jared Lewis - Northland Capital Markets, Research Division

Okay. And on the drilling program, you've got 3 in McKenzie. The fourth, is that going to go to McKenzie as well?

Jonathan Samuels

I'm not -- actually, I don't know off the top of my head where that's going to drill its first well. There are wells in Williams County on our drill schedule. I have to look at it to figure out, to see where it's going to start up. We can get back to you after the call, if that's helpful.

Jared Lewis - Northland Capital Markets, Research Division

Yes, no, no. That's fine. And I just on the RockPile, again, I know, in the February call, you kind of gave some margin-type guidance as it -- how should we look at that given the accounting change going forward?

Jonathan Samuels

Yes, I mean, the accounting change should have no impact on the RockPile guidance. I mean, our -- we continue to believe the right way to look at RockPile is on a standalone basis, and we give guidance to that effect. So you have standalone revenue guidance and standalone cash flow guidance, and that's going to be your margin. So again, if you're RockPile, whether it's income on the Triangle statement, it's even irrelevant. RockPile margin is RockPile margin, and Triangle shareholders own that.

Operator

[Operator Instructions] And your next question comes from the line of Ron Mills of Johnson Rice.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Just one, Justin, maybe for you, just one financial follow-up. On the RockPile cash G&A for the fourth quarter, I understand what you're saying about the startup cost. But the RockPile cash G&A in the fourth quarter was quite a bit higher than where it was in the third quarter. When you look at it, going forward, what -- especially now that you have a second rig coming in, what's a good run rate for that RockPile cash G&A? And I'm just trying to make sure that, that fits into the EBITDA guidance that you previously provided for fiscal '14 for RockPile.

Justin J. Bliffen

Yes, thanks, Ron. I would say that a ballpark run rate G&A number is approximately $4 million a quarter for RockPile. And again, to echo Jon's earlier comments, that bump-up in our fourth quarter RockPile G&A was at a conclusion of hitting end-of-deal milestones in order to get that business from ground zero one employee up to the business that it is today.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Okay, so bonus-related then.

Justin J. Bliffen

But you won't see -- in other words, you won't see that increase in 1Q to 2Q and so forth.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Okay, perfect. And then when you look at your operated drilling program, obviously, a majority is there in McKenzie County. Are you still focused and planning on continuing to do 100% ceramic down in McKenzie, and the ceramic white sand mix up in Williams? Or how are you thinking about future completions as you gather more data in the play?

Jonathan Samuels

We're definitely going to continue with ceramics in McKenzie County, the blend. I mean, we want our well costs to be as low as possible. We are going to experiment with this year's using some lighter-weight ceramics that are cheaper and see if we get the same results. So that's $400,000 to $500,000 per well in ceramic costs in McKenzie County.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Okay. And then, the -- you talked about adding that fourth rig for 3 to 4 wells, and CapEx doesn't change. You also referenced that they were -- it was drilling and just cost efficiencies were part of that. Is part of that also related to the fact that the way you're having to reduce your capital cost for the RockPile related...

Jonathan Samuels

No. It's -- we got levers to pull regarding our CapEx because we have wells to go drill but have different working interests. We have some locations that are an 80% working interest and some locations that are 30%. So our -- what we spend is obviously going to be very different between the two. So we look out to the schedule. We were definitely conservative when we started the year. Remember, we planned this a couple of months ago. A number of costs have come down, and our drill times are down. We're -- our teams are doing better, they're figuring things out. For our area, RockPile efficiencies were up so we just looked at it across the portfolio and felt very comfortable adding 3 to 4 gross wells and not changing the CapEx.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

And if you add those 3 to 4 gross wells over the summer months, what's the -- what are you guys modeling from drilling to completion time? And I'm only bringing it up because I assumed it's more conservatism. But it would seems to me, if you drill an incremental 3 to 4 wells, that the fourth quarter rate that you guys have had in your most recent presentation, including the days, has not yet changed it. Am I thinking about it correctly that the drilling wells could have some impact on your numbers by the fourth -- fiscal fourth quarter?

Jonathan Samuels

For sure. I mean, we mentioned it, we certainly get about where our fraction is relative to our guidance. So obviously, with -- there's a big contributing factor at the back half of the year, it's the gas plant coming online. So we would rather leave our guidance where it is and then beat the number versus bringing it up today, which just leaves you room for error, that I think your instincts are 100 spot-on.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

And does the guidance in for the fourth quarter, that includes the impact of Caliber and the gas sales?

Jonathan Samuels

Correct.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

And the 3,200 versus this 3,700 barrels of current production, at least as referenced in your press release, is all over that delta related just to the flared gas?

Jonathan Samuels

Yes. It's not all in McKenzie County. There are [indiscernible] Williams County. But it will be hooked up to other gas processing systems. But yes, that is the delta.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Okay. And then the -- finally, the -- just on the liquidity position. You have the $65 million in cash. You have the $110 million available under the revolver, I believe. Can you just correct me in terms of what current liquidity is, if I'm incorrect, there? And as you look out over your program, it looks like that gets you into fiscal '15, or...

Jonathan Samuels

Yes, we have, in our presentation, we have a slide that covers this on how the $134 million of total liquidity today. And we think that grows -- the liquidity grows faster than the CapEx spend, really, from the credit facility. And then as we've mentioned in the past, our plan is you got to get past some -- a certain threshold to access how you'll market some. And definitely, it needs to be an offering over $200 million to $225 million for it to make sense, so where does your production have to be? But high yield is certainly part of our long-term financing plans, given where rates are. So the likely outcome for this year is you see the -- see production increase, you see the bank facility increase if you need it to. If you felt tied, you can take on a bank second lien and at a high yield, which should improve liquidity position. And we don't need to do that right now. And at some point, high yield is the lowest-cost, long-term funding for us. If we'll model it internally, we're actually pretty comfortable.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

And then lastly, just in -- with RockPile. You're going from 1 to 2 frac spreads. When you have your 2 frac spreads operating and you have full-time 3-rig program, and that may increase going forward, but based on that, from if you we're looking at RockPile standalone, what do you think the split will be between RockPile -- I mean, sorry, Triangle-operated program versus nonoperated, percentage-wise?

Jonathan Samuels

Our guidance this year, it really came to your question on utilization and what will RockPile achieve. Our guidance for them, you guys can work it out, based on the metrics that we gave before, $4 million to $5 million frac cost per well, and the number of wells Triangle is doing this year and the total RockPile revenue, it's really a question of how successful RockPile is at sourcing third-party work. We've given the guidance that we're comfortable with where Triangle will not fully utilize one spread. So RockPile will have an entire spread available, plus part of the one that is frac-ing Triangle wells when we don't need it available for third-party work.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

I mean, just trying to get out of it, I mean, it seems like, if you have 2 frac spreads, that you would be somewhat -- somewhere between 25% and 40% on Triangle-operated, just to know if that would have jived with what you would have provided.

Jonathan Samuels

Yes, I mean, the delta is that a lot of the third-party work RockPile is doing right now is for areas of the basin that their customs are not pumping ceramic, it's plug-and-perf. So I mean, RockPile did 90 stages for an operator in 72 hours last week, which we believe is a record, sliding sleeve and sand. It costs less for doing it more -- a lot more quickly. And it's just a different type of completion. You can't do that in McKenzie County. You won't get the production that we get. There's [indiscernible] in McKenzie County is a lot higher than other parts of the basin. And right now, RockPile's third-party work is coming from some of those areas of the basin that are lower service density.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

And then, as you go forward for RockPile, it sounds like, anything you operate, you won't be able to recognize income. It'll be a reduction to your full cost pool. If you don't have an interest in a well that RockPile completes, you can book -- you can recognize the income. The third bullet point, I'm just curious, if you are -- if you have a nonoperating interest in a third-party well that RockPile completes, what are the certain circumstances that limited income can be permitted? Or have you been directed on that?

Jonathan Samuels

I was given a really sophisticated answer. And I didn't really understand it, to be honest. It's complicated. Essentially, the total amount of income has to exceed Triangle's total cost to develop a well or something like that. So we had a 10% working interest, and it was a $10 million well, and so our cost was $1 million. RockPile could recognize any income from that well over $1 million. So that will go to the full cost pool. I might have just gotten that completely wrong. I'm not an accountant. I think the simpler way to guide you is that we do not foresee a scenario in which that's going to happen. So I was just unlikely to recognize any income, would be the simple model point. That changes. If we pick up work in area where we have a big non-op interest, we'll certainly communicate that, I tried, Ron, I couldn't figure it out.

Operator

Your next question comes from the line of Eli Kantor of Iberia Capital Partners.

Eli J. Kantor - Iberia Capital Partners, Research Division

I was hoping you could talk a little bit about what the service cost environment looks like in the Williston Basin. Last year, many of the Williston operators reported well cost reductions that were at least partially driven by a decline in service costs. And with gas prices recently increasing and potentially gas-directed drilling activity increasing, have you seen any change in service availability? And have you modeled any potential increase in RockPile's revenues or EBITDA associated with the potential tightening in the market later this year?

Jonathan Samuels

To your question, first, there is -- our assumptions, we stand by our guidance. So the guidance we've put out is our view on what RockPile will generate in the current environment. I think the general trend you're talking about, which is service prices down now and a perception out there that there's going to be tightening in the back half of the year is something that people talk about. I've been hearing that a lot, as people -- the general story I hear from a lot of folks is people busted their budgets last year laid down rigs. You're going to see those rigs come back and get months, obviously. That's a dynamic environment, and a lot the companies operating in the Bakken have choices where they spend capital and put their rigs, including gas plays. So I do not have any comments on the gas market and what that's going to do with the Williston Basin service supply, but that's certainly a factor that will influence it, regarding the overall cost environment, I'd definitely say that there's more serviceability. There's a lot of people who were building last year and stocks kind of built, and so it's available, there's a lot of capitalism that have been going on, with people starting up new companies and providing services. We continue to kind of believe that quality services are constrained. There might be more people calling you, but that doesn't mean they have the supply chain, the people and everything they need to perform at a level that's going to be additive to our overall development program. But it is impacting pricing.

Eli J. Kantor - Iberia Capital Partners, Research Division

At the top of the call, you had mentioned that frac costs that RockPile charges to its customers ranges between $4 million to $5 million per well. It -- do You assume that sits flat the duration of next year?

Jonathan Samuels

That's where RockPile charges Triangle. Other customers totally depends on their well design. But RockPile's done frac-ing that took less than a day and were $1 million.

Operator

Thanks for your questions. Ladies and gentlemen, I'd now like to hand back the call to Jonathan Samuels for the closing remarks.

Jonathan Samuels

We appreciate all of you joining. And we look forward to updating you on Q1 results in the middle of June. Thank you.

Operator

Thank you for joining today's call, ladies and gentlemen. This concludes the presentation. You may now disconnect. Have a good day.

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