Newfield Exploration (NFX) CEO Lee Boothby on Q3 2017 Results - Earnings Call Transcript

Newfield Exploration Company (NYSE:NFX) Q3 2017 Earnings Conference Call November 1, 2017 11:00 AM ET

Executives

Steve Campbell – Vice President of Investor Relations

Lee Boothby – Chairman and Chief Executive Officer

Analysts

Dave Kistler – Simmons, Piper Jaffray

Josh Silverstein – Wolfe Research

Derrick Whitfield – Stifel

Ron Mills – Johnson Rice

Subash Chandra – Guggenheim

Brian Singer – Goldman Sachs

John Herrlin – Societe Generale

Richard Tullis – Capital One Securities

David Deckelbaum – KeyBanc

Leo Mariani – NatAlliance Securities

Operator

Good day everyone. Welcome to the Newfield Exploration Third Quarter 2017 Earnings Conference. For opening remarks and other housekeeping items, I will turn the conference over to Steve Campbell, Vice President of Investor Relations. Please go ahead.

Steve Campbell

Thank you, operator, and good morning, everyone. A few of us are still assembled in our Halloween costumes from late last night, but we appreciate you guys dialing in for today’s call. Following this morning’s prepared remarks from our Chairman and CEO, Lee Boothby, we’ll have members of our leadership team available to take your questions. As always please limit your time during Q&A to one question and one follow-up.

Let me again remind you today that today’s call is being recorded and will be available on our website, along with our earnings release, the financial tables and non-GAAP reconciliations as well as @NFX. We will reference certain non-GAAP measures, so please see the reconciliation in our earnings release and in @NFX. Today’s discussion will contains forward-looking estimates and assumptions that are based on our current views and reasonable expectations.

In summary, statements in yesterday’s news release and @NFX and on this conference call today regarding our expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under the Federal Securities Laws. There are many factors that could cause actual results to differ materially from our expectations, including those we’ve described in the earnings release and @NFX, our 10-K and 10-Qs, our prior outlook release and other filings with the SEC. Please refer to the risk factors in our earnings release and @NFX for additional information.

Thanks again, and I’ll now turn the call over to our Chairman, Lee Boothby.

Lee Boothby

Thank you, Steve, and good morning. I’ll open today’s call with our key message right upfront: Newfield delivered. Our significant a ramp in the Anadarko Basin oil production came through over the past three months. We’re seeing strong results from our recent wells, with STACK outperforming our quarterly expectations by about 4,000 barrels of oil equivalent per day. We continue to execute very well as we ramped from three completion spreads to six and completed about 40 wells in the Anadarko Basin during the third quarter.

We did this with the backdrop of inexperienced crews and the hurricane that dropped 50 inches of rain on our office and made weather-related issues for our field personnel very challenging. I applaud our operations personnel for making the right things happen, doing the right things and getting it done once again. We’re excited to share today’s progress report with you this morning and we appreciate you dialing in. We generated some significant milestones over the past quarter. Here’s a short list. We posted more than 25% increase in our oil production in the Anadarko Basin quarter-over-quarter.

To be clear, that’s second quarter 2017 to third quarter 2017, not year-over-year. Our Anadarko Basin production averaged nearly 105,000 barrels of oil equivalent per day during the third quarter, a new record for Newfield, erasing several quarters of relatively flat production as we transitioned from HBP drilling to pad drilling. Well performance and execution had been equally strong and we now expect our Anadarko Basin production to average around 116,000 barrels of oil equivalent per day in the fourth quarter, up another 10% sequentially.

This number is at the upper end of the range we provided for you back in February. Our recent oil well in STACK had a 24-hour record for production per thousand feet of lateral, coming in at 5,100 barrels of oil equivalent per day over the initial 24-hour period. Oil cut was 67%. This is a good follow-up to our Burgess well, and we now have two of the top five 24-hour oil well IPs in STACK. The Burgess, which was drilled earlier this year, is projecting a type curve well in excess of 3 million barrels of oil equivalent after 120 days. We’re still learning with every well we drill and complete.

Our Stark and Freeman pads have shown strong early performance. These NFX-operated developments were drilled to test 10-well spacing configurations in the Meramec with all wells completed with 2,100 pounds of proppant and 2,100 gallons of water per foot. Average infill well performance from both pilots is tracking above our type curve. Production updates on BOE and oil can be found in our @NFX publication. It’s early, but we remain encouraged and are confident in our resource estimates for STACK. We invested $316 million in the third quarter and we’re on track to deliver this year’s program for our stated $1.1 billion.

In today’s @NFX, you will find a slide that shows Newfield as the best-in-class driller in every basin where we are active today. The slide shows penetration rates across the three drilling regions. Newfield is the clear leader, and we benefit from a culture of innovation, with our teams constantly challenging each other to improve. We expect to see continued efficiency gains in the Anadarko Basin as we progress our development. Our drilling results continue to get better, with recent wells averaging 700 feet a day in SCOOP and just under 1,000 feet a day in STACK.

Year 2017 is shaping up to be a very good year for Newfield as we are executing well against our beginning of year objectives. Our 2017 program was focused on STACK pilots to test various spacing assumptions and advanced completions. We recently completed and turned to sales the Freeman pilot. Results from the nine infill wells in the Meramec look consistent with our Stark pad after 60 days of production. Both pads were completed with Newfield’s GEN17 completion design of 2,100 pounds of proppant foot and 2,100 gallons of liquid per foot.

Although early, cumulative average 60-day production from both pads on an oil equivalent basis outperforming the Company’s 1.1 million barrel type curve. Our Stark pad, which now has 120 days of production, is estimated to generate an internal rate of return of more than 60% at a $50 flat WTI price. In addition, the remaining portion of our HBP drilling program continues to show excellent results across our acreage position. During the quarter, we provided you with an updated list of wells with cumulative production out to two years. It was an impressive list that spanned across our acreage.

In @NFX today, we provided data on another eight recent HBP wells in STACK, including the play’s record-setting oil well, which commenced production with 24-hour initial production rate of 5,100 barrels of oil equivalent per day, some 67% oil from a 7,140-foot lateral. In SCOOP, we commenced sales from two new developments during the quarter. The McClelland pad was our first development with eight infill wells drilled in the Woodford. Average 30-day rates for the eight infill wells were 1,966 barrels of oil equivalent per day, 36% of which was oil.

The McClelland infill wells are performing in line with our recent Tina development, where production has averaged nearly 1,500 barrels of oil equivalent per day, 41% oil over the first 120 days. The second development was the Holinsworth, which had seven infill wells in the Woodford. Initial 24-hour production per well averaged 3,193 barrels of oil equivalent per day, 33% of which is oil, 30-day production data is not yet available. Despite some significant weather issues during the quarter, our Williston Basin production averaged nearly 22,000 barrels of oil equivalent per day.

The Williston basin continues to deliver for us. With a single operated rig, we’ve been able to grow our production through optimized completions and significantly more productive wells. The Williston is expected to deliver more than $100 million free cash flow for us in 2017. Our recent wells have estimated gross EURs of more than 1 million barrels of oil equivalent and we raised our type curve in the Williston earlier this year. We estimate that we have about 200 operated locations that deliver strong returns in today’s oil price environment.

In addition, we have hundreds of non-op locations in the Williston as well. In preparation for these quarterly updates, I typically go back and reread our prior transcripts. Last quarter, we detailed several key priorities that are present today as they were then, especially in light of the recent discussions we’ve had with many of you on the road. These priorities are: First, we’re focused on delivering our three-year plan which we laid out for you in February. Despite the exuberance for quickly rising oil prices earlier this year, we used $50 per barrel of WTI as our base planning assumption in 2017 as well as a flat rig count in the Anadarko Basin.

When combined, this base plan was set to deliver double-digit compound annual growth over the planned period. Since that time, we raised our 2017 production growth estimates from 3% to today’s 9% to 10% growth outlook without adding increased activity levels. We’re executing extremely well today and our well performance across the organization has been very strong. But growth by itself is not our goal. That’s why my second point on last quarter’s conference call would likely occupy the first spot today, based on recent discussions. We remain focused on improving our returns. Full stop. Our overarching goal is to transition our company to one that delivers sustainable production growth within our funds from operations.

We certainly had this ideal in our mind when we set our activity and spending levels for this year, and I am confident that Newfield will be in the short list of companies that can deliver on this objective. It will be important that investors reward companies focused on these new metrics and not revert to past behaviors which overwhelmingly favored production growth over capital discipline and improved returns. Our leadership is on board and we are pursuing creative ways to ensure the ongoing alignment with our owners, from the boardroom all the way to field operations.

Third, we are rapidly advancing our learning curve in STACK and solving for the optimal returns-focused development well spacing. This year’s pilot program is providing us with data that will drive improved returns and margins through optimized operations on the road ahead. Our fourth objective relates to SCORE and understanding the vast resource that lies within our own operated HBP acreage position in the Anadarko Basin. For a $100 million investment this year, we made the assessment of other prospective horizons on our acreage of priority. By year-end, we will have up to 10 operated wells in these prospective horizons and a better understanding of their commerciality and plans for future development. We remain very encouraged with some of the early results we are seeing in SCORE.

Before opening the call up to your questions, I’ll quickly cover our third quarter financials. For the third quarter, we bested Street estimates for both earnings and cash flow. Net income was $87 million or $0.44 per share. Earnings were impacted by onetime tax benefits of $17 million or $0.09 per share, driven by carryback of net operating losses and unrealized derivative loss of $34 million or $0.16. After adjusting for the effect of these items, net income would have been $104 million or $0.52 per share. Revenues for the third quarter were $439 million. Net cash provided by operating activities was $173 million and discretionary cash flow from operations was $262 million.

As I mentioned earlier, we are right on track with our investment plan for 2017. You can find a table in @NFX that details our quarterly investment pace, excluding capitalized interest and overhead. Our domestic production in the third quarter was 159,000 barrels of oil equivalent per day, surpassing the upper end of our guidance range. Domestic production for the quarter was 41% oil. Including China, our total company production in the third quarter was 14.9 million barrels of oil equivalent or 162,000 barrels of oil equivalent per day. This is approximately 12,000 barrels per day above the second quarter of 2017. Of the total, 64% was liquids and 36% was gas.

As a percentage of overall volumes, we expect that our fourth quarter mix will reflect slightly higher gas and NGL production. This is primarily due to several large development pads brought online in SCOOP, the largest is a non-op development currently producing at very high rates from the condensate window of the play. Our net share in that development is over 10,000 barrels of oil equivalent per day. It’s very rich gas, but only 11% black oil. Our more normal oil gas and NGL split should prevail into 2018.

As you know, our Pearl field in China remains off-line awaiting repairs for our third party-operated storage vessel that we expect to be completed by early next year. We lifted the remaining oil in the vessel during the third quarter, resulting in 239,000 net barrels. No additional liftings are expected until next year. We continue to add to our hedge position for 2018 and 2019. We’re essentially insulating a mid-50s oil price and protecting ourselves from the downside. As we move into development plays and plays like STACK, it will be increasingly more important for us to manage commodity price risk to ensure acceptable returns on our development programs. Newfield has an excellent track record in this regard, and expect our behaviors to remain consistent. Please see @NFX for the complete updates on our derivatives positions.

Before closing out our prepared remarks this morning and moving to your specific questions, let me take a few broader – make a few broader comments about our business and our near-term focus. Over the last quarter, we’ve spend some time on the and met with approximately 15% of our owners. These meetings were done with our Lead Director and chair of our Audit Committee. It was a great opportunity to have a dialogue about our company, our industry and gain important insights on how our owners collectively view the future. Be assured that we hear you. Our industry is at an inflection point today where the land grab is behind us.

HBP drilling has shored up large, contiguous acreage positions in resource plays and we’re now entering the harvest mode. Harvest mode should look different, and historic behaviors of aimlessly chasing production growth at the expense of returns should become a thing of the past. Newfield is in a unique position today, blessed with a quality inventory of opportunities. We expect to be in the short list of companies that will transition to delivering improved returns and cash flow growth while living within our means. Simply stated, production growth should become an output of implementing the right development strategies to maximize value creation. On the road ahead, we are focused on delivering double-digit growth while demonstrating improved efficiencies throughout our operations.

As always, thank you for your interest and investment in Newfield Exploration. And operator, we’re now ready to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] We have our first question from Dave Kistler with Simmons, Piper Jaffray.

Dave Kistler

Kind of picking up on your comment about being a little gassier in the fourth quarter. When we look at the McClelland and Tina infills and going back to kind of the Q2 slide deck where those are generating 70% rate of returns, is it necessarily bad that mix is getting a little bit more gassy with those types of returns? And how do you think about that in your go-forward portfolio?

Lee Boothby

Dave, hello and thanks for your question. I think the short answer is we’re returns-focused and you can count on team Newfield to pursue the best returns in the portfolio. They’re incredibly strong returns. We’re excited about the well results. And I think we should all become a bit agnostic with regard to product type when you’re generating 70-plus percent rates of return. So we’re very pleased with it. I think it doesn’t affect the mix in the short-term, as indicated. But we’re going to continue to pursue the high-return portions of our portfolio.

Dave Kistler

Okay. I appreciate that clarification. And then going back to something you were talking with respect to the weather interruptions and how you guys were to avert any issues there, can you talk a little bit about how you structurally have planned to be able to do that when other operators have been using it as an excuse relative to their performance this quarter?

Lee Boothby

I can’t speak to the other operators, Dave. But I’ll tell you that our team does an amazing job of planning and reacting. We weren’t without stress. Obviously, in the weather-related effects and some of the backup in the system, certainly don’t want to act like we didn’t have stress. There was a lot of stress in our team, but they planned effectively and executed extraordinarily. And then of course, that’s all Gulf Coast and related effects that spilled back towards pressure in the Mid-Continent. And on top of that, our Williston Basin folks were hit with weather. And I never heard a peep out of our team, not one complaint, not any bellyaching, nobody looking to blame any weather on delivered results. So as I said, team Newfield delivered. I’m proud of them.

Operator

We have our next question from Josh Silverstein with Wolfe Research.

Lee Boothby

Good morning, Josh. Hello.

Josh Silverstein

Hey, good morning. Sorry, I was on mute. You mentioned the 40 wells in the Anadarko Basin this quarter. Just wanted to see if that was a little bit below where you guys were thinking. Maybe there were some weather issues that had some impact there. And then maybe going forward, what would be kind of the quarterly cadence? Or if you want to look at annual cadence for how many wells can be turned online with a 10-rig program.

Lee Boothby

Well, the 40 was in line with our plan expectations, so I would say that’s what we built to. We loaded up in the first half of the year with respect to the multi-well pad developments. We did have a handful of HBP activity that continued through the first three quarters, but that was dominated by the multi-well pads. As far as cadence, still in the short-term, continue to be some variability as we move rigs between SCOOP and STACK to keep the overall development program on track. The ultimate cadence in 2018 forward will be dependent upon where we set our final capital budget and plan.

And we’ll come out with that in early February. But I would say in general, based upon the activities that we’ve seen this year and the tight capital budget, you’d expect a more normalized level to be 35 to 40 wells per quarter. And we’ll advise if we come out with a plan that’s above or below that. But that’s probably in line with what you might expect on the road ahead.

Josh Silverstein

That’s great. That’s helpful there. And then thanks on the comments on the kind of normal split of the production mix there. And I know there was no other question on it, but is the normal split around the 35% level where you were this quarter? I realize maybe fourth quarter’s a little bit gassier. And I understand that there’s a bit of rig mix between the two areas, but STACK is over 45%, SCOOP’s around 25%. So I’m just wondering if that 35% is kind of the right blend.

Lee Boothby

Yes. So it’s obviously moves around depending on the pieces that you look at. I think I’d start with a reminder to everybody that if you think about where we’re going to be on domestic oil fourth quarter 2017 over fourth quarter 2016, we’re going to be up some 25% on oil. So oil’s growing. We benefited by improving NGL pricing and we’re blessed with having exposure across the phase envelope and we’ve been able to drill and complete wells that have really high NGL yields, so we benefited there as well. Anadarko Basin, when you isolate on oil, it’s up some 30% fourth quarter of 2016 over – fourth quarter 2017 over fourth quarter 2016. Again, strong upward momentum that’s going to carry into 2018.

What I would suggest to everybody, and I’ve tried a couple of times during the course of last year to suggest this, is to not be so hung up on single percentage fluctuations, up or down, quarter-over-quarter, because as we move around on the phase envelope and you turn on 8, 10-well pads that have the variability we’re talking about, that’s going to affect the numbers a percentage point or so. Ultimately, I would expect that we’ll maintain, when we say 2018 forward, you look at the total liquids percentage that we delivered in 2017, we’d say we’ll have a similar mix going forward. I don’t see that changing materially. We may sort of slide up or bias to oil over that time period, but I’d look at the mix on an annualized basis to be kind of plus or minus 1% or 2% around the numbers that we’re posting for 2017.

Operator

We’ll go next to Derrick Whitfield with Stifel.

Derrick Whitfield

Thank you and congrats on a strong quarter guys.

Lee Boothby

Thanks, Derrick.

Derrick Whitfield

Lee, at a high level, how would you think about spending and capital allocation in a $55 to $60 price environment versus the planned $50 assumption you mentioned earlier? Would you be biased to pile cash or slightly increase activity with a focus on returns?

Lee Boothby

Well, first and foremost, we’re going to stay returns-focused. I think that’s where our management and board are focused, that’s where our operations leadership team is focused and that’s driven all the way down to field level. So we’re making decisions today on optimizing returns and delivering cash flow growth. I mean, that’s the ultimate measure. Clearly, we said that we want to move to balance within the timeframe that we talked about back in February, in that three-year period. Beyond that, our investments will be dictated by the pricing environment, the macro and the cash available.

But we haven’t changed any of our thinking, sitting here today, over what we articulated back in February. And I think the cool thing is we’re ahead of schedule and I think we carry great momentum into 2018. And if we see a $55, $60 world develop, then that just gets easier. We kind of like that.

Operator

We’ll go next to Ron Mills, Johnson Rice.

Ron Mills

Good morning, Lee. A quick question. As you think about – with HBP coming – or nearing an end in the STACK and you talk about being agnostic on returns, how do you think about capital allocation between the SCOOP and STACK in terms of rig count, given the compelling returns there despite the different product mix?

Lee Boothby

Well, I think when you get to an HBP point, then when the team, and that’s Gary, John and our operating teams, look to optimize on the program, they’re going to focus on where they can generate the best returns within the portfolio. So in the end of the day, we’ll have capital budget, we’ll make the allocation, and their job’s going to be to optimize the return.

So we’ll go to the places that give us those outcome. I expect that we’ll continue to see activity in both SCOOP and STACK that’s a high return for both areas. Williston Basin, we’ve been running a rig for the last couple of years. And we’ve got really strong returns there. So you can continue to see activity there. But it’s all focused on high returns. Let’s use the phrase that’s popular these days. It’s a premium inventory, premium returns. That’s what we’re focused on. We’ll go wherever we have to go to get them.

Ron Mills

Great. And is there any marked difference between kind of your Stark and Freeman pads in terms of being over pressured and normally pressured? And how does that play into – or how do you think that plays into your oil results?

Lee Boothby

Yes. I think when you go back, and I think we’ve been consistent with over the last several years, you moved from southwest to northeast kind of across our acreage position, across the broader STACK play. Go all the way out to the west, you start in the dry gas window. As you move back towards Cana Woodford an up-dip of that area, you get it kind of in the gas – kind of wet gas condensate window. And then you go through volatile oil and then into the black oil window.

Our acreage position remains 80% plus in the black oil window. We’re blessed to have exposure in that wet gas condensate volatile oil window, and that’s where we and industry have been focused in a $50 world because the combination of pressure and yield and product yield have generated really, really strong returns. But we still see strong returns from East to West. As long as you’re in the liquids window, wells out west tend to cost a little bit more and wells to the east cost a little bit less.

So F&D and returns are something that our team looks at. And when John and Gary are executing the game plan. They’re taking all of those factors into account in terms of optimizing the returns.

Operator

We’ll go next to Subash Chandra with Guggenheim.

Subash Chandra

Yes, hi. Good morning, Lee. Just a question, first question on the increased density pilots. Were these all two string?

Lee Boothby

The well results that are posted?

Subash Chandra

Yes, correct. The wells in those pilots.

Lee Boothby

I believe they’re stated in the fine print and I have to wear glasses these days. So when I [indiscernible]

Steve Campbell

I’m pretty sure they’re three string. As is the type curve, yes.

Lee Boothby

I’m sorry? As is the type curve, Steve added.

Subash Chandra

As a three string type curve, okay. And the cost variance, 3 to 2, is it sort of $0.25 million, $0.5 million range?

Lee Boothby

Cost variance?

Subash Chandra

Yes, from two string to three string. Because I guess you’re going to do two string at your acreage to the east.

Lee Boothby

No, no, no. Here, two stream versus three stream is very simply this: two stream, when we say two stream, is separator results. So we’ll have natural gas and liquid volumes. Three stream…

Subash Chandra

No, I’m sorry, Lee. String, not stream.

Lee Boothby

I was worried that maybe you stayed up last night trick or treating or something.

Subash Chandra

Had some of that as well.

Lee Boothby

But as you move west, in the deeper sections, there is extra string of pipe. And in general, you’re looking at about $750,000 adder for that string of pipe. Yes.

Subash Chandra

Okay, got it. So – but the wells that you’re announcing in your pilots, those are two string.

Lee Boothby

The wells to the west, the west will be – have the extra string in it. The Freeman’s would – three string. So when you move into the black oil, you can think about that as two string. So those wells generally have an advantage on cost.

Subash Chandra

Okay. Got it. Okay. And second question, I think you inferred this already, continued investment in the Williston. And what about Uinta? And how do you think about those two assets holding the line on volumes heading into 2018?

Lee Boothby

I mean, I think Williston we’ve been pretty straight up about where we’re at there. We’re generating high returns. I love the performance of the team and you should probably plan on seeing our rig continue to execute there. Uinta, we owe you guys an update in 2018 on our progress out there. We’ve had the JV that’s coming to an end, I guess, in terms of the activity there. So we’ll have well results that we can talk about next year. And we’ll be able to talk about that in terms of where it fits in the portfolio prospectively. But I’ve been pleased with the progress the team’s made the last couple of years in terms of learning curve.

Operator

We’ll go next to Brian Singer, Goldman Sachs.

Brian Singer

Thank you, good morning. Wanted to follow up on a couple comments you made in your opening remarks. The first was creative ways of alignment between shareholders and the board room, and there was that working the field. If you could add some more color on what some of those creative ways or creative options are. And then the second is on margin improvement. If production mix is flat, can you talk to what impact we could see on the operating cost side of the equation or whether margin expansion will be more coming from capital cost via lower F&D or lower CapEx per barrel?

Lee Boothby

So I’m going to take the first one, and if I forget pieces of the second one, I might ask you to repeat. There were a lot of words there. So on the first point, when you – when we talk about alignment, it’s having a plan that is certified and blessed at the board level; and goals, which we’ve been very steadfast in over the last half dozen years. All of our goals that are part of the annual incentive plan for the entirety of staff, so that’s management and everybody down to the field level, absolutely aligned with the return focus that we’re talking about.

So everybody’s playing off the same page of the playbook and executing and there’s good communication. So I think that’s critical. Oftentimes, if you go back historically, it’s easy to talk a game, it’s a little bit more difficult to play the game. And our intentions are to not just speak the words, but to deliver the results. And I think that the companies that have a track record of delivering those results year in and year out, have proven operators and have proven ability to execute, I expect that those will be the winners on the road ahead for the reason stated in the earlier commentary.

So very simply, we’ve got everybody aligned. It’s not a new thing at Newfield, but with emphasis, everybody’s aligned on the elements that we’ve laid out over the course of this 2017, and I would expect that alignment to be enhanced on the road ahead. As far as the second question, I said there was a lot in there. Can you give me the short reminder of all the things you said? And let me make sure I hit on…

Brian Singer

Driver of margin improvement. Is that coming? Specially if production is flat, right? Is that an op cost point, or is that a capital cost point?

Lee Boothby

Well, I mean, we’re moving on all fronts. I mean, our team’s focused every day and working to improve F&D, right? There’s always a lot of conversations about well cost. It’s a bit of a head fake some days. There’s all kinds of type curves and yields, so when you think about returns, it’s an F&D game. Margin enhancement, you got to be improving returns, and you can do that by lowering cost and improving yields. So our completion folks are working hard to give us better completions that have better yield per foot of lateral.

And on the other side of the equation, we’re working very, very hard to think about the best locations for product mix. As the macro shifts, where do you get the best yield of product mix that can optimize the revenue stream and generate the returns. On the LOE side, I’ve been absolutely amazed at what our teams have been able to achieve over the last several years in terms of driving LOE cost down. Never bet against them, and they’re going to stay focused on it. And I think that’s part of the equation. And then at a leadership level, we’re also focused on making sure that we’ve got an accretive G&A profile that’s part of that.

So when you put all of those pieces together, playing forward, we’ll have an accretive profile because we’re extracting the efficiencies out of the organization and we’re staying focused on driving improving returns. The other item that’s been helpful in areas like STACK, and we’re going to continue to press this on all fronts and all operating areas, working to lower differentials. And some of our investments and infrastructure, the core contiguous positions, the operating advantages that, that affords, we’ve been able to see those benefits.

And I think we’ve talked about them enough that you can go back and look at the high points there in terms of what we’ve delivered. You should take it as an expectation going forward by our team that we’re going to continue to find those opportunities and drive them forward. And then I touched on one of the earlier questions, we’ve seen an improving NGL pricing scenario develop as 2017 has played out. And that really drives some incremental cash in that area and it changes some of the positioning for those wells in the portfolio when we’re talking about optimizing returns. So one of our core values is adaptability, and I think our team has demonstrated that in spades over the last few years.

And we’ll continue to adapt, shift and lean in to some of those developing trends. But it’s multiple fronts. It’s not single item. And then ultimately, as we look forward, it would be my hope that we can all become a little bit more constructive and worry about so much on where rigs are positioned, but more on the results that are being delivered from those rigs. I think that tells you a lot about the quality of the team and the decision-making and the consistency of management.

So just call that a plea to say look out into the future and become a little more comfortable with the idea that if companies are delivering results, they’re making good decisions. And we’re going to deliver those results. And we’ll continue to update you guys on the road ahead.

Operator

We’ll go next to John Herrlin, Societe Generale.

John Herrlin

Have you and the board had any discussion, since you’re going to have more of a returns-focus on, one, dividends. And second question, do you think, given your book debt load, that you’ve been penalized even though you’re not going to have any real maturity issues until 2022, do you think as you get more returns-focused, that you’ll look at delevering a little bit on a book basis? Or will you just let earnings carry it out.

Lee Boothby

So maybe start with the first one there, John. And this is not new dialogue for management or the board. Our view, very simply, is we’ve got to execute and deliver. We had to get our acreage HBP-ed so we could move towards development. Now that we’re finishing off the HBP phase, we can optimize development. As we optimize development, we’re optimizing returns. And we’ll keep all of those things on the table on the road ahead. I think the clearest demonstration of returns-focused that’s flowing through is going to be growth in cash flow and the fact that you can do it living within your means.

So think about playing forward, 2018 forward, we’re going to look at that and understand what we need to do within whatever price range that we choose to contract the plan on. And we’ll communicate that actively with the board. So returns focus with the board is not new language. And ultimately, balanced at delivering – being able to deliver a balanced plan delivers growth, that demonstrate returns. Beyond that, we’ll cross those other bridges when we get there.

And as far as penalized, levered and this, that, the other thing, I don’t really have a strong opinion. I like where we’re at. I think we’ve got a good debt maturity ladder. We’ve got a strong financial position. And I’ll give Larry Massaro and the team a lot of credit for keeping us in the fairway there. We’ll continue to make smart decisions and on the road ahead as we face those decisions then. We’ll make the right decisions at that time.

Operator

We’ll go next to Richard Tullis, Capital One Securities.

Richard Tullis

Thanks, good morning. Nice quarter, Lee.

Lee Boothby

Thanks, Richard.

Richard Tullis

Sure. Just a couple of questions. So China oil volume’s obviously declining, but still viable given international oil prices. What sort of cash flow could you expect from those properties next year, say, they’re back up and running in first quarter?

Lee Boothby

Well, since we’re shut in at moment, we’re hoping the reservoir’s recharging, that would be the first thing. And I’m not suffering decline right now because we’ve got shut in. But it has been on decline. And my view is that it’s been a strong-performing asset. We’ve got two or three years of good production out in front of us when it comes back online. We’ll update you on cash flow and what our expectations are when we come out with our plan in February 2018. We expect it to be back online early next year.

Richard Tullis

Okay. And then secondly, Lee, does the higher current oil price environment, hopefully sticks around, allows for some meaningful level of dollars to be allocated to, call it, exploratory efforts next year? And what sort of things could you look to do?

Lee Boothby

Well, I would tell you that we’re always thinking about our exploration and new ventures team, talks about the opportunity list in terms of hopper and conveyor. The things we’ve been doing are derisking, this year, the SCORE play, zones that are already on HBP acreage. That’s the obvious place. We’ve already made that investment. I would say that, respectively, given our rich with inventory, high-return, premium, quality inventory, that we’re going to be development-focused. But we’ll continue to have export their ideas from time to time, we’ll work that into the program. But our program’s going to be strongly development and focused when moving forward.

Operator

We’ll go next to David Deckelbaum with KeyBanc.

David Deckelbaum

Thanks for taking my question, Lee. Nice job on the quarter.

Lee Boothby

Thanks, David.

David Deckelbaum

Wanted to just marry your comments around balance sheet, this sort of evolution with the industry. How do you view the state of, I guess, your total asset package right now? You’ve had some successes in the Williston, and it warrants keeping a rig there for a couple of years. But I guess as we get into next year and have well reserves from the Uinta, I know you have other assets like the Arkoma, how aggressively are you going to be pursuing, I guess, pruning your total asset base to become a little bit more efficient here?

Lee Boothby

So I’ll make it hopefully clear. We have a very healthy perspective on this, I would say at a management level and I would say a staff level that’s been demonstrated over the last several years, and certainly this carries into boardroom as well. We call it grow, hold or divest. And every asset that sits in Newfield’s portfolio is tested every day on that basis. So we’re growing an asset, we have to know why we’re growing the asset, that’s generally the asset you’ll see active investment in. If we’re holding an asset, then we’ve got to be able to answer the question on why we are holding that asset? To what purpose?

And if you can’t meet the grow or hold test, then divest is the right answer. I think we’ve sold in excess of $3 billion of assets over the last several years. We’ve redeployed that into the portfolio that we have today. So reinvested North American resource plays. We’ve been consistent on this front that every asset has a life cycle. So we’ll continue to have active dialogue in that regard. And clearly, at the right time and place for the right reasons, we maintain the option of divesting assets to accelerate activity in our portfolio. So we’ll stay focused on that. And it’s going to continue to be part of our daily decision-making.

Operator

And we have time for one last question, that will come from Leo Mariani, NatAlliance Securities.

Leo Mariani

Hi, guys. Just wanted to maybe ask the oil cut question for the fourth quarter a little bit differently. I think you’ve described it well, Lee, in saying that the gas cut goes up a little bit because you’ve got some very prolific pads coming online on the SCOOP play that have gassier. I guess, alternatively, maybe are there fewer STACK pads coming online in the fourth quarter, which are obviously oily there? Obviously, you had a huge third quarter in terms of STACK pads turned online. Just trying to get a sense of maybe there’s just less oily property also coming online as well.

Lee Boothby

So Leo, I’m going to give you a gold star. That’s spot on. Just in terms of the sequencing and where things fit in, we do have a decrease in completed and POP-ed wells, put on production wells, in STACK in the fourth quarter. And we’ll build that cadence again as we move into 2018. So that’s one of those variables that we’re working to manage. I think that we have taken steps to move towards a consistent frac fleet in terms of counts.

So we’re reducing volatility in frac fleet. And Gary and the team are working every day very hard to make sure that we’re balancing out all of those demands. So consistent activity in the flat frac fleet 2018 forward, but no way around it. We turned on a bunch of pads which represent a bunch of drilling activity and capital investment in STACK in the third quarter, we have fewer STACK wells coming online in the fourth quarter. Spot on.

Leo Mariani

Yes, that makes sense, for sure. And I guess just in terms of a quick follow-up here. Obviously, you guys are now in full pad development mode at STACK. Do you guys see potential for continued well cost reductions? So maybe you could just give us a sense of what well costs are now and maybe you could give us some projection as to where that may go over the next six months, barring any service cost increases.

Lee Boothby

Yes. I would say that the cost that we’re experiencing at present are kind of in line with what we’ve talked about here over the last few months. So I don’t have any new color to give you there. I think you can put that out. We’re working hard on the 2018 plan, and since we haven’t presented preliminaries to the board, I’ll just go ahead and stay silent on that until early February – excuse me, February of 2018, when we come out with our plan.

What I will say is our team’s working every day, per the earlier conversations, to drive down cost. And that’s on all fronts. We have to do it. It’s an imperative. I think it’s something that they do exceptionally well. We demonstrated what – how that plays out on the drilling front in the @NFX publication. So we said at the beginning of our transition to North American resource focused and our shift to oil, that we ultimately needed to be a leader on the operating front in any area we chose to deploy capital.

So I think that drilling performance demonstrates that. We’re attacking completions in the same way, we attack field-level operations the same way, we attack margins the same way, and our team is relentless in that regard. So you can count on them to continue to deliver. And I’ll promise that I’ll give you as much color as I can and that you need when we come up with our plan early in 2018. But again, we feel really good about our 2017 results and really excited about the 2018 forward game plan.

Operator

And that does conclude the question-and-answer session. We’ll turn the conference back over to Mr. Boothby for any additional or closing remarks.

Lee Boothby

Well again, thank you all for dialing in this morning. I appreciate the questions. We’re very pleased with where we sit closing out the third quarter, excited about getting into 2018 and executing that forward plan. Look forward to visiting with you on the road here in the weeks and months ahead. Thanks for your investment and your interest at Newfield, and thanks for your time today. Have a good day.

Operator

That does conclude today’s conference. Thank you for your participation. You may now disconnect.