SRC Energy's (SRCI) CEO Lynn Peterson on Q2 2018 Results - Earnings Call Transcript

SRC Energy, Inc. (NYSEMKT:SRCI) Q2 2018 Earnings Conference Call August 2, 2018 11:00 AM ET

Executives

Lynn Peterson – Chief Executive Officer

Jimmy Henderson – Chief Financial Officer

Mike Eberhard – Chief Operating Officer

Nick Spence – Executive Vice President and Chief Development Officer

John Richardson – Manager-Investor Relations

Analysts

Gabe Daoud – JPMorgan

Welles Fitzpatrick – SunTrust

Irene Haas – Imperial Capital

David Deckelbaum – KeyBanc Capital Markets

Brian Corales – Johnson Rice & Co

Kyle Bickel – Stifel

Oliver Huang – Tudor, Pickering & Holt

Dan McSpirit – BMO Capital Markets

Kashy Harrison – Simmons Piper Jaffray

Operator

Greetings, and welcome to the SRC Energy Incorporated 2018 Second Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, John Richardson, IR Manager. Please go ahead, sir.

John Richardson

Good morning, everyone. This is John Richardson, SRC's Investor Relations Manager. Thank you for joining us to discuss SRC's second quarter results for the period ended June 30, 2018.

With me today is SRC’s CEO, Lynn Peterson; CFO, Jimmy Henderson; and Chief Operations Officer, Mike Eberhard; and Chief Development Officer, Nick Spence, who will also be available to answer questions during the Q&A session.

Please be advised that our remarks today, including answers to your questions include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those include risks relating to commodity prices, competition, technology, environmental and regulatory compliance and others described in our filings with the Securities and Exchange Commission, which are incorporated by reference.

We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information in this call. The relevant definitions and GAAP reconciliations may be found in our earnings release and 10-Q, which can be found on our website at srcenergy.com in the Investor Relations section.

Following the prepared remarks, time permitting, we'll open the call to your questions. I would like to remind everyone that a replay of this audio webcast will be available via the company's Investor Relations page at www.srcenergy.com.

I would now like to turn the call over to the CEO of SRC Energy, Mr. Lynn Peterson. Lynn?

Lynn Peterson

Thanks, John. Good job. Good morning, everyone. And thank you for joining us on our second quarter earnings call. We filed our Form 10-Q last evening, and as always, we ask that you refer to it for detailed information.

We are not going to spend much time on today's call, reviewing results from the first half of 2018 as we have consistently messaged that our numbers would be significantly impacted by the shortage of gas processing in the basin, and we were exactly correct.

We cautioned that any read through to our operations and asset base would be misleading. Instead, we are going to focus on the remaining six months of the year and a glimpse into 2019.

On the bright side, we are extremely pleased that DCP's Mewbourn 3 plant is now mechanically complete, commissioned and has been placed into service. The plant is processing gas, and we anticipate that the nameplate capacity of 200 million per day should be fully operational over the next several weeks.

And now, the question shifts to what does this mean to SRC? Given that we are already into August, we view the third quarter of 2018 as a transitional quarter. July and most of August will reflect constrained production, similar to what we saw in the second quarter. As we get closer to September, we anticipate that the overall filled pressures will trend lower, allowing for new wells to come online later in the period. When DCP system has adjusted for the new plant capacity and additional compression, we expect to see our overall allocation move higher. As a result, third quarter production should show a moderate growth profile. However, as our allocation increases, we expect fourth quarter production to reflect the growth that we build into our original guidance issued earlier this year.

As a reminder and assuming that DCP follows the protocol that you laid out to all the operators, we would expect all operators to share in the new plan somewhat in relationship to their current overall gas processing volumes with DCP. In our case, we represent 15% to 20% of the current system, and we anticipate that we'll receive a like-type percentage of the new plant's capacity.

We remain firm on our full year average production guidance of 48,000 BOE to 52,000 BOE per day. With the ability to bring on new pads, our oil, as a percentage of total commodity mix, should increase off of the 43% that we saw in the second quarter. Consistent with our production, this increase in oil percentage will be somewhat muted in the third quarter, which will get back to a normal operating number in the fourth quarter.

Additionally, as we are able to bring on new wells, pads and have flush production, we anticipate that per unit lease operating expenses should trend lower from the second quarter number.

Lease operating expense per BOE should settle into an average for the second half of the year, similar to what we have experienced in the first half of 2018 or in the range of $2.25 to $2.50 per BOE.

Looking into the early part of 2019, we would not be surprised to see some limited constraints on production as we anticipate Mewbourn 3 reaching capacity quickly. However, in addition to the Mewbourn expansion, DCP Midstream has also recently announced that the O'Connor 2 plant should be operational early in the second quarter of 2019, which will go a long way in alleviating this situation. The additional capacity should again allow us to resume our production ramp. This plant, which is currently under construction, will add another 300 million per day of processing and bypass capacity.

Beyond 2019, DCP Midstream has also announced and is permitting its Bighorn plant 12, which will be designed to process up to 1 Bcf per day of gas. And this plant is expected to be commissioned in stages beginning in 2020.

Clearly, SRC directly benefits from the DCP Midstream plant expansions discussed above. In addition, other third-party plant developments and expansions announced to date of about 1.2 Bcf per day indirectly benefit SRC, as activity from peers in the basin should be drawn to these capacity addition. It also provides DCP and other gas processors with options to offload volumes, if needed.

Our team is continuing to work acreage trades and acquisitions in an effort to further block up our position. We completed a small purchase of nonoperating interest in the second quarter, and we have just recently signed an agreement to swap approximately 2,500 net acres with another operator. These transactions benefit SRC by increasing working interests in some of our existing and future pads as well as reducing our exposure to wells where SRC is not the operator.

We will continue this process as we move through the second half of the year. We expect our full year drilling and completion capital expenditures to be at the higher end of the guided $480 million to $540 million. The additional plant processing capacity that has been placed into operation ahead of schedule provides us with the opportunity to add a second completion crew in June. Thus, increasing activity earlier than originally anticipated. This guidance also takes into consideration our increased working interests related to the recent acreage transactions.

The second closing for Noble's operated wells in the Greeley Crescent II acquisition continue to be on schedule for this fall. At closing, SRC will receive a yet-to-be-determined volume of production for a yet-to-be-determined value. At that time, SRC will take over operations of the vertical and horizontal wells previously operated by Noble.

While we have been able to maintain the key aspects of our corporate philosophy, the first half of the year hasn't been without difficulty. Our work through this period has set us up for a strong finish to the year.

With the balance sheet in mind, we continue to maintain a disciplined financial approach, as we consider the company's activity levels going forward. In fact, despite the curtailments we experienced, our adjusted EBITDA of $223 million, closely in line with our drilling and capital expenditures of $231 million during the first six months of the year.

In addition, we have continued to enhance our acreage positions through the incremental, high-quality transactions. Most importantly, through all the activities, we continue to strive to provide a work environment focused on the safety of our employees, consultants and the communities in which we operate.

With that, I'd like to turn the call back to the operator, who'll open the lines to Q&A. Thank you.

Question-and-Answer Session

Operator

Thank you. At this time we will conduct a question-and-answer session [Operator Instructions] Our first question comes from Gabe Daoud with JPMorgan. Please state your question.

Gabe Daoud

Good Lynn and everyone else. And thanks for the prepared remarks. Maybe just if we could expand a little bit further on DCP and the situation. So Lynn, I guess, it sounds like the expectation is planned [indiscernible] still up pretty quickly here, and then you're likely constrained in 1Q and potentially 2Q of 2019. So I guess, the first half of 2019, you're essentially flat from 4Q 2018. Is that how we should be thinking about it at least at this point?

Lynn Peterson

Yes, Gabe, I think we'd need to probably show a little patience here. Let's get that Mewbourn plant fully operational. Let's see how that goes. We've got operators that move rigs around to different parts of the basin. I don't think it's going to be the situation we've just experienced. So I guess, I'm going to try to ask you to put this off for a little bit. Let's see how this all goes, and we'll circle back with you as we approach the end of the year.

Gabe Daoud

Okay. I understood, Lynn. Thanks. And then just maybe shifting gears a little bit, could you maybe talk about your expectation for ballot initiative, 97, I think, signatures are due pretty quickly here. Just any updated thoughts around that?

Lynn Peterson

We love to talk politics. So it's true that the situation – I don't know where we are at, Gabe. We're here in all kinds of different numbers. We're a few days away from probably seeing if they're in the ballpark. So again, I don't mean to push you off, but we've got to have to wait till next week to see where we're at. I think we, as an industry, are prepared. And I think we will get through, no matter what shakes out of this. So I really – anything else would be a personal expression.

Gabe Daoud

Understood thanks Lynn. I’ll let someone else in.

Lynn Peterson

Thanks Gabe.

Operator

Our next question comes from Welles Fitzpatrick with SunTrust. Please state your question.

Welles Fitzpatrick

Good morning.

Lynn Peterson

Good morning Welles.

Welles Fitzpatrick

So should we also assume something like 15% to 20% of capacity on O'Connor when that comes on in the first half of 2019?

Lynn Peterson

Yes, I guess, such kind of way we're looking at. And again, I think as people move around and other plants come on, you can see some of these numbers start to move a little bit. So I think when we look at kind of our modeling, that's the approach we're taking.

Welles Fitzpatrick

Okay. And then kind of following on the last question. It seems like DCP has been pretty accommodating as of late, pushing off gas that maybe doesn't work into their system on to others. A, is that correct? And B, if so should we then think of Latham and Fort Lupton as helping out the basin in general and maybe you've got specifically before O'Connor comes along?

Lynn Peterson

I think all of this is going to help wells. They're offloading production where they can right now. I think that'll continue and volumes could probably going to go up and down over time. So again, I think it's really a very positive statement here for the basin. This plant is open, there are some others that are going to be open here before the end of the year. We're moving, and it's finally exciting. Actually, it's fun to have a call this morning that we can be excited about, not to – I'm trying to tell you they have to wait till the third quarter. So Jimmy, you want to add anything to that?

Jimmy Henderson

Yes, I guess, the only thing I'd add to the matter of other third-party processors is that, I think, yes, the wells, in general, the more processing in the basin does help the entire equation, whether it's offload or it's temporarily alleviating pressures from some of the production around – outside of the core where we are. So I think it all helps, just as you said.

Welles Fitzpatrick

Okay. And just one last one. And I understand that you guys haven't done 30 day or 90 days for a long, long time. But one thing that some – not too many folks are talking about is obviously when these plants come on, it's going to help you guys on 3Q, it's going to help you guys on 4Q.

Can you talk at all to what the drop and pressure is going to do to sort of basin-level economics? What it might do to your 90-day rates to your EURs or IRRs? I mean, one would assume that in so much as the productivity gains have been kind of massed for the past four quarters that there would be some momentum as pressure declines in the basin. Is that a correct take? And it's tough. But is there any way to quantify that?

Lynn Peterson

Yes, I'm going to ask Mike Eberhard to maybe give his opinion on this. And again, I think we're all in a situation of unknown right now. I think our field staff is absolutely delighted to able to keep wells on production right now. So Mike, do you want to give your thoughts?

Mike Eberhard

Yes, well, I think the answer to your question, it's still a little bit up in the air, which you've heard a little of today. We need to see how far the pressure has come down. Obviously, as the line pressure comes down, that does help our production and the wells that we have online are able to produce a little easier against it. Again, we still have volumes that we need to maintain.

So we'll stay up against that. I think the big thing that, as Lynn said, is this is going to allow us to maintain wells on production and not take them on and off, which is going to be big and help in our overall well productivity as we go down the life of the well.

Lynn Peterson

Welles, I can tell you we're also going to continue to shift. I know we've talked a lot about NPV per DSU. I think you're going to start to hear us talk more about EURs per DSU. I mean, I think we need to get our focus away from individual wells and think about how we are draining the reservoir and what is the economics we're driving here? So you're going to hear us talk more and more. So I just want to introduce that concept.

Welles Fitzpatrick

Makes a lot of sense. Thank you guys so much.

Lynn Peterson

Thanks Welles.

Operator

Our next question comes from Irene Haas with Imperial Capital. Please state your question.

Irene Haas

Hi, a very good news of DCP's plant expansion for 2018, 2019 as such. Any feelings as to what August extra gas was sort of due to the regional market? Just would like a little color on that.

Lynn Peterson

Sure, Jimmy?

Jimmy Henderson

Yes, I don't think it's going to affect the regional market too much. I think what you're seeing, I mean, in August, we saw CIG differentials widen out quite a bit in the second quarter, somewhat seasonal and somewhat just pressures of gas throughout the – so it's kind of helping in every region in the country.

So I don't think that's going to change too much, it'll probably continue to follow a CIG strip, and it's going to be more of an effect across the nation as – via ebbs and flows of gas at each basin. I would say that one of the things that we always had DCP on the back about is their ability to take away the gas or make arrangements for taking away the gas and the yields.

So that's as important as anything here is that we have the take away capacity, leaving the basin as they expand, and we think they have made proper arrangements, and they've expanded some of their own systems further down the line to make sure that we have deliverability out of the basin and get to markets.

Irene Haas

Great, thank you very much.

Lynn Peterson

Yes, Irene, I'd add, let's enjoy the moment. Let's not worry about tomorrow yet. We've got some additional gas capacity. Let's smile for a day or two.

Irene Haas

Thank you.

Lynn Peterson

Thanks Irene.

Operator

Thank you. Our next question comes from David Deckelbaum with KeyBanc Capital Markets.

David Deckelbaum

Good morning, thanks for taking my questions.

Lynn Peterson

Good morning Dave.

David Deckelbaum

Lynn, I'll avoid political questions and just, I guess, I have to ask more on the DCP thing. But is it fair to think about if we imply that you have about 15% of the capacity, does that sort of suggest that you have, unlike a net basis on production, like 10,000 barrel equivalent a day of uplifts with the capacity that's coming online?

Lynn Peterson

I hope it's a little bit more than that. But that's reasonable.

David Deckelbaum

Okay.

Lynn Peterson

You're at the ballpark probably.

David Deckelbaum

Okay.

Lynn Peterson

I just want to caution that all this is just happening. We want to continue. Let the system come down overall in pressure and then we'll see where everybody falls. There's still some work to be done. I guess, I want to make sure that everybody understands that.

David Deckelbaum

Absolutely. I know we're all excited that it's finally here.

Lynn Peterson

We all are.

David Deckelbaum

And then with the Noble closing in the fall, will you all be responsible for plugging? I know you're the legacy vertical wells. Is that something that Noble would've already taken care of?

Lynn Peterson

No, that was all built into the purchase price and all that. We will take over the control of that.

David Deckelbaum

Got it. And just the last one for me. I know you've talked a lot about unknowns right now. But considering like the constrained environment of this year, to some extent, is it fair to say that we haven't really been tweaking completion recipes because you can't really tell us it's having an impact. Is that something that is kind of front and center as you look into maybe the beginning of 2019 or back half of 2019, as you see the basin becoming more alleviated? Or is it kind of like right now we just kind of want to block and tackle with the recipe that we have, and we think that we're fairly well optimized from a completion perspective.

Lynn Peterson

No, I'm going to give Mike and Nick a pat on the back here. I think we've done a tremendous amount of work over the last six, nine months here, continuing to work on completions, continuing to think about density well bores. Again, going back to this concept. How do we maximize the value that we're getting out of each one of these DSUs? So while we haven't been able to show production necessarily. They're saying they're seeing in the field that everybody is excited about it. Mike, Nick, please jump on here.

Nick Spence

Yes, Mike has been doing a lot on the completion side. We're looking forward into 2019, as Lynn said, taken a bit of a little more focused approach on the NPV of every DSU we have, and sort of that may be going to playing with the density and seeing what Mike can give some results from his experimentation on the completion side. But continually moving forward had allowed us a lot of things to look at as they come on production. Mike, you want to?

Mike Eberhard

No, exactly. We just continue to – we have done some tweaks over this. We've done some with design with fluid systems continuing. Yes, we don't have the results, we won't have mere for a little bit, but we haven't just sat back and pumped the standard design. We still identified tests and then conducted them.

David Deckelbaum

I appreciate the color guys. And best of luck with the plant coming on line.

Mike Eberhard

Thanks Dave.

Operator

Thank you. Our next question comes from Brian Corales with Johnson Rice & Co.

Brian Corales

Good morning guys. Couple of questions. The transaction that you just purchased, that was just – was that just a working interest partner? And are you all basically 100% now or close to it?

Lynn Peterson

It was nonoperated interest that were scattered through some of our existing pads as well as a lot of our future pads as we look to 2019 and beyond. So we're not 100%, but I think we're north of 90% on nearly everything right now. We're continuing to work that. So I mean, that's one of the things we've challenged our staff to do. I think the flip side of that, I mean, with our recent swap that will continue to get closer as we exit the year is really alleviating our nonop expenditures. I mean, we really do want to control what we're doing here and that's how we believe that we can best manage our balance sheet and give you guys good guidance.

Brian Corales

Okay. Is this these smaller deals – is that what kind of you're pursuing now? Or is there something bigger in the – on the horizon? Or are you kind of happy with just blocking your position up?

Lynn Peterson

Brian, I think you know us well enough. I mean, we're always looking at everything. I mean, we've got to continue to stay focused at what we're doing here. I mean, right now it's blocking and tackling and cleaning things up, so we can continue our drilling efforts. But I mean, our team is totally focused on building the company in the long haul too. So it goes both ways.

Brian Corales

Okay. And then one final one. You'll have a bunch of docs or even wells completed but not brought online. How do you envision those coming on? Is it you wake up in the morning, turn a new one on each day or how does that work?

Lynn Peterson

At first, we got to wake up and then we'll go to work and figure out what we have to do. So no, it's not as simple as that, unfortunately, Brian. And again, so the way it's going to have to work is the entire system needs to go into this new plant, pressures they're going to be drawn down over time. And then during this whole process, we will be bringing on some additional wells. Mike, do you want to kind of clarify how this is baked in?

Mike Eberhard

Yes, for the next couple of weeks, especially, we're going to have to kind of maintain where we are at. So the plant can't get online to get leveled out. Once we see where we're at, then we do have wells that are ready to go. And as our allocation increases, we will bring them on to fulfill our allocations. And it will give us the opportunity, again, to go back where we can moderate our oil wells a little bit better and get back a little on our gas wells. So it'll give us some flexibility there that we haven't had through the last couple of months.

Brian Corales

Got you. Okay. Alright thanks guys.

Mike Eberhard

Thanks Brian.

Operator

Thank you. Our next question comes from Kyle Bickel with Stifel. Please state your question.

Kyle Bickel

Hi good morning guys.

Mike Eberhard

Hi Kyle.

Kyle Bickel

I know you guys kind of touched on this earlier, and you anticipate sort of moving from individual well results. But I guess, post the expansion, do you anticipate some of these third quarter and fourth quarter pads will kind of be able to flow freely and we might see some rates or an ops update? Or should we kind of expect some of these newer pads to continue to be managed as you work through the new allocations?

Lynn Peterson

Again, I think we're going have to get into the fourth quarter here. I mean, we're all ready. Unfortunately, first of all, I guess, as Mike said, this is going to take a couple of weeks started to get the pressure lined out. And next thing, we know we're going to be October 1. So I think we'll continue to put information out as we gain it. But I do think we're really looking into Q4 and into early next year before we have a better understanding.

Kyle Bickel

Okay. Sounds good. And then, I guess, just sort of how inflation has compared to sort of your expectations? I know there's another operator that was kind of pointing to some inflation on the stimulation front in the basin. I was just curious if – how that's kind of compared to what you guys budgeted for at the beginning of the year?

Lynn Peterson

Actually, I think we're pretty pleased. I'll let the guys all speaker here, but you know we kind of build in somewhere around 15%, plus or minus, depending on specifics into our budget. And I think we're actually pretty pleased where we're at. Mike, I know you've talked in the past about sand and stuff. Any comment?

Mike Eberhard

Yes, I think with the Permian sand finally coming online, sand supplies as such has a little less pressure there. Right now, we're not seeing any real pressure from what we've experienced over the first of the year. And I mean, so far, we've been able to maintain, so we feel good where we're at.

Lynn Peterson

Yes, I think from Nick's standpoint, we've seen some increase on the steel side, which we anticipated after all this come to front, but...

Nick Spence

Yes, we've seen all the increases that we expect to see for this year, and we're well within our budgeted guidance on the drilling side. So I don't think we'll see any surprises through second half of the year. We're pretty pleased with where we're at.

Kyle Bickel

Alright I appreciate the color.

Nick Spence

Thank you.

Operator

Our next question comes from Oliver Huang with Tudor, Pickering & Holt. Please state your question.

Oliver Huang

Good morning everyone and thanks for taking my questions.

Lynn Peterson

Good morning.

Oliver Huang

Just had one quick question. I was wondering – I don't know if it's too early to tell, but I was wondering what we should expect for Q4 well cadence and if we should expect it to be front-end weighted to get volumes on to DCP as early as possible?

Lynn Peterson

I think where we're at, I think, our guidance that we laid out, the number of wells and all this, I think, we're moving right down the road here. And I think by the year-end, we're going to feel pretty good with those numbers.

Mike Eberhard

Exactly, yes. We brought on the second frac through.

Lynn Peterson

Right. I mean, that's what – you can look at our CapEx, we tried to be pretty straightforward about that. We think we're going to have a little higher in the second half of the year with second completion crew that these wells will get in online here as we get into the fourth quarter. So we're excited about it.

Oliver Huang

Okay, perfect. And I guess, just in terms of wells looking out forward into early 2019, I was wondering if you all have kind of thought about potentially choking some of those wells back similar to the first half of this year to kind of get more oil production and to turn on new wells?

Lynn Peterson

Again, I think if we have capacity, we're going to be at a whole different world. So we believe that O'Connor two is coming on in the first part of the year. We're not – we should be able to operate pretty smoothly as we go through 2019. And again, if we go back, there's a lot of other capacity coming into the basin. And I'll say one more time, I think the basin looks pretty bright for a change.

Oliver Huang

Okay, perfect. Thanks for the time.

Lynn Peterson

Thank you.

Operator

Our next question comes from Dan McSpirit with BMO Capital Markets. Please state your question.

Dan McSpirit

Thanks folks. Good morning.

Lynn Peterson

Hey Dan.

Dan McSpirit

Lynn, implied in your like-type percentage comment is DCP closely monitoring market share of each producer. Is that a correct statement? And what's the risk if anyone producer is taking more than their current allocation and potentially squeezing others?

Lynn Peterson

Yes, obviously, it's a fine line, but DCP is very much on top of it. I think they have control over all the operators. They're not going to be a bully in the playground. I've heard that comment around a few times, I really don't think it's going to happen. I think we're trying to be realistic. If we maintain our current percentages, I think we will be fine. All the operators here in the basin, we're pretty close in that group, and I think everyone is going to try to work together for the most part.

Dan McSpirit

I appreciate you expressing a very straightforward view on how this is going to work. Just as a follow-up here, what are the line pressures in the basin today? And I guess, where do you see them going over the weeks ahead as the plant becomes operational? And how long will it take for line pressures to get back to the pre-Mewbourn plant levels?

Lynn Peterson

That's a loaded question. I think where we're at, we've been pushing up around for 100 here for quite some time, and our team has done an extremely good job in the field and it's been – it's put a heavy burden on them, but they've really come through for us. Mike, I know this is – it's all over the board right now, but maybe if you want to comment.

Mike Eberhard

This is speculation process. We're seeing pressures come down. I think it's about all we can say. The plant is up and running. Again, we get the systems stabilized. We're very encouraged with what we've seen. It's only been on for two days. So it's a little bit hard to say too much. But we are seeing pressures start to come down, which is, again, encouraging.

Dan McSpirit

Great, I appreciate it. Thank you gentlemen. Have a great day.

Mike Eberhard

Thanks Dan.

Operator

Thank you. [Operator Instructions] Our next question comes from Kashy Harrison with Simmons Piper Jaffray. Please state your question.

Kashy Harrison

Hi, good morning everyone. And thanks for taking my questions. So I was just wondering, are you all getting any inbounds on the services sides from maybe some service companies that are fleeing the Permian due to the takeaway situation?

Lynn Peterson

I don't really think so at all. I mean, that's one of the beauties of Colorado. We have a great service system here. We've got great service providers. We don't really go to the peaks and the valleys that some of these other basins go to. Mike, Nick, I mean, you got any thoughts on?

Mike Eberhard

No. We've not seen any impact.

Lynn Peterson

I think we're in great shape here.

Kashy Harrison

Sounds good. And then maybe more so on a bigger picture – from a bigger picture standpoint. I was wondering, Lynn, if you could just share your thoughts on just consolidation in the DJ Basin over the medium to longer term? Do you see any potential for, perhaps, a merger of equals moving forward?

Lynn Peterson

Yes, I can't really speculate on that type of thing. I mean, I think as all basins are mature and go through those, I think they'll continue to be consolidation in various shapes and forms. I think when you look at our economics, they stack up extremely well to other basins. And as a result, I think people always want to try to grow their position here. So I don't think I can really comment on much else in that regard.

Kashy Harrison

That’s it from me. Thanks for taking my questions. Have a great rest of the day.

Lynn Peterson

Thank you.

Operator

There are no further questions at this time. I would now like to turn the call back to Lynn Peterson for closing remarks.

Lynn Peterson

Alright, well, thank you, again, for joining us this morning. We're all looking forward to the days when Colorado politics and gas processing constraints no longer dominate every conversation, and we can instead focus on the issues that are within our control. I'm very proud of our team and the intense focus they displayed during what has been a challenging first half of the year.

We are all anxious to resume demonstrating efficiencies and high returns that our assets are capable of generating. We'll be attending several conferences over the coming quarters. We look forward to seeing many of you at these events. We encourage you to call John Richardson if you have any further questions.

And as always, we very much appreciate the support. So have a great weekend, and we'll talk next quarter. Thank you.

Operator

Thank you, sir. This concludes today's conference. All parties may disconnect. Have a great day.