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Edited Transcript of WLL earnings conference call or presentation 1-Aug-19 12:30pm GMT

Q2 2019 Whiting Petroleum Corp Earnings Call

Denver Aug 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Whiting Petroleum Corp earnings conference call or presentation Thursday, August 1, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bradley J. Holly

Whiting Petroleum Corporation - Chairman, President & CEO

* Charles J. Rimer

Whiting Petroleum Corporation - COO

* Eric K. Hagen

Whiting Petroleum Corporation - SVP of IR

* Kevin A. Kelly

Whiting Petroleum Corporation - VP of Marketing

* Timothy M. Sulser

Whiting Petroleum Corporation - Chief Corporate Development & Strategy Officer

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Conference Call Participants

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* Andrew Elliot Venker

Morgan Stanley, Research Division - VP and Lead Analyst for the Mid-Cap Oil & Gas Exploration & Production

* Asit Kumar Sen

BofA Merrill Lynch, Research Division - Research Analyst

* David Adam Deckelbaum

Cowen and Company, LLC, Research Division - Senior Analyst

* Jeoffrey Restituto Lambujon

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Exploration and Production Research

* Joseph David Allman

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Leo Paul Mariani

KeyBanc Capital Markets Inc., Research Division - Analyst

* Marshall Hampton Carver

Heikkinen Energy Advisors, LLC - Founding Partner and Director of Research

* Michael Stephen Scialla

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* Neal David Dingmann

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Paul William Grigel

Macquarie Research - Analyst

* Wei Jiang

Crédit Suisse AG, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning. My name is Keith, and I will be your conference facilitator today. Welcome, everyone, to the Whiting Petroleum Corporation Second Quarter 2019 Financial and Operating Results Conference Call. The call will be limited to 45 minutes, including Q&A. (Operators Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Eric Hagen, Whiting's Vice President of Corporate Affairs.

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Eric K. Hagen, Whiting Petroleum Corporation - SVP of IR [2]

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All right. Thank you, Keith. Good morning, and welcome to Whiting Petroleum Corporation Second Quarter 2019 Earnings Conference Call.

On the call with me today is the Whiting management team. During this call, we'll review our results for the second quarter 2019. This conference call is being recorded and will also be available at our website at www.whiting.com under the Investor Relations section.

We also posted an updated corporate presentation to our website earlier this morning. Please note that our remarks and answers to questions include forward-looking statements that are subject to risks that could cause actual results to differ materially from those in the forward-looking statements.

Additional information concerning these risks is set forth on Slide #2 of our corporate presentation and in our earnings release.

With that, I'll turn the call over to our Chairman, President and CEO, Brad Holly.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [3]

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Thank you, Eric. As we continue to navigate the challenging industry landscape of volatile commodity prices and a constrained gas infrastructure market in North Dakota, we're taking strong measures to improve our margins and deliver on our goal of generating free cash flow. This is consistent with our stated strategy to deliver a better cost structure and more consistent results.

Now I'll briefly cover the quarter and then address the strategic initiatives we announced yesterday. I'd like to start off by referring you to Slide #8 in our corporate presentation. This slide demonstrates that year-over-year, our oil production rates have been consistent with our historical results. Our wells are performing as anticipated, and the reduction of our oil guidance is a function of above ground constraints. We're getting strong well results at Foreman Butte, as depicted on Slide 26 of our updated corporate presentation.

We're delivering top-tier results from acreage purchase for an attractive price. We believe this illustrates our team's ability to understand the rock and apply the latest technology to further expand the Bakken core. Conservatively, this success adds over 100 net risk, high-quality locations to Whiting's inventory.

Second quarter oil production was impacted by a very tight situation for gas processing across the basin. Industry gas capture in May, the latest month reported by North Dakota, was 81% versus a regulatory mandate of 88%. Whiting is committed to remaining a responsible operator and continuing to meet this standard. To minimize flaring, we're producing some wells at constrained oil rates, while we focus on increasing gas capture through the installation of mobile combustion units, building out gathering systems and completing our Ray Gas processing plant. Constraints also impacted the pace of planned operating activity.

In summary, infrastructure constraints were more severe than anticipated, and we did not have enough cushion for associated operating delays. These factors lowered oil production. To address this trend, we've adopted a revised program with a higher risk factor for unplanned downtime. Infrastructure constraints are forecast to persist for the remainder of 2019, but our modified plan is designed to account for this, and we believe it will result in a more stable production rate and more consistent results.

Now turning to the restructuring initiatives that we announced yesterday. As the oil and gas industry landscape continues to evolve, we see the opportunity to improve our cost structure and streamline our operations in order to become a leading, value-focused developer of unconventional assets. We're committed to safety, cost efficiency, disciplined capital execution and maximizing returns.

As part of our restructuring plan, we conducted a reorganization and reduced our workforce by 33% or 254 employees. Of this total, 94 were executive and corporate positions. The decision to reduce headcount is always a difficult one, as it impacts talented colleagues and friends. However, this action will better align our business unit with the operating environment and drive long-term value.

I want to take a moment to highlight the key initiatives of our restructuring. We redesigned the company's organization to improve cost and enhance execution, streamline operations to expedite the delivery of peer-leading returns and free cash flow. We're implementing new technologies and processes in the field to enhance operational efficiency. The reorganization is projected to generate $50 million of annual cost savings and should improve corporate capital efficiency going forward.

On the financial side, we're focused on capital discipline and paying down debt. We maintained our 2019 capital budget guidance of $800 million to $840 million. To accommodate more nonop spending, we reduced spending in other areas like exploration. The nonoperated properties we have elected to participate in are highly economic. By participating, we create a value option to either retain or sell the associated properties. This is evident in our sale of $53 million of nonoperated properties at attractive prices. Between our savings from restructuring and Redtail deficiencies rolling off in April of 2020, we saved approximately $50 million in G&A and $60 million in Redtail deficiencies on an annualized basis. This improves our margins by $2.40 a barrel and adds another $1.21 per share of cash flow.

Before we open the Q&A, I want to welcome Correne Loeffler as CFO. Correne has a strong background in corporate finance and extensive capital markets experience. Her skills and experience will be a strong addition to our team, and we look forward to introducing her to you in the months ahead.

We thank Mike Stevens for his long service at Whiting and wish him the best in the future.

Operator, please open up the conference call for Q&A.

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Questions and Answers

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Operator [1]

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[Operators Instructions) And today's first question comes from Neal Dingmann with SunTrust.

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Neal David Dingmann, SunTrust Robinson Humphrey, Inc., Research Division - MD [2]

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Welcome. Brad, my question is you definitely said on -- let's just hit the constraints that you referred to. You said now you put so should maybe a bigger buffer in there. Other items to you and are you doing things like where you lock in some contracts, will you try to build out your own pipes? Can you just maybe talk about anything else other than putting a bigger cushion how you sort of view the plan for the remainder of the year? Or are there, in your opinion, enough sort of the infrastructure coming on latter part of the year where you don't need to make these changes as well?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [3]

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Yes. Thanks for the question, Neil. And I'll take a stab and maybe have Chip Rimer, COO, and even Kevin Kelly, our VP of midstream Marketing help me out on this. I mean that has been our big concern and our big constraint in North Dakota, as have you seen up there with the industry increasing to 88% gas capture. We worked very hard to meet that, and we are meeting that today, but that is putting significant pressure on us. When we came out with our budget this year, we had some key initiatives to try to help that. Looping lines in Sanish, putting on our Ray Gas plant and putting in these mobile combustion units is all helping us. But what we've seen is that with a startup of new equipment, the downtime is very significant. And so as third parties have started up new equipment, we've had significant downtime. And Chip can walk you through when those things go down, it's not an instantaneous up back on the production side. So they can go down for a day, and it takes us a little bit of time to get the wells back on at times and get it lined out again. And so we've seen those bubbles, and we are increasing our anticipated downtime to account for that moving forward as the infrastructure gets lined out. Chip?

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Charles J. Rimer, Whiting Petroleum Corporation - COO [4]

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Yes. Brad, thanks. This is Chip Rimer. Yes, Neil, that's correct. We've had times back -- I think we had close to 14 downtimes in the second quarter. And when we have those downtimes, we're seeing up to 4,200 barrels a day of oil when we go down, when we have those downtimes. And it takes little while to get those wells brought back on, swapped, working on artificial lift to get them back on, so that's been a big impact to us. A lot of that happens in the Tarpon area, which is very prolific to force.

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Kevin A. Kelly, Whiting Petroleum Corporation - VP of Marketing [5]

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This is Kevin, Neil. As far as rest of year, there's some big processing additions coming on about a Bcf spread across several of the key processors, ONEOK, Hiland, Targa, [Herco.] We think that will help us by year-end. Another key component of the ONEOK is Elk Creek Pipeline. So by year-end, going into 2020, we feel much better about the infrastructure across the basin.

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Neal David Dingmann, SunTrust Robinson Humphrey, Inc., Research Division - MD [6]

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And maybe just for my follow-up, Brad, just to stay with that. Is that the problems -- I mean you've seen that sort of across the board? Are there areas such in Sanish on the east or different areas that you potentially couldn't accelerate to maybe have maybe improvement even sooner than expected?

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Eric K. Hagen, Whiting Petroleum Corporation - SVP of IR [7]

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Maybe -- it's Eric Hagen. Yes, you are correct. So in general, the constraints have been in the western side of the basin, Central Basin, McKenzie County. That's where we've had a lot of activity in the first part of the year and end of last year, places like the Flatland unit. And as we move to the east, it is less constrained. We actually have a right to put our gas into the large gas processing plant there, which does reduce the risk. So that is one of the changes heading into the second half of the year that we think will improve our execution.

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Operator [8]

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And the next question comes from Leo Mariani with KeyBanc.

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Leo Paul Mariani, KeyBanc Capital Markets Inc., Research Division - Analyst [9]

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Just wanted to ask a little bit of question on sort of activity levels in the Bakken. I think you guys brought on about 50 wells in the second quarter. Just trying to get a sense of where we see wells being tied in, in 3Q, in 4Q. I'm just trying to get a sense of some of the impact that you kind of mentioned on the midstream and activity levels, is that really going to impact well tie-in? I think you guys were previously planning on bringing a pretty large group of wells on in the third quarter.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [10]

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Yes. Thanks, Leo. I appreciate the question. And I think you've described it pretty accurately. We had originally planned on bringing 9 additional wells on in the second quarter and because of these constraints and operational delays, we were not able to do that. But as Eric mentioned, we're moving the program to the east. We're moving more and more activity into the core of Sanish, where we feel like we have takeaway capacity. It's a lower working interest hence, that's going to help us beat our CapEx guidance. We're going to complete about half of the net wells in the fourth quarter than we were in the third quarter. But the third quarter -- we still have some stuff in the south that we're bringing on a little bit in the north and the activity is moving to the east into Sanish.

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Leo Paul Mariani, KeyBanc Capital Markets Inc., Research Division - Analyst [11]

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Okay. That's helpful. And I guess, just also wanted to ask on the CapEx. Looks like you guys are kind of guiding third quarter CapEx, roughly flattish with 2Q. You guys did drop a rig I guess in the last couple of months, can you just kind of help me out with what's kind of keeping the CapEx run rate still kind of high there in the third quarter?

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Charles J. Rimer, Whiting Petroleum Corporation - COO [12]

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Yes. Leo, it's Chip Rimer. Yes, we're taking from 3 frac crews going to 2 frac crews in this quarter towards the end of the quarter, 3Q. As Brad said, we're moving a lot of our activity over into the Sanish area, which has a lower working interest. You can see those slides on 17 through 21, you can see how prolific those wells are in that area. So pretty excited about going over there. We're also going to be running up on some additional DUCs, and we're going to have which is above our normal inventory. So overall, I think we're in line, but we will be moving to Sanish, it will be a reduction in working.

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Leo Paul Mariani, KeyBanc Capital Markets Inc., Research Division - Analyst [13]

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Okay. So basically, you expect that CapEx to fall pretty dramatically in the fourth quarter. Just trying to kind of get a sense of how those numbers move around a little bit here?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [14]

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Yes. Just to recap it, so we went from -- we recently dropped a rig and then we're dropping a frac crew at the end of the quarter. We're working into interest that has a little bit -- into an area that has a little bit lower working interest, and we're also accumulating some DUCs. And if you look at our original plan we released at the beginning of the year, really what we're going to do second half of the year isn't all that different. It's just -- we're looking at the timing of POPs. But if you look at the activity, it was already forecast to drop fairly significantly in the fourth quarter. So we think all of those things give us confidence that we will see a significant drop.

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Operator [15]

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And the next question comes from Drew Venker with Morgan Stanely.

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Andrew Elliot Venker, Morgan Stanley, Research Division - VP and Lead Analyst for the Mid-Cap Oil & Gas Exploration & Production [16]

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I was hoping if you can just give us an update on what you think maintenance CapEx would look like for 2020? If you can give us an exit that would be great.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [17]

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Yes. Drew, we're just not going to comment on 2020 now because with the situation so constrained in the basin, it's really hard to project -- predict downtime and capital efficiency. So we prefer to wait until the third quarter, see how some of these gas processing plants that Kevin mentioned come on. Then I think we'll have a better basis to forecast that.

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Andrew Elliot Venker, Morgan Stanley, Research Division - VP and Lead Analyst for the Mid-Cap Oil & Gas Exploration & Production [18]

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Okay. And remind us the timing of when the Ray plan is expected to be complete?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [19]

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The Ray plan actually was just -- was completed. So...

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Andrew Elliot Venker, Morgan Stanley, Research Division - VP and Lead Analyst for the Mid-Cap Oil & Gas Exploration & Production [20]

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Okay. So we see the benefits of that coming in the next couple of quarters?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [21]

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You should see the benefits of that.

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Operator [22]

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And the next question comes from David Deckelbaum with Cowen.

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David Adam Deckelbaum, Cowen and Company, LLC, Research Division - Senior Analyst [23]

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I just wanted to ask on -- just -- you talked about the downtime situation before. Should we -- we should think about the forward guidance now risking for unplanned downtime, but also a constrained environment where you're turning in wells into a tighter system. So is it sort of like a 50-50 contribution there?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [24]

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Yes. If you look at the 3,000 barrels a day that we pointed out in the call, it was -- about 2,000 of that was from delays in POPs. And that's when you're waiting on gathering lines to be put in place or compression to be installed in the system so you can flow the wells. And about 1/3 of it was constrained rates. And I think Chip gave a good example of that in an area like the Flatland area where you have a large number of wells, a large pad. If you get constrained, you can lose 3,000, 4,000 barrels a day for a period until they debottleneck that. And going forward, the plan is risk that it -- similar to that in terms of the risk volumes.

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David Adam Deckelbaum, Cowen and Company, LLC, Research Division - Senior Analyst [25]

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Okay. Has this caused you at all -- I know that you're kind of like restructuring the reporting lines. I guess how do we think about planning now going forward? Is the -- I know you're moving east into Sanish. I know plans were to kind of ramp up in Cassandra with Ray coming online, how much are geographically plans changing right now versus what you had set out in the beginning of the year?

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Charles J. Rimer, Whiting Petroleum Corporation - COO [26]

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They're not changing very much. Maybe when it's all said done. We're very close to our original plan.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [27]

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Yes. We think our original plan was a solid plan in terms of trying to move away from constrained areas. It's just that it wasn't risked enough, and it led to some downtime that we hadn't predicted, frankly.

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Charles J. Rimer, Whiting Petroleum Corporation - COO [28]

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Our original plan was to move into Sanish area without move to the east.

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David Adam Deckelbaum, Cowen and Company, LLC, Research Division - Senior Analyst [29]

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Got it. And just lastly for me, I think we had thought about midstream spends next year sort of declining, particularly, after I guess Ray was included this year. Has this situation made you look at all on sort of required spend around field infrastructure? And should we expect any changes there?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [30]

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David, it's Brad. I just don't see a whole lot. I think we're still -- that message is still good. We don't see a whole lot of spending in 2020. We had some short-term stuff like line looping and getting Ray up and running. But as Kevin mentioned earlier on the call, there's a lot of infrastructure coming to bear at the end of this year, both gas and NGLs, and we think that's going to help us quite a bit. But -- so we don't see anticipated increased spend on our side.

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Operator [31]

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And the next question comes from Joe Allman with Baird.

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Joseph David Allman, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [32]

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Just trying to get a more full understanding of the infrastructure constraints. So is it overwhelmingly processing? Or is it actually a combination of kind of processing, but also maybe some gathering in some larger pipe?

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Kevin A. Kelly, Whiting Petroleum Corporation - VP of Marketing [33]

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Yes. This is Kevin, Joe. So it's -- the processing is part of it and the NGL takeaway. So in the first part of the year, especially in the Tarpon area, we're waiting on big compression to come online, that will help us flow there. It came online a little bit late and then it had a bunch up and down. And as we work through this year waiting on new processing, that becomes sort of the second-tier bottleneck in the second half. But as we see line of sight with ONEOK's reiteration yesterday and its own plan of bringing Demicks online fourth quarter of this year as well as the NGL line fourth quarter of this year, will become more positive getting into the end of the year.

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Joseph David Allman, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [34]

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Got it. And do you see any -- do you see like pretty much full resolution kind of late this year, early next year? Or do you think there is visibility on some further constraints over the next couple of years as well?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [35]

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I think with the additions and when we look at for the basin for the next couple of years, the basin looks like it has good room of growth for the wet gas.

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Joseph David Allman, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [36]

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Okay. That's helpful. And then just in terms of locations, is it overwhelmingly the west but also some issues in the east? Or could you just kind of describe location wise the constraints?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [37]

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It was still predominantly for us in the core of the system and our south area, McKenzie County and in particular, the Tarpon area.

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Operator [38]

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And the next question comes from Paul Grigel with Macquarie Capital.

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Paul William Grigel, Macquarie Research - Analyst [39]

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I was wondering if -- as you guys think about the fourth quarter slowdown and the cadence into '20 really was not formal '20 guidance. Should we be thinking that there's a resumption back to kind of normalized level of activity at this point in time? And then is there any thoughts on potential increased seasonality with winter costs being higher versus the summer and loading into 2Q or 3Q more so?

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Eric K. Hagen, Whiting Petroleum Corporation - SVP of IR [40]

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So there's always -- it's Eric, Paul. There's always going to be seasonality in the Bakken. And as Chip mentioned, we are building some additional DUCs. And we'll -- we also have sort of extended our POP schedule a little bit. So we'll be popping a fewer more wells later in the quarters. And that, hopefully, will give us some momentum into that seasonality.

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Paul William Grigel, Macquarie Research - Analyst [41]

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Okay, that's helpful. And then I guess maybe you guys could talk about the current plans on either converts or the 2021 and just where you kind of stand today on, your thoughts on addressing those maturities as we start to advance closer towards them.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [42]

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Yes. Sure. Paul. Thanks for that question. We feel like we have multiple options on our upcoming debt maturities. Our first one is to try to pay down debt with free cash flow. We're trying to build the organization to be able to do that. The second, we continue to sell the noncore assets. As you've seen us do a couple of transaction this quarter that helps us and that's what those are designed to go for. The third thing, we have the $1.75 billion revolver with only $40 million drawn at the quarter end. So that's an option. And finally, we could refinance the debt. But we are looking to pay it down. We want to get a lower net debt to EBITDAX as well as reduce our absolute debt.

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Operator [43]

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And the next question is from Jeoffrey Lambujon with Tudor, Pickering, Holt.

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Jeoffrey Restituto Lambujon, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Exploration and Production Research [44]

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First one is just on the nonop. As you think about the opportunity set there, can you just give us some guidelines on how you think about budgeting for that part of the business? Just trying to get a sense or how to forecast that going forward.

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Timothy M. Sulser, Whiting Petroleum Corporation - Chief Corporate Development & Strategy Officer [45]

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Yes. Sure. Jeoffrey, this is Tim Sulser. We've had, a -- obviously, an uptick in nonop activity. We're very pleased with the well results. That said, we did have an opportunity to monetize some of those assets this quarter. We did that in 2 separate transactions, both for -- to the operator of those properties. And so we were really excited about the well performance, the AFE capital came in a little higher than we expected. So we were pleased to transact where we did. And we'll continue to kind of look at those opportunities as we go forward. But again, our nonoperated assets are -- in amongst our operated assets we see really good results and manage that accordingly.

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Jeoffrey Restituto Lambujon, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Exploration and Production Research [46]

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I appreciate that. And then just following up on the midstream side in terms of the expected relief. What's baked in now for you all in terms of the timing there? I know you mentioned a couple of projects coming online in Q4. Is that what's kind of assumed to provide relief going into next year? Or are there any solutions you kind of point to in early 2020 as well?

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Kevin A. Kelly, Whiting Petroleum Corporation - VP of Marketing [47]

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So this is Kevin. Yes, we're being conservative. We know what the schedule is. People bringing on things in the fourth quarter. But really, we're looking at those as a year-end. We want to be optimistic, but also realistic, given some of the downtime constraints as we solve things, get brought up earlier in the year. So really by -- it's year-end is what we're looking at.

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Jeoffrey Restituto Lambujon, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Exploration and Production Research [48]

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Anything in the early 2020 time frame to watch for as well as the year-end kind of Q4 timing, the bulk of it?

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Kevin A. Kelly, Whiting Petroleum Corporation - VP of Marketing [49]

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Year-end is the bulk of it. Another plant will be the Demicks II plant, which is Q1.

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Operator [50]

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And the next question comes from Asit Sen with Bank of America.

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Asit Kumar Sen, BofA Merrill Lynch, Research Division - Research Analyst [51]

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Brad, can you talk a little bit about the departure from the original plan of operating 3 asset teams in the context of the announced restructuring? You talked about evolving industry landscape, but the infrastructure constraint could be fairly transitory. So just wondering if you could talk a little bit about your -- the thought process in such a big restructuring.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [52]

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Yes. Thanks, Asit. I appreciate the question and the philosophical ramifications there. We broke out into 3 asset teams really to get micro focused in our individual asset areas and really understand our business on a very isolated area with good leadership. It allowed us develop leadership capabilities internal. It allowed us to try some different things. And as we look going forward at really the competitive landscape and trying to cut cost out of system, I would say we reorganized from a corporate model to an asset-based model. And now everyone in the company is super focused on really 4 things. We're looking to be safe, and we've got to be safe every day. We're looking to be focused on production, focused on capital efficiency and then cost leadership. So everybody is about creating value now. And we really feel like that the -- bringing everybody together under one major asset team is going to allow us to transfer technology across the organization. It's going to allow us to maximize our opportunities and make sure that our highest and best opportunities are coming for us first. We've had some improvements on both innovation and technology that we're using. And we have provided more technology into the field. And we can see our business better. And we haven't really had any significant headcount reductions and our D&C areas are drilling in completion areas. And so we think that same amount of focus will be generated there. But everyone is really rallying around kind of those 4 pillars that we were using to try to drive value.

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Asit Kumar Sen, BofA Merrill Lynch, Research Division - Research Analyst [53]

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Okay. Appreciate the color. And then a nice nonoperated divestiture. Just wondering if you have more to go? Is there a target that you can elaborate?

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Timothy M. Sulser, Whiting Petroleum Corporation - Chief Corporate Development & Strategy Officer [54]

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Yes. So this is Tim Sulser. And as I had mentioned earlier, we're absolutely pleased with those 2 transactions that we did, and we will continue to look at divesting those in favor of being able to then further focus our capital and attention on our operated assets.

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Eric K. Hagen, Whiting Petroleum Corporation - SVP of IR [55]

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Yes. And Asit, I'll just chip in there. It's Eric Hagen. We sold about 700 barrels a day. We've got about 10,000 barrels a day. So we have a very solid nonop position, and it has lot of potential value.

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Operator [56]

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And the next question comes from Marshall Carver with Heikkinen Energy Advisors.

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Marshall Hampton Carver, Heikkinen Energy Advisors, LLC - Founding Partner and Director of Research [57]

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Yes. On the personnel cost savings, the 33% headcount reduction, when does that fully kick in? And how much of that will be hitting the G&A line items versus other line items like LOE or something like that?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [58]

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Yes. Thanks, Marshall. I appreciate the question. That was actually executed on yesterday. And so immediately, August 1, we're at our new size. We estimate about $15 million of cost savings this year. That's kind of net of the onetime severance payment. Of that $15 million, I would think about half of it goes to G&A and about half of it LOE and exploration for the back half of this year. On an annualized basis of the $15 million, feel like about 75% of that is going to be G&A and 25% of that is going to roll through LOE and exploration moving forward.

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Marshall Hampton Carver, Heikkinen Energy Advisors, LLC - Founding Partner and Director of Research [59]

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Okay. And then a follow-up. We typically think of the Bakken as being flattish in the first half of the year and then big growth in the back half of the year. Knowing you not -- don't want to give a lot of color on 2020 yet, but with all this infrastructure coming on at the end of this year and beginning of next year, is it safe to say that you're going to have a lot of growth in the first part of next year so that waiting for growth for the back half of the year will be different in 2020?

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Eric K. Hagen, Whiting Petroleum Corporation - SVP of IR [60]

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Marshall, it's Eric Hagen again. Just to reiterate, we're just not going to give 2020 commentary until we have line of sight that -- at year-end. All the processing is in place. We'll look at how our POP schedule develops into the third and fourth quarter and our momentum coming out of the year in addition to how we want to deploy our DUCs. But yes, I mean, I do agree with you overall kind of logically that we're setting up -- for the prior question, we're setting up for to be a more -- having more momentum heading into the tough season than we usually do.

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Operator [61]

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And the next question comes from Victor Prado with Crédit Suisse.

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Wei Jiang, Crédit Suisse AG, Research Division - Research Analyst [62]

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Sorry. This is Betty Jiang from Crédit Suisse. So -- and following up on the POP cadence on and to ask about that again, on the power plan is 146 turning lines in 2019, of which 60 completed in the first half. So I just wanted to clarify, is the POP count generally staying largely the same but more back-end weighted? Or is the second half POP count coming down much lower than the prior program?

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Charles J. Rimer, Whiting Petroleum Corporation - COO [63]

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Yes. It's going to stay the same, Betty. We're just -- this is Chip Rimer. We're going to back-half weighted on the POP count going forward.

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Wei Jiang, Crédit Suisse AG, Research Division - Research Analyst [64]

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Got it. And then, Brad, you mentioned in the start of the call that you want a more stable production and consistent program going forward. So as we -- I know you're not coming down 2020. But as we think about the baseline activity, is the second half '19 level in terms of rig count and crew count as a good baseline going forward?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [65]

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Yes. Betty, I appreciate the question. I think you're accurate there. As you've seen in the last few quarters we struggled to make oil production, and that has been forecasting at these wells. We know the potential in the wells are there. The wells are performing well, and we're taking those wells and the tight curves, and we're adding that to our program. And we've seen that, that hasn't been that easy to do with the infrastructure. And so we've just backed off of that and added more downtime of that. We're obviously working internally on our own facilities and constraints to make sure we move do that. We're also working actively with our third-party gathering companies as well as the processors to try to align all that equipment out, and then we can open up our wells and flow through that with more stability going forward. So that's why we've come out with the new guidance moving forward. It's something that in this -- in the environment that we're currently operating in, we think that, that's achievable, and we can do that, and we'll be looking to improve upon that moving forward.

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Wei Jiang, Crédit Suisse AG, Research Division - Research Analyst [66]

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Great. And then just one quick follow-up. Is there an -- can we get an update on the year-end DUC backlog on the -- in terms of absolute numbers? I guess -- what's the number of actual working DUCs that can be drawn down at year-end?

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Charles J. Rimer, Whiting Petroleum Corporation - COO [67]

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Yes. Betty, it will be close to the 50 at the end of the year, this is Chip Rimer.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [68]

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We've carried a normal, like, 40, probably working inventory of 40 DUCs. And we're just -- it's a few more DUCs at the end of the year. So probably go out with 10 more than what we normally have.

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Operator [69]

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And the next question comes from Mike Scialla with Stifel.

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Michael Stephen Scialla, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [70]

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Brad, I appreciate the comments you made on the strategic changes that you put in place. Just wondering, a part of the prior plan was to do acquisitions and maybe convert some noncore areas in core as what's like you did with the Foreman Butte acquisition. Just wondering, are you still in position to do that now? Or have you changed your plans there long term?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [71]

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Yes. Mike, I appreciate the comment. We think the Foreman Butte thing was a great bit of work. We saw that opportunity there and really felt like that we could improve upon it and 117% improvement on the prior wells are as important. At this commodity price, we certainly are focused on paying down debt. And that is what we are working on. We're building a value-based organization that can generate significant free cash flow, and we want to reduce our absolute debt at this time. And so that is our primary focus at this point. We'll continue to learn about the rock, we'll learn about the basin, and we think we understand it pretty well today, but we'll continue to try to drive value on our own acreage. We've got -- as you know, we've continued to have some Tier 2 acreage of our own that we think we can turn in Tier 1. So we're working on our existing yellow acreage right now. And -- but we'll always have our eyes open, but our priority clearly right now is to pay down debt.

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Michael Stephen Scialla, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [72]

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Okay. And you mentioned in your prepared remarks, you added at least 100 locations with your new completion design. Were those all in Foreman Butte? Or can you give any more detail on what contributed to that increase in the inventory?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [73]

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Yes. Mike, that was just a Foreman Butte comment. So that's just based on the 55,000 acres that we purchased last year. We see those 100 net locations on that acreage.

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Eric K. Hagen, Whiting Petroleum Corporation - SVP of IR [74]

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Again if you run the math on that Mike, you'll those are net. And it's also risked on a very reasonable spacing assumption.

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Operator [75]

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And the next question is a follow-up from Joe Allman with Baird.

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Joseph David Allman, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [76]

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Just on the operating costs. So operating costs rose in the second quarter versus the first quarter. Was that overwhelmingly or exclusively the infrastructure constraints? Or was there something else in there?

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Charles J. Rimer, Whiting Petroleum Corporation - COO [77]

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Yes. Joe, this is Chip Rimer. Yes, we had some flooding impacts that occurred to us over -- in the North McKenzie County, Yellowstone flooded. And so that impacted the numerous wells over there. Our workover cost rose in the first part. I would thank our operations folks. They jumped on that and addressed that challenge and got it knocked out. But a lot of that was driven by workover activity. And the other thing was our mobile combustion units where gas capture drove that.

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Joseph David Allman, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [78]

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Okay. That's helpful. And then back to the convert question. The converts you're doing April next year, so it's another current. Is the plan to really knock those out this year? Or might you actually get into next year to knock those out?

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [79]

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Yes. Joe, this is Brad again. We're focused on that right now. We're working on that. Again, we sold 2 noncore assets this quarter and with the design of using that moving forward to help pay down that debt. We can do some more of that in the back half of the year as well as continue to try to generate free cash flow going forward. So we'll generate free cash flow to pay that down. We'll sell noncore assets to pay that down. And then we have the $1.75 billion revolver that's undrawn to use to help that as well.

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Operator [80]

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And there are no more questions, I would like to return the floor to Eric Hagen for any closing comments.

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Eric K. Hagen, Whiting Petroleum Corporation - SVP of IR [81]

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Great. Thank you very much, Keith. Whiting will be presenting at the Barclays Conference on September 4 in New York City. I will now turn the call over to Brad Holly for closing remarks.

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Bradley J. Holly, Whiting Petroleum Corporation - Chairman, President & CEO [82]

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Thank you, Eric. We remain dedicated to our strategy of focusing on margins, full cycle returns and generating free cash flow. As a management team, we remain disciplined in our investment decisions and focused on further strengthening our balance sheet.

Our commitment to delivering shareholder value is evident in the tough decisions we recently made to improve our cost structure and maximize capital productivity.

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Operator [83]

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Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.