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WPX Energy Inc (WPX) Q2 2019 Earnings Call Transcript

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WPX Energy Inc (NYSE: WPX)
Q2 2019 Earnings Call
Aug 6, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning my name is Jodie and I will be your conference operator today. At this time, I would like to welcome everyone to the WPX Energy Second Quarter Earnings Call. [Operator Instructions]. I would now like to turn the conference over to your host, Mr. David Sullivan, Director of Investor Relations. Please go ahead.

David Sullivan -- Director of Investor Relations

Thank you and good morning, everybody. Welcome to the WPX Energy Second Quarter 2019 call. We appreciate your interest in WPX Energy, Rick Muncrief, our CEO, Clay Gaspar, our COO, and Kevin Vann, our CFO will review the prepared slide presentation this morning along with Rick, Clay and Kevin other members of the management team are available for questions after the presentation. On our website wpxenergy.com, you will find today's presentation and the press release that was issued after the market closed yesterday. Also, our Queque will be filed later today. Please review the forward-looking statement and disclaimer on oil and gas reserves at the end of the presentation. There are important and integral to our remarks, so please review them. So with that, Rick, I'll turn it over to you.

Richard Muncrief -- Chairman & Chief Executive Officer

Thank you, David. I appreciate everyone who is joining us today. Thank you for your interest in our company, our results, and our plans. All of them were coming together quite nicely, just as we've expected. We've ramped up another strong quarter here at WPX and look forward to visiting with you today. Everything we're accomplishing starts for people, they're delivering incredible things, many of which never make a press release but are essential and foundational to our business nonetheless. Let me give you two examples. Up in the Williston based we just celebrated five straight years without an employee lost-time accident. I work in the front line I know first-hand how much there is to manage, not to mention the extreme weather this [Indecipherabe] North Dakota.

Congrats to our team up north for staying safe and keeping our operations top tier that track record has kept a lot of barrels moving and a lot of revenues flowing especially when you think about the record production volumes we're now producing in the Bakken. Secondly, out in the Permian, our midstream investments are continuing to pay off the numerous ways as we are rapidly building a solid Midstream business with our Crude gas gathering and processing and our water systems. In early July, we cut our flaring percentage an all-time low, all the way down to nearly 2.5%. We look forward to even further improvement

That supports Revenues too but also speaks too how deeply we care about capturing value doing the right thing and working through whatever challenges come our way in our case, increasing our gas capture is involved a complex mix of planning, contracts, pipe, processing capacity. But very key partnership and a series of timely strategic investments. It's certainly paying off, considering the strength of our price realizations in the Permian, that's simply didn't happen by accident, it happened because our people got ahead of the game and started assembling the right roadmap for our volumes. The same can be said for Permian technical team as we strive to simply be the best there is among some very strong peer companies. That's who we are here, at WPX and it shows and how we get things done. And that's not all. We're working on a lot of things for our shareholders. Just like we said we'd do.

Now let's turn to page 2 and examine our progress. Back in February, we discussed our desire to return additional capital to shareholders beginning in 2021. And then in April after accelerating the monetization of our Oryx system, we said we'd look at the feasibility of adjusting our timetable all along we said that could involve continued debt retirement, dividends and-or stock repurchases. Yesterday, we followed through on our word and announced a decision to implement a share repurchase program. This is the next step in our efforts to return capital to shareholders. As you saw in our news, our Board of Directors has approved a program to buy up to $400 million worth of WPX shares over the next 24 months.

The market's current sentiment about our sector has created favorable circumstances for an action like this. And if the market remains irrational we will be opportunistic, doing so will not impact our development cadence in 2020 or our ability to continue to grow production. We are generating free cash flow today and expect to generate $100 million to $150 million dollars in free cash flow in the back half of the year, which will help support our repurchase program. The company is showing strength in other key metrics as well. We've increased our cash flow by 48% in the first half of the year, have seen outstanding outcomes for price realizations of Permian received $350 million from the sale of our interest in Oryx pipeline project and doubled the capacity of our joint venture processing plant in the Permian and we see more momentum ahead in the next few months. We're raising our full-year Oil guidance by 4% and our full-year volume guidance by 5%, all while keeping our capital plan unchanged.

I'm very pleased with our execution, our outlook and what we're accomplishing for shareholders. We're confident, bullish and undoubted in our belief in our people, our plans in the future of the company. Let's turn to page 3, they're definitely an underlying success story here WPX and underpins where we're at today. We've made a number of decisions over the past 5 years to transform the company and none more important than our entry into the Permian Basin, we never doubted the assets for a second or whether we could execute but doing so put significant pressure on our financial metrics.

But however, we saw a very compelling course for the company and what it can ultimately allow us to do for shareholders. Today we're reaping the benefits of acting on those convictions. This slide shows how far we've come. Once we got the assets in house and started unlocking their potential, not having all the potential is an ongoing process that continues to this day and it will for some time. So far we've released leverage dramatically completely turned around our ability to generate free cash flow and sizably increased production in both physical barrels and on a debt-adjusted per share basis. Would I do it all over again? Absolutely. It punctuated our switch from gas to oil and our ability to drive our margins higher. And with that, I'll turn it over to Clay Gaspar, our COO.

Clay Gaspar -- President & Chief Operating Officer

Thanks, Rick and good morning everyone. Yesterday, we announced a From reiteration of our 2019 capital guidance. And at the same time, significant performance beads on all of our critical quarterly metrics and bumped annual guidance on all 3 commodity streams. We also posted some very impressive price realizations that are the product of years of work focused on staying ahead of the Midstream bottlenecks. I've heard our peers talk about the challenges of how this low commodity price environment can be. I can tell you we consider today's environment mid cycle, our plan is built on $50 oil with our assets and with our team, we can do quite well in the $50 to $55 world we just stay focused on driving our costs, performance up and ultimately generating full-cycle returns to the bottom line. Since our company making acquisition of RKI in 2015. We've been working hard to get our balance sheetrock solid and then make the very significant turn to generate free cash flow, as Rick said, we are there now. This is a major milestone for WPX and we're incredibly proud of this achievement.

Now let's turn to slide 5 and talk about how we're creating value from our groundbreaking Pecos state project. On the 3rd quarter call. Last year I discuss the technical work we're doing in the Pecos state pad in Delaware you might recall I describe it as one of the most successful tests I've ever seen and creating real-time tangible value. Just to remind everyone on this Six-well pad, which included the Upper and Lower Wolfcamp A and the X, Y interval we utilized fiber optics, microseismic, chemical tracers, geophones and external temperature and pressure gauges, which allowed us to monitor the effectiveness of our stimulation in real-time and watch how the changes in the frac design impacted each perforation along the lateral, ultimately leading us to more effective frac designs. Also, we've continued to monitor the production of these wells to further understand the impacts of the design changes.

In the case of the well with the fiber optic cable, we're still continuously watching the pressure and temperature for every inch of that lateral. The learnings from this project have significantly contributed to 22% reduction in Delaware costs. We've also been able to apply some of the changes to the Williston Basin, the mine at Delaware, first two Williston pads, which have incorporated the learnings from the Pecos State to the Williston Basin. We've been able to lower well cost and improved early time production, I'll be talking more about the Minot Grady in more detail in a few slides. During the quarter, we took a 1,200-foot core in the Third Bone Spring interval in the Stateline. This now gives us over 2,000 feet of core in the Stateline from the base of the Second Bone Spring to the base of the Wolfcamp B. These cores are giving us invaluable data, which allows us to target, the optimal landing zones, development cadence, and horizontal and vertical spacing as we develop this vast world-class resource.

I should also point out that the improvements in world-cost and drilling times are not theoretical or projections. These are actual costs that includes drilling, completion, facilities, artificial lift as well as any trouble time with these wells experience. The drilling times are averages from spud to rig release and also included in the associated travel fund. This is not the best or just record wells, these are averages include all the wells for these periods. While these improvements are very impressive. We believe we have more to come in the coming quarters and years ahead.

Now, let's turn to slide 6, and we'll talk about the 2019 Delaware activity. This slide is a summary of our activity comparing the first half to the second half of the year. Remember, we entered the year with 7 rigs running in the Delaware and drop 2 rigs during the first quarter to average about 5.6 rigs for the first half of the year, the second half of the year, we will continue to hold 5 rigs flat. For the first half, we benefited from higher average rig count and efficiency gains and put 47 gross wells on first sales, we spread out our locations to better understand the inventory quality and to meet some CDC obligations. We also landed in eight different landing zones in the first half of the year, in the second half will be putting 31 gross wells on sales with over 2/3 of our of those in the core Stateline acreage position. With 100% of our sales coming from the 3rd Bone Spring or the Upper Wolfcamp.

The more focus second half of the year will yield more predictable development type activity and will also drive lower LOE costs by predictable and lower water costs. Let's turn to slide 7, and I'll discuss Delaware realizations. We've been publicly discussing the importance of our Midstream & Marketing strategy in the Delaware for 2 years and quietly working on it a year ahead of that. On the Second Quarter 2017 earnings call I presented in the slide titled, staying ahead and securing infrastructure in the Delaware, it's spelled out our basic strategy on oil, gas, and NGLs for the gathering regional and end markets, it didn't get much airtime on the call, but is the foundation of our price realizations today. Everything from our takeaway capacity, or excuse me take away Agreements with Atmos, WhiteWater, and Oryx to buy-sell agreements out of Midland and our Catalyst JV with Howard Energy Partners are all important components to a much bigger strategy to avoid bottlenecks and create value where we are able to identify pinch points in the system way ahead of the market.

As you can see in the realized prices we receive for oil and natural gas in the Delaware they both exceeded WTI and NYMEX for the quarter. On the oil side we receive $60.12 per barrel, including basis swaps as we mentioned on the previous call, our capacity on Gray Oak comes on later this year. It will allow us to get our barrels to Corpus Christi and realize international pricing, which could further enhance our oil realizations. Our realized natural gas price was $2.04, including basis swaps when you include the positive impact of commodity management of $0.95. Our total realized price for the quarter is $2.99. This is despite Waha gas being basically worthless during the quarter. The positive impact of commodity management relates to the physical hedge we have on our Atmos transport to offset the dedication to sell some of the gas into our Waha through February 1, 2020. Our excess transport on Atmos allows us to purchase gas at Waha prices and then ship that gas to receive Gulf Coast prices. Realizing 16, 3 in this environment is a pretty impressive print and reflects the hard work and forward-thinking of our Midstream & Marketing team we've created very significant value in the monetization of some of these assets and there is still creating value through superior price realizations going forward.

Now, let's turn to slide 8 and I'll provide some updates on the Williston Basin. Williston continues to exceed our own high expectations as I discussed on our last call, we slowed down our activity in the basin late in the first quarter due to some extreme weather and safety concerns related to that weather. I said at the time Williston will decline in the second quarter, but I was confident that it would quickly get back on track. As it's worked out, the team is significantly recovered in the second quarter production slow down and we'll show a very impressive rebound on the third quarter. I'm happy to report that we've met and continue to meet the North Dakota Industrial Commission gas capture rules every month since it's been in place, this year we've captured over 90% every month. As the NDIC ramps the gas capture requirements next year to 91%, we are confident in our ability to stay compliant and not be Production constraints. The mine not gradient sand pads are two recent examples of why my confidence regarding Williston getting back on track with so high.

Both of these pads are exceeding our initial type curve and the mine, not gradient HY. So the company daily production record of 5,862 barrels of oil equivalent per day, with nearly 5,000 of those barrels being oil. The mine not gradient the Wilston sand pads, the first wells, using the modified completion designs from the technical work we did in Pecos state pad in the Delaware. We continue to drive cost down, productivity up and this just old fashion value creation. Now let me turn to Kevin for his CFO update. Kev?

Kevin Vann -- Executive Vice President & Chief Financial Officer

Thank you, Clay. And thank you to your entire team for producing the results that are driving free cash flow, which enables us to accelerate return of value to our shareholders. From those of us here in TULSA to those in the field who are on the front line, making it happen every day to our Midstream & Marketing team who are leading the industry and optimizing the realized prices on what we produce and sell, you give me options that a lot of CFOs, don't have. The WPX team understands the need to execute in a disciplined fashion, always with an eye on value creation and being opportunistic when the markets give us the chance to do so.

That spirit of exploring for opportunities has really made us who we are today. From the timely entry into the Delaware to our Midstream partnership and our marketing strategy around our oil and gas. Now we are going to take advantage of an irrational market, as Rick indicated earlier, our leverage was at nearly 4.5 turns in 2016. Now our trajectory by the end of this year, puts us below 1.5 tonnes in 2016, where we're out spending our operating cash flows by nearly $200 million and our trajectory this year puts us at $100 million of cash flow above our capital spend, we as a company know how to take advantage of the market conditions and to manage the risks to continue this trajectory for years to come.

Now let's turn to slide 10. Our capital spending exactly where we communicated it would be halfway through the year, we had indicated initially that approximately 55% of our capital would occur in the first half of the year as we were transitioning from a higher rig count in 2018 to our current level. As you all know, our activity and spending is not a linear formula across every month of the year it can be a little higher or lower from month to month. Depending on how wells fall within that particular quarter. So for the full year, our capital guidance remains unchanged at $1.1 million to $1.275 billion. Further, we expect approximately $260 million to $275 million of the remaining activity to occur during the third quarter and $262 million to $270 million in the fourth.

Now as far as full-year production guidance, we expect full-year total production of 162,000 to 165000 barrels of oil equivalent per day, up from the original 149 to 161 per day or a 5% increase midpoint to midpoint. We are also raising our full-year oil guidance, production guidance. to 101 to 103 per day from the previous 96 to 100 per day. As Clay mentioned earlier, our third-quarter production is already trending materially above our initial expectations. As many of the wells that were completed late in the second quarter or early in July have come online. This level would moderate slightly as we get into the winter months.

Turning to slide 11 for the quarter, we are reporting oil production of nearly 98,000 barrels per day, which is 21% higher than the second quarter of last year. Both basins drove this increase from last year. However, our sequential quarterly growth from the first quarter was driven by the Delaware. Natural gas volumes were 35% higher than last year and were primarily driven by the Delaware and as Clay discussed our cash realizations on both oil and gas were industry-leading. Our second quarter NGL production was 46% higher, again driven by the Delaware, our realizations per barrel were impacted by higher than planned ethane recoveries, which also drove volumes.

For the second quarter, we are reporting an adjusted EBITDAX of $339 million which is $51 million higher in the second quarter of prior year. This increase is primarily driven by higher oil revenues with the higher volumes of the 21% increase we realized $99 million in higher oil Sales. However, with the quarter-over-quarter decrease in oil price revenues were negatively impacted by $55 million. Lease operating expenses were higher than last year, primarily resulting from higher volumes, but also from an increase in water handling costs as we drilled in some fairly remote areas in the Williston. In addition, we incurred some unplanned workover expenses related to electrical service interruptions in the Delaware.

For the quarter, we are reporting adjusted net income $37 million versus $23 million in 2018. The improvement was driven by the same factors impacting adjusted EBITDAX, however, our DD&A was $24 million higher than last year and was driven by our increased production volumes. Despite this absolute increase, our DD&A rate improved by a little over $2 per barrel, as we continue to drill, better wells at lower cost. Our capital expenditures incurred for the second quarter totaled $341 million versus $355 million last year. Our second quarter activity reflects a $42 million increase in process development activities primarily driven by the timing of 24 wells that went on first sales in July, which again is driving our current production rate as well as some Midstream spend that allows us to get ahead of our development activity in the back half of the year.

As I mentioned earlier, this is exactly where we thought we'd be on capital for the first six months of the year. From the CFO seat, we had a very solid quarter and were nearly cash flow positive for the period. As you think about our current production rate, the way we are executing operationally and how we are managing the commodity risk and optimizing our price realizations, it's hard not to be excited as we transition to generating excess cash flow and begin returning some of that back to our shareholders. Returning value to our shareholders starts with this repurchase program due to our view that buying our stock currently represent substantial value, but we will consider other forms of capital return in the future if we determine them to be effective methods of driving stockholder value. With that, I'll turn it back to Rick for some closing comments.

Richard Muncrief -- Chairman & Chief Executive Officer

Thank you, Kevin. I can't think of another time when WPX have been better position financially or strategically, we plan to remain opportunistic. We continue to shape of the company that is known for generating healthy margins, attractive returns and flexing our creative muscles. And you can see all of this in our discipline, our execution, how we protect pricing for our production and how we're returning capital to shareholders, ahead of schedule. WPX has never been content with the status quo and we never will, we've come this far by taking advantage of times where market conditions unwittingly worked in our favor. Where others see challenges we see opportunity, and it's how we keep creating value. At this time, we can open the lines for questions and I'll turn it back to the operator.

Questions and Answers:

Operator

[Operator Instructions]. The first question comes from the line of Asit Sen with Bank of America Merrill Lynch. You are now live .

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Thanks, good morning guys. I have one for, Clay. And then one for Rick. Clay, Williston Basin has been somewhat lumpy this year as we think about 2020 should we expect a much more level loaded program and also any early thoughts on completion cadence in Delaware next year?

Clay Gaspar -- President & Chief Operating Officer

Yeah, so the lumpiness of Williston, it's interesting as you look back and I think our references all two or three quarters ago. If you look back part of the last 10 quarters WPX post a big gain one quarter, production gain and then there's kind of a mile gain the max. And then a big one and then a mile, we only had once that cadence fell out and we had to kind of mild gains. I think first, 4th quarter to first quarter. First to second because of the Williston slowdown in completion activity related some winter weather. If you take that one anomaly out you basically have a big quarter and then a quiet quarter in the background. Permian is just steadily increasing every quarter. Okay? Every quarter Williston comes in with a big splashy pad really drives the numbers and then it kind of is quiet the next quarter.

So I think what we're seeing in this quarter, we're talking about kind of a relatively mild quarter for second quarter for Williston big quarter in the 3rd, relatively mild quarter in the 4th. I think it stays at the same cadence. I think as long as we're running three rigs as long as we're drilling these super high-quality wells, that's just kind of what gives -- what Williston gives to the bottom line of the company. I'm sorry, your second question for me. Or there was a Part B of the first question?

Asit Sen -- Bank of America Merrill Lynch -- Analyst

No, it's a completion cadence in the Delaware for next year, you kind of answered that.

Clay Gaspar -- President & Chief Operating Officer

Okay. Yeah, on the Delaware side, it's kind of steady, you have the economies of scale five rigs running is probably relatively low-end of where we've been over the last 18 months. But even with that, we're steadily running one frac crew and then at times of spot second frac crew to kind of catch-up, but it's a little bit more predictable quarter-to-quarter.

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Great. So, Rick, you mentioned multiple times in the press release as well, if the market remains irrational, you will become more opportunistic. Could you elaborate your thoughts on the irrationality as you see it based on your track record your experience with multiple cycles, your conversation with current investors, what is the market missing in your mind?

Richard Muncrief -- Chairman & Chief Executive Officer

Well, I think your rationality in my mind is when we haven't reported a good quarter yet, but some of your peers report maybe some less than favorable results, and you see your equity trade down dramatically and when that happens time and time again, and there's really no basis for your performance to top of that, we think that sets up a great opportunity and for us, and so we will be rational in our thinking and address that. I think the market is missing several things. If you look at our oil growth we've actually doubled our oil growth in the Bakken in the Permian basins in the last 24 months, how we got execution has been top tier and then you think about the balance sheet improvement through the creativity of our teams here.

So I think that's just a bundle middle really lapse in judgment if you will, market and I don't want to be overly harsh, but we just think it sets us up really nicely, and so we're prepared to take full advantage of that.

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Thanks, I appreciate the color.

Operator

Your next question comes from the line of Derrick Whitfield with Stifel. Your line is open.

Derrick Whitfield -- Stifel -- Analyst

Good morning all. And congrats on your strong quarter and update.

David Sullivan -- Director of Investor Relations

Thank you.

Derrick Whitfield -- Stifel -- Analyst

Perhaps for Clay, I know you referenced steady growth for the Delaware in your earlier comments just now. However, when I think about slide 6, to me it would seem fair to say that your capital efficiency should materially improve in the second half as you completions shift to more oil prolific formations in the 3rd Bone Spring and Upper Wolfcamp intervals. Is that a fair assumption?

Clay Gaspar -- President & Chief Operating Officer

Yes, Derrick. [Indecipherable] Somebody else on this call? I would say -- I was talking about it's kind of a little bit more historic in the prior question, thinking about kind of the big quarter, quiet quarter cadence that we've had, that's really on the Williston side. Permian is nice and steady quarter to quarter, every quarter it's improved short of one. I think for the first quarter this year. I think you will see that continue to ramp two things are happening in the Delaware, one what you're talking about the quality of the assets. Moving more development right in the middle of Stateline.

The second thing is, we're benefiting from a flatter base decline in both Williston and in Permian, especially in the Permian side, as we've seen this tremendous growth that Rick just reference. Obviously, the flip side of that is a significant base decline. That's not a bad thing is just kind of a factual basis of the shape of the type curve of these kind of wells from resource plays. But what happens in year two and year three is these things materially flatten you're building off of flatter base decline and so your growth continues to improve year-over-year right along with your capital efficiency from drilling these better and better wells, so yeah, I'm very bullish on where we're headed on the Delaware side.

Derrick Whitfield -- Stifel -- Analyst

That's helpful. And then staying on the Delaware. Given the increased attention on spacing and parent-child issues. How would you characterize your approach to co-development in the second half ?

Clay Gaspar -- President & Chief Operating Officer

Yeah, we are unwavering in our opinion that co-development is the right approach. I'd say all of our peers are at different stages. I think we are probably a little further along than most we've I'll reference back Section 22 that we talked about and that must have been two and half years ago that we were talking about the first fully developed spacing test we've tested tight we've tested loose on purpose. We have tested places where it's going to be type tighter spacing, you have to cross the line to know where the line is we're not ashamed to say that.

What we're chasing now and really excited about with the amazing amount of inventory we have. You can think about things like not just maximizing PV-10 because you may get more inventory, but you may push yourself into lower returning wells, but pushing that into higher returning wells. Thinking about the spacing that really drives significant bottom line, full cycle returns of the corporate bottom line. So in today's commodity price with that kind of value creation mindset things continue to evolve on the contrary to that is decreasing well cost, sand costs, all these things very significant components, but we think are most important is the number of landing zones, the thickness of the interval. The timing in which the revisits happen because you can't develop all of this in one visit, if you wait too long to come back that well interference from the prior test can negatively impact your second visit.

So we're very thoughtful about that as well. Much more to come on this, but we're excited about our understanding and how we're driving value to the bottom line in an amazing amount of quality inventory.

Derrick Whitfield -- Stifel -- Analyst

Very helpful. Thanks for your comments.

Operator

Your next question comes from the line of Mike Kelly with Seaport. Your line is open.

Mike Kelly -- Seaport Global -- Analyst

Good morning guys. Good quarter. Rick, I was hoping to kind of check in on your 2020 priorities. So just open maybe you could discuss the strategy heading into next year. Maybe just give us an idea, a ballpark idea, how are you thinking about growth and in general, activity levels? Thanks.

Richard Muncrief -- Chairman & Chief Executive Officer

You bet, Mike, I think that growth is still going to be important. We're going to be working on our finalized 2020 plan every year. We have a strategy session in September with our Board and we pressure test over assumptions, we try to stay current on all the data that we can get our hands on in all the perspectives. We can get our hands on and then we'll be ready to roll out toward year-end A final 2020 plan. But we think that growth is still very important. We think that generating free cash is very important.

So those really are the two foundational things if you from a platform perspective, if you think about it that way. We want to make sure that we maintain a strong balance sheet. And so I think as we look at the second half and Clay and Kevin to talk about our result. A lot of momentum in the second half of this year and I think it's going to really bode well for 2020 and so we feel really, really nice about how it's setting up for us.

Mike Kelly -- Seaport Global -- Analyst

Great. I appreciate that. If I flip over the Bakken, Clay, just be curious and your thoughts here. I think last year the market may be concerned that your North Sunday Island wells while spectacular, we're going to be repeatable going to answer the call here at the state Minot sand looking as good, if not better, just curious on if you think that's kind of the new base case going forward. If you have running room and inventory that could look as good as what you put up this quarter. Thank you.

Clay Gaspar -- President & Chief Operating Officer

Thanks, Mike. I know it's a set of question and Rick give me the eye, we've had this call for this question on this call. A number of times over the years, how far are we going to push our type curve for Williston, we're going to hold this as a million barrel mark that we have today, we think in type curves as kind of the next couple of years or so of inventory. What we can repeatedly deliver and knowing that stuff happens. We have operational upsets the reality of weather whatever comes our way, we want to be able to make sure we can deliver, for that.

I am as excited as anyone else on the well performance. There is some real questions as we stepped away from the North Sunday Island epicenter of the Williston Basin. Can we continue to deliver these well results? The team has stepped up the completion guys have been very creative as I mentioned, we're bringing in ideas, we're not ashamed to look across-the-fence and learn from our peers, we look from other basins anything and everything is fair game. Therefore, the performance has been great, also point out that's sub $7 million well cost fully baked on the reservation, a lot of my peers are kind of thrown in the towel and don't want to fight the good fight to work on the reservation. I think that is pretty industry-leading. So we're pretty excited about where we're at, I think it's repeatable going forward I would still hesitate to shift your type curve up to any group of wells, subset of wells, but we hope to continue to consistently deliver and beat on our type curve expectations.

Mike Kelly -- Seaport Global -- Analyst

All right. Appreciate it. guys

Clay Gaspar -- President & Chief Operating Officer

Thanks, Mike.

Operator

Your next question comes from the line of Brian Downey with Citigroup. Your line is open.

Brian Downey -- Citigroup -- Analyst

Good morning. Nice quarter. Thanks for taking the questions. I noticed on slide 5. The Delaware well, costs are down 22% from 2018 average levels, which I believe is a 5% greater decline than was shown in the last quarter's Dec. Could you give any additional color on what's driving that incremental cost decrease and any additional runway, you see on efficiencies in well cost reductions throughout the rest of this year?

Clay Gaspar -- President & Chief Operating Officer

Yeah, happy to talk about it. Again that's a two-mile lateral including drilling completions, facilities, artificial lift. And if this is look back numbers either actual so includes any kind of issues. We might have had with well sometimes industry tends to talk in if everything goes right we could drill a well for that, that, that. This does not this kind of, well, this is look back numbers. That 22% I think the stimulation design is a big component of it, changes we've made, won't go into the details, give all of our secrets away, but I can tell you some of the design changes that we've made. We are effectively stimulating the entire lateral and doing it in a much more efficient cost-effective manner, that's the real trick of the trade.

I also point out the bottom right of the slide shows our improvement in drilling times. Drilling is directly -- the drilling cost is directly proportional to the drilling time. So we tend to use that as a proxy for efficiently getting the well placed in the right position safely and if we can do that in a quick manner. We're usually money ahead. The drilling team has done a phenomenal job. And again, it's not just a best of a one-off well. Our drill manager here is a repeatable consistent results kind of guy and he wants to see that average move down consistently over time and I think that's the right approach. I think you see it yield in the results in these kind of look back numbers, more to come on that, by the way.

Brian Downey -- Citigroup -- Analyst

Got it. And then going back to slide 6 and then Dec Prior co-development question I would Delaware first sales activity concentrated in the Upper Wolfcamp during the second half of the year. Directionally, how should we think about that mix shift shifting into 2020 if any?

Clay Gaspar -- President & Chief Operating Officer

I think we will. I mean Stateline let's just be honest. That is, are the epicenter of our activity, the addition of the third Bone Spring inventory as that inventory matures and learn more about landing zones we've tested at least two landing zones in the Third Bone Spring Sand. Excuse me, in the Third Bone Spring line today we've both have been very productive, both have had very competitive individual well returns with the best of the Wolfcamp A. So that's very encouraging for us. What we don't know yet, we're working on is how many ultimate landing zones that we have. What's the spacing for it, how do we go into co-develop? We have a very, very good, strong belief that this is an independent flow unit from the Upper Wolfcamp.

So what that means is we can go in and individually -- independently develop that and not feel obligated to at the same time as the Wolfcamp A. It's very important because we want to go in with five rigs, we're kind of having to take basically a small of bites as we can sometimes to as many as five or six wells. Hit that with the rig, the rig out way gets completion crew in, get those wells online and then bring the rig back in and do it again with the third Bone Spring as it matures and really falls into the full development. You will have another ability to go in and then plow that down for huge reproductive again, bottom line full-cycle returns.

Brian Downey -- Citigroup -- Analyst

Great. I appreciate the color. Thanks everyone.

Clay Gaspar -- President & Chief Operating Officer

Thanks.

Operator

Your next question comes from the line of Brian Singer with Goldman Sachs. Your line is open.

Brian Singer -- Goldman Sachs -- Analyst

Thank you. Good morning

Kevin Vann -- Executive Vice President & Chief Financial Officer

Brian.

Brian Singer -- Goldman Sachs -- Analyst

Question on the free cash flow and how that relates to the pace of share repurchase as we go forward into next year, do you expect to fund the share repurchase solely from free cash flow. And if you don't see it you would wait on the buyback or would you use the recently strengthened balance sheet from asset sales, as are you willing to use that in part in addition to free cash flow to meet the buyback expectations?

Kevin Vann -- Executive Vice President & Chief Financial Officer

Hey, Brian, this is Kevin. The buyback will primarily be funded by our free cash flow. I think as you think about the timing of working capital changes in the back half of this year with crude settlements kind of later in the month. You may see a little bit from time to time. He is a little bit of the revolver in order to be able to do so, but the intent is we're going to be using our free cash flow in order to buy back those shares.

And as you Project into 2020. I think if you were to look at the consensus this most of the consensus estimates out there are projecting pretty good free cash flow from our portfolio next year, obviously, as Rick mentioned, we still have some work to do with our Board and then our September strategy session about what 2020 actually looks like. But with the portfolio that we have and the trajectory that we're on. the well results that we're seeing most of the program is really just going to be funded with our free cash flow.

I think as we mentioned earlier. Whenever we did our Oryx monetization in our WhiteWater monetizations of our equity investments there that might accelerate and really what this does -- what this did was it created that kind of balance sheet support as we were projecting our leverage for the balance of this year and our leverage for next year to be able to do so. And the one thing you will see is, as we start to buy back in the shares. We're going to adjust our hedge book in order to, again, it's, Clay mentioned we plan at 50 strips, a little bit above 50 and we can maintain a really, really healthy balance sheet profile with a little bit of additional hedges as we start executing on this program.

Brian Singer -- Goldman Sachs -- Analyst

Great, thanks. And then my follow-up is, you highlighted the disconnect that you see in terms of how the market and how investors are looking at WPX are you seeing a disconnect elsewhere in an asset or corporate level that would peak your interest from a consolidation perspective or is the buyback here a signal that you're solely focused on the free cash flow and buyback capabilities WPX?

Richard Muncrief -- Chairman & Chief Executive Officer

Yeah, Brian, I think our priority and I answered this question on the last quarterly call, we're focused on sells right now we've got when the asset you have better than anybody else that's what's given us the the campus do what we're doing. You see Crude price hanging in there pretty well and yet you see the equity valuations just totally disconnecting from that. And that gives us the confidence to do what we're doing and you're right, I think you're seeing some of the multiple compression in companies and the sector is really overdone. I think.

And so, while there may be some things out there that look kind of interesting. The bottom line is, we're really focused on ourselves. And I can tell you if you could be part of the conversation Clay and his team having with some of our neighbors Delaware on putting these two-mile units together we have checkerboard positions and the return enhancements we see from that. That's really where more of our priority is right now.

Brian Singer -- Goldman Sachs -- Analyst

Thank you.

Richard Muncrief -- Chairman & Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Neal Dingman, with SunTrust. Your line is open.

Neal Dingman -- SunTrust -- Analyst

Morning guys, good details today. My question maybe Rick for you to acquire, even Kevin, when you guys think about these days, the Pad size versus tied up, I'm just wondering how you view that versus tying up the capital and potential efficiency behind that. I mean there is obviously a couple of ways to think about that. I'm just wondering, you've kind of test a bit different, but I'm just wondering how you think about if you would even venture to even a larger size pad these days.

Richard Muncrief -- Chairman & Chief Executive Officer

Neal, I think it's an interesting balance. We have a guy in our organization as titles Director of subsurface for the Delaware Basin and his world is every day trying to crack that code and optimize that scenario. Sometimes we've given him five rigs to run with and sometimes is seven and sometimes it's more than that, but I think balancing land requirements, making sure we check all of those boxes, understanding the different parts of our geography, we still have some kind of parts of the basin that are a little bit further removed in the Stateline. We have to understand those and figure out when they fall into to the mix.

And then thinking about the flow units and very importantly, not partially developing a flow unit and leaving a negative path behind you if you know what I mean. If we so just develop the Upper Wolfcamp A plow it down and then you come back in a year later and trying to do the Lower Wolfcamp A just what it is not there anymore you have ruined that interval. So that's, that's a big part of the motivation, as I mentioned earlier, we're trying to kind of take the minimum bite that we can in a kind of a vertical slice.

So we might hit an X, Y, upper A, Lower A even a B sometimes those would be four wells and then gives us get that rig or two out of the way and then go in and complete them, and they come back in 6 months later. Do it again and again and again. As we scale up rigs over time years from now we'll be able to take bigger bites, I think you have more cost efficiency each mode that you avoid is as efficiency gain, the efficiencies of being able to scale the completions, given that frac crew on location and completing more wells your facilities efficiencies come along with that, but then there is an other side of that coin where if you bring on too many wells at one time they requirement for facilities and pipe and infrastructure can be incredibly big and that can kind of get to be the flip side of efficiency and actually cost you more in the end.

So there's kind of a sweet spot in there. I would say anywhere from three rigs, or excuse me three wells to 10 wells per visit, probably as we see it today is the right approach per visit and then importantly, you've got to get back to a pretty quick Kevin, that's it for a year or 2 before you go back, you will have some really, really bad awareness when you come back to visit.

Neal Dingman -- SunTrust -- Analyst

It's great details and that leads me to sort of related follow-up, you mentioned about sort of pushing the boundaries when it comes to spacing and it sounds like just on the, which you just telling me here, you sort of have done the same now is it pertains to formation so are you sort of at the point now that you feel good or are you going to continue to sort of push those boundaries a bit more, or are you already there and it's going to be more pure developmental when you look at sort of 2020 and beyond?

Richard Muncrief -- Chairman & Chief Executive Officer

We are moving to more and more full development mode. Now, on your first point do we have the final recipe on exact spacing and how many wells and all that stuff. Neal. Because what happens as soon as you get a $5 shift or $10 shift in commodity price everything changes, well cost changes, local sand versus importing sand, everything changes and so we very attuned to that and we are self-aware enough to know that we're never going to have the final answer. We're always working toward that right approach but it's a bit elusive and you never quite reach it.

But I'm really proud of the work that the team has done the core that we've taken the project that we've taken the spacing tests that we have in the ground and we've been able to watch for a couple of years, there is nothing like empirical data to tell you what really works and what really doesn't. And so all of that is a very incredibly important for us to work toward that the right, quote right solutions.

Neal Dingman -- SunTrust -- Analyst

Great details. And I guess keep up the good work.

David Sullivan -- Director of Investor Relations

Thanks, Neal.

Operator

Your next question comes from the line of Brad Heffern with RBC. Your line is open.

Brad Heffern -- RBC Capital Markets. -- Analyst

Hey, good morning everyone. Question on Midstream. So I think in the past you've talked about the success that you've had has led to potential partners coming to you with new opportunities that you might have not seen before. I'm curious if you're still seeing that kind of activity. If you think that Midstream Investment is attractive at this point or if the repurchase program sort of supersede that?

Richard Muncrief -- Chairman & Chief Executive Officer

Yeah, Brad. I think the questions have evolved. But the questions keep coming. Everything from exporting oil along the Gulf Coast, how that functionally works, where does the oil go? We're in those conversations. Now, let me be clear, we're not building ports on our own or anything along those lines, but it's interesting and very humbling to have some of these super majors and other world leaders in that space call up our little WPX and what our opinion on some of that.

So, very flattered to be part of those conversations and always have an eye for how do we create value for our own shareholders in those conversations. We went all the way back up to, right in the middle of Stateline and in the heart of the basin, the water discussions are fast and furious.

You can bet we have calls had a call yesterday, just inquiring about what our plans are and we're very opportunistic, we watch these things and look for how do we create the most value at the same time most importantly, protect that upstream E&P business because you could do something really flashy and cash in some money on one of these deals and really live to regret it quarter after quarter after quarter. If that counterpart is not performing. So we're pretty selective in those kind of marriage type proposals, but we're always looking to creative and very, very proud of how we see what others may perceive as challenges as opportunities to create incremental value.

Yeah. Brad all this Rick. I think that it's just a capital allocation decision and that's my job, I think is, is to try to work with Clay and Kevin and the team is on what is the best capital allocation decisions, we can make an and so we are seeing those opportunities and we have to be very thoughtful. We now have the share repurchase, which when you look at what our NAV is we feel like our NAV value is to where we're trading at today. That's a pretty good slam dunk of an investment, I think.

And so that Versus some of these so wonderful Delaware and Bakken returns we're seeing our wells versus some of the Midstream equity investments that we've made that we've done very, very well. So the opportunity still come your way. We'll try to do the best we can being great capital allocator.

Brad Heffern -- RBC Capital Markets. -- Analyst

Okay, thanks for that. And then sort of along the same lines, you mentioned the water. But just how should we think about the plan going forward for the Midstream assets that you already have, including the Howard JV and so on. Are we going to see more monetizations like we saw in 2019 or how are you thinking about that?

Clay Gaspar -- President & Chief Operating Officer

We are going to be very, very thoughtful it's we'll watch the market we think in a lot of ways, or Midstream asset and portfolio is still a little bit immature and, but we also know that from time to time Monetization is the right way to go. And so once again, we'll try to make the right decisions when is the right time to monetize and if it is right to monetize it. And so we will keep you posted.

Brad Heffern -- RBC Capital Markets. -- Analyst

Okay, thank you.

Operator

Your next question comes from the line of Betty Jiang with Credit Suisse. Your line is open.

Betty Jiang -- Credit Suisse -- Analyst

Good morning. I have a question on 2020. So given the well cost savings you're seeing today and generally doing more with less equipment. If you maintain at the current eight rig pace. Do you think you can do the same well activity with the lower year-on-year capex next year?

Richard Muncrief -- Chairman & Chief Executive Officer

I think we could because if you think, Betty. The first half of the year, we did have some higher well cost. We had some obligations I believe on some sand purchases such that if you walked away there a pedal a bit those sorts of arrangements will be expired. So I think your assumption, right same level of rig count, you'd probably see less D&C capex.

Betty Jiang -- Credit Suisse -- Analyst

Great, thanks. And then just broadly on 2020 planning. I know it's early days, but high-level perspective, are you solving for are you part as some adequate level of free cash flow or than adequate level of production growth with free cash flow Morris and output?

Kevin Vann -- Executive Vice President & Chief Financial Officer

This is Kevin any we're still in the early phases. But I think first and foremost, we're focused on returning free cash flow or optimizing our free cash flow with an eye on how much production growth is the right amount of production growth given the kind of threading of the needle between how much free cash flow we can generate with -- and I only will talk about rig count, it's more as you just asked. It's more about the efficiencies that we're getting out of how much free cash flow given the reduction in capital that we're seeing coming on a per well basis.

So that's really -- I think where we start is it's free cash flow. It's the capital efficiency that's driven by the well results and then kind of what's the resulting production growth. And we comfortable with that production growth.

Betty Jiang -- Credit Suisse -- Analyst

Got it. Thanks for that. If I may. Squeeze one more in on Clay, I know probably not an issue for WPX but on the Bakken gas infrastructure constraint in the basin. Could you give any comment around that?

Clay Gaspar -- President & Chief Operating Officer

Thanks for the question Betty I'm real proud of what the team has done. We worked very hard on this. We do have the advantage of being very high oil cuts nearly 85% on our end of the Williston Basin that works in our favor, but we worked very hard with our Midstream gathers. We have worked very closely with the NDIC to make sure we understand the rules we explore every option and how we can possibly meet those gas capture rules. As I mentioned in my prepared remarks, we've met that every month. Very proud of that.

We continue to do so and will continue to do so going forward, there are challenges out there when gas price is the way it is in the Williston Basin the midstream providers are often. There is no financial motivation for them to lay additional lines every now and then you have right away constraints or other challenges like that and so it's really a big deal for the Williston Basin. I think the NDIC has worked very well with industry, but also have some very strong opinions rightfully so about not wasting resources. We share those opinions and I think we've done a very admirable job of being able to meet that month after month and now, year after year.

Betty Jiang -- Credit Suisse -- Analyst

Great, thank you for that.

Operator

Your next question comes from the line of Leo Mariani with KeyBanc. Your line is open.

Leo Mariani -- KeyBanc -- Analyst

Hey guys, just a question sort of surrounding that the thinking with the buyback here. Obviously, that the buyback is opportunistic, but can certainly involve a fair bit of capital and consume a lot of free cash flow over time. Do you guys see the buyback is kind of delaying a potential dividend announcement and then additionally, does the buyback also potentially obviate sort of earlier discussion about maybe adding a rig in 2020?

Kevin Vann -- Executive Vice President & Chief Financial Officer

I think you're right, it is, we are being as opportunistic as we can. I don't know if it really delays the implementation of a dividend. I think what it is, as we look at returning -- we are committed to returning value to shareholders. We have the portfolio, the debt and now we're starting to generate the free cash flow. That gives us the options in order to be able to do it. And as I said in my seat and then I look at what's the best return -- what's the best mechanism to return value to shareholders.

Right now with kind of the irrational trading that we're seeing in the upstream equities as in particular the way we've traded against a strict mentioned our NAV. That is the best opportunity here. That's the best mechanism to return shareholder value now. It doesn't take dividends out of my out of the toolbox for us. I think it's just a matter of, as we start thinking about over the next couple of years. How are we going to returning value to shareholders, we needed tool in our toolbox and we're going to be opportunistic as we think about that. Free cash flow and how to get it back to the shareholders.

Clay Gaspar -- President & Chief Operating Officer

Yeah, I'll just add some Kevin. It's an evolution, right, because the first thing was we needed to pay down our debt. That was our first quarter paying back to shareholders was driving debt down, that was a massive focus for us over the last couple of years, we feel like we have, -- if not checked that box. We're well on our way to moving from one five down toward 1.0 and net debt to EBITDAX.

I think the dividend conversation is really that sustainability to the point that. Okay. We are ready to commit to this for the very foreseeable future. And the point that we can continue to increase that dividend over time and all the things you'd like to see and to be honest. We're just not there today, it's not -- we're not at the point where we can, where you ready to commit to that. I think in the face of having the dividend or excuse me, the buyback opportunity we do we see that as a better opportunity. And then once the dividends come into focus we will move that direction as well.

Leo Mariani -- KeyBanc -- Analyst

Okay, that's helpful. And I guess just a follow-up here. Obviously , you guys talked about better oil price realizations when Gray Oak comes online later here in the 4th quarter. Can you guys give a ballpark of obviously some price benefit beginning of a ballpark of how much you could see GPNT for BOE go up when that comes on?

Kevin Vann -- Executive Vice President & Chief Financial Officer

Wat's that number about? When Gray Oak outcomes on what's the increase in GPNT on that one?

Clay Gaspar -- President & Chief Operating Officer

Oh, it's probably somewhere around $015 $0.20?

Kevin Vann -- Executive Vice President & Chief Financial Officer

Yeah, pretty negligible. We will see that added on to the Williston.

Leo Mariani -- KeyBanc -- Analyst

Okay, thank you very much.

Clay Gaspar -- President & Chief Operating Officer

Just an important point on that is when we get up and run and obviously, we're getting that to Corpus that's tying those barrels to Brent pricing international pricing, and so now you're really that cost is much more outweighed by the benefit of seeing international prices.

Leo Mariani -- KeyBanc -- Analyst

Okay, helpful. Thank you.

Operator

Your next question comes from the line of Kashy Harrison with Simons Energy. Your line is open.

Kashy Harrison -- Simmons Energy -- Analyst

Good morning and congratulations on getting to the point where you can begin returning capital to shareholders.

Clay Gaspar -- President & Chief Operating Officer

Thank you.

Kevin Vann -- Executive Vice President & Chief Financial Officer

Thank you.

Kashy Harrison -- Simmons Energy -- Analyst

So. And maybe one for Clay and Kevin you highlight the Delaware well costs I think tracking maybe around $9.5 million for Two Mile lateral Williston, it looks like it's tracking sub $7 Million, when you take those lower well costs into consideration, when you take your base declines exiting 2019 and consideration which I imagine should be lower on a year-over-year basis. I was just wondering if you could help us think through that DNC maintenance capex level to hold the 2019 Q4 exit rate flat through next year.

Clay Gaspar -- President & Chief Operating Officer

Yeah, I anticipated. The maintenance capital question and it's one of those tricky numbers, Kashy. It's a, how do you -- you're talking about oil talking about BOE, and how do you manage that, here's the way I'll answer it and it's kind of a high-level sense for us to maintain essentially the same ratio of rig counts that we're doing today, same gas-oil ratio, the same kind of mix in general and to -- when we think about maintenance capital fourth quarter to exit kind of flat that's probably $800 million or $900 million to get that point.

Kashy Harrison -- Simmons Energy -- Analyst

Excellent. And then, that's very helpful and then building upon if your earlier questions. I know that it's very highly dependent on in quite frankly, an enormous amount of variables, but I was wondering if you could just walk us through as you stand today. How you think about your base case horizontal spacing assumptions on average for an integral, how you think about the optimal vertical spacing, how you think about the number of landing zones, all of that that could be economically developed within call it a $50 to $55 environment, and then maybe as well as -- I think you made an earlier comment about how you think about that Maximum time lag between the parents in the enfolds wells before you run the risk that you're going to start to see degradation in the infill wells.

Kevin Vann -- Executive Vice President & Chief Financial Officer

All right. Kashy. I realize that was a follow-up question sub-point A to Z. I'll try and I'll try to level if you ask. As we think about in today's environment $55 the optimal spacing, let's just start in Stateline itself Wolfcamp at the Upper Wolfcamp. So let's Upper A Lower A X, Y and sometimes B wherever that flow unit is that's probably four landing zone, two to four landing zones depending on where you're at in the area. Now, it's an interesting -- I mentioned the number of landing zones one because it was your question. And then two, it affects how tight you can drill as well.

If you have three landing zones versus two, that definitely impacts how many wells you can cram in on a horizontal sense, when we are driving for higher returns and making sure that we're yielding enough meat on the bone to get all the way through to full-cycle returns. I think we're probably as few as four wells per landing zones, maybe as six wells per landing zones probably in that range for each one of those. So four times four is 16, six times four is 24 for that would kind of be your range.

Richard Muncrief -- Chairman & Chief Executive Officer

Wells that we land in the upper Wolfcamp A and so different ways to talk about that in a kind of bird's eye view but it depends on landing zones and individual well thickness and obviously the well -- or the reservoir parameters like permeability come into play as well.

Kashy Harrison -- Simmons Energy -- Analyst

Got it. And you would still have incremental landing zones associated with the I imagine with the 3rd Bone?

Clay Gaspar -- President & Chief Operating Officer

Yeah. Whole another full unit. And like I said earlier, we are holding back on saying just because we don't know yet how many landing zones and well spacing in regards there but I hope that it shapes up something similar to the upper Wolfcamp A to meet the individual well results the thickness that we see. Interestingly, it has more natural frac barriers in that formation. So you'll be able to better control some of the stimulation. But it's too early to kind of nail that went down.

Kashy Harrison -- Simmons Energy -- Analyst

All right, thank you.

Clay Gaspar -- President & Chief Operating Officer

And don't forget about the the zones below the B as well. We still have C&D that has lots of opportunity. It just has a higher gas Cup that will, that will come to us in.

Unidentified Participant

Got it. Thank you.

Operator

Your next question comes from the line of Irene Haas with Imperial Capital. Your line is open?

Irene, you might be on mute.

Irene.

Irene, your line is open.

David Sullivan -- Director of Investor Relations

Let's go to the next caller.

Operator

Your next question comes from the line of Gabe Daoud from Cowen. Your line is open.

David Sullivan -- Director of Investor Relations

Next caller.

Kevin Vann -- Executive Vice President & Chief Financial Officer

Gabe are you there? Next caller.

David Sullivan -- Director of Investor Relations

Next caller please.

Operator

Your next question comes from the line of Jeff Grampp with Northland Capital Markets. Your line is open.

Jeff Grampp -- Northland Capital Markets -- Analyst

The last man standing. I guess I appreciate.

Clay Gaspar -- President & Chief Operating Officer

Everybody else has moved on until the [Speech Overlap]

Jeff Grampp -- Northland Capital Markets -- Analyst

I appreciate you guys squeezing me and I'll just leave it at that one kind of philosophical one here out for you guys on the buyback, Rick, you mentioned in the release, you don't want this to impact your ability to grow in 2020. But just kind of curious how you guys kind of settled in. Why is the $400 million kind of the right number to put out today and how you guys may be balanced any conversations internally on, did you -- were there any conversion I guess on scaling back growth and doing a larger buyback program. Given the opportunity in your stock here?

Richard Muncrief -- Chairman & Chief Executive Officer

You know, the buyback is something that we've contemplated for quite some time. This is not just something that came about in the last 10 days. We've discussed this option will there more for quite some time. We always felt like that to do it. You needed to be in that plus or minus 10% of your total outstanding shares to make it meaningful for shareholders and it was -- we ended up getting there and so we went ahead and thought it was the right time to implement the program especially with some of the recent performance we just we hate to keep beating the bare horse, but the behavior of we call rational it just seems like a perfect setup for us to step in and once again make a just a really good fundamental investment in buying ourselves.

Clay Gaspar -- President & Chief Operating Officer

As far as upsizing. I think it's much too early for that we're just, we'll see how this first tranche goes over the next 24 months.

Richard Muncrief -- Chairman & Chief Executive Officer

Yeah. And I think if you look at, again, if you look at our projected kind of consensus estimates free cash flows over the next 24 months and you think about $400 million. That's not, that's not a bite that's too big for our balance sheet. I did mention that we were going to as we buy back in this shares in order to protect the balance sheet that there is still a little bit more hedging but again $400 million over two years.

It was really pretty commensurate with the amount of free cash flows. We have the opportunity to generate and still give a pretty good growth profile to create more cash flows as we think about thousand and 2021 and beyond.

Jeff Grampp -- Northland Capital Markets -- Analyst

Got it, understood great details, guys, thanks.

Richard Muncrief -- Chairman & Chief Executive Officer

Thank you.

Operator

Your final question comes from the line of Gail Nicholson with Stephens. Your line is open.

Gail Nicholson -- Stephens -- Analyst

Good morning, thanks for setting me up. I just wanted to ask you, your thoughts about ethane rejection versus recovery in the second half of '19 you have a unique situation with your flexibility and optionality with the [Indecipherable] facilities and I just kind of curious how you guys are thinking about ethane?

Clay Gaspar -- President & Chief Operating Officer

Thanks for the question. Gail, it's a very dynamic market. I can tell you a situation that happen was within the last week, the issues happened down in Baytown. I think it was maybe mid-week evening by within 12 hours of that we had already talked to our partners at Howard, we have already made changes of the plan. We're already switching to ethane rejection in the face of a crashing ethane market. That's a pretty unique ability for an E&P company to be able to control and have a say in that real-time.

So we will continue to move with the market. We're very thoughtful about, staying ahead obviously [Indecipherable] gas prices working hard on the NGLs as well. It's just, it's a little more difficult market to kind of -- down because it's so dynamic. We'll continue to watch it. I don't have any strong predictions on where ethane prices are headed. But I can tell you, we'll continue to watch it as quickly as real-time and make appropriate changes to stay in line for the best value creation.

Gail Nicholson -- Stephens -- Analyst

Great. And then just going back to the kind of comments you guys you made in regards to optimal landing zone post the core data analysis that you did, when you look back at the landing zone before core data versus post-core data you know what percent of wells were being landed optimally prior to the core data being done?

Clay Gaspar -- President & Chief Operating Officer

It's a great question . It's a -- sometimes this core data you're moving the landing zone 10 or 15 or 20 feet. So it's not like you're going from two landing zones to three or your shifting feed into a really a different interval sometimes what we're trying to do is push that landing zone, so you getting the energy of the frac to breakthrough frac barrier and make sure you're accessing part of the reservoir. Other times you're trying to distance yourselves from that frac barrier so it remains an effective frac barrier and you're able to keep that frac constrained.

So I would say it's more about fine-tuning. It's kind of like the ultimate frac design, you're never fully there and then once you figure it out for one drilling spacing unit you move over a couple of miles and it changes again. So we have a really good core of that core is able to tie back to the logs we're part of a consortium, in the area. So we share information with other operators learns from that information. We have a very robust framework structure all the geologic data. So we're able to move kind of around the field and understand if we learn something here. How does it apply two to five to 10 miles away? So it's pretty dynamic.

I would say, very few are landed perfectly just like your completion design, very few are ever perfect. You're always in search of that perfection and always trying to continue to move toward it, but this incredibly important data helps us get closer every day.

Gail Nicholson -- Stephens -- Analyst

Great, thank you so much.

David Sullivan -- Director of Investor Relations

Thanks Gail.

Operator

There are no further question at this time, I will now turn the call back over to Mr. Rick Muncrief.

Richard Muncrief -- Chairman & Chief Executive Officer

Thank you, operator and thanks to those that are still on the call today, we appreciate the opportunity to spend time with you today. We're excited about our future. We had a wonderful quarter. And we're going to have a strong second half and I think it really sets us up for a nice 2020 . So thanks again. Have a a great day.

Operator

[Operator Closing Remarks].

Duration: 72 minutes

Call participants:

David Sullivan -- Director of Investor Relations

Richard Muncrief -- Chairman & Chief Executive Officer

Clay Gaspar -- President & Chief Operating Officer

Kevin Vann -- Executive Vice President & Chief Financial Officer

Asit Sen -- Bank of America Merrill Lynch -- Analyst

Derrick Whitfield -- Stifel -- Analyst

Mike Kelly -- Seaport Global -- Analyst

Brian Downey -- Citigroup -- Analyst

Brian Singer -- Goldman Sachs -- Analyst

Neal Dingman -- SunTrust -- Analyst

Brad Heffern -- RBC Capital Markets. -- Analyst

Betty Jiang -- Credit Suisse -- Analyst

Leo Mariani -- KeyBanc -- Analyst

Kashy Harrison -- Simmons Energy -- Analyst

Unidentified Participant

Jeff Grampp -- Northland Capital Markets -- Analyst

Gail Nicholson -- Stephens -- Analyst


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