Good day, ladies and gentlemen, and welcome to the Q2 2017 Bonanza Creek Energy Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded.

I would like to introduce your host for today's conference, Mr. James Edwards, Director of Investor Relations.

Sir?.

Thank you, Vince. Good morning, everyone, and welcome to Bonanza Creek's second quarter 2017 earnings conference call and webcast.

On the call this morning I'm joined by Seth Bullock Interim CEO; Scott Fenoglio, Senior Vice President of Finance and Planning, Principal Financial Officer; Curt Moore, Senior Vice President of Land and Dean Tinsley, Vice President of Operations and Engineering.

Yesterday evening, we issued our earnings press release posted the new investor presentation and filed our 10-Q with the SEC. All of which can be accessed on the Investor Relations section of our website. Some of the slides in the investor presentation will be referenced this morning during our prepared remarks.

Please be aware that our remarks will include forward-looking statements that are subject to many risks and uncertainties that could cause actual results to differ materially from the projections in these forward-looking statements. You should read our full disclosures as described in our 10-Q, 10-K and other SEC filings.

Also, during this call, we will refer to certain non-GAAP financial measures because we believe they are good metrics to use in evaluating performance. Reconciliations of these measures are most directly comparable GAAP measures are contained in our earnings release.

We'll start the call with prepared remarks and provide time at the end for Q&A, during one hour call. Now, it is my pleasure this morning to introduce Seth Bullock, Interim CEO..

Great. Thanks, James. Good morning, everyone. And thank you for joining us for our second quarter earnings call. As previously announced I'm a Managing Director with Alvarez & Marsal and have been named the Interim CEO at Bonanza Creek as the Board of Directors proceeds with its search for a permanent CEO.

Before handing the call over to Dean and Scott for their respective operational and financial updates. I would like to take a minute to discuss the company's recent emergence from bankruptcy, my role here at the company and some of the strategic goals the new Board of Directors have set in motion for the organization.

As many of you know, the company recently emerged from Chapter 11 bankruptcy, which resulted in the equitization of $850 million of unsecured debt.

A $208 million equity rights offering and a restructured oil purchase contract that effectively halved the company's DJ Basin oil differentials, will also dramatically reducing our minimum volume commitments. Upon emergence on April 28, the company announced a new board that included six independent directors.

The board has quickly oriented itself with the new company and focused its intention first on approving a 2017 budget, which would allow the company to restart its drilling and completion activities.

Dean will take more about the details of the program in his operational remarks, but I'm happy to announce that the company recently completed its first four DUC wells and spud its first well of the 2017 program on July 28th. The focus of the 2017 capital plan is quite simple.

One; to dramatically accelerate our use and learning's from proven leading edge completion techniques. Two; to apply these techniques across our acreage and three; to secure and delineate our French Lake acreage. In each case the decision making process has been driven by expected project returns.

This is resulted in a program that we believe will provide substantial returns and significant growth potential. Concurrent with its approval of the 2017 capital plan, the board accepted the resignation of Richard Carty and engaged me to serve as Interim CEO.

As part of my engagement, I along with the team of colleagues from A&M have been tasked for finding areas to streamline the company and reduce its cost structure. Although cost reduction efforts remain ongoing we've recently implemented a reduction in force that lowered the expected annualized run rate of cash G&A to approximately $30 million.

And this compares to recurring cash G&A of approximately $45 million in 2016. We are now focused on additional non-payroll G&A and LOE reductions with the intent of creating a lean company that is structured to thrive in a lower commodity price environment. As previously announced the board is continuing its search for a permanent CEO.

The board recognizes this can be achieved through a traditional search or an acquisition or combination with a third-party. As such, the board is embarking on dual paths.

One it engaged [indiscernible] in executive search firm to identify and review CEO candidates and two, it is simultaneously pursuing strategic opportunities that could also result in sourcing permanent leadership.

The board has taken no preference to a specific path at this point, but wants to ensure all opportunities are being explored to place a strong CEO.

Given the confidential nature in variety of outcomes these processes could yield, we will not be providing any additional information or commenting further regarding this topic during the Q&A session of the call.

Before turning the call to Dean for his operational update, I want to offer my observations as a newly seated Interim CEO in restructuring professional. I've been very encouraged by how quickly and effectively the board and employees have worked together to mobilize and restart the business.

I think this organization has been able to accomplish a tremendous amount in a short period of time, in setting the groundwork to be a nimble company that is able to adapt and thrive in the current oil and gas price environment.

And I personally want to thank Bonanza Creek's employees for their continued hard work and resilience through the process of restructuring and emergence. With that I'm going to hand the call over to Dean to speak to our operational program and the items the organization is testing the field to maximize, our well performance.

Dean?.

Thanks, Seth. Good morning, everyone. My name is Dean Tinsley. I'm the VP of Operations and Engineering here at Bonanza Creek. As Seth mentioned, I'll be focusing a majority of my comments this morning on our 2017 program. Our execution thus far and key learning's we hope to achieve from the program.

Before I dive into that detail, I wanted to quickly touch on our performance from the second quarter. Our production for the quarter averaged approximately 16,000 barrels of oil equivalent per day within our guidance range and all of our cash operating expenses have decreased on both a sequential and year-over-year basis.

Our team has worked diligently since the downturn to find areas where cost could be cut, without sacrificing health, safety or the environment.

While we've reduced our absolute LOE expenses by over 40% over the past two years, we will continue to be laser focused on improving our per BOE expenses until we're recognized as a top tier operator in the DJ Basin. As was mentioned in our release last evening, we recently commenced our drilling and completion program within the last month.

The aim of our program is to quickly ascertain the improved potential of our acreage given enhancements in both drilling and completion technology. The company has not been drilling and completing wells since the first quarter of 2016.

In the 18-month period following the companies idled activity, great progress has been made by our peers with regard to drilling and completions, which has resulted in significantly enhanced well performance. We plan to close this gap very quickly by applying these techniques on every well that we drill or participate in this year.

On Slide 14, we have laid out a quick history of our completion design iterations over the years. As you can see, we have moved our designs to double the amount of proppant per lateral foot and have decreased the stage facing by over half.

Our operated wells in 2017 also incorporate what we call enhanced recovery flow back, which chokes the wells to keep the down-hole pressures for longer. These techniques are aimed at enhancing overall recoveries and increasing oil cuts. But in doing so, they do delay peak production rates by a number of months.

We now expect our wells to hit peak production around the fifth month. Though we don't have significant data yet to confirm the impact of our most recent designs, we are very encouraged by the uplift to offset operators, are experiencing testing similar designs.

Our plan to test completion designs doesn't stop with the most recent iteration in our 2017 program. As a company, we will continue to leverage proven industry leading technology and [indiscernible] learning from each of our wells to shape our ever evolving understanding of how a reservoir performs.

By thriving to remain the leading edge of drilling and completion design, we can ensure that we're maximizing well performance for our current and future drilling inventory. These performance enhancements could be incredibly powerful levers with regard to unlocking shareholder value.

On Slide 13 of the investor presentation, you can see that we plan to drill and/or complete four multi-well pads on the western portion of our acreage. And eight single XRL appraisal wells in our French Lake acreage. All of these wells, which will be completed in 2017 and through the first quarter of 2018, will involve increased completion intensity.

As you can see on the map, our 2017 operated program is focused on the western portion of our legacy acreage, where we can make the most use of our Rocky Mountain infrastructure assets.

To bolster our winnings on enhanced completion designs throughout our acreage areas, we plan to participate in approximately 18 non-operated enhanced completion wells.

By dedicating our entire program to these various forms of enhanced completion design, we hope to quickly ascertain the improved potential of our acreage using the leading edge of current technology. As we look to maximize our returns, finding ways to constantly maximize our well performance will always remain a critical part of our program.

And again, we will continue to strive to be on the leading edge of industry design. It is worth noting on this slide, that a majority of our completions will not occur until the fourth quarter of 2017 and into 2018. This means that the late 2017 program will have little impact on 2017 production.

This also means that our assessment of well performance regarding the higher intensity completions will be ongoing through the first half of 2018. We will carefully monitor the early data from this program and as well as activity of offset operators. And this information will help inform our 2018 capital planning.

As of today, our company generated the data is limited to the first 30 days or so of production on our recently completed DUCs, as shown on pad one of the slide.

This pad [indiscernible] 2,000 pounds of sand per lateral foot and 100-foot stage spacing and we do not expect to see peak production rates for sometime due to our enhanced recovery flow-back protocol. Moving to another important value opportunity for our company in 2017, I would like to direct you to Slide 15 to discuss our French Lake acreage.

As many of you know, we purchased this acreage in the back half of 2014 and are very excited to now have the opportunity to pursue the development of this promising greenfield area. Our French Lake program contemplates eight initial XRL wells to be drilled and completed, again using our preferred leading edge drilling and completion designs.

It is important to note that our acreage position in this area is in a checkerboard pattern and we're working collaboratively with offset operator to develop this field using long laterals.

By drilling and completing these initial wells in French Lake we will have largely satisfied our remaining at risk [indiscernible] and essentially held our entire core Wattenberg position by production as well as gain a valuable insight into the reservoir performance of our French Lake acreage.

After completion of this initial program, we intend to engage with the offset operator to design and structure a comprehensive development agreement around the upstream and midstream development attributes.

This acreage presents a very unique and exciting opportunity and that it adds very light prior development, thus providing a clean slate to engage with the offset operator to design a multi-year comprehensive development plan.

As the last portion of my prepared remarks this morning, I want to thank all of our employees who I know are excited to be drilling and completing again for their energy, professionalism and resiliency. I look forward to the results from our 2017 program and the opportunity those results may unlock as we move into a normal operating environment.

I will now turn the call over to Scott Fenoglio for the financial update..

Thank you, Dean and good morning. I'll keep my comments brief this morning regarding our financials. As Seth mentioned at the beginning of the call, our recently restructured balance sheet is free of debt and we had cash on hand at the end of the quarter.

We emerged from bankruptcy at the end of April and qualified for the adoption of fresh-start accounting beginning with this second quarter of 10Q [ph]. The adoption of fresh-start accounting may make the comparisons of financials with prior period difficult especially on a per share basis.

We provided a few non-GAAP tables in the press release to assist with the more typical year-over-year comparisons. We expect our 2017 program to be funded with cash on the balance sheet and cash flow from operations.

Upon emergence from bankruptcy we negotiated in exit facility which gives us access to $192 million borrowing base that has a redetermination holiday until the spring of 2018. This borrowing base along with the cash on hand gives us liquidity of approximately $245 million and clearly puts us in a strong position financially.

As we look into the out years of our operating program, we want to ensure we retain that financial strength. As such, we positioned to scale our development to tie closely to our balance sheet, ensuring ample liquidity and low leverage metrics. As a measure to help protect our cash flows and keep our balance sheet in check.

We've recently reinitiated our hedging program. the initial oil hedges we put in place were cashless collars that had an average forward price of $41 per barrel and a ceiling of $52 per barrel. A complete summary of these hedges is included in the appendix to our investor presentation.

These initial hedged volumes will help protect some of the cash flow harvested from our production through the end of April, 2019. As our drilling and completion program continues, we plan to methodically [indiscernible] hedges to lock-in returns from new drill projects and keep a meaningful percentage of our PDP hedge for both oil and gas.

With that, I'll turn the call to the operator to begin the Q&A session..

[Operator Instructions] our first question is from David Beard of Coker Palmer. Your line is open..

I was hoping you can talk a little bit about your I guess philosophy about out spending especially looking into 2018 and 2019.

How much would you tolerate or not? Or would you just plan on spending within cash flow? And then the correlated question, how much leeway would a new CEO have to vary from that philosophy relative to where the board sits now?.

Hi, David this is Scott Fenoglio. I'd be happy to answer that. We'll certainly be considering any leverage and outspend as we develop the 2018 capital budget that's the process I expect the new CEO to be heavily involved, so their input will be crucial to that.

We haven't set any metrics right now, as we don't have that [indiscernible] yield in place and we want to give them the leeway to be part of that decision making..

Okay, no that's helpful. And then maybe a bit on the ground question.

Just help me understand a little bit about gathering system sort of required to service your anticipated drilling program and just maybe comment on line pressures in new drilling area?.

Hi, David. This is Dean Tinsley. Yes we're fully equipped from an infrastructure standpoint to support the 2017 program and beyond. With our RMI assets in place, we're well positioned from a line pressure standpoint given our line pressure is running at 50 to 75 pound range and give us the best opportunity for well performance to be optimal..

Okay, that's great. Appreciate the color. Thanks for your time..

[Operator Instructions] I see no other questions in queue. I'll turn it to Mr. Bullock for closing remarks..

Thanks Vince. Thank you again to everyone for joining our call this morning. I hope you found it informative. As you can tell from a call there are lot of things in motion right now with Bonanza Creek.

All of the aim of maximizing value for shareholders, the company as you heard is aggressively moving to enhance corporate returns both through pushing the limits of completion design to maximize well performance and also continuing to drive down its call structure.

And the board is also swiftly moving to see a permanent CEO and we look forward to sharing results from these various initiatives over the coming quarters. So thanks again..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program. you may now disconnect. Everyone have a great day..