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Whiting Petroleum Corp  (NYSE:WLL)
Q4 2018 Earnings Conference Call
Feb. 27, 2019, 11:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning, my name is Keith, and I will be your conference facilitator today. Welcome everyone to the Whiting Petroleum Corporation Fourth Quarter 2018 Financial and Operating Results Conference Call. The call will be limited to 45 minutes, including Q&A. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. (Operator Instructions) Please limit your questions to one question and one follow-up.

I'll now turn the call over to Eric Hagen, Whiting's Senior Vice President of Investor Relations.

Eric Hagen -- Vice President of Investor Relations.

Thank you very much, Keith. Good morning, and welcome to Whiting Petroleum Corporation's fourth quarter 2018 earnings conference call. On the call with me is Whiting's Chairman, President and CEO, Brad Holly; CFO, Mike Stevens; our newly arrived COO, Chip Rimer; Chief Corporate Development and Strategy Officer, Tim Sulser; and Senior Vice President of Engineering, Pete Hagist. During the call, we'll review our results for the fourth quarter 2018 and then discuss the outlook for full year 2019.

This conference call is being recorded, and will also be available on our website at www.whiting.com. To access the presentation slide, please click on the Investor Relations box on the menu, and then click on the Presentations and Events link.

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 from those in the forward-looking statements.

Additional information concerning these risks is set forth on slide number two, and in our earnings release. Our Form 10-K for the year ended December 31, 2018 is expected to be filed later today.

And with that, I'll turn the call over to our Chairman, President and Chief Executive Officer. Brad Holly.

Brad Holly -- Chairman, President and Chief Executive Officer

Thank you, Eric. I would like to start off by thanking the Whiting team for their hard work in 2018. We achieved five major goals during the year. The first goal was introducing a compelling business strategy for unconventional resource development. We are one of the first mid cap E&Ps to adopt a strategic plan that focused on free cash flow over growth.

Our second goal was to get the right leadership team in place. We made breakthrough progress in strengthening our executive team in 2018, which I will detail shortly.

Goal number three was to deliver material free cash flow. In 2018, we generated $280 million of free cash flow. This includes the fourth quarter, where we generated $19 million of free cash flow, despite numerous challenges. Whiting's free cash flow, power is what separates us from our peers and allows us to compete for capital in any industry.

Goal number four was to pay down debt. During the year, we reduced debt and other long-term liabilities by $100 million. And finally, goal number five was to increase top tier inventory. In the Williston Basin, we added or upgraded over 450 gross locations that span our properties.

An issue I want to address directly is our 2018 capital spend. High quality, high rate of return, non-op spending came in higher than projected in the fourth quarter and our own activity ran ahead of schedule. Also, infrastructure spending escalated during the second half of the year, as we expanded our Ray gas plant. We conducted an extensive after action review and have strengthened our capital planning process. Capital discipline is a top priority in 2019, and we will rigorously pursue executing on our guidance.

I want to discuss an important achievement in 2018. The reorganization of Whiting's field operations into three highly performing asset teams, and Whiting's senior leadership structure into four executive pillars of responsibility. Great businesses are built by great people working together in a environment of shared values. Our priority was to establish a new business strategy that focused on value creation as measured by capital efficiency and free cash flow. To execute on this strategy, our next endeavor was to establish a culture that prizes communication and innovation.

We reorganized our field operations into high performing interconnected asset teams during the first half of 2018. The results have been excellent as seen in multiple projects highlighted in our corporate presentation.

Next, we search for the strongest executive talent across the industry to create four pillars of responsibility across our business functions. We completed this process in late 2018. COO, Chip Rimer recently joined the team to lead our operations Division. This includes Operations, Engineering, Environmental Health and Safety and Land. Chip brings 35 years of operations experience coupled with an incredible work ethic, a passion for safety and genuine care for people.

CFO, Mike Stevens, our longest-serving executive leads our Financial Division, which includes marketing and IT. Mike brings a wealth of experience, about the Whiting culture and has navigated some challenging financial times as CFO.

Chief Strategy Officer, Tim Sulser joined in September of last year and leads our Strategy and Planning Division, which includes planning, business development and exploration. Tim began his career in Reservoir Engineering and understands the importance of Tier 1 rock. He also has a deep understanding of the opportunities in the Williston Basin from his experience in banking and as a successful private operator.

It is my job to lead all the divisions by creating a thriving corporate culture and ensuring that we are all working together to create value for our shareholders.

We are also excited to welcome several new leaders who recently joined the team. Shane Fross, serves as our new Senior Vice President of Operations. He has a passion for his people and a track record of delivering industry-leading results in the field.

Kevin Kelly joined as our new Vice President of Marketing. He will provide the fundamental analysis to underpin our marketing strategy and enhance our risk management.

Jason Finch joins us as Vice President of Planning. He brings a detailed planning framework to Whiting's free cash flow driven business model.

Brad Marvin joined as Vice President of Business Development. He will further strengthen our ability to optimize the value of our portfolio.

And finally, Chris Edwards joined as Vice President of Exploration. He is excited by the potential of Whiting's unparalleled technical database in the Williston Basin and its industry leading geotechnical staff.

In summary, if we get the right people on the bus and in the right seats, we can move the Company from good to great. Our new organizational structure and enhanced leadership team positions Whiting to deliver even better performance as we unleash the full potential of our strong asset base and the talented people in our organization.

I want to end my prepared remarks by celebrating the achievements of our asset teams in 2018. The teams are pumping some of the most innovative and effective completions in the Bakken, as they execute on a proprietary development process. This has revolutionized thinking about what constitutes best practices in the Williston Basin, and significantly expands the resource potential of the play. We highlight several of these in our corporate presentation. These include our Northern team's success in the Cassandra area. Whiting's Periot wells are delivering core type results and outperforming competitor wells that utilize similar profit levels.

In our Eastern area, we drilled infilled wells across multiple projects that are significantly outperforming the parent wells. Not to be outdone, our Southern team completed the four wells Stenehjem pad in the southern Hidden Bench area using Generation 5.0 completions.

Our previously disclosed Mallow and Loken wells in the area were tremendous, but the Stenehjem wells are outperforming them. This is what we mean by optimized or rightsize completions. The way we are placing the profit is driving superior results. We believe we are creating more stimulated surface area within the target intervals. These process innovations are a big part of why Whiting's inventory continues to expand and why Whiting is a leader in capital efficiency and free cash flow.

With that, I will hand off to Mike Stevens to review the quarter and our 2019 outlook.

Mike Stevens -- Chief Financial Officer

Thanks, Brad. Oil production in the fourth quarter grew 3%, consistent with our expectations. Gas and NGL volumes were impacted the equivalent of 5,000 BOEs a day due to gathering delays and a gas processing outage.

In aggregate, cash costs were generally in line with expectations as lower than guidance G&A per BOE and production tax helped offset slightly higher LOE per BOE, stemming from the curtailed gas volumes. DD&A per BOE remained strong. Bakken differential spiked dramatically in December, which resulted in higher than anticipated oil differentials. Natural gas differentials and NGL pricing were relatively strong, driven by seasonal demand.

Bakken realizations have improved significantly from fourth quarter levels and we believe they will stay in this range throughout the year. In 2019, we're pursuing a program similar to 2018 in terms of capital spend and activity levels. When you back out Redtail, the Williston Basin is expected to post strong 11% growth driven by capital efficiency similar to 2018.

Oil growth is expected to be even stronger at 15% and our oil volumes as a percentage of total volumes are expected to remain consistent at 67%, primarily because we are drilling in areas like Sanish with a higher oil percentage. As a reminder, we have elected to run Redtail for maximum free cash flow, rather than diluting corporate level capital efficiency by investing their chase growth.

When we elected to keep the Redtail field, we expected to exit Q4 '18 at 15,000 BOEs per day. The Redtail team worked hard to shallow the decline and due to their efforts Redtail exited the year more than 2000 BOEs per day above our initial estimate. Redtail volumes are expected to decline 45% in 2019 and exit Q4 '19 at 9,800 BOEs a day.

We plan to continue investing in infrastructure in 2019. This increases flexibility and marketing and products in order to avoid -- and marketing our products in order to avoid third party operator bottlenecks like we experienced throughout 2018. Also, these types of investments can typically be monetized at attractive multiples as we've done in the past.

We forecast that corporate LOE, DD&A, G&A per BOE and production tax should be at similar levels to 2018. I'd like to spend a minute on our Williston Basin versus Redtail cost structure. We forecast Redtail will average 9800 BOEs per day in the fourth quarter of 2019, which represents approximately 8% of total volumes versus Redtail averaging 14% of volumes in Q4 '18.

Redtail deficiency payments added a $1.47 to our oil differential in Q4 '18. Redtail LOE is $8 per BOE versus $6.80 in the Bakken. In other words, as we progressed through 2019 and into 2020, the full growth potential and cash flow power of our Williston Basin assets should become evident.

I'd like to finish by elaborating on what Brad said about our teams. Whiting is not focused solely on free cash flow generation. We are also a resource discover in the Williston Basin, new approaches to development pioneered by our asset teams have created significant development opportunities for Whiting.

In 2018, we could see these results in our project in southern Hidden Bench, North Polar and the McNamara project at Sanish. In 2019, we should have results from about one new initiative each quarter. This quarter, we highlighted Cassandra. As the year progresses, we will see results from Wildrose in the North, Foreman Butte in the South and Pod 9 in the East. Whiting is leading the way in expanding the Bakken core.

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

Questions and Answers:

Operator

Yes. Thank you. We will now begin the question-and-answer session. (Operator Instructions). And the first question comes from Neal Dingmann with SunTrust.

Neal Dingmann -- SunTrust -- Analyst

Good morning, guys. Brad, my first question for you. The team just -- philosophically, how do you think about just as far as free cash flow versus growth do you sort of envision both of those working in conjunction, as you all continue to accelerate or given what prices do and do you have to focus on one versus the other?

Brad Holly -- Chairman, President and Chief Executive Officer

Sure Neal, that's something that we debate all the time and we're clearly focused on free cash flow generation. Our -- capital efficiency and value creation is our top priority, and we will grow and continue to generate free cash flow to the extent that we can remain -- maintain that strong capital efficiency and high returns.

Neal Dingmann -- SunTrust -- Analyst

Very good. And then just secondly in the release, you speak about converting some of your acreage to core -- to the core areas. Will you continue to -- my question is really going forward, will this continue to be a focus on delineation like this, or will your Bakken program become more virtually all developmental soon?

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah, great question, Neal. I think our philosophy, even up to a year ago was that the Halo would expand in the Bakken, that it had been contracted just due to low commodity prices, and as we stepped out in these areas, we saw really good subsurface geologic features and mapping, and we really felt like Generation 4.0 and now 5.0 completions could unlock those areas. Everywhere that we've stepped out so far, we've seen very positive results, very positive results versus the parent wells, very positive results versus offset wells from older generations. And so we're very excited about what we're seeing in all the areas that we've tested so far and we feel like that those areas that we used to call Tier 2, have kind of moved into our core development areas.

Neal Dingmann -- SunTrust -- Analyst

Okay. And then, just like to sneak one last one, and just on weather on the recent update, if that had any impact? Thank you, all.

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah. I'm going to let Chip Rimer take that one.

Chip Rimer -- Chief Operating Officer

Yeah, Neal. Yeah, the average temperature in February had been about minus 6 degrees, in fact, Brad and I were up there in minus 34 degrees just earlier this month. And I'll tell you, I'm astonished and amazed at how our folks up there work our operations, though, I've seen very little to no impact. These guys -- it hasn't been their first rodeo on having low temperatures.

Neal Dingmann -- SunTrust -- Analyst

Thank you, all

Operator

Thank you. And the next question comes from Jeffrey Campbell with Tuohy Brothers Investment Research.

Jeffrey Campbell -- Tuohy Brothers Investment Research. -- Analyst

Good morning. First question, thinking of slide 10, and also taking in the Redtail decline that you detailed in the call. What do you expect to corporate decline to be in 2019 and what might that slow to in 2020?

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah. The corporate -- let's hand off to Jason Finch, our Vice President of Planning.

Jason Finch -- Vice President of planning

Yeah, thanks, Jeffrey. Corporate decline -- the corporate decline overall in 2019 is going to be really roughly flat overall. We have seen about GDP(ph)we're looking at 36% roughly. You can see in slide 10 there, that's really competitive versus our peer group and it's something that helps us generate higher -- part of what helps us generate a higher free cash flow potential throughout the year in the future.

Jeffrey Campbell -- Tuohy Brothers Investment Research. -- Analyst

And sort of to that point, it sounds like 2019 is going to be the big year of decline in Redtail, and then that's going to taper off after 2019. Is that fair?

Jason Finch -- Vice President of planning

Yeah, that is fair. We do see quite a decline and Redtail. The teams out there are working really hard on minimizing that decline, we see just under 40% probably as we look at that and and we're optimistic on what we can do out there. But as we get into 2020 that levels out, come up wedge(ph)well that we put on in 2018, it still becomes much lesser than influence, I'm going to focus on the value that we can create in the Williston Basin.

Jeffrey Campbell -- Tuohy Brothers Investment Research. -- Analyst

Okay, right. That's helpful. And then my other question was just, we're starting to -- by the way, I meant to compliment you on the increased transparency of these slides, slide 15, 17 and 21, with all the detail on CapEx in the various areas, it's really helpful. We're starting to see more Gen 5 sneaking up in the slides. So I was just wondering, is that a completion that's levered to certain specific production areas or is that going to probably become the new norm for most future completions?

Chip Rimer -- Chief Operating Officer

Yeah. Hi Jeffrey, this is Chip Rimer. Yeah. I see, this is a potential optimization going forward. As we continue to tweak with our completions, we're looking for capital efficiency and value creation. So this is not a -- this is a not a story that's just one recipe. It is another(ph)one thing that we do across the board, we're going to use it by area by area and zone-by-zone. We're going to achieve that through, what I would call a multi-step process with multi-disciplined teams working together.

You look at it -- it's looking at -- you're looking at technology, models, we're putting all it together and then you're creating, you look at data that you're receiving and then you're tweaking it. And so as you do that you're creating and generating capital efficiency that separates us from others. And if I think about it, our flexibility to be able to do that, our culture of innovation, what we have here in technology, and the history and knowledge we have these basins really allows us to create that value and met that success.

Jeffrey Campbell -- Tuohy Brothers Investment Research. -- Analyst

All right. Well, I think the uplift in the Tier 2 areas is really pretty remarkable. So keep up the good work.

Eric Hagen -- Vice President of Investor Relations.

Let's just follow up on Chip's answer, it's Eric and just (multiple speakers) slide 16 as well, where you can see that we're outperforming our peers in the same geological footprint using -- these are actually Generation 4 fracs. We're using similar amounts of profit that are getting better results. So I think that's a really good evidence of the effectiveness of our ompletion methodology, Jeff. And thanks for the compliments on the presentation. Appreciate it.

Jeffrey Campbell -- Tuohy Brothers Investment Research. -- Analyst

You Bet. Thank you.

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah. This is Brad. We're trying to build a internal philosophy that we never get a cookie cutter approach. And so we're not after a Gen 5 secret sauce, what we're after is using technology and innovation and continuing to prove. So we know we can always get better and that we're trying to drive that improvement in every -- every time we invest capital dollars in these wells. We're trying to drive that to get improved efficiency.

Operator

Thank you. And the next question comes from Leo Mariani with KeyBanc.

Leo Mariani -- KeyBanc -- Analyst

Hey guys. Just wanted to follow up little bit on the the Wildrose area. I guess, you guys indicated this could be a catalyst for the next release. Where you guys at there? I guess, I thought you guys were kind of fracking some wells there kind of late in 2018. If any update, you can kind of share in terms of where you're at on progress there?

Mike Stevens -- Chief Financial Officer

Yeah. I appreciate the question. Yeah, the wells are performing very well at there right now. But it's look -- it's pretty early. We just started putting the wells on back, just prior to the first of the year. So give us a little more time and we'll give you more updates as we go.

Leo Mariani -- KeyBanc -- Analyst

Okay, that's helpful. And I guess just clearly you guys have a belief that you're having success in terms of expanding the core, the play and converting some of these Tier 2 areas to Tier 1. If I heard you right, I think you guys said that largely all the step outs in the past year or so have kind of been successful with the new frac technology. And I guess the question would be is as you guys have success there, is the plan to kind of continued to pick up new acreage in those areas? And what's kind of the availability of that acreage over the next year or so, and what's Whiting's appetite for that?

Tim Sulser -- Chief Corporate Development and Strategy Officer

Yeah. Leo, this is Tim Sulser and we're absolutely focused on the Bakken, and in that value creation in the -- as the play continues to expand. So we will certainly look at opportunities to increase our footprint. I think, I'd also mentioned on the Gen 4 and 5 completion techniques. It's also important to understand that the core of our play will continue to improve as well. As we mentioned in our call that, we've added or high graded about 450 locations. So it's again those Gen 4 completions and Gen 5 completions and really that rightsizing completion will continue to make our highest quality acreage even better too, so.

Leo Mariani -- KeyBanc -- Analyst

Okay. And I guess any thoughts around kind of picking up new acreage in some of these areas, where you're having success on the step-ups?

Tim Sulser -- Chief Corporate Development and Strategy Officer

Yes. We're continuing to look and continue to try to expand our footprint at the right -- at the right cost.

Leo Mariani -- KeyBanc -- Analyst

Okay. And I guess can you guys also just discuss kind of production cadence in 2019, certainly, it looks like your pop schedule is much more weighted away(ph)from the first quarter. I mean, should we just assume that kind of production growth in the Bakken kind of follows the pop schedule in 2019, where maybe you don't really have any growth in 1Q, and it really kind of starts in 2Q. How do we think about that as the year progresses?

Mike Stevens -- Chief Financial Officer

I think you are going to see production pretty flat as we start. But you're right, those pops will make the difference. And I think you'll see a little bit more production in Q2 and Q3. That is correct.

Leo Mariani -- KeyBanc -- Analyst

Okay. Thank you.

Operator

Thank you. And the next question comes from John Freeman with Raymond James.

John Freeman -- Raymond James -- Analyst

Hi guys. When I am looking at the '19 plan and obviously the considerable uplift you're all seeing from the Gen 5 completions. Can you just give sort of a ballpark kind of estimate on what percentage of the planned completed wells in '19 would be Gen 5 completions?

Chip Rimer -- Chief Operating Officer

Yeah. This is Chip Rimer. Thanks for the question. Yeah, I think, majority of them will Gen 5, of course, like I said before, we're always trying to grow and tweak aand we'll continue to look at every area that we work in, depending on zones or areas to get the best value out of our wells

John Freeman -- Raymond James -- Analyst

Okay. And I guess, if I combine, I guess that question on sort of the productivity uplift you're seeing on the Gen 5 with the details that you all give on slide 14 in terms of some of the efficiency targets on the cost side, are those already embedded in the 19 guidance?

Chip Rimer -- Chief Operating Officer

Yes. Yeah, they are already embedded.

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah, John, they're in there. So we think about -- we think about unlocking the oil that's in the rock. But it's also about how well that you can execute your programs. And we're very proud of what the teams did, as you can see, we're comparing ourselves head-to-head against the average in North Dakota. And you could see what we did in '18 and then we got targets out there that we are counting on the teams to deliver in 2019.

Mike Stevens -- Chief Financial Officer

I would say on the completion targets, Brad we also have drilling targets. So across the whole operations, we have targets, such as like these KPIs.

John Freeman -- Raymond James -- Analyst

Thanks, guys. And then if I was just following up on Neil's question earlier, when we think about like the way you layout your strategic vision on slide three, is there like a long-term sort of a debt or leverage target that you all think about?

Mike Stevens -- Chief Financial Officer

Yeah. There is. We want to get leverage down below 2 times. We feel more comfortable down at 1.5 times. I think in absolute debt terms, we've talked about it before, but we'd like to move our debt from $2.8 million down to closer $2 billion by(ph)the time.

John Freeman -- Raymond James -- Analyst

Great. Thanks, guys.

Mike Stevens -- Chief Financial Officer

John, we think about the free cash flow generation as paying down debt and pursuing Bakken bolt-ons if they make sense as Tim said. So in the absence of really high quality upgrades,(ph)paying down debt is our priority.

John Freeman -- Raymond James -- Analyst

Got it. Understood.

Operator

Thank you. And the next question comes from Tim Rezvan with Oppenheimer.

Tim Rezvan -- Oppenheimer -- Analyst

Good morning, folks, and thank you for taking my question. I appreciate all the operational color that you provided, but on the strategy side, investors seem to have taken a pretty negative view of the 2019 outlook as it relates to kind of maintenance CapEx on upstream and midstream intensity. So Brad, I just wonder if you could kind of explain why the Board thought this was the best approach for 2019, and if at all thoughts on curtailments impacted your plants?

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah. Tim, great question. I appreciate it. I think what we're seeing, what you're seeing is really the power of our Bakken potential here. Little bit being overshadowed by an asset that is very oily that we're not investing any dollars in this year. So we've got the Redtail asset coming down in the 40%. And so that's masking really nice overall growth in the Bakken.

So if you look at that healthy growth, we're growing oil even faster than we're growing the overall Bakken, but double-digit production growth inside of free cash flow is something that we think is very attractive and we're just really trying to drive at that high capital efficiency as indicated by attractive rate of return and free cash flow generation. So the amount of growth versus free cash flow is an output of achieving our highest capital efficiency and returns.

Tim Rezvan -- Oppenheimer -- Analyst

Okay. Okay. And then just to clarify, third-party gathering processing issues, was that at all factored in the budget?

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah. Tim in 2018, we saw over two months of downtime with third-party gas takeaway issues at various plants and we had to overcome that quarter-over-quarter by moving our operations around by moving our delivery points around and it's a real advantage of having a large footprint over the entire Bakken, because we can move rigs and completions and pops around to try to take advantage of where the existing infrastructure is today, but we really felt like it was strategic to try to control our own destiny. And so that's why we went to work on expanding our Ray gas plant where we could control that. And so we've got a much bigger focus on '19 on the gathering side and the delivery side to try to be able to control more of our destiny moving forward.

Tim Rezvan -- Oppenheimer -- Analyst

Okay. Thank you for that. And then just a follow-up, I know Mike mentioned monetizing the midstream is something you'll look for. How much of that factor in kind of given that, call it $90 million of midstream CapEx, weighs on the free cash flow generation and exacerbates the deleveraging process, How much is that in the back of your mind maybe once you get volumes through that system?

Mike Stevens -- Chief Financial Officer

Well, we've got to invest to keep the gas flowing. That's number one. We don't -- we don't want to add to the debt levels obviously, we want to pay them down. So it's all kind of a -- kind of a balancing act. But for right now, we need to invest a little bit in the infrastructure to keep the volumes moving and comply with the North Dakota requirements.

Tim Rezvan -- Oppenheimer -- Analyst

Okay. And then thinking about 2020, do you see similar investment needs going forward or is this really a one-time spend for medium-term growth?

Brad Holly -- Chairman, President and Chief Executive Officer

To date, Tim, we don't see a lot of that in 2020. We think this is our opportunity in 2019. There is some substantial infrastructure that we need to put in, but there's a lot of gas takeaway capacity that ourselves and others are putting in 2019, and we think this sets us up really nicely for 2020.

Tim Rezvan -- Oppenheimer -- Analyst

Thanks so much.

Operator

Thank you. And the next question comes from Gail Nicholson with Stephens.

Gail Nicholson -- Stephens -- Analyst

Good morning. I was just wondering if you could provide some thoughts on the Sanish infrastructure project, you guys are doing this year, and then the benefits post the completion of the project?

Brad Holly -- Chairman, President and Chief Executive Officer

Gail, Sorry, was that in Sanish?

Gail Nicholson -- Stephens -- Analyst

Yeah.

Brad Holly -- Chairman, President and Chief Executive Officer

(inaudible)

Chip Rimer -- Chief Operating Officer

Yeah. We're working with our midstream provider and we're doing some looping allowing us more access to the plants. This is what we're doing right now Gail. This is Chip Rimer.

Gail Nicholson -- Stephens -- Analyst

Okay, great. And then looking at the presentation on slide 25, you guys talk about you are introducing a new initiative to reduce SPUD to completion cycle time. Is that predominantly driven by the goal to improve the monthly pumping hours as well as the cycle time between stages or is there something else in that process that you guys are targeting in '19? And just kind of, is there an internal target from the aspect of where you want those SPUD to completion cycle time to improve to, I mean, I'm always amazed every quarter how you guys continue to get on the drilling as well as completion side. I was just kind of curious on where you think you are in that learning curve right now?

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah, Gail. Thanks for noticing that. I think a lot of us have been involved in unconventional resource development for a decade or so. And there's a real factory like manufacturing mentality to this(ph)to get really good at it. So our real goal is from the time we spend the first dollar on a regulatory permit that we have line of sight to get that molecule, all the way to the sales point. And there's a lot of optimization that can be done in that realm. I think a lot of us have with that and we are really pushing to get that very efficient. So we begin with the end in mind, and we know where that molecule can be sold to before we start the process.

So I'll let chip expand on that.

Chip Rimer -- Chief Operating Officer

Yeah Brad, I would also say that we're looking the entire well construction process. And so when we're looking at this, you're looking from how can I get things out of critical path, how can I move it faster, how quicker I can make the cycle times, I can create a larger rate of return, if I can do that. So you may have heard something called DWOP, which is drill a well on paper, and that's how our -- see our efficiency is on the drilling side, we're doing the same thing across entire cycle of our construction here and we're looking for huge value when we get through this. So a combination of the entire process, whether it's from regulatory side, or to the facility side. In fact, we are right now building facilities, and stay on critical path, they really they get on board so we can drill(ph)a well right on the facilities immediately when it's ready to go.

Gail Nicholson -- Stephens -- Analyst

Great, thank you. And just kind of point of clarification and we haven't done -- Montana hasn't seen a lot of activity recently for about several years ago. Well cost are always lower in Montana and versus North Dakota. Is that still the right way to think about it, even with the change in the completion design?

Chip Rimer -- Chief Operating Officer

Yes.

Brad Holly -- Chairman, President and Chief Executive Officer

Yes.

Gail Nicholson -- Stephens -- Analyst

Great. Thank you.

Operator

Thank you. And the question comes from Paul W. Grigel with Macquarie Capital.

Paul W. Grigel -- Macquarie Capital -- Analyst

Hi, good morning, Brad. Maybe one for you, how do you balance the decision making process between A&D and debt reduction with the free cash flow given really almost a wholesome new team except for maybe Mike there.

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah, thanks for the question, Paul. I mean, paying down debt is our priority. We want to get our balance sheet in order and that's always kind of the first call. And so in order to do a -- some kind of acquisition of new inventory, it really has to make high hurdles. And I can tell you Paul, we looked at numerous things last year and only executed on one of those. And I think you can see from the work of our sales team, we really thought that was an outstanding opportunity to pick up 55,000 acres at a very attractive price and go immediately to work to on it. And so full cycle rate of return is really important.

If you burden an acquisition with the upfront cost to acquire it, you've got to get very active and you got to go at it and generate that full cycle rate of return. And so we have good debates in our shop among that, but there is a high hurdle to be able to go out and buy more inventory.

The best way we can do it and what we've challenged our asset teams do is give us more inventory on our existing acreage, and they've been highly successful at doing that this year. And that's generating a lot of opportunity for us. So we'll continue to look. It's very prudent for us to use all of our knowledge of the basin to understand the basin fully and to watch for opportunities, where we might have information that could be advantageous. But we continue to drive of paying down the debt and that we want to get that into the areas that Mike described earlier today.

Paul W. Grigel -- Macquarie Capital -- Analyst

Yeah. That makes sense. And I guess maybe turning to flaring with your guys' infrastructure spending. How should we look at your current capture rate, and is there any concerns with timing of either completions or build-out of the infrastructure side for any potential flaring issues going forward through 2019?

Chip Rimer -- Chief Operating Officer

Yeah. Paul, this is Chip Rimer. Great question. Yeah, no, we've been able to stay above the North Dakota capture rate, which is 88% with no problems. We've also been able to take our plan and move it around. So we're in places where we can move gas out of the systems, and then, as we said before, we have the right gas plant that's going in this quarter. Also, we have the ability to take portable gas plants that we move around. So we minimize the flaring going forward.

Paul W. Grigel -- Macquarie Capital -- Analyst

Great. Thank you very much.

Operator

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

Marshall Carver -- Heikkinen Energy Advisors. -- Analyst

Yeah. Thank you for taking my question. Nice improvement in the Cassandra wells. Your prior presentation showed areas broken into Tier 2 and Tier 1. Do you think these positive Cassandra wells would move it into Tier 1 and how many locations would(ph)that have added ?

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah, Marshall, absolutely. We're very pleased with those results. If you look at them, they're on par with our development at Polar and North Polar just very close, so that moves that position into our all Tier 1 inventory, and we are obviously working on what the proper spacing is and how many zones will develop there. And so we're still early in that process and so we'll continue to work on how many locations that adds overall.

Marshall Carver -- Heikkinen Energy Advisors. -- Analyst

And I guess that's a nice lead into my next question, what are your plans for future drilling there. Will you be drilling some more wells in the next year or two to better assess it?

Brad Holly -- Chairman, President and Chief Executive Officer

Back to the process, we described on slide 25, it really is about developing a well thought out manufacturing process. And so, we've got some early success in Cassandra .We'll do some more testing in Cassandra in 2018 and we'll put that program, a full-scale development plan to go out and run, likely to start, right at the start of 2020. And now the goal is to make that entire process. As we talked about the strategy on the front page, the real goal is to make that entire development program as capitally efficient as possible. And so, there is some real advantages in doing it systematically and well thought out plan. And that's where we're working on now.

Marshall Carver -- Heikkinen Energy Advisors. -- Analyst

All right. Thank you.

Operator

Thank you. And the next question comes from Mike Kelly with Seaport Global.

Mike Kelly -- Seaport Global. -- Analyst

Hey, guys. Good morning. Brad, you mentioned the declines in Redtail are going to masking the success of the Bakken program in '19 and probably tamping(ph)down the overall corporate growth to some extent. And my question is, if you look out to 2020 to actually see this reverse to some extent, and I'm curious if you would compare 2020 corporate growth versus '19, similar activity levels if we'd expect that to actually take up a notch, just given, what you laid out at Redtail. Thank you.

Brad Holly -- Chairman, President and Chief Executive Officer

Yeah, Mike. I think you're thinking about that exactly right. We announced six months ago that we're going to keep Redtail, as because we thought the inherent free cash flow generation of that asset was greater than what we could move that asset for. And then we went to work on shallowing that decline, again, our teams have done a tremendous job out there. As you saw, we were a couple of thousand barrels of oil ahead of the decline. So the goal this year for that team will be to try to continue to arrest that decline. We've got some people out there doing some really innovative things that we're proud of. But as that decline shallows and they get smaller down to only 8% of our volume as a Company, you will see that growth rate tick up with the similar spend rate that we have this year.

Mike Kelly -- Seaport Global. -- Analyst

Okay. Appreciate that guys. Thank you.

Operator

Thank you. And as there are no more questions. I will now like to turn the call back over to Eric Hagen.

Eric Hagen -- Vice President of Investor Relations.

Thanks, Keith. Whiting will be participating at the Raymond James 40th Annual Institutional Investors Conference on March 4th and 5th. And we'll also be participating at the Scotia Howard Weil 47th Annual Energy Conference March 25th and 26th. With that, I'll turn the call over to Brad Holly for closing remarks.

Brad Holly -- Chairman, President and Chief Executive Officer

Thank you, Eric. I want to thank my fellow Whiting employees, the Whiting Board and our shareholders. We are building a great Company and getting better every day. Challenges lie ahead, but with the right people in place at Whiting, the right shareholders backing us and a commitment to a business model that can compete for capital, in any industry, we will rise to the challenge. I'm excited about continued execution excellence, and improving our performance in 2019.

Operator

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

Duration: 40 minutes

Call participants:

Eric Hagen -- Vice President of Investor Relations.

Brad Holly -- Chairman, President and Chief Executive Officer

Mike Stevens -- Chief Financial Officer

Neal Dingmann -- SunTrust -- Analyst

Chip Rimer -- Chief Operating Officer

Jeffrey Campbell -- Tuohy Brothers Investment Research. -- Analyst

Jason Finch -- Vice President of planning

Leo Mariani -- KeyBanc -- Analyst

Tim Sulser -- Chief Corporate Development and Strategy Officer

John Freeman -- Raymond James -- Analyst

Tim Rezvan -- Oppenheimer -- Analyst

Gail Nicholson -- Stephens -- Analyst

Paul W. Grigel -- Macquarie Capital -- Analyst

Marshall Carver -- Heikkinen Energy Advisors. -- Analyst

Mike Kelly -- Seaport Global. -- Analyst

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