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Continental Resources Inc (NYSE:CLR)
Q3 2019 Earnings Call
Oct 31, 2019, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the Continental Resources Incorporated Third Quarter 2019 Earnings Conference Call. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions].

I would like to now turn the conference over to Rory Sabino. Please go ahead.

Rory Sabino -- Vice President, Investor Relations

Thank you, Ben. Good morning everybody and thank you for joining us. I would like to welcome you to today's earnings call. We'll start today's call with remarks from Harold Hamm, Chairman and Chief Executive Officer; Jack Stark, President; Scott Donnelly, Vice President of our Southern region production and John Hart, Chief Financial Officer. Other members of management will be available for Q&A as needed. Today's call will contain forward-looking statements that address projections, assumptions and guidance. Actual results may differ materially from those contained in forward-looking statements. Please refer to the company's SEC filings for additional information concerning these statements and risks. In addition, Continental does not undertake any obligation to update forward-looking statements made on this call. Also this morning, we will refer to initial production levels for new wells, which, unless otherwise stated are maximum 24-hour initial test rates.

Finally, on the call, we will refer to certain non-GAAP financial measures. For a reconciliation of these measures to generally accepted accounting principles, please refer to the updated investor presentation that has been posted on the company's website at www.clr.com.

With that I will turn the call over to Mr. Hamm. Harold?

Harold G. Hamm -- Chairman and Chief Executive Officer

Good morning and thank Rory, and thank you for joining us on our third quarter earnings call. Results were exceptional with assets and execution driving cash flow positive production growth and shareholder value. We generated $158 million in net income in third quarter alongside 20% oil production growth year-over-year. Free cash flow is tracking toward $500 million for the full year, driven by our continued capital discipline while achieving consistent results across the Bakken and Oklahoma operations.

The Bakken continues to be the premier US oil shale play and we saw a single day of record historic production volumes in September despite some weather impacts earlier in the month. This is a true testament to the quality of our teams in the field and the result of our shift to manufacturing mode, providing sustainable and repeatable results across our vast Bakken footprint.

This quarter, we want to focus on some exceptional worldwide results out of Oklahoma. Oil production in the South was up 62% year-over-year driven by the quality of our wells and Project SpringBoard and the two new all units were brought online in STACK. We also saw a record daily production from the Southern region. As the company has shifted to unit development, our teams have been successful in execution and know exactly what to do. We are proud of their operational expertise and efficiencies they are achieving.

Remember, efficiency gains of SpringBoard has allowed us to release seven rigs in Oklahoma. We can do more with less capital expense. We will provide some more operational color on STACK later in the call. For now, I just want to emphasize the differentiated and peer-leading position of our SCOOP and STACK assets. Continental will continue to be capital disciplined and we are committed to our capex target for the year. We are down now to 18 rigs with six rigs in the Bakken and 12 here in Oklahoma, delivering the same well counts vested for 2019 with 10% pure rigs on average. Our quarterly dividend is set to begin next month. The natural evolution for our company.

We have also executed a $187 million in share repurchases year-to-date as of October 29, 2019. Continental is strongly aligned with shareholders. We are right sized for the times and focused on positive cash flow. We are low cost leader with investment grade debt. With the deep opportunities that supported by strong drilling inventory, we will continue to focus on delivering value and returns. From macro standpoint, we believe we are approaching the tipping point on the world's supply balance on oil. It has been estimated that US need to be about 809 rigs to balance our supply and demand and we are nearing that mark, now we're 807. As the rig count indicate for both oil and gas responsible operators are exhibiting and capital discipline to balance the market.

We see OECD crude inventories below the five-year average and the industry is adjusting to market conditions. While global financial market volatility may not be going away soon, Continental is focused on what we can control. We are executing at a high level with the lowest cost among oil weighted peers and feel confident about our ability to generate sustainable cash flow positive growth through 2019 and beyond. Continental will continue to deliver operational excellence and shareholder value.

And regards to 2020, we're all looking ahead and I can appreciate that many of you would like more insight into what 2020 may look like. I want you to know at this time, we are assessing our plan for 2020 looking at our normal scenarios and uses of capital. We're going to refrain from speaking about 2020 until early next year as we usually do when we submit our annual budget.

We understand, you may have questions. But to be efficient with our time on the call, we will hold off on that discussion for now.

Now for further operational color. I'll turn the call over to Jack Stark.

Jack H. Stark -- President

Thank you. Harold, and good morning everyone. We appreciate you being on the call. As Harold pointed out, our teams once again delivered exceptional results in both our North and South regions this quarter. In our Northern region, we completed 57 gross operated Bakken wells with an average IP of 2,313 Boe per day. These results should sound familiar and today I want to highlight the consistent well performance we're getting from our Bakken assets. Since we began harvesting our Bakken assets in 2017, we have completed 440 gross operated wells with initial rates averaging approximately 2,300 Boe per day and 80% of the production was oil. I mentioned this to point out the consistent performance we're getting from the ongoing multi-zone unit development of our Bakken assets.

The consistency of our Bakken well performance is further reinforced on slide 5 in our deck, which shows the first year average cumulative production per well from our 2017, 2018 and 2019 Bakken drilling programs. Looking at the slide, you will notice. It's hard to discern one year from the next because the production curves track right on top of each other. That's what I call repeatable performance. Likewise, the returns from our 2017 and 2018 drilling programs have been outstanding, as both programs have paid out in approximately one year. We expect our 2019 program will pay out in a similar time frame as well.

Looking at slide five, you can also see that these results are not concentrated in one area, but come from units all across our leasehold. These outstanding results explain why we consider the Bakken to be the premier oil play in the US and are pleased to control the largest acreage position in the Bakken with over 8,600 net acres and approximately 3,800 operated locations remaining in inventory.

Now, I will point out that our third quarter production from the Bakken was down sequentially by approximately 3,000 Boe per day. This decline was driven by outside operated production, it was down approximately 6,000 Boe per day due to weather and other transitory issues. Our operated production on the other hand was up approximately 3,000 barrels equivalent per day. Thanks to the great job by our Bakken team. Our Bakken team also continues to focus on building and optimizing our acreage position and during the quarter, added approximately 10,000 net acres through strategic leasing bolt-on acquisitions and trade.

Now let's move to the Southern region where teams have been doing an excellent job growing oil production. In fact, approximately 50% of the company's third quarter oil production growth year-over-year has come from our Oklahoma assets. To tell you more about this. We've invited Scott Donnelly, our Vice President of Southern Region production to join us on the call today. Scott?

Scott Donnelly -- Vice President, Southern Region Production

Thank you, Jack. Our Southern teams were extremely busy during the quarter. We turned a total of 80 gross operated wells to production. 63 of the wells were in SCOOP and 17 were in STACK. Production averaged a record [Technical Issues] net barrels of oil per day by 31%. This out performance reflects the operational efficiency gains and exceptional performance from the reservoirs. The fixed Springer rows 2 and 3 came on strong as expected with initial rates averaging approximately 1,650 Boe per day per well with approximately 80% being oil . I'm also pleased To report that the average performance of all 52 Springer producers are in line with the 1.3 million Boe blended type curve that was announced during our January SpringBoard conference call and shown on slide eight. The teams projected performance for the Springer were spot-on. Springer also has 30 -- SpringBoard also has 32 Woodford wells producing at the end of the third quarter. Slide eight shows that the average Woodford well is trending nicely with the legacy Woodford oil type curve early time. To-date, approximately 8.7 million barrels of oil has been produced from Project SpringBoard alone. We have approximately 39 wells that have been drilled and are awaiting completion with the bulk being completed in early 2020 and nine drilling rigs drilling ahead in SpringBoard. Given the out performance in the third quarter, which was driven by operational efficiencies and that brought wells online ahead of schedule, we have increased our fourth quarter target for SpringBoard from 22,000 net barrels of oil per day to approximately 24,000 net barrels of oil per day.

To the North and STACK, we brought on one of the most impressive unit development projects in the company's history, the Reba Jo & Schulte units were developed within the STACK over-pressured oil window and consist of 14 total wells in two separate benches within the Meramec Reservoir. Combined, the 14 wells delivered an impressive 38,320 barrels of oil per day and 113.8 million cubic feet per day initial rate. This equals 57,292 Boe per day or on average 4,092 Boe per day per well with 67% of the production being oil.

The key to success for our Continental STACK development has been our team's ability to dial in to the right densities for each target as well as properly stimulating the rock during completions. Our teams have been able to maximize value from our units. Thanks to our geologically superior acreage position and our teams operational expertise. For example, in the Continental STACK, we have also seen 16% lower completed well cost compared to the industry offsets in our most recent development projects . Our shifts to unit development mode in the South is driving improved returns and consistent outcomes.

As Harold mentioned earlier, our drilling efficiencies have allowed us to reduce our rig count in Oklahoma, from 19 to 12 rigs, while still achieving our corporate objectives. The completion teams continue to outperform as they completed over 530,000 lateral feet within a single quarter, all while averaging a 40% increase in stimulation stages per day.

Our production team turned on some of the biggest wells in our 52-year history, while continuing to expand our gathering infrastructure. At the end of the third quarter, I'm pleased to say that approximately 65% of our oil and water in the South are currently being handled via pipe and growing. I'm very proud of our performance in the third quarter and I want to say a big thank you to all the members of the Southern region.

And with that I will turn the call back over to Jack.

Jack H. Stark -- President

Thanks Scott and great job by you and your team. Now, there is one thing I would like to add before handing the call over to John. A report has been circulating that unfortunately cast some doubt on the performance of our SpringBoard project. The outstanding results we announced here today should put those doubts to rest. I want to emphasize that our Springer well results came in as guided in our January conference call. In addition, oil production growth from SpringBoard has beat expectations every quarter since the project began approximately one year ago.

We cannot stop inaccurate reports like these from coming out. So, we encourage shareholders to rely on our guidance and our track record of delivering results.

With that, I'll turn the call over to John.

John D. Hart -- Chief Financial Officer

Thank you, Jack. Good morning, everyone. 2019 has been marked by our ability to execute and deliver. Our net income, production growth, and our cost metrics are all driving strong double-digit return on capital employed and increased shareholder value. As of October 29, we have repurchased 5.5 million shares for $187 million. We plan to continue prioritizing our share buybacks with our excess cash. We see tremendous value in the acquisition of our stock as our share price does not reflect our strong earnings, cash flow and the deep oil weighted inventory we have for future growth.

Given our focus on share repurchases, our debt has stayed relatively constant throughout the year with our net debt to EBITDAX holding at a solid at 1.6 times at the end of the third quarter. Our previously announced quarterly dividend of $0.05 per share will be paid on November 21 to shareholders of record as of November, 7. As Harold mentioned, this is the natural evolution for the company and something we have got it to expect over the last couple of years.

Continental is focused on generating shareholder value and maximizing returns. Not only are we delivering year-over-year oil weighted production growth, dividends, buybacks, and corporate returns that compete against the broader market, but we have also made strategic decisions to build our minerals portfolio. Year-to-date our minerals entity has been approximately $120 million in acquisitions across SCOOP and STACK. 80% of this $120 million has been reimbursed by Franco-Nevada. As we highlight on slide 16 , 90% of our minerals are under Continental-operated units. Year-to-date, over 75% of Continental wells spud in the South had underlying mineral ownership. Volumes and revenue continue to grow, and we expect our minerals entity to continue increasing in scale significantly over the next few years.

Ultimately, we believe the minerals entity could make an attractive IPO candidate. We are pleased with the progress to date. We also want to highlight our capital discipline. Third quarter non-acquisition capex came in slightly lower than the second quarter and almost 10% lower than the first quarter. As we look to the fourth quarter, we continue to expect capex to be significantly lower around $550 million; each quarter has been lower throughout the year.

This is by design, as we expect to be roughly in line with capex expectations for the year. Fourth quarter and annual capex includes the incremental capex incurred from the previously unbudgeted bolt-on acquisitions and increase in mineral activity as we discussed last quarter. Even after tightening our guidance, for many of our cost metrics last quarter, we continue to see strong results in our LOE and G&A. Oil differentials continue to trend in line with our expectations, while gas differentials continue to be impacted by weakened NGL pricing.

We do see future relief as new projects come online, for example, the Bakken Elk Creek Pipeline will start in November and the Mid-Con Arbuckle II Pipeline will come online in the first quarter of 2020. As we

guided to last quarter, third quarter production is relatively flat with second quarter. However, in the late third quarter and early fourth quarter, we have additionally, brought on approximately 50 highly productive gross operated wells. The production from these wells will be realized in the fourth quarter where we expect production at approximately 350,000 per day.

We feel good about our production profile and expect full-year production to be at the mid to upper end of all of our annual production guidance.

2019 has been a year of execution across all of our disciplines, and we look forward to seeing this trend continue. We will remain disciplined and focused on maximizing free cash flow and shareholder returns.

With that, we're ready to begin the Q&A section of our call and we'll turn the call back over to the operator. Thank you.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Doug Leggate with Bank of America. Please go ahead.

Doug Leggate -- Bank of America -- Analyst

Hi, good morning everybody and thanks for taking my questions. Guys, I had to go back in my archives to dig out our stock primer from a couple of years ago to remind myself that not all-stock is created equal and I wanted to ask why now to go back to the STACK, what's the running room left in the STACK? Hopefully Rory doesn't think this is multiple questions and this relative to SpringBoard what's the capital allocation going forward within the Southern area, but great results in the STACK Obviously.

Jack H. Stark -- President

Yeah. Doug, this is Jack. Good question. As far as the running room. We've got 55 -- 60 units out there in the oil and condensate window that we have available to us in the future that we would operate. And so that's I guess a quick answer to that. As far as the pace at which we're drilling right now, We've got two rigs up there. We're drilling -- they both drilling in a main single unit right now, and we've also got another well that's being completed. So right now, we're continuing our activity. As far as looking forward ahead, 2020, when we get our plans put together will go ahead and give you some more clarity on how we allocate our capital in rigs into -- in Oklahoma.

Doug Leggate -- Bank of America -- Analyst

Okay, thank you for that. My follow-up is really more of a housekeeping question though. You guys are -- very helpfully publish a 10-Q at the same time you publish your numbers. And it seems that one of the stand outs was the decline in non-operated revenue in the quarter. I'm just wondering if you could offer any color as to what was going on there. Because it seems to us that your underlying operating performance was a lot better than perhaps you and the headline results suggested and that things outside of your control may have contributed to not achieving the full potential, especially in the Northern area. Any color you can offer whether that can be remediated on future quarters?

John D. Hart -- Chief Financial Officer

Sure. Doug, that's one of the things that Jack had in the script that he was touching on. That's -- there were some weather issues, one of our larger non-op partners dealt with. And then there is just a timing where they had some curtailment due to offsets and other things. The key part of that is, all of that's transitory, good portion of that's come back on online here in October. It's not all back on, but it will be as we go forward. So nothing -- nothing really negative just more timing and just momentary impact .

Doug Leggate -- Bank of America -- Analyst

I apologize, my line dropped halfway through the call.

Unidentified Speaker

No worries at all. I gave a little more color as well.

Doug Leggate -- Bank of America -- Analyst

Got it. Okay, thanks so much guys.

Operator

Our next question comes from Arun Jayaram with JP Morgan. Please go ahead.

Arun Jayaram -- JP Morgan -- Analyst

Good morning. Good afternoon, gents. I was wondering if you could maybe give us a little bit more detail on as what is driving the better performance that you're seeing in the South, because one of your comments is that the wells are essentially performing in-line with your type curves, but I was wondering what has contributed to the higher oil output at SpringBoard that you're seeing in a relative to the guidance?

Jack H. Stark -- President

There is a great question, Arun. And SpringBoard is just a tremendous asset for the company, an oil asset and there is a lot of things that play into obviously the out performance. And first thing comes down to just the reservoirs themselves. I mean the Springer and Woodford as you can see on slide eight are just performing right in line with expectations. The teams have done a great job of identifying what the proper density is in here and how they anticipate these wells will perform and I mean we couldn't ask for really more as Scott said spot-on projection of where we could be. The next part of that really is just the production is exceeding our guidance and substantially here in the third quarter as a result of really just the efficiencies that have continued to build here from our row development and so and what does that translate to, it translates to more wells on sooner.

We're still going to end up by year-end putting on the same number of wells, we just got a lot more of them on in third quarter than originally planned and it's -- again it just comes down to that operating efficiencies that are still building, this means, we're still continuing on and I can't help but mention just from an operating cost standpoint, when you think right now we've got 65% of our water and oil on pipe. I mean it continues to just drive our operating cost down and from an oil differential standpoint, the -- it's the lowest oil differential, we have in the company, it's really sub $2 in there for the barrels.

And so, and on top of all this, this is -- one of the really great thing about SpringBoard is that we own approximately 19% of the minerals underneath this asset. So when you put it all together, it doesn't get a heck of a lot better than this and we've got a lot of development sitting out front of us. We've got probably 40% of the units in the Springer still remain to be drilled and we've got about 80% of the Woodford units in the Project yet to be drilled. So a lot of headroom here to continue to grow at, and it's just a fantastic for us project.

Arun Jayaram -- JP Morgan -- Analyst

Yeah. And I guess my follow up, Jack is, based on your -- the five year outlook that you unveiled -- I think it was maybe in January, it calls for pretty ratable growth from both the Northern and Southern divisions. I think it's a 12.5% kind of CAGR. So just wanted to know is beyond, it sounds like you still have 40% of the activity at SpringBoard, but what are the next phases of growth or projects that you have in the South, which will support that longer-term growth objectives?

Jack H. Stark -- President

Yeah, well quite frankly, we've drilled and are currently testing some wells -- initial wells we've drilled in our SpringBoard 2 project and really are -- from competitive reasons. As we've mentioned before, we're really just not going to really get into any details right now and not really going to provide an outline. But I guess just know that we have SpringBoard 2 in the queue and we have SpringBoard 3 and SpringBoard 4 down in Southern Oklahoma that we also are currently really just continuing to build our positions through strategic leasing and acquisitions.

And so we will come out with more color on this as we solidify our positions and but right now we're very pleased with where we're at and how this project in this -- basically this region is growing.

Arun Jayaram -- JP Morgan -- Analyst

Great. Sounds like bit more meat on the bone in Oklahoma. Thanks again gents.

Jack H. Stark -- President

Yes. And I should add, if you had noticed, 50% of the oil production year over year has come from Oklahoma. I don't think a lot of people would have thought that.

Arun Jayaram -- JP Morgan -- Analyst

Great.

Operator

Our next question comes from Drew Venker with Morgan Stanley. Please go ahead.

Drew Venker -- Morgan Stanley -- Analyst

Hi, everyone. A lot of great color already. So I was just hoping you could talk a little bit more about fourth quarter and and where that trajectory is heading early next year. So on the capex side John, I think you said 4Q capex around $550 million and then on production can you give us -- just want to confirm that $550 million and -- on production give a sense of the oil mix in 4Q?

John D. Hart -- Chief Financial Officer

Yeah, the roughly $550 million on capex for the fourth quarters is what we're projecting today. Around 350,000 on the overall mix are on production. The mix -- oil ratio, I think this quarter is [Phonetic] about 59% or kind of the 58% to 60% -- 58%, 59% in the fourth quarter. So it's really good, it's really solid. We're very pleased with that and to carry us into 2020.

Drew Venker -- Morgan Stanley -- Analyst

Thanks, John. And as far as the activity level -- the spend is down quite a bit in fourth quarter sequentially. Is that the current run rate for drilling rigs and frac crews [Phonetic] a good starting point for next year or would that pick back up once the budget is reset?

John D. Hart -- Chief Financial Officer

We'll come out with 2020 in the February time frame as I think Harold commented on earlier, look forward to doing that. We're in the midst of that we've got a lot of optionality. The thing about run rate, you need to consider is how much more efficient we are now at the end of the year, well, compared to the beginning of the year. We talked about rig changes throughout the year and a lot of that was just driven by efficiency. We're in line with where we expect it to be dollar spend was in the fourth quarter we're in line, wells completed and productions obviously was increased previously this year on the forecast. And we're -- as I talked about in the call, we're doing very well with that. So 2019 is frankly is probably ahead of pace a little bit and it sets us up nicely.

Harold G. Hamm -- Chairman and Chief Executive Officer

But I think Drew that you're probably referred to some of the costs that we're seeing were result of the slowdown and rig activity. [Indecipherable], Pat you might want to frankly [Phonetic] ask that these were cost baked in. Now, we're still see in some --.

Pat Bent -- Sr. Vice President, Operations

Yeah, Drew, this is Pat Bent. And so with respect to where we're at from an activity perspective, we're currently at that 12 rig count that we talked about we've got wants to improve in the South too and the north. We may exit the year, slightly higher, but with those activity levels we see -- like the preferential market pricing that we've been able to take advantage of working with our partners, and so we've seen rig prices decrease in that 20% to 25% range. We've seen double-digit percentage decreases in our stimulation pricing. So across really all the service product lines that we engage in we've seen some preferential treatment there and would anticipate that carrying on into 2020.

Drew Venker -- Morgan Stanley -- Analyst

And were those price decreases, was that relative to third quarter? Are you saying third quarter versus second quarter?

Pat Bent -- Sr. Vice President, Operations

Yes. Second quarter -- it's relative -- third and fourth quarter relative to second quarter.

Drew Venker -- Morgan Stanley -- Analyst

Okay, thanks. John and Pat.

John D. Hart -- Chief Financial Officer

Sure.

Operator

Our next question comes from Jeanine Wai with Barclays. Please go ahead.

Jeanine Wai -- Barclays -- Analyst

Hi, good afternoon, everyone.

Jack H. Stark -- President

Hello.

Jeanine Wai -- Barclays -- Analyst

Well, I think that Drew just touched on my cost savings questions about how sticky there. So I'll move to my next one. So, it's on buybacks, and it's just a broader question. So in terms of the five year plan and the billion dollar repurchase program. I know we're only in year-one. So there is plenty to go here. But are the buyback strictly opportunistic or is it meaning the free cash flow, now, a bigger part of the near-term capital allocation process. So I'm assuming that you won't be done with buybacks after you hit the first billion. So I'm just talking more broadly.

Harold G. Hamm -- Chairman and Chief Executive Officer

Yeah. We -- it is opportunistic -- what the market sees in our stock price, that certainly there has been opportunity that we've weighed in on and we'll just have to see how that continues. The market hasn't valued oil and gas as it should and and we very well may continue after the first billion is gone.

Jeanine Wai -- Barclays -- Analyst

Okay. So it's not as if you're trying to back solve some kind of return in the near term, it's just the free cash flow when it shows up you'll just pay it out or buy back stock?

John D. Hart -- Chief Financial Officer

It's an indication of the available cash that we have and that we're able to generate, coupled with the misalignment of the share valuation with what we think is an appropriate valuation. We think it's a tremendous investment opportunity.

Jeanine Wai -- Barclays -- Analyst

Okay, great, thank you for taking my question.

Harold G. Hamm -- Chairman and Chief Executive Officer

Thank you Jeanine .

Operator

Our next question comes from Brad Heffern with RBC Capital Markets.

Brad Heffern -- RBC Capital Markets -- Analyst

Hey, everyone. Just as a follow on to that question as it relates to the debt, obviously you guys haven't really paid down this quarter or the prior quarter and the cash has gone to the repurchase. Should we think about the targets that you previously had the $5 billion and the $4 billion is just being moved out or as long as the stock is at current levels, are you effectively going to allocate all the free cash to the repurchase?

John D. Hart -- Chief Financial Officer

So it's probably a mixture of all those debt. If you look at net debt this quarter, it was down a little bit from last quarter. It's not huge, it was $30 million or so, but it -- we did improve it. We also called some bonds which will reduce interest expense as we go forward and we'll continue to work opportunistically to do things in those regards that we think that are smart for the long-term. As we go forward the $5 billion is a target that we retain and we want to achieve that target. I think we've got a number of ways that we can achieve that going forward and we'll continue to work on that. Today, where the share price is, yeah, we're prioritizing share buybacks today, but we do continue to retain that target and we'll continue to work forward as we go forward and it may take a little longer, it may not, it depends on a number of variables.

Brad Heffern -- RBC Capital Markets -- Analyst

Okay, thanks for that. And then another question on Oklahoma, obviously you guys have had better results and effectively all your peers in the SCOOP, STACK and you've seen a lot of them moving away from the play. I'm just curious if there is a potential that you might do a larger acquisition to build your footprint there, given that you seem to be the best operator?

Harold G. Hamm -- Chairman and Chief Executive Officer

Well, thanks for that. We do have good operation there, a lot of those people up there claim to be in the STACK weren't in the STACK. Yeah. So that was one of the big discrepancies out there . It is a good play, a lot of -- everybody saw that and a lot of people tried to tag on to it, even though they were outside that area all together. So yes, we're going to keep or eye open -- eyes open to opportunity, we always do up there as well . And if we find a bolt-on at works, we'll be announcing that.

Brad Heffern -- RBC Capital Markets -- Analyst

Okay, thank you.

Operator

Our next question comes from Neal Dingman with SunTrust.

Neal Dingman -- SunTrust Robinson Humphrey -- Analyst

Afternoon guys. Jack, following which you said earlier, you spoke of the oil and this I think you mentioned the SCOOP, could you just maybe comment on how you see the future overall maybe for 4Q and then in the 2020 just the overall oil cut trending this quarter and next year?

John D. Hart -- Chief Financial Officer

Well, Neal. Like we said, we'll touch on 2020 when we do our announcement around the first of the year, we'll give some perspective there. But as John mentioned previously he was saying oil cuts in the fourth quarter, probably looking at 58% to 59% range.

Neal Dingman -- SunTrust Robinson Humphrey -- Analyst

Okay. Okay and then checking the projects -- you had those slide showed the unit economic model slides -- showing the optimal well count, I think one was in the over-pressure Meramec and the other over in the SCOOP and I think I'm looking here at the Meramec I showed around the best PV-10 was around eight wells there and going to non-SpringBoard I think in the SCOOP Springer it was around four to get there, could you comment, is that still in the ballpark of what you're seeing is sort of to maximize each of those?

John D. Hart -- Chief Financial Officer

Yeah, I mean in STACK. I mean it's really pretty much spot on with what we're seeing out there. When we have two zones developed -- that are well-developed and we feel we can put like in Reba Jo & Schulte we put four wells in the upper and three in lower. And so we have seven wells total. And there are units out there, where we only have one zone. So we may have two or three wells in those units. So as we've said in the past here [Phonetic], on average we'll probably going to have two well -- two zones to target per unit, and we could have up to four wells per zone.

So I really think that our teams have really dialed in on density and they dialed in on to it very early and have really guided our outstanding performance that we show on say page nine. When you look at that -- you take a look at those curves and look how -- we had a unit oil type curve that you're referring to there. And, look how the Schulte, Homsey, Jalou, and Reba Jo have all just extremely out performed that unit.

So we're very pleased with it. We obviously we've got dialed in on what is the appropriate density here down in SCOOP. As far as Springer is concerned, when we're in the thicker areas obviously, we can have more wells, and thinner areas we'll have fewer wells. And so, but is four good average. I'd say three -- four will be probably good average depending on where you're at in the units.

Neal Dingman -- SunTrust Robinson Humphrey -- Analyst

Very good. Thanks for the details John.

John D. Hart -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Brian Singer with Goldman Sachs.

Brian Singer -- Goldman Sachs -- Analyst

Thank you. Good morning.

John D. Hart -- Chief Financial Officer

Good morning, Brian.

Brian Singer -- Goldman Sachs -- Analyst

Harold very big picture, I know there's a lot of moving pieces and the broader oil macro and yet you highlighted some improvement on the supply side that you see coming. I guess as it relate to Continental, what would you need to see in the broader oil macro environment to raise activity and how does the priority of free cash flow and the level of buyback impact that activity level?

Harold G. Hamm -- Chairman and Chief Executive Officer

Brian, I think that when we get into a balanced situation, we're going to see a significant move, it won't be $5 to $10. It's going to be a significant move in the commodity price. So we're already seeing production rolling over and I think everybody is becoming aware that the earlier estimates were much too high this year in the US and so capital discipline is working as it should be. And frankly needed in both areas we needed, it's not only just in oil, but also natural gas and we're seeing it as well. But there's a couple of plays that obviously the rig count hasn't come down, like it needed to, that's Haynesville and Marcellus -- I'm sure by cracking those two plays -- they definitely need to back up there to see this market balance. So it takes both to make, make an oil people [Phonetic] as we say and so that's going to have continue a little bit, but when it does, it'll be a big move. You get into 2021, you don't see these long-term project coming on like we see here in 2020. So people tend to look at about a year ahead, once we get in 2020 they outlook will be a little bit dismal out there in future, as far as supply goes.

Brian Singer -- Goldman Sachs -- Analyst

And is that, do you need to wait on the futures curve to move, to move to make for Continental to dedicate additional activity to benefit from that or is that something you can start planning on based on your macro outlook ahead?

Harold G. Hamm -- Chairman and Chief Executive Officer

We have obviously, Brian. We have plenty of inventory that we could move forward, but I think the responsible operators want to see it happen, before they make a move. I don't think that we could make those adjustments prior. That's not the example that we need to be setting out there for the industry. So I'll wait for it to happen.

Brian Singer -- Goldman Sachs -- Analyst

Great, thanks. And I, my short follow-up is on the Bakken, you talked in your comments about some of the non-ops and weather-related issues that and that have come back and in September, the production was down, it has come back online. Do you anticipate beyond winter weather any other kind of hiccups or so on the non-operated side or the operator side in the Bakken, or should we expect more steady state sequential growth?

Harold G. Hamm -- Chairman and Chief Executive Officer

No, it's going to be steady state sequential growth in the future, Brian. Some of this is more than just weather for few of these outside operators. One was the Elk Creek NGL line that had to be put into place and that these gas plants even though they're built, they were dependant on it before they start production. So they got -- three of those coming online around first year between now and the first year. So, some of that was the hold up as well.

Brian Singer -- Goldman Sachs -- Analyst

Great, thank you.

John D. Hart -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Derrick Whitfield with Stifel. Please go ahead.

Derrick Whitfield -- Stifel Nicolaus & Company, Inc. -- Analyst

Thanks, good morning all. And congrats on a strong ops update. Well, certainly not pressing for your 2020 plan. Could you comment on your estimated maintenance capital to hold Q4 production flat estimating current capital efficiency levels?

John D. Hart -- Chief Financial Officer

Yeah, it's, we'll through that up with the 2020 plan as well as we always do, historically, we've said it's for D&C only it would be 1.5 to 2 [Phonetic] I would say, if you're looking at a multi-year, it would still be in that range, if we're looking at holding flat for one year, which probably do it toward a tighter side or maybe a bit better than that, but kind of depends on that perspective also. So nothing materially different from what we've talked about before.

Derrick Whitfield -- Stifel Nicolaus & Company, Inc. -- Analyst

Got it. Great. And then as a follow-up. Picking up on Arun's earlier question, how should we think about the production level where SpringBoard 1 plateaus and the timing for the official introduction of SpringBoard 2?

John D. Hart -- Chief Financial Officer

Well, again SpringBoard 2, at least some view on this performance will be part of our 2020 program that we'll come out with, but you can expect SpringBoard production to continue to grow into 2020.

Derrick Whitfield -- Stifel Nicolaus & Company, Inc. -- Analyst

Very helpful. Thanks for your time.

John D. Hart -- Chief Financial Officer

You bet. Thank you.

Operator

Our next question comes from Phillips Johnston with Capital One. Please go ahead.

Phillips Johnston -- Capital One Southcoast, Inc. -- Analyst

Hey guys, thanks. Just a follow-up on some of the questions about [Indecipherable] it looks like oil mixes have increased pretty significantly, it's about 34% from 28% in the second quarter, is that improvement mostly just a function of plush production that you saw from the large completion there that you had in Q3 or are there other factors there to consider that sort of drove that. And I guess maybe also how should we think about that mix going forward over the next few quarters.

Harold G. Hamm -- Chairman and Chief Executive Officer

I think the couple of things to consider there and as, just on the Springer production that everybody was anticipating that also the Woodford production and and the blend of those two. And so it's not just necessarily plush production [Indecipherable] have a lot lower rate of decline than initially anticipated.

Jack H. Stark -- President

Yeah. If you look at those. I think it's on charts eight there. Our Woodford wells are averaging and once we've grown, so far, averaging about 77% oil. So I mean they're knocking right on door of the 80% and it'll get there and Springer was -- very oil rich reservoirs that we're targeting here. And so it's going to definitely have an impact on our performance.

Phillips Johnston -- Capital One Southcoast, Inc. -- Analyst

Okay, great. And then just maybe for Harold or John, just on the share repurchase program. Looks like you guys have bought back about 5 million shares. So far at an average price of around $34 and change the stock today is closer to $29, so about $25 million or so under water at this point obviously your playing for the long term here, rather than six months. But you do have a relatively small share flow to begin with. So I guess my question is, has there been any serious consideration at the Board level to adopt a variable dividend strategy just on top of the fixed dividend that you've already established with an ultimate goal of paying out a targeted, a percentage of your actual realized free cash flow to shareholders every quarter?

John D. Hart -- Chief Financial Officer

We bought back 5.5 million shares, were a little bit under $34 or $33 and change on that. We're going to realize a significant upside in that in the future. So maybe a little bit under now. But you're right, we looked at the long term. When you're looking at a company that's made well over $500 million of net income in nine months, positive cash flow, good production growth, the right mix, great inventory. It's not a $28 or $29 stock. That's why I said earlier, we think it's a tremendous investment opportunity. In regards to dividend and stuff. I wouldn't speak for the Board. That's -- we've got our first dividend coming out here in a couple of weeks, we're extremely excited about that. We think it's a momentous milestone for the company and we'll go from there. But I appreciate the insight.

Phillips Johnston -- Capital One Southcoast, Inc. -- Analyst

Okay. Thanks John.

Operator

Our next question comes from Leo Mariani with KeyBanc. Please go ahead.

Leo Mariani -- Keybanc Capital Markets -- Analyst

Yeah. Hey, guys. So just a question to follow up a little bit on the Bakken here. I guess over the past year, you guys have done some pretty successful step-outs in the Bakken. I just wanted to get a sense of what is the longer-term well performance looked like on some of the step-outs and have you guys kind of been continuing that program in the second half of this year?

John D. Hart -- Chief Financial Officer

Well, as far as the step-outs concerned. We're pleased with the performance of those wells. I don't have the numbers of -- for those projects right in front of me, but as I remember, it seems like in the first 90 days our Baird well [Indecipherable] produced like 65,000 barrels equivalent. I think our Burian down South was like 95,000 barrels of oil equivalent. And then I think our McClintock was probably about 120,000 and these are all in the first 90 days. So that's all I can recall at the moment. But they're very, very good wells for us. And as far as I think part two of your question is how does all this fit into our plan?

Harold G. Hamm -- Chairman and Chief Executive Officer

Yeah, I think we're offsetting the McClintock right now. So yes, it is continuing.

John D. Hart -- Chief Financial Officer

Yes. And so the activity is continuing. We do have the unit also in the McClintock drilling as Harold said. And again, we, you know there is -- we've got so much territory to cover out here. These step-outs were really designed to give us a good perspective on what we could expect in these areas. So we can put these into our queue and our plans in the coming years. And so, bottom line is we're pleased with what we're seeing.

Leo Mariani -- Keybanc Capital Markets -- Analyst

Okay, that's great color. And I guess, have you guys been impacted at all by sort of the lack of gas processing there in the Bakken, and you obviously referenced some plants coming online by the end of the year, has that curtailed any of your production in 2019 and just trying to get a sense of whether or not we'll just see kind of a smoother runway next year with a lot more processing capacity in the basin.

Harold G. Hamm -- Chairman and Chief Executive Officer

It has -- we've been fully aware of the processing capabilities that we've had up there and as we've moved rigs around the field offset that lack of the plant facilities. But certainly with what's coming in now, it's going to set us up real well going into the future. So we're pleased with where we're at and continental has led the way with more gas capture than anybody else in the field, so we're proud of what we've done, where we're at.

Leo Mariani -- Keybanc Capital Markets -- Analyst

That's great color, for sure. And I guess just lastly with respect to weak gas and NGL prices which you guys clearly touched on, obviously, those have not been very good here in the last couple of quarters. Does that kind of cause you to sort of think a little bit differently about capital allocation or you might, kind of shift more activity to the North versus the South, given the higher percentage of oil up there, how do you sort of think about that.

Harold G. Hamm -- Chairman and Chief Executive Officer

Well, we've shifted operations here in the South to more oily areas certainly and we'll continue to do that, but we're pretty well positioned where we're at in the North at this particular time.

Jack H. Stark -- President

Yeah, we've got plenty of oil inventory down in Oklahoma to continue to have comparable allocation of dollars going forward.

Analyst

Okay, thanks guys

Operator

Our next question comes from Marshall Carver with Heikkinen. Please go ahead.

Marshall Carver -- Heikkinen Energy Advisors LLC -- Analyst

Yes, thank you. Want to make sure I have my math right, so you talked about sticking to the the original number of wells to sales in Oklahoma. And I have your original guide for the year was to have 100 net operated wells to sales and your 92 [Phonetic] the third quarter with 56 in the third quarter. So with sticking to 100 for the year. Would that be just 10 net wells to sales in 4Q or do you think you could go a little bit over the 100 target?

John D. Hart -- Chief Financial Officer

Well, I mean, at this time, we're just, we're not really we're sticking with our guidance. At this point, obviously there were some timing issues and things that can change of a little bit up or down. But, but we're just saying with our guidance .

Marshall Carver -- Heikkinen Energy Advisors LLC -- Analyst

So a huge slow down into 4Q. [Technical Issues]

Jack H. Stark -- President

We've got a big slug of wells coming on here late in the third quarter.

John D. Hart -- Chief Financial Officer

I don't know if I'd call it a huge slowdown. I'd say a lot as we talked about last quarter, we had a significant amount of completion activity in the third quarter and those wells came on late third, fourth quarter so that we talked about production on the call. We see strong production here in the fourth quarter.

Marshall Carver -- Heikkinen Energy Advisors LLC -- Analyst

Okay.

John D. Hart -- Chief Financial Officer

Capital spend is just not as high, just the timing of these big projects.

Marshall Carver -- Heikkinen Energy Advisors LLC -- Analyst

Okay, thank you.

Operator

Our next question comes from Subash Chandra with Guggenheim Partners. Please go ahead.

Subash Chandra -- Guggenheim Partners -- Analyst

Yeah, hi guys back to SpringBoard here, is this a fair way to think about it that the Springer locations, which I think, on your original presentation, you would be drilled out on next year? Peaks you out on oil production in the play and then the Woodford puts you in maintenance mode beyond that point in time. And any commentary on what the well costs are per foot between the Springer and Woodford?

Jack H. Stark -- President

As far as well oil production growth. No, I don't see as we transition as we drop our say our Springer inventory here that Woodford will continue on. And continue to grow our oil production there, you take a look at those curves, there on slide 18 you can see the Woodford production is very robust and actually has a bit of a slow -- lower decline rate than the Springers as well which has sustained the the volume very well.

And as far as cost. I don't have any cost per foot. Not that I have any on top of my head. John?

John D. Hart -- Chief Financial Officer

And I think we've targeted for the Springer-- on a two-mile laterals we're around $1,000 per completed lateral foot, so a $10 million well cost. We're not quite there yet, but we're working our way toward that and the with the -- no set [Phonetic] design we have on Woodford that we've been successfully -- that has been successfully deployed we [Indecipherable] in that range, maybe a little bit less as well.

Subash Chandra -- Guggenheim Partners -- Analyst

Got you. Okay. And my follow-up. In the STACK if I wrote the numbers down correctly, there was a sequential decline I think what was the reason behind that is that again timing or non-op?

John D. Hart -- Chief Financial Officer

No, right now I'd say timing is a big part of that. You get basically just the cadence .

Subash Chandra -- Guggenheim Partners -- Analyst

Got you. Okay, thanks guys.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Rory Sabino for any closing remarks.

Rory Sabino -- Vice President, Investor Relations

So we're at the top of the hour. Thank you very much for joining us today. And please reach out to the IR team for any further questions. Thank you.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call participants:

Rory Sabino -- Vice President, Investor Relations

Harold G. Hamm -- Chairman and Chief Executive Officer

Jack H. Stark -- President

Scott Donnelly -- Vice President, Southern Region Production

John D. Hart -- Chief Financial Officer

Unidentified Speaker

Pat Bent -- Sr. Vice President, Operations

Doug Leggate -- Bank of America -- Analyst

Arun Jayaram -- JP Morgan -- Analyst

Drew Venker -- Morgan Stanley -- Analyst

Jeanine Wai -- Barclays -- Analyst

Brad Heffern -- RBC Capital Markets -- Analyst

Neal Dingman -- SunTrust Robinson Humphrey -- Analyst

Brian Singer -- Goldman Sachs -- Analyst

Derrick Whitfield -- Stifel Nicolaus & Company, Inc. -- Analyst

Phillips Johnston -- Capital One Southcoast, Inc. -- Analyst

Leo Mariani -- Keybanc Capital Markets -- Analyst

Analyst

Marshall Carver -- Heikkinen Energy Advisors LLC -- Analyst

Subash Chandra -- Guggenheim Partners -- Analyst

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