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Continental Resources Inc (NYSE:CLR)
Q1 2020 Earnings Call
May 11, 2020, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2020 Continental Resources Inc. Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference call over to used to be, Vice President of Investor Relations. Please go ahead, sir.

Rory R. Sabino -- Vice President of Investor Relations

Good morning 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, Executive Chairman; and Bill Berry, Chief Executive Officer. Other members of management will be available for Q&A, including Jack Stark, President and Chief Operating Officer; and John Hart, Chief Financial Officer.

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 in this call. 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 -- Executive Chairman

Good morning and thank you for joining our first quarter earnings call. In response to the unprecedented times we are facing, Continental has taken consistent and proactive steps to ensure we are preserving value over volumes. We are using this downturn to even further refine our operational efficiency. When we provided our original budget in February, we were already forecasting a fundamentally oversupplied market and the first half of the year. So, we reduced our pace of growth to deliver a disciplined approach to value creation. Then in March, we were hit by demand destruction attributable to COVID-19, as well as the dumping actions of Saudi Arabia and Russia. Thanks to our highly skilled operations team, the optionality of our portfolio and our predominantly held by production acreage position, Continental quickly responded as a first mover and adjusting our plans for 2020. We reduced spending by 55% versus our original budget. In response to the unprecedentedly low prices, we began voluntarily curtailing operated oil production across the Bakken and Oklahoma, and are curtailing up to 70% in May.

Our internal supply and demand models, consistent with the external models see a significant reduction in production due to decreased capital expenditures and worldwide curtailment. As is evident from recent peer earnings, reporting and commentary of the U.S. oil and gas industry coupled with supply cuts coming out of OPEC plus, they're starting to curb production as to not overwhelm storage capacity. We are also seeing the easing of the stay-at-home order across the globe, as economies get back to work, as we have here in Oklahoma, which we believe will lead to increased demand for petroleum products.

The Saudi's, in spite of recent efforts and having taken steps in the right direction as needed to do more with recent demand estimates down more than 30% and their announcement this morning validate this, in this demand slump. It is important that the U.S. oil and gas industry, as well as other global producers continue exerting capital discipline to not over produce into an oversupplied market during these times. Everyone needs to continue to cut back and participate as the slump continues. UAE and Kuwait are examples of this. Our models show that the market begins balancing by mid year and predicts 2021 will be strong and 2022 will be stronger. We are already beginning to see the consequences of supply and demand rebalance manifest at current and future prices.

I know that you would prefer that performance from our model, as to how we ramp production over the next few months. We believe its best for the company to remain flexible as the market recovers. We also know from experience, we can quickly bring this deferred production back online, once market conditions improve, and we will not see degradation in reservoir performance, as wells are brought online. We are doing our part to responsibly preserve our high-quality assets and shareholder capital, as a leader in this industry. Bill will provide more details about this later on the call.

Finally, I'm thankful for President Trump's leadership in the midst of these disease volatile market conditions. While it is unlikely that the Saudis will flood the market like this again anytime soon, I believe this recent downturn has highlighted to the federal government, just how important U.S. shale producers and the preservation of the American energy renaissance are to the U.S. economy, jobs and to our national security.

I would now like to turn the call over to Bill, who will provide more details regarding our priorities and outlook and his current environment.

William B. Berry -- Chief Executive Officer

Thank you, Harold and good morning everyone. In 2020, Continental has continued to demonstrate its commitment to the responsible stewardship of our assets and shareholder capital. As Harold mentioned, we are proactively preserving shareholder value over volume.

Referring to slide 3, our priorities include protecting our balance sheet, preserving cash flow, conserving our world-class assets for improved market conditions and delivering capital efficient operations. With strong portfolio optionality and liquidity, we plan to be well positioned for when market conditions improve.

Continental has a strong track record of preserving shareholder value, thanks to the strength of our assets and the capital and operating efficiency of our teams, we are the lowest cost producer among our oil-weighted peers.

Referring to slide 4, our drill bit F&D cost, operating WTI breakeven price and cash costs, are consistently highlighted as peer leading by the investment community. We delivered another solid operational quarter, as our assets continue to deliver strong oil performance. First quarter production exceeded both our internal and analyst expectations, averaging over 360,000 BOE per day and over 200,000 barrels of oil per day.

Referring to slide 5 and 6, our teams delivered consistent and capital efficient results from our deep inventory set in the Bakken and Oklahoma. Production expenses per BOE of $3.61 and DD&A per BOE of $16.35 were both well within our previously issued guidance range for the year. On total G&A, at $1.31 and cash G&A at $0.81 were materially better than previously issued guidance.

We spent $650 million in non-acquisition capex in the first quarter. This is over half of the previously revised capex budget of $1.2 billion, which is 55% reduction from our original guidance. The remaining $550 million in capex will be spent over the next three quarters and we are already seeing the potential for costs to trend even lower. At current strip, we are targeting to be cash flow positive in the second half of the year. We continue to demonstrate a strong commitment to our balance sheet, having reduced our net debt over $1.7 billion over the last four years, included in this amount is $139 million of principal that we repurchased and retired from late March to early April. These bonds were repurchased at a steep weighted average discount to par of 53%. With no imminent maturities and borrowing base redetermination, as well as an unsecured credit facility, we have a strong liquidity position.

Harold mentioned we are minimizing volumes by curtailing 70% of our operated oil production basin in May or about 60% of our total BOE base. I want to make it clear that all of this production is cash flow positive at today's prices. I'd like to further highlight the depth of Continental's flexibility and optionality to preserve value. In anticipation of the possibility of a continuation of an oversupplied market, we have to date, refrained from entering any oil sales agreement from June. In June, we intend to continue curtailing our oil production, selectively targeting sales that maximize our natural gas production to take advantage of the momentum in natural gas prices. This enables us to have the flexibility consistent with our plans to defer our production for a more stabilized constructive and higher priced markets that we perceive as imminent.

Referring to slide 7, I'll highlight our 55% reduction to capital spend from our original guidance. We will also reduce our rig count by over 80% from the beginning of the year. We have dropped high expectations for rig utilizations from about 20 rigs to four rigs by year-end 2020. We have zero stim crews running in the Bakken and expect to average one stim crew in the south for the remainder of 2020. We suspended our quarterly dividend and are prioritizing liquidity and debt reduction.

While we repurchased 8.1 million shares in the first quarter at an average price of $15.60 per share, this represents more than 2% of our shares outstanding. We have now suspended our share repurchase program. We have minimal long-term service commitments and a majority of our acreage is held by production. As the current price environment remains dynamic given market uncertainty caused by COVID-19, the company has decided to withdraw its previously issued guidance for 2020, and suspend further guidance. We will reassess issuing new guidance as market conditions continue to evolve.

In closing, I want to take a few moments to acknowledge and thank all of our employees and team members, especially those in the field for their continued commitment to safety and operational excellence during these unprecedented times. Our teams have demonstrated exceptional nimbleness in responding to changes in capital and production targets, and continue to deliver exceptional capital efficiency and cost savings across all our operations. The COVID-19 related risk, restrictions and limitations placed on each of our team members and their families put a great deal of stress on each and every one them, yet the team continued to deliver outstanding performance across every part of the organization. My sincere complements and deep admiration go to each and everyone, I can't imagine a more committed and capable team in the Continental Resources team, and I'm proud to be a part of it.

With that, we're ready to begin the Q&A session of our call and we will turn the call back over to the operator.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question today will come from Arun JR. Please go ahead.

Arun Jayaram -- J.P. Morgan -- Analyst

Yeah, good morning. I wanted to get your views, perhaps for John, on what sustaining capital looks like today from a D&C in total perspective for the year? I was wondering if you can give us some color on the Bakken versus the south?

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Are you asking about maintenance capital?

Arun Jayaram -- J.P. Morgan -- Analyst

That's correct.

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

OK. So the fourth quarter, we pretty much to talk about maintenance capital, just about every quarter. It's a very fair question. So if you look fourth quarter to first quarter. Those are the production levels that we're at there now. So they're are pretty consistent. We've talked in the past about a maintenance capital for D&C being in the $1.5 billion to $2 billion range. We've always been very much straight down the middle of the fairway. I've seen a lot of questions on from a lot of companies and some of them look at it differently. Some of them factoring a lot of DUCs. Some of them factoring lower levels of production. I think the -- but just being consistent, not applying the benefit of DUCs, not applying some of the other things that some others do, just a normal course, we could hold in that $1.5 billion to $2 billion for several years and hold flat up to the fourth quarter and the first quarter in those numbers.

If we were to apply DUCs, we were to do some of the other things, we can reduce that number lower for year one certainly. And additionally, as we're going forward, we're continuing to reap efficiencies and additional cost benefits, and I could see that going even further down with those types of things factored in. But just to be right down the middle of the fairway, I'd say $1.5 billion to $2 billion.

Arun Jayaram -- J.P. Morgan -- Analyst

Great. And just my follow up John, the cash balance did rise in the quarters. I was wondering if you could broadly talk the balance sheet management in the downturn, and it looks like you did tap on the facility, but just wanted to get your thoughts on just managing the balance sheet [Multiple Speakers]?

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Certainly. Thank you. Arun. Obviously, we've done a lot of things from a cost savings perspective. You've seen reductions in G&A from what was already a remarkably low, G&A $0.81 on cash G&A in the first quarter, so we're very strong in those categories. Going into the -- and our banks are very strong. Our credit facility is strong. We don't have covenants really in their debt-to-capital covenants, only one we have and we're well south below that. And we're not -- there is not any realm of even approaching that. Our debt would have to go up by $8 billion to hit that covenant level. So, that tells you we've got a lot of cushion. But going into the virus, with everyone moving to remote work, with banks moving to remote work, just with concerns that how would this work, because none of us have ever dealt with these types of things before the virus I'm speaking to. We decided to go ahead and have a little bit of cash on hand. Just ahead of time, just to make sure that if there were a hiccup in the systems and drawing cash, with debt payments and other things, interest payments coming due, that we would have that cash in hand. So we were probably -- maybe overly cautious, but we wanted to make sure there weren't any hiccups in the system, so we did access a bit. Obviously, we've been a very large revolver with a lot of liquidity.

Arun Jayaram -- J.P. Morgan -- Analyst

Great. Makes a lot of sense. Thanks a lot.

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Thanks, Arun. Nice talking to you.

Operator

Our next question will come from Brad Heffern with RBC Capital Markets. Please go ahead.

Brad Heffern -- RBC Capital Markets -- Analyst

Hey, good morning everyone. A question on the shut-ins. So you talked in the prepared comments about how all the wells that are shut-in are still cash flow positive. And so I'm curious if the shut-ins are really just supply demand related, or if there is some sort of price component, where you're looking for a certain price to sell that oil at, and so is there a chance that we could see the shut-ins linger, even if we do see a recovery in crude, more than we have already?

William B. Berry -- Chief Executive Officer

Yeah. Thanks Brad. A good question. What we have been doing internally is, a lot of analysis based on optimizing the combination of cash flow present value and then debt repayment and everything we've been doing is orchestrated in that effort. And if you look at the way we view the world, it has been a clearly destabilized world. The supply side has been destabilized, we're seeing that starting to correct. Obviously with COVID-19, the demand side will significantly destabilize. We're starting to see that come out. And on top of that, we're seeing the market pricing mechanism with Merc more going negative, also in a destabilized world. So with those three destabilizing factors, we've kind of taken the position that we will kind of manage this in a very deliberate approach, taking a look at when we want to put our volumes back on. Clearly from a contango point of view and from a fundamental point of view, you can do an analysis on this and say yes, you should look to, at some point in time, bringing production back on, you should probably look at doing that imminently, as I said in my comments.

At the same time as you see that contango start to shift a little bit, you'll start to see it -- doing that from the fundamental perspective, you'll start to see us probably laying back into the -- bringing production back on.

Brad Heffern -- RBC Capital Markets -- Analyst

OK, thank you for that. And then I guess as far as cadence for the rest of the year goes, you talked about the one stimulation crew in Oklahoma. You said there are no Bakken crews currently. Should we assume that that's the case for the rest of the year, or is there a chance that potentially Bakken completions come back at some point? Thanks.

William B. Berry -- Chief Executive Officer

Yeah, we're not going to provide that level of guidance at this point in time, Brad. But the spend rate, which is the cadence, you're looking at, it's a little bit faster in the second quarter than the third, in the fourth, but not a whole lot of difference between the quarters. And then we're going to make a judgment call month by month, taking a look at what the fundamentals are looking at doing, and then making that determination, to when we start bringing the stim crews back in.

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Recall Brad, that we are nicely below our $1.2 billion budget also. So there is flexibility.

Brad Heffern -- RBC Capital Markets -- Analyst

OK, thank you.

Operator

The next question will come from Doug Leggate with Bank of America. Please go ahead.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Thanks. Good morning everybody. John, I hate to beat on the maintenance capital question, but I wonder if I could just ask you to clarify, will you talk about sustaining capital? I guess, you were talking about fourth quarter 2019, first quarter 2020, what do you think the exit rate looks like in exiting 2020 if you like, and I'm really curious what that maintenance capital looks like? And I guess if I could just clarify a little further, do you preserve the production capacity by shutting in the production, so essentially, they are both the same number? I guess I'm looking for the exit rate and the sustaining capital goes along with that?

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

You've got a lot in there, Doug. So obviously we retracted guidance for the year. We recognize that you need -- would like more color on that. Let us get back to the markets that we talked about and bringing production back on and we will give you additional clarity on the balance of the year -- here as we go forward for the year. Obviously, if you're not completing and you've got normal declines when you're producing your production, which come off a little bit with the efficiencies and cost savings that we talked about, that capital maintenance capital number, I would expect to go down. So it might still be within the range we've given toward the lower end, it might be below that end. If we factor things such as DUCs and other things in, it could be remarkably lower than that. So there is a lot of flexibility there. We feel good about where we're at, We will give you more color on exit rates in fourth quarter production as we see the cadence of bringing production back on.

From a reservoir perspective, I think that was the last part of your question. Look, we've dealt with weather and other things in the Bakken for well over a decade. Our experience and our history in the plays we're in, shows us there is no impact of shutting in production. So we don't expect to have any impact whatsoever. So yes, we're preserving the production capacity into what we believe will be an imminently better commodity for us.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

So to be clear then, exiting 2020, we should still think of about $1.5 billion to $2 billion as a sustaining capital?

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

You know, I would say, I think it could be lower, but let me see where that -- let's see where the exit rate is, and when we guide you on that, we will guide you on that. We'll update that maintenance capital for you as well.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

I know, I know it's not -- we're not pretending there's any precision here, so I appreciate the answer. My follow-up if I may...

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Yeah. We've always tried to be transparent, fair and open. But obviously we need to see how this plays out a little bit to make sure we're giving you good guidance.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

I understand completely. My follow-up if I may is probably for Harold, but join you might want to chime in here as well. And it's really about the go forward business model for Continental and Harold, if I could just preview this a little bit, I mean you've talked -- you've been very vocal, as there is a lot of people about Saudis dumping oil and all the rest of it. But if we take a step back, you guys might have some of the lowest cost assets in the industry without any shot of a doubt, but not everybody does. And the U.S. as a whole increased by 50% from when, September 2017, when Saudi started supporting the price. So you could argue that in a free market, they're really just basically saying, we're not going to subsidize the U.S. shale model anymore. So I'd really like your response, as t- whether -- why you see this is a dumping issue, and not, I guess over-enthusiastic or in the words of the Texas Railroad Commission, wasteful production, given the growth we've had since September 2017? Coming at the other side of this, what does Continental strategy look like, and I'll leave it there. Thanks.

Harold G. Hamm -- Executive Chairman

Certainly, it was a dumping issue. They picked some atrocious time to try to do that. But when they made their announcement, to discounting oil into market. You know from Friday till Monday. The price was down 30%, on May 9th to the 10th. So it was a dumping issue. You know I don't think they'll do this again, but you never know, you have got to have a dose down in that, that this doesn't work and they increased their production altogether by about 3 million barrels and you can see the result of that with what's floating on the water. So a lot of it out there. But there is a lot of reasons, they can't do this and the future and we are not going to be protecting them militarily and have them try to take this industry down, hurt national security in the future.

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

So Doug, follow-up on your strategy going forward, really good question. I think what you're going to see is the, the whole industry in the United States, starting to take a different approach and I think you've seen that with a lot of the comments that have been out in this quarter's report. You saw us last quarter go out and say, we're not going to oversupply -- over producing in an oversupplied market, and we took a very strong position and for that effect we continued that position. And I think what we're seeing in the industry as a future business model, is market share is going to be an important issue and the market share capture rate that the U.S. was pursuing in the past was probably not sustainable and I think that's what what happened here recently. So I would expect to see those growth rates attenuate in the U.S. over the next few years.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Any thoughts on what that means for Continental?

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Well, we established what we felt we could do -- would do this year and then you saw the resource base we have, has the capacity to deliver a lot more, but we're not going to be providing guidance at this point in time, as to those growth rates.

Harold G. Hamm -- Executive Chairman

I think to Bill's point out I think everybody can tell, I don't know if they were shocked a little bit. But the percentage of growth and the low percentage of growth that we put forth at beginning of the year. But everybody, all the other operators out there have basically come back around those numbers. So we weren't far off in what we did.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Guys, I appreciate the answers now. I hope you guys are all doing well up there. Thank you.

William B. Berry -- Chief Executive Officer

Thanks Doug. Thank you very much. Stay well.

Operator

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

Derrick Whitfield -- Stifel -- Analyst

Thanks. Good morning all.

William B. Berry -- Chief Executive Officer

Good morning.

Derrick Whitfield -- Stifel -- Analyst

Regarding your voluntary curtailments for April and May, wanted to see if you could speak to your curtailment strategy more broadly in terms of approach and well selection regarding approach. I'm really focused on whether you're pursuing full shut-ins or simply pinching back on wells?

William B. Berry -- Chief Executive Officer

Yeah, we've got an internal model that we use to help guide us on this. And it's a well by well, pretty granular analysis looking at everything from operating cost to GORs to differentials and and that's what we're using to determine what we end up for either curtailing or shutting and most of the time, it was in a full shut-in, just because that's managing your operating costs in the most efficient manner, but not always. Jack, I don't know whether you have anything else you want to add to that?

Jack H.Stark -- President & Chief Operating Officer

No. That hits it.

Derrick Whitfield -- Stifel -- Analyst

And as a follow-on question, could you comment on your views on the economic conditions required to return wells to production? I imagine it's a function of the future curve, but there is also some differentials that play as well?

William B. Berry -- Chief Executive Officer

Yeah, it's more to the fundamentals and the three things that I mentioned earlier, clearly had a destabilized supply market and and we're seeing those fundamentals changing. We clearly had a destabilized demand side and we're seeing that change and the destabilization that that was caused by the Merc allowing the WTI to go negative, has put a pretty big shadow over all of us, as to how we go forward with the nominations and the commitments of volumes. And you guys probably understand, and I'm sure everybody has run their numbers, but for each and every producer in the United States that sold on WTI, the April price impact of the average price of April, was probably $2 to $3 reduction for every barrel sold in April as a result of the negative number that we saw on WTI. And what we're seeing now, there's 5 million barrels more in storage in Cushing than there were then. And so there's even tighter storage market and so I think we will continue to watch it closely, as to see if that that destabilized market pricing mechanism continues or not.

Derrick Whitfield -- Stifel -- Analyst

Thanks guys. Very helpful.

William B. Berry -- Chief Executive Officer

Thanks Derrick.

Operator

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

Jeanine Wai -- Barclays -- Analyst

Hi, good morning, or afternoon, everyone. This is Jeanine Wai.

William B. Berry -- Chief Executive Officer

Hello, good morning.

Jeanine Wai -- Barclays -- Analyst

Hi, good morning. Thanks for taking my question. My first question is on capital efficiency. From the presentation it looks like there is a meaningful increase and capital efficiency in the SpringBoard anticipated for this year, and a slight improvement in the Bakken. So we were just wondering can you provide a little bit more color on this and how much of this improvement do you think is sustainable, if we see a price recovery?

Jack H.Stark -- President & Chief Operating Officer

Thanks for the question Jeanine, this is Jack and yeah you're referring to slides 5 and 6 in the deck here, and I'll start with 5, with the Bakken there and I'll start off with a chart right on the top there to begin with. Just to emphasize just strong repeatable results, we continue to get from the Bakken. I think that's just an amazing chart. You see basically three years plus another quarter. Our first quarter here in '20, and you can see how these wells are performing, basically right in line with each other, over that period of time. And so it's just a -- just a remarkable repeatability and that's what we love about the Bakken, is it's dependable performance.

So to try to put some perspective on how these cost efficiencies are contributing, also to the capital efficiency of the play. We've come up with this metric that you see on the bottom right-hand chart, that basically shows you for the barrels produced in the first 12 months for $1,000 spent. And you can see, it's about a 12% increase over that three year period of time and so a lot of people are thinking, as time goes on, your capital efficiencies are going to decrease and in fact they continue to increase. So to me, its pretty impressive, considering that you know we're middle innings in the Bakken, as opposed to early innings.

Now if you go to page 6, you look at say SpringBoard here and you're in early innings. And again on the top right chart, you see SpringBoard completed well cost reductions of about 24%. But we're also seeing drilling cost efficiencies and facilities, there are so many things going into this. But when you get down to the bottom here chart, you can see that's about a 76% increase, you're exactly right, it is a much more significant increase in SpringBoard and that's just a result of the efficiency gains that we're making operationally across the play, combined with the excellent performance of the rock. You've got to have good rock for starters and then these reflect the capital efficiencies coming from our operations and so I just think again, it just shows the strength of the assets themselves and the excellence of our operating teams on how they're bringing these barrels to market.

Jeanine Wai -- Barclays -- Analyst

OK, great, thank you for the comprehensive answer. Those charts are really helpful. Also my my follow-up question, maybe following up on Doug's question, but pointing out a little bit more toward the dividend, assuming that we do see a price recovery, does the dividend suspension lend itself to just a more conservative approach to capital spending going forward, so that you can accelerate maybe reinstating that dividend?

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

The dividend was suspended along with other reductions we made in G&A and other things to preserve cash, in this low environment liquidity and cash are the most important things. So that was a component of that. We didn't eliminate it, we suspended it. So that is something, the Board can review in the future. But ultimately that's a Board decision, and I would be getting ahead of them to speculate one way or the other. So I'll defer on that. But we have a lot of optionality obviously.

Jeanine Wai -- Barclays -- Analyst

OK. Thank you for taking my questions.

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Anytime. Thank you.

William B. Berry -- Chief Executive Officer

Thanks Jeanine.

Operator

And our next question will come from Neal Dingmann with SunTrust. Please go ahead.

Neal Dingmann -- SunTrust Robinson Humphrey -- Analyst

Good morning all. My first question for John or Jack, I'm just wondering this has kind of been asked, I want to sort of tackle this a different way, wanted to know how you all view future priorities of your free cash flow, including potential stock buybacks, debt repayment reinstated dividend or organic or external growth; because if I recall not so long ago, you would place toward the top of the list repurchased stock going to look like you had done that throughout first quarter. So I'm just wondering how you view the progress now?

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Yeah, we did that January, February, early February, we haven't done it. So we've we're not there now, I would say today, it's debt reduction. You saw that we bought bonds at a discount of $0.53 on the dollar. They are trading a lot lower than that, but in doing that, we eliminated -- in essence we eliminated $16.5 million of total debt since we bought them at a discount. If that opportunity presents itself again, I would say we will evaluate that. Right now liquidity preservation and reducing debt would be at the forefront of all of those items.

Neal Dingmann -- SunTrust Robinson Humphrey -- Analyst

Thanks John. And my second question for Jack, I was just wondering Jack, you touched on this also a little bit earlier. Could you talk a little bit about, I'm just kind of curious from a broader standpoint, with the more minimal activity at least potentially for the rest of the year, how you would go about attacking the larger springboard and Long Creek projects, with just having a minimal activity potential on each?

Jack H.Stark -- President & Chief Operating Officer

Right. Well, both of those plays. I mean the assets aren't going any where, and with the reduced rig count of course, we'll see these develop at a little bit slower pace. But when you take a look, say for instance, at Long Creek, we've got about 20% of the 56 wells we plan to drill in there, have been drilled and with facilities in place and they're really basically ready to begin production, once we get -- once we decide to go ahead and stimulate the well. So Long Creek is in good shape and these wells are a particular area that -- of the unit where they can -- we don't have to develop this whole unit all at one time and so this is, I guess you could say maybe phase one of Long Creek, given the the lower pace of drilling now. And then SpringBoard development of course will proceed more slowly as a result of the rig count reduction. But again, these assets aren't going anywhere, they are as strong as ever and we will bring them on, as it makes sense.

Neal Dingmann -- SunTrust Robinson Humphrey -- Analyst

Makes sense. Thanks guys.

William B. Berry -- Chief Executive Officer

Thanks Neal.

Operator

And our next question will come from Brian Singer with Goldman Sachs. Please go ahead.

Brian Singer -- Goldman Sachs -- Analyst

Thank you and good morning.

Harold G. Hamm -- Executive Chairman

Good morning.

Brian Singer -- Goldman Sachs -- Analyst

The original capex plan that you talked about on the last call, I believe had a lot of wells that were coming on later in 2020 or in 2021. And I believe the budget, the original budget had something like $700 million per well that wouldn't come online until 2021. In your current revised plan, can you talk about how we should think about the lag between when investment does start to ramp up, and when we would see the impact either on growth or on mitigating decline?

Jack H.Stark -- President & Chief Operating Officer

Three to six months after that. You can look back historically over us, once we start applying capital because we're on larger pads and we're doing big developments, it doesn't come on immediately. But once we start bringing those on, you're bringing on large volume. So I would say it's a fairly quick and robust ability to adapt and bring that on, but it's -- three to six probably toward the longer end of that cycle, just depending on the size of a pad and where we're at in the stage of it, whether we have to drill or whether it's already drilled, all of those types of things. Samson has already drilled and is completing it, so quicker in there. But I think that fits well into contango market and it fits well into our views of the market, and obviously we don't just fixate on spot prices, we are looking at longer term values in the ability to enhance shareholder value.

Brian Singer -- Goldman Sachs -- Analyst

Great, thanks. And then my follow-up is, and I'm going to take a shot at it, but I don't know whether it will be successful. Any ability to comment on what you see your DUCs at year-end based on your current plan? And then with the cost and efficiencies that you're seeing, can you try to maybe quantify that and what could be cyclical versus what is secular?

Jack H.Stark -- President & Chief Operating Officer

Yeah, Brian, I'd say that we're probably going to be in about 150 wells in progress at year-end in that range. Last year, we are probably about 200, 215 I think was the number. So for comparison, there you go. And your second part of the question was, cost efficiencies...

Brian Singer -- Goldman Sachs -- Analyst

And how much of the costs would be forever, gains versus temporary gains?

Jack H.Stark -- President & Chief Operating Officer

Yeah. And in cost efficiencies, we talked about this even before the call just to verify, but we're looking at cost efficiencies that are predominantly structural at this point, and that we're referring to here. And so I'd say probably in a range of 90%, Pat, would you say, 80%, 90% is sustainable and structural going forward?

Pat Bent -- Senior Vice President, Operations

Yeah, Jack. And this is Pat Bent. I think that is correct. I think 90% plus are structural in nature. We've done a really good job in terms of our pricing and contracting new pricing that touched close to the bottom, but the vast majority of what we've been able to gain are structural in nature. So technical advancements, operational advancements, reduction in non-productive time. So again 90% structural is a good number.

Jack H.Stark -- President & Chief Operating Officer

Brian in these times, our teams are just, they aren't leaving any stone unturned looking for ways that they can continue to improve the efficiencies in the field and the things that we've been going through with them here in the last few weeks, is really quite impressive, and I mean we're drilling some wells. We do have some rigs in here, and we are setting records right now with some of the wells we're drilling. And just because of the efficiencies and downtime elimination, what have you, that the teams have been able to do. So as the last time, we are going to come out of this downturn stronger and more efficient than we were.

Brian Singer -- Goldman Sachs -- Analyst

Thank you.

William B. Berry -- Chief Executive Officer

Yeah, I'm going to repeat Jack's last comment for emphasis. It is significant, the amount of benefit that we're gaining from this pause in activity, so to speak to actually go back and look at our engineering and look at the activities we're doing, both from geoscience end from the technical engineering side, and reconfiguring a lot of our activities and we're seeing that already manifest itself in savings that Jack's talking about. So, we saw a stimulation that we probably cut 30% out of the cost of stimulation just by redesign. And the benefit came from having time to actually pause take a look at it, because we are running so fast with all the activities we have going on, this gave us a chance to kind of sit and look at some of the data and understand it a little bit better.

Brian Singer -- Goldman Sachs -- Analyst

Thank you very much.

Operator

Our next question will come from Noel Parks with Coker & Palmer. Please go ahead.

Noel Parks -- Coker & Palmer -- Analyst

Good morning.

William B. Berry -- Chief Executive Officer

Good morning.

Noel Parks -- Coker & Palmer -- Analyst

I was hoping you could catch us up on your gas marketing arrangement? I was wondering if you had anything heading out into the future that you were working on earlier in the year before everything hit with oil prices? And just if you could also just refresh us, kind of where you stand on some of those early arrangements that were put in place in anticipation of LNG?

Jack H.Stark -- President & Chief Operating Officer

Yeah, we don't have any, any gas that's going specifically an LNG contract we're selling into the market. We are about 800 million a day is what we're flowing right now on gas. So, quite a bit of of gas, a lot of it from the south, obviously with the transportation benefit that we have here in the south.

Noel Parks -- Coker & Palmer -- Analyst

Great. And I mean just with -- as you look ahead to when you start ramping up activity again, just based on the varying product mix across the different areas of the Mid-Con, are there any particular areas that would be heading up higher in the priority list, if we assume that the improvement we see it in gas actually does get sustained?

Jack H.Stark -- President & Chief Operating Officer

Noel, I don't think there is any area in particular. Areas in STACK and SCOOP in particular are are really -- there being in Oklahoma, you have Midship coming on and I'm just speaking to a dynamic that could influence prices and actually improve prices, is just with Midship coming on. There's going to be a lot of gas being taken out of the Mid-Continent region, and could, so it could actually provide an uplift in the basis of price for us here, because we're not on Midship itself. So hopefully, other than that we're pretty much business as usual.

Noel Parks -- Coker & Palmer -- Analyst

OK, great. And just to sort of follow up, by virtue of what's going on, as far as the service cost component of your AFEs, we have heard a lot about vendors looking even in this environment, where there's not a lot of activity looking to continue to cut prices more. And I am just wondering, do you have a sense of whether the drilling cost and the completion costs from the vendor side are kind of heading down proportionately, or and -- in the event of a rebound, you think those would also kind of go up proportionately? Do you think you can sustain better savings on the on the rig side, maybe as opposed to the frac side?

Jack H.Stark -- President & Chief Operating Officer

Noel, I think we mentioned a little bit earlier, when you look at the cost savings that we're able to generate currently, 90% of that is structural which would leave the other 10% plus-minus subject to pricing, and so there is that small variability associated with the pricing aspect of it, whether it moves down a percent or two, or up a percent or two, really the key is that the savings that we've been able to generate are structural in nature through our technical teams.

Noel Parks -- Coker & Palmer -- Analyst

Great, thanks.

Operator

Our next question will come from Nitin Kumar with Wells Fargo. Please go ahead.

Nitin Kumar -- Wells Fargo -- Analyst

Good afternoon, gentlemen, and thank you for taking my question. I guess my first question, I know this has been addressed a little bit, but slide 4, you show some very strong cost efficiencies compared to peers. You've also taken probably what is the biggest curtailment that we've heard of so far this earnings season. Do your costs allow you to come back to work a little bit earlier? I mean, I'm just trying to understand, what are your gating factors for bringing back this volume yeah?

William B. Berry -- Chief Executive Officer

So clearly, when you see the cost structure like that, that suggests that anyone else -- most of the other companies that are producing, they're producing at higher costs, and so they're producing cash flow positive at those costs, we clearly would be producing cash flow positive at these costs. And so it gets back to the earlier comments that we made, we just see that there were three fundamental pieces that we're destabilized and we took our production off of that. If you go back to to the production we had in April, we would have actually preferred to reduce that production even further, but we had nominations and commitments to the buyers that we ended up and delivering to. And so what we're looking for is that fundamental strengthening and we're starting to see signs of it, that's why we're seeing the pricing, we think it's going to imminently start strengthening here as a result of the fundamentals on the supply, the demand side is coming back. And then the third one is the one I mentioned, that we're still looking at the market pricing mechanism. That's the one that needs to get a little bit more stability in how it's going to be done in the future.

Nitin Kumar -- Wells Fargo -- Analyst

If I can get a clarification, I think I heard you say that you were not taking any nominations right now? Does that mean for June for is that for May?

William B. Berry -- Chief Executive Officer

For June, we are already committed with nominations in May.

Operator

And our next question will come from Paul Cheng with Scotia. Please go ahead.

Paul Cheng -- Scotia Howard Weil -- Analyst

Thank you. Good morning, gentlemen. So I think that the first one -- Hi, can you hear me?

William B. Berry -- Chief Executive Officer

Yeah. Thanks Paul.

Paul Cheng -- Scotia Howard Weil -- Analyst

Hi there. Good morning. Bill, just curious that when at some point that the COVID impact is going to be higher, and if we see a more favorable environment, where are you going to spend money first? Is it in Bakken or in SCOOP? And also that, if we do see a $50 oil price, at that point, is the activity level going to go back into your original activity level or that after COVID, you're going to have a low spread, or lower activity level?

William B. Berry -- Chief Executive Officer

I'll start with the last one, Paul, and that we we highlighted earlier in this year, that we were going to the growth rate this year and then a attenuation of the growth rate that we had over the five-year plan. And so we were expecting that this market share issue was going to be coming to fruition, and it is a realization that we're all right now. So we already had attenuated that. And the slides that Jack was referring to, showing the inventory and the strength of the inventory. So it's not a function of inventory. There is a function of, we just think we are doing a little bit more measured pace.

And as far as the Bakken versus the SCOOP, I think what you'll see there is, we don't make that determination, on the fly as to whether we're seeing the strengthening of the fundamentals on the gas or the fundamentals of the oil driving that. The good news is, we've got full flexibility to do that. We've got a range of assets in the South that go everywhere from low geo ore to high geo ore, and we've got assets up in the north that are really strong oil focus. And so with the portfolio we have, we have that optionality.

Operator

And our next question will come from Gail Nicholson with Stephens. Please go ahead.

Gail Nicholson -- Stephens Inc. -- Analyst

Good morning. Can you talk about your thoughts on the workover and recompletions in the current price environment and has your philosophy on that program changed at all?

Harold G. Hamm -- Executive Chairman

On the workover and recompletion, is that your question?

Gail Nicholson -- Stephens Inc. -- Analyst

Yeah, just how you guys are thinking about that in the current price environment, and if that philosophy on that program has changed at all, going forward?

William B. Berry -- Chief Executive Officer

Well, we currently don't have a recompletion program active and we had a few in the beginning of the year, that in this environment we've discontinued that. From a workover perspective, we kept the minimal amount of workover rigs active in the Bakken, that we felt like were necessary for the critical well activity that we have there, but have reduced that count pretty dramatically as well.

Jack H.Stark -- President & Chief Operating Officer

Some of our non-ops have done a fair amount of recompletions, they still got a few in their system. So we get quite a bit of data and that's something that we'll will be evaluating that data further, as we go forward. So there is still some progress there.

William B. Berry -- Chief Executive Officer

Yeah, most of that falls into what we describe as discretionary spending and we've pretty much eliminated all discretionary spending.

Gail Nicholson -- Stephens Inc. -- Analyst

OK, great. Thank you.

Operator

This will conclude today's question and answer session. I would like to turn the conference back over to Rory Sabino for any closing remarks.

Rory R. Sabino -- Vice President of Investor Relations

Thank you very much for joining us today. Please address any further questions to the IR team and have a great day.

William B. Berry -- Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks].

Duration: 51 minutes

Call participants:

Rory R. Sabino -- Vice President of Investor Relations

Harold G. Hamm -- Executive Chairman

William B. Berry -- Chief Executive Officer

John D. Hart Sr. -- Vice President, Treasurer and Chief Financial Officer

Jack H.Stark -- President & Chief Operating Officer

Pat Bent -- Senior Vice President, Operations

Arun Jayaram -- J.P. Morgan -- Analyst

Brad Heffern -- RBC Capital Markets -- Analyst

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Derrick Whitfield -- Stifel -- Analyst

Jeanine Wai -- Barclays -- Analyst

Neal Dingmann -- SunTrust Robinson Humphrey -- Analyst

Brian Singer -- Goldman Sachs -- Analyst

Noel Parks -- Coker & Palmer -- Analyst

Nitin Kumar -- Wells Fargo -- Analyst

Paul Cheng -- Scotia Howard Weil -- Analyst

Gail Nicholson -- Stephens Inc. -- Analyst

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