Callon Petroleum Company (NYSE:CPE) Q3 2019 Earnings Conference Call - Final Transcript
Nov 05, 2019 • 09:00 am ET
flow, improved returns on capital and further our efforts to strengthen Callon's financial position.
We are excited to hit the ground running on our integrated development plan and reap the benefits from the strategic combination of two talented teams and high-quality asset bases. I'll start on Page 4 by visiting our introductory slide from our February outlook earlier this year. Entering 2019, our message was clear to investors: This year, we're focused on harvesting asset value through increased pad development and cycle time reductions. We would seek to optimize margins and increase our operational flexibility. Through thoughtful capital allocation, we would minimize outspend and moderate growth. And from a longer-term perspective, we would seek to balance the preservation of longer-term reinvestment opportunities with our near-term return profile.
This approach would advance our goal to generate sustainable free cash flow from a model driven by leading capital efficiency, coupled with differentiated cash margins and resilient growth profile supported by a strong well productivity and a maturing decline profile as. As we look back at our activity and accomplishments during 2019, we have stuck exactly to that road-map. Our shift to scale program development while operating within a reduced budget relative to 2018 has driven record levels of capital efficiency across the portfolio, as we have expanded our deployment of larger projects from the Midland Basin to the Delaware Basin earlier this year.
Our margins remain among the strongest in the industry and have been furthered by our success in reducing costs on acquired properties in the Delaware Basin and leveraging the infrastructure investments we've made in earlier years. In addition, the optimization of the portfolio through the sale of almost $300 million in assets year-to-date allowed for the redemption of high cost preferred stock, reducing our cost of capital in simplifying our capital structure. We firmly believe that the strategic combination of Callon and Carrizo will meaningfully increase the impact of these initiatives through an increased critical mass of development activity and infrastructure in the Delaware Basin, operating and corporate cost reductions and an expanding set of asset optimization and rationalization opportunities.
In sum, we will be a stronger company with an advantage cost of supply to improve our competitive position as the unconventional oil and gas business matures. We've honored our promises and delivered exceptional performance as a result. As we look forward to 2020, the opportunities for shareholder value creation are expanding greatly as we continue to execute our strategy across a larger asset base and unlock the benefits of thoughtful scaled operations.
I'm going to let Jeff start us off with the operational update for the third quarter. Jeff?
Thanks, Joe. Execution during the third quarter continued to exceed expectations with our capital efficiency benefiting from two significant large pad developments, one each in the Delaware and Midland Basins. We saw lower operating costs as the optimization project that we kicked-off in the first quarter of this year was completed during the early portion of the third quarter.