Centennial to curtail up to 40% production in May

Centennial Resource Development Inc., Denver, has suspended all near-term drilling and completion activity, and expects to curtail up to 40% of production in May in response to weak realized prices. Future curtailment decisions will be made on a month-to-month basis, subject to commodity prices and contractual obligations.

The company reported operations as part of its first quarter 2020 results May 4.

In early March, the company was operating a five-rig program and two completion crews.

Total capital budget for the year is expected to be $240-290 million, a 60% reduction compared to its original capital program. Drilling and completion costs are expected to be 85% of the company’s total budget, with the remaining portion to be spent on facilities, infrastructure, land, and other. Updated guidance provides flexibility to resume modest operational activity in the second half of the year, depending upon commodity prices.

In addition to capital reductions, the company has reduced general and administrative expenses through layoffs and reduced salaries for remaining employees. Base salaries for the chief executive officer, chief financial officer, and vice-presidents have been reduced by 25%, 15%, and 10%, respectively. The board of directors have reduced their cash retainer by 25%.

For the first quarter, Centennial reported a net loss of $548.0 million compared to a net loss of $8.1 million in the prior year period. The net loss was driven by a $611.3 million non-cash impairment charge, primarily related to proved properties as a result of lower commodity prices in the futures curve.

Average daily crude oil production increased 2% to 41,512 bo/d compared to the prior year period. Average total equivalent production of 71,820 boe/d was flat compared to the prior year period.

Total capital expenditures incurred for the quarter were $175.4 million, inclusive of $146.8 million in D&C capital expenditures. Centennial’s facilities, infrastructure, and other capital expenditures totaled $25.2 million for the quarter, with an additional $3.4 million spent on land. As a result of the company’s five-rig drilling program, capital expenditures for the first quarter represent 66% of its updated full year 2020 budget. The company expects to significantly reduce activity during the remaining three quarters of the year.