(NEW YORK)–Centennial Resource Development, Inc. (NASDAQ: CDEV) released their financial report showing the company has increased pro forma liquidity to $468 million, while WTI crude oil shows bullish rally back above $20 a barrel.
In the coming days and weeks there will be a separation of the oil companies who can survive this downturn, and the ones who can’t. Although not a pretty report CDEV shows they may be one of those oil companies who will most likely make it through the storm by boosting liquidity, and cutting costs.
CDEV Survival Plan
The Company laid out their survival plan to cut costs and ramp up cash to weather this energy crisis.
– Suspended all near-term drilling and completion activity
– Expect to curtail up to 40% of production during May in response to weak realized prices
– Revised total capital budget approximately 60% below original guidance
– Plan flexible approach to future operational activity depending upon commodity prices
– Maintain focus on balance sheet protection and liquidity
Balance Sheet Boosted Up
In addition to these survival tasks the company also highlighted increased liquidity, which is foremost the most important thing going forward at this time.
– Pro forma liquidity of $468 million
– New $700 million borrowing base at March 31
– Initiated plan to reduce annual G&A expenses by approximately 30% on an annualized basis
– Hedged significant amount of second and third quarter oil volumes to protect against downside risk
– Amended credit facility to replace total leverage covenant with first lien leverage covenant
– Launched debt exchange offer to reduce total debt and lower interest expense
The key take away is that CDEV now has pro forma liquidity of $468 million, which should allowed them to weather through this storm to better times.
Outlook for WTI Turning Bullish
After such a horrific crash the outlook for WTI crude oil may be about to change as more states reopen, which should start to reflect in greater draw-downs from storage facilities as more factories and cars hit the road.
This move back up in WTI crude may help boost the entire energy sector, with specific focus on companies who have already shown they have the liquidity to survive.
For now all eyes turn to the price of WTI crude to determine when CDEV can restart their rigs, and begin producing revenues again.
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About Centennial Resource
Centennial Resource Development, Inc., an independent oil and natural gas company, focuses on the development of unconventional oil and associated liquids-rich natural gas reserves in the United States. The company’s assets primarily focus on the Delaware Basin, a sub-basin of the Permian Basin. Its properties consist of acreage blocks primarily in Reeves County in West Texas and Lea County in New Mexico. As of December 31, 2019, it leased or acquired approximately 78,195 net acres; and owned 1,569 net mineral acres in the Delaware Basin. The company was formerly known as Silver Run Acquisition Corporation and changed its name to Centennial Resource Development, Inc. in October 2016. Centennial Resource Development, Inc. was incorporated in 2015 and is headquartered in Denver, Colorado.
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