Delta Petroleum Corporation (DPTR)
Q2 2010 Earnings Call Transcript
August 10, 2010 12:00 pm ET
Broc Richardson – VP, Corporate Development and IR
Dan Taylor – Chairman
Carl Lakey – President and CEO
Kevin Nanke – Treasurer and CFO
Andrew Shapiro – Lawndale Capital Management
Joe Allman – J.P. Morgan
Gregg Brody – J.P. Morgan
Evan Templeton – Jefferies
Kevin Cabla – Raymond James
Previous Statements by DPTR
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Hello and welcome to the Delta Petroleum second quarter earnings conference call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I'd now like to turn the conference over to Broc Richardson. Mr. Richardson, please go ahead.
Thank you for joining us for Delta's second quarter 2010 financial and operating results conference call. Before we begin, I would like to remind you that we are conducting this call under Safe Harbor and that this call will include projections and forward-looking statements within the meaning of Federal Securities laws and are intended to be covered by the Safe Harbor protections.
In that regard, you will refer to the cautionary statement displayed on Delta's website, which is incorporated by reference with respect to the information provided for this call. Investors are urged to consider closely the oil and gas disclosures in Delta's Form 10-K for fiscal year end December 31, 2009, as updated by subsequent periodic and current reports on Forms 10-Q and 8-K respectively.
Today's speakers from Delta are Dan Taylor, Chairman of the Board; Carl Lakey, President and CEO; and Kevin Nanke, Treasurer and CFO. With that, I will turn the conference call over to our Chairman, Dan Taylor.
Thanks, Broc. Good morning, everyone. As we announced last week, we have closed on the sale of non-core assets for cash consideration of $130 million to Wapiti Oil and Gas. We received approximately $112 million of the proceeds on July 30. The remaining $18 million is held in escrow, pending required consents, which we have no reason to believe, will not be received.
As stated in the press release, the proceeds have been used to reduce borrowings under credit facility. While there were some assets sold in this transaction, we would have liked to have retained, the fact of the matter is that we simply did not have the adequate capital to develop those assets.
Combining that with our need to address our near-term credit facility balance and maturity, the asset sale was necessary. Kevin will discuss further the senior credit facility in his comments.
The asset sale was the result of a competitive process and part of the strategic alternative process previously announced and discussed. This process has now been concluded and the company will focus on creating value with its core assets through operations. The Board of Directors will, of course, re-evaluate the renewal of this process at a later date.
During the quarter, we completed one well in the Vega area. The results of this well in addition to other wells completed in prior quarters have been very positive, in fact, better than expected. Carl will discuss these completions in greater detail in his comments.
At the closing of the asset sale, the efforts of Management are now directed to refinancing our senior credit facility, which matures in January. As stated in our press release, our revolving credit facility borrowing base was re-determined downward to $35 million after the asset sale. It should be understood that our asset base supports a conforming borrowing base much larger than $35 million, but given the short duration until the maturity of the facility, we agreed that a lower number was acceptable.
Kevin will discuss the status of our refinancing efforts in his comments. As was announced last month, the Board of Directors named Carl Lakey Delta's Chief Executive Officer. Carl was the clear and unanimous choice given his experience and the Board's desire to refocus Delta's efforts towards its operation.
Carl is proven to be a very capable manager and leader not only during his tenure here at Delta, but also previously in his career when he managed operations and budgets much larger than those at Delta. We have full confidence in his ability to direct this company in a way that creates value from our asset base.
With that, I'll turn the call over to Carl for his comments on operations. Carl?
Thank you, Dan. With the closing of the Wapiti transaction and the resulting improved liquidity created for Delta, the company will now focus its efforts on operational improvements of the company's core oil and gas assets.
Before I describe the path forward for our focused Delta Petroleum, it should be pointed out that Delta will be reorganized in light of the new post Wapiti property portfolio to best position our intellectual talent to execute our plan. Part of that reorganization will result in a smaller workforce proportional to our remaining assets.
Delta has already undertaken two prior reductions in workforce. Our current team is very talented and accomplished in their skills, making this part of the plan even more difficult.
We expect that many of our field employees will transition to Wapiti to assist them with the continued efficient operations of those assets. Overall, Delta's salary and benefits costs are expected to be reduced by roughly one-third through the changes anticipated in this restructuring after the associated cost with severance.