Baytex Energy Corp (BTE) 2007 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Baytex Energy Trust 2007 first quarter results conference call.

During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. (OPERATOR INSTRUCTIONS)

As a reminder, this conference is being recorded, Wednesday, May 9, 2007. Your speakers for today are Raymond Chan, President and Chief Executive Officer, Derek Aylesworth, Chief Financial Officer , and Anthony Marino, Chief Operating Officer.

I would now like to turn the conference over to Derek Aylesworth. Please go ahead, sir.

Thank you, Sharon. Ladies and gentlemen, while listening please keep in mind that our remarks of this conference call contain certain forward-looking statements within the meaning of the Securities acts.

We caution that assumption views in the preparation of such information although considered reasonable by us at the time of preparation may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Many of which are beyond our control.

There is no representation by Baytex that actual results achieved during the forecast period will be the same in all or in part as those forecasts.

Thank you, Derek. Ladies and Gentlemen, thank you for taking time and joining us on our first quarter conference call.

While the first quarter of 2007 was a rather normal quarter for Baytex, by that I mean we were able to execute a capital program pretty much as planned and the production for the quarter was in line with our internal target and public guidance, there were a number of notable events on the macro funds that affected Baytex and our industry.

Firstly, all price experienced some tremendous volatility during this first quarter. At the closing out of 2006 at U.S. $61.05 per barrel, WTI began 2007 with a quick and unexpected decline. By January 18, closing price for the [four] month contract was barely above $50 at $50.48.

Opinions were about as to the near term outlook for oil price with a decided negative bias, coupled with a late start to Winter in North America resulting in (inaudible-heavy accent) gas price in the first half of January trading in 5.50 to 60 [predictable] range, the new year brought an ominous start to our industry. In reaction to this environment, a number of energy trusts reduced their distributions.

At Baytex, we received many inquiries about our plan. As we have always subscribed to a conservative payout strategy and combined with a flexible balance sheet with ample liquidity we did not see the need to adjust our distributions based on such short term changes.

We were fortunate to be in a position to take this view because just as quickly as oil price came down, it recovered our lost ground in the following weeks and the general outlook has turned positive again. With current price in the mid $60 U.S. range, the remainder of this year.

Secondly, with the pending legislation on taxing income trust, a number of energy trusts are shifting their operating model to limit capital spending and distributions within cash flow, and to focus the capital programs on internal exploration and development as opposed to acquisitions. For Baytex, we have adopted this operating model since inception as we believe it is the best way to manage in an older value in the long run so we are not spending time to retool our organization to fit a new way of doing business.

Another development in the first quarter that bodes well for Baytex is the evidence of fundamental improvement in heavier differentials for Canadian crude. Historically, heavy oil differentials widened during Winter months due to lower seasonal demand. Such was not the case in Q1 '07 as low (inaudible-heavy accent) differentials adjusting for the premium for posting paid by the refiners, averaged only 27% of WTI price.

In fact, since the pipeline reversals last Spring, which expanded access of Canadian heavy crude to the U.S. lower Midwest and Gulf Coast regions, transacted (inaudible-heavy accent) differentials have averaged 28% of WTI for the 12 months ended March 31, 2007. Baytex is very excited about this fundamental improvements as the impact on the long term profitability of our heavy oil is improved.

As I said earlier, we had a pretty normal quarter in Q1 '07, and I guess normal is okay for these interesting times. We are pleased with the results of our Q1 capital program. Our drilling (inaudible-heavy accent) and the initial production from the nine new horizontal wells continue to add to our confidence level with regard to the long term prospectivity of this asset.

We are happy with our cost control efforts as our capital programs were executed on time and on budget and we held an increase in operating costs to less than 5% compared to one year ago. We are well positioned to continue with our prudent strategy to deliver consistent and superior returns to our unit holders.

This is the end of our prepared remarks. Thank you, very much, and we would like to take your questions at this time.

Sharon?

Thank you. (OPERATOR INSTRUCTIONS)

One moment, please, for the first question.

(OPERATOR INSTRUCTIONS)

Mr. Chan, I am not showing any questions at this time.

Thank you, Sharon. Ladies and gentlemen, again thank you for your participation in the Q1 conference call and we look forward to reporting our second quarter results in three months time. Thanks again.

Ladies and Gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines.