Baytex Energy Corp (BTE) 2008 Q1 法說會逐字稿

Welcome to the Baytex Energy Trust 2008 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) Please be advised this conference is being recorded Wednesday, May 14, 2008.

I would now like to turn the conference over to Derek Aylesworth, Chief Financial Officer.

Thank you. Ladies and gentlemen, while listening please keep in mind that our remarks in this conference call contain forward-looking statements within the meaning of Securities Acts. We caution that assumptions used 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 whole or in part as those forecast.

Thank you, Derek. Ladies and gentlemen, it's Ray Chan. We are very please to report our results for the first quarter of 2008. I will provide a brief review of the operations and then ask Derek to provide a review of the financial results. I will provide my summary comments and then we will be open for questions.

Our operating results continue to be very strong in the first quarter. We achieved average quarterly production of 38,157 BOEs per day in Q1 which was in line with our production guidance for the year. Production volumes were down modestly from Q4 of last year as a result of some extreme cold weather in January which negatively impacted deliveries in some of our producing areas. We are particularly pleased to have been able to maintain these results with a relatively modest capital program. Our Q1 spending of $51.6 million is on track to a full year expenditure level within our CapEx guidance.

We anticipate that Q2 volumes will be modestly affected by seasonal issues around spring break up. However, we expect to be consolidating the results from the acquisition of Burmis Energy in early June. I will expand on that transaction later. The production contribution from the property acquired in June of last year continues to exceed our expectations. In the first quarter production at Pembina averaged 4,974 BOEs per day well ahead of the 3,500 BOEs per day at the time of the acquisition. Combined with the significant improvement in commodity prices from the time we acquired these assets the true value of these acquisitions is very evident.

Our operating results at Seal continue to be very positive as well. Q1 production average 2,500 barrels per day, with only very minor contribution from the 10 horizontal producing wells we drilled in Q1. These new producers were brought onstream largely in April and have lifted current production at Seal to approximately 4,000 barrels per day. Several of these wells are dual lake horizontal producers which have come on at initial production rates of over 200 barrels per day per well. We are planning to drill an additional eight to ten wells in the third quarter to complete our 2008 drilling program.

Another exciting development for us at Seal is the commencement of our cyclic steam pilot test. We recently began injecting steam into the reservoir using a single well bore equipped to handle the heat from the steaming process and expect to commence production from the thermally stimulated reservoir in a little over a month. To outline our results about test may not be available until the first half of 2009. We look forward to the potential to realize significant production and reserve addition through the use of thermal recovery techniques.

As you are aware last month the Government of Alberta announced and measures the deal with the unintended consequences of the new royalty framework. These new measures will offer some degree of relief for the drilling of certain deep oil or natural gas wells in Alberta. While we appreciate efforts of the government to engage in a dialogue with the industry and the relief which was offered we do note that in the case of Baytex the relief is not material to our operations. We will continue to evaluate our portfolio and direct our capital investments to those projects which generates the highest rate of return. I will now turn the conference over to Derek to discuss our Q1, 2008 financial highlights.

Thank you Ray. We are very pleased to report record quarterly cash flow of $101.6 million with the commodity price environment in Q1 a key driver of these results. Average WTI prices in Q1 of $97.90 U.S. per barrel were up 8% from Q4 while heavy oil prices increased over 30% as third party infrastructure problems in Q4 were resolved and refining demand increased. The improvement in our realized heavy oil price had a 19% increase over Q4 of 2007 to average $59.65 per barrel was less traumatic than the market improvement as a result of the fixed differential sales contracts we have in place for a portion of our heavy oil volumes. But the improvement in heavy oil pricing bodes well for the future of all heavy oil producers. Our wellhead natural gas pricing also improved averaging $7.42 per Mcf in the quarter or 18% higher than the previous quarter. As impressive as these results are current commodity prices are yet significantly higher than those realized in Q1. With current spot price per WTI over $120 U.S. per barrel, Western Canadian heavy blend price at about $100 a barrel and [AKO] gas price around $10 per Mcf.

Based on this impact of this pricing environment Baytex has previously announced an increase to its distribution to $0.20 per unit per month commencing with the distribution in respect of March 2008 operations. We are pleased to be able to share the benefit of higher commodity prices directly with our unit holders. We are well able to finance this level of distribution and our capital programs as evidenced by our Q1 payout ratio of 38% after participation in our distribution reinvestment plan. The financial position of Baytex continues to grow stronger along with elevated pricing. Our quarter end monetary debt of $436 million represents 1.1 times annualized Q1 cash flow, a level with which we are very comfortable. Combined with over $130 million in undrawn credit facilities we are well positioned to take advantage of new business opportunities which may arise. The equity market is rewarding all this good news and good performance.

During the first quarter of 2008 Baytex delivered a total return of 23.2% to our unit holders. As of the close of the market yesterday our year to date total return was 51.1%. I'll now ask Ray to provide his concluding remarks.

Thank you Derek. We are looking ahead to a continuation of the very strong start we have had to 2008. Our operating results are in line with our expectations and we are pursuing very exciting development at some of our key properties. Commodity prices are in particularly favorable -- favor about heavy oil producers and our financial results expected to reflect that accordingly. This positive outlook is further supplemented by the (inaudible - highly accented language) closing of the acquisition of Burmis Energy Inc. in early June.

This acquisition we improved the product mix bound to Baytex will provide us with additional development inventory for our non heavy oil portfolio and will be completed at acquisition metrics which are very accretive to our unit holders. Pro forma this acquisition we have revised our production guidance upward to an average between 40,500 BOEs per day and 41,000 BOEs per day for the balance of 2008. We have also revised our capital spending guidance to $170 million for the year in order to maintain that production level. At current commodity prices Baytex should have sufficient cash flow to fund our current level of distributions and a revised 2008 capital program with free cash flow remaining. We will continue to evaluate opportunities to utilize that free cash flow in the best interest of our unit holders. Ladies and gentlemen, thank you for your attention and we are now open for questions. Operator? Operator?

Yes. Thank you. (OPERATOR INSTRUCTIONS) Ray, there are currently no questions at this time. I will turn the conference back to you.

Thank you, ladies and gentlemen for attending our conference call and we look forward to reporting to you our Q2 results in early August. Thank you very much.

Ladies and gentlemen, that concludes our conference call. We thank you for your participation and ask that you please disconnect your lines.