Obsidian Energy Ltd (OBE) 2012 Q2 法說會逐字稿

Good morning. My name is Nick, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Penn West Exploration 2012 second-quarter results conference call. (Operator Instructions). Jason Fleury, you may begin your conference.

Thank you and good morning. Welcome to Penn West's 2012 second-quarter financial and operating results conference call. My name is Jason Fleury, and I'm responsible for the investor relations group here at Penn West.

With me this morning in Calgary is our President and Chief Executive Officer, Murray Nunns, Chief Operating Officer Hilary Foulkes, and Chief Financial Officer Todd Takeyasu, and other members of our senior management team.

Before getting started this morning, I would like to quickly remind listeners of our customary conference call advisory. Penn West shares are traded both on the New York Stock Exchange under the symbol PWE and on the Toronto Stock exchange under the symbol PWT. All references during this conference call are in Canadian dollars, unless otherwise indicated, and all conversions of natural gas to barrels of oil equivalent are done on a six-to-one conversion ratio. All financials are reported under International Financial Reporting Standards.

Certain information regarding Penn West and the transactions and results discussed during this conference call, including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities laws and necessarily involve risks. Participants are directed to Penn West's second-quarter news release and are also asked to review the advisory notice therein. This news release can be found at www.PennWest.com.

Participants are also cautioned that the included list of risk factors contained within that release is not exhaustive. Official information detailing other risk factors that could affect Penn West's operations or financial results are included in reports on file with Canadian and US security regulatory authorities and may be accessed through the SEDAR website at www.SEDAR.com and the SEC website at www.SEC.gov, or at our own website, www.PennWest.com.

During this conference call, certain references to non-GAAP terms may be made. Participants are directed to Penn West's MD&A and financial statements available on our website, as well as filings available on the website noted earlier, to review disclosures concerning non-GAAP items.

I will now turn the call over to Murray Nunns, President and Chief Executive Officer. Murray?

Thank you, Jason. Good morning, everybody.

You know, Penn West's strategy over the past five years has really supported the evolution of the Company away from the limitations of vertical development and into increasingly profitable horizontal technologies.

We have a history of proactive balance sheet management through ongoing strategic portfolio management, which has included world-class joint ventures and timely material asset dispositions. This has allowed us to execute our strategies, which has ultimately led to significant increases in the intrinsic value of Penn West's assets.

Two years ago, less than 2% of Penn West's production came from well bores using horizontal multi-frack technology. By the end of this year, we anticipate 30% of our production will come from horizontal multi-frack wells. These new light oil wells deliver significantly higher rates of return in the long run. The value of this technology as added to our asset base will only continue to grow in the future.

Over the years, Penn West has assembled and unlocked some of the most valuable plays in their space. Additionally, our portfolio includes a broad inventory of oil-weighted properties, which are not critical to our ongoing -- our go-forward strategies. We have demonstrated the ability to sell these core assets at attractive valuations to accomplish strategic goals, such as new play development or balance sheet support.

We have demonstrated our ability to make these deals happen and we believe that we are in a strong position today to achieve material value for the assets currently being considered for sale. Hilary will give you more color on this later in the call, but make no mistake. We have the breadth of inventory and the ability to transact with a broad spectrum of potential buyers.

Commodity pricing is cyclical, and it's impacted by broad economic factors, as well as, obviously, speculative volatility. We are mindful of these impacts on our business and we exercise prudence during all parts of the pricing cycle.

Additionally, pricing differentials between US benchmark WTI and Canadian crude oil streams have been weighing on western Canadian producers for several months now. At times, the differential has been as much as CAD25 a barrel. While this has narrowed considerably since Q2, the volatility of this differential is persistent and has had and has a significant impact on our netbacks.

In both the US and Canada, active pipeline projects at varying stages of completion indicate that there will be an easing of capacity constraints on Canadian crude in 2013. Current infrastructure projects alone will not solve all of the transportation refining access limitations in North America in the longer term, but they are a significant start. Export access from Canada and increased access to US refining is necessary for western Canadian producers to fully realize the potential value of Canadian oil.

Taking into consideration the impact of ongoing differential volatility in the hydrocarbon pricing on our price realizations, we have adjusted our capital plans accordingly for the remainder of 2012. Original net capital spending for Penn West was anticipated to be between CAD1.3 billion to CAD1.4 billion; we now anticipate our 2012 net capital spending to be between CAD1.2 billion to CAD1.25 billion.

Our 2012 average daily production volumes are expected to be between 165,000 and 168,500 BOE per day.

We have indicated to our shareholder base before that in softer portions of a commodity price cycle we would ensure consistency in the dividend while delaying growth plans. Over the last three years, we have taken appropriate measures to ensure balance sheet integrity. Let's just go to a Canadian euphemism -- we don't skate into the corner with our heads down. So I would like to remind shareholders that Penn West's Board of Directors has declared a third-quarter dividend of CAD0.27 per share to be paid on October 15, 2012, to shareholders of record on September 28, 2012.

I will now pass the call to Hilary Foulkes, our Chief Operating Officer, to give you greater insight into our A&D programs in particular and our ongoing operations.

Thank you, Murray, and good morning. Murray has laid out the strategy behind our asset disposition program, and I want to provide you with some color on how this has been progressing.

Ongoing portfolio management is necessary as we continue to high-grade our asset base. This process increases our focus, improves corporate productivity, while funding development efforts. Non-core asset sales earlier this year were scattered properties sold largely into the junior market and contributed over CAD340 million in proceeds.

The assets in the process we are currently engaged in is quite different. We are actively marketing a number of properties suitable for both outright sales and joint ventures. Quite simply, we will determine which properties we transact on based on value.

The assets are of the size which attracts an entirely different buyer group than our other transactions earlier this year. The size, quality, and composition of these assets is attracting interest from private equity, pension funds, life insurance companies, and national oil companies. As outlined in the press release earlier this morning, we are targeting CAD1 billion to CAD1.5 billion in proceeds. Based on current interest levels, we are confident we will be able to transact.

Now, for a quick operational update for the second quarter. The capital program continues to deliver strong results with early production at or above expectation in all major plays and in a significant number of other fields we talk about less frequently.

In the Spearfish, operations are in full development. We are realizing a reduction of approximately 15% from our Q1 2012 costs. This equates to a savings of approximately CAD200,000 per well. We view the Spearfish as an example of the efficiencies that can be gained when full-scale development occurs.

We anticipate the NGL recovery plant will be onstream by the first quarter of 2013, and gas conservation will follow in 2014 on completion of the third-party transmission line. We remain confident we will reach 14,000 barrels per day of production in this play Q1 2013, which is our facility capacity.

You may have heard this on previous calls. It's the drill it and fill it strategy.

We generally confine our comments to the big four oil plays, but the results at Swan Hills are exceptional and bear mentioning. At East Swan Hills, we drilled seven wells this year. Our recently completed dual-lateral horizontal well is particularly noteworthy. The first leg of the well had peak rates of 1,500 BOEs per day and produced more than 24,000 BOEs over a 24-day period. That makes the finger math easy.

The second leg tested peak rates of over 800 barrels a day. Our [six and 15] well had peak rates of 1,950 BOEs per day. This well has averaged over 650 barrels a day in the first month of production. Five other wells completed in 2012 are either producing at or above tight-curve expectations currently or, based on test results, are expected to.

Planning is underway to increase our gas handling capacity in 2013 to support an ongoing program in East Swan Hills.

In the Slave Point play, the Swan Lake area continues to impress us as successful (technical difficulty) drilling further increased our confidence. Well performance is very consistent. We have a major facility upgrade which is expected to be onstream in the fourth quarter of this year, and this will allow us the capacity to accelerate activity as we have a significant inventory in Swan Lake supported by our very large land position.

Our aggressive program in Otter is delivering as expected, and we are seeing successful gains in efficiencies with our most recent dual lateral drilled in two thirds the time we projected. This equates to a cost savings of CAD1 million.

We believe that Slave Point at Sawn, Otter, and Red Earth also present a significant prize to EOR development, which we expect to accelerate in 2013.

Excitement over western Canadian source-rock plays remains high. In our 230 section, almost five township land position in the Duvernay is in the liquids-rich to oil fairway. In the immediate vicinity of our largest block, which is 167 sections at Willesden Green, eight competitor wells have been drilled with a cross-section of results, helping further define the liquids-rich fairway.

Our 100% working-interest, vertical, exploratory wells drilled and completed over the past year is in line with recently released liquids-rich competitor results from the perspective of gas composition, thermal maturity, and calculated deliverability. While still early stage, we are very pleased with both the size and the location of our acreage. We are very well positioned to be a material player in this emerging resource.

The second-quarter average production was in line with expectations both internally and on the Street. Based on slowing the pace of capital spending, which Murray outlined earlier in this call and which was detailed in our press release this morning, we anticipate third-quarter average production to be slightly higher than our second-quarter average volumes, roughly in the mid-160,000 BOEs. This is consistent with the updated 2012 full-year average annual production guidance updated this morning, 165,000 to 168,500 BOEs per day.

While weakness in the commodity prices is outside our control, we've been very active in addressing our costs, both capital expenditures and operating expenses. We've demonstrated capital cost savings through efficiencies that come from full-scale development; from consistent, long-term relationships with service providers; and from internal procurement and operational strategies. These improvements come from lowering average drilling times, uniform well design in key development plays, stockpiling material, and consistency of crews, both drilling and completion.

We've been successful in leveraging our size and activity levels to ensure top-tier status with our service providers. Beyond efficiencies and relationships, when commodity prices result in lower activity levels, there are also absolute service cost savings that need to be realized.

We have proven up one of the most extensive light oil inventories in North America. We continue to rationalize and high-grade our asset base. We are realizing cost reductions, and our program continues to deliver as expected. It's also been punctuated with some exceptional results, as you heard this morning.

Just before we take some questions, I'd like to introduce the other members of our senior management team in attendance today. In addition to Murray Nunns, Todd Takeyasu, and Jason Fleury, with us here this morning are Dave Middleton, Executive VP and Managing Director of Peace River Oil Partnership; Mark Fitzgerald, Senior Vice President, Development; Gregg Gegunde, Senior Vice President, Production; Thane Jensen, Senior Vice President, Operations; Keith Luft, General Counsel and Senior Vice President, Stakeholder Relations; Rob Wollmann, Senior Vice President, Exploration; Jeff Curran, Vice President, Accounting and Reporting; and [Maggie Lake], Manager, Crude Oil Marketing.

I'd like to now turn this call over to the Operator and open up the phone lines for questions.

(Operator Instructions). Greg Pardy, RBC Capital Markets.

Three quick ones for me. Just curious as to how many wells you've got behind pipe just awaiting tie-in right now.

And then, with respect to the asset dispositions, just curious how granular you could get at this stage. How formal is the process that you're moving forward with, timing? And curious as to whether you could give any sense as to what production range we could be talking about if you go from, call it, 1 billion to the 1.5 billion level.

And the last question is just, what would you be looking at in terms of optimized debt metrics post the asset sale? Thanks very much.

I'll take on that first question in terms of how much behind pipe, how many drilled. Actually, I'd say about three quarters of our drilling for the year is actually already in the bag.

We did a lot in the first half. A lot of that is pad drilling that will be completed and tied in in the second half or spread out across the second half as we complete the tie-in.

The difficulty in giving single numbers is that the second half, although a smaller portion of the well count, are actually the bigger wells. They're dominated by wells on Slave Lake, Swan Hills, and the Cardium play, and we're much lighter on the shallow plays.

So well counts alone really are actually misleading. And in fact, a lot of the wells in Slave, and I'm going to put a ballpark out there, there's 25 to 30 times in the second half, most of those are duals. So they actually add up to significantly more volume. So really, that's why we're staying away from giving individual numbers.

Could you just refresh on your other two questions?

Yes, sure. So why don't we just go right to the debt metric question. So just, Murray, post the asset sales, then, what do you want your balance sheet to look like from a metric standpoint?

I'll throw that one to Todd.

Hi, Greg. Really our view of what the balance sheet should be hasn't changed. In a low pricing environment, we like to see 1.5 to two times. And at a higher pricing point in the commodity price cycle, we like to see something inside of 2.5.

So we're really looking to do a relatively significant balance sheet reset here such that we can get it to a more continuous mode of operation without really worrying about the balance sheet. We think that commodity prices are looking much more favorable than two or three weeks ago. And we're pretty optimistic that way. And we've talked a lot about the asset sales and they're a significant part of resetting our balance sheet.

Okay, thanks, Todd.

And then, just the last question was, what's the potential production impact you could see or is it just too early?

Probably too early to call it. I think it really depends -- you know, we've got a real breadth of character of assets that are going out, and I think it depends which ones we choose to sell, sort of thing.

So we're obviously concentrating on ones that will yield the highest for the least. And that's the general form of it. I don't think you'd see us go past 10,000 in any form or fashion.

Okay. Thanks very much.

Kate Minyard, JPMorgan.

Just a couple of quick questions. First of all, just on the CapEx cut, you guys have trimmed CAD100 million to CAD150 million. I'm just curious as to where that might be. It looks like there's a little bit of a production impact, but it seems to me that if you were cutting CapEx, maybe prior guidance would have suggested you were going to trim in areas that might lead to future production like EOR, and yet you're still pursuing EOR. So is it maintenance CapEx that you're cutting in some of the less profitable areas or where is that trim?

Kate, it's Hilary here. The cuts really are pretty much little bits across the board. So there's no one area that we're targeting.

We know that some of the -- I mean, there's little bits that we can scrape off in a number of different areas. We don't want to hit any particular area hard, and we want to be able to continue to complete and tie in the inventory that we drilled in the first half of the year.

Okay. And then, just a question on the dispositions and the strategic rationale. It looks like you've mentioned not only you're pursuing assets for sale, but you also mentioned the potential for JVs. And so, I guess my question really is, are the dispositions primarily designed to unlock value that you think is not being recognized in the current share price? Or is it to get rid of assets that are non-core in the portfolio to more focus on core areas?

My assumption is that if you were looking at JVs, you'd retain operatorship. So how do you balance the two objectives in the dispositions program? Thanks.

Sure. There's a couple of things. First of all, we look at our asset base as giving us the leverage for a choice.

So that's the first element where we have a very broad asset base that's going to allow us to look at both focusing on core areas, so if we can get out of non-operated areas, if we can get out of some of our non-core properties, that certainly helps. And those are cash dispositions.

On the joint venture side, these are for areas that are still very early in their evolution from a value perspective, and we don't want to define what the ultimate value is to a cash disposition. So then it makes much more sense for us to retain operatorship; for us to get cash as a down payment, if you like; and then a carry similar to what we've done in some of our previous joint ventures.

So it's a combination of the two that we're looking at as the levers that we can pull here in the relatively near term.

Okay. And I realize it might be a little bit early, but do you have a notion as to the breakdown in that total amount as to rough percent that might be sale versus JV? Or is it too soon to tell?

You know what, Kate, it's too soon to tell. What we've done, we want to make sure that we have choices. And so, we've got a lot of potential transactions that we can do.

And what we'll do is at the appropriate time, we'll narrow it down to probably one or two. And so, really, it's too soon for us to define what that's going to look like.

Okay, all right. Understood. Thank you so much. Appreciate it.

Michael Zuk, Stifel Nicolaus.

This is a question for Hilary, I would assume. Just looking for a little more detail on perhaps your Duvernay strategy, and anything -- any more color you could add there would be helpful. Thanks.

Well, we kind of gave away the top secret information this morning by saying that we've drilled an exploratory well, vertical well, in the area, just in the Willesden Green region of the liquids-rich fairway.

So that's a good start. So you should be able to take a look at public data and see where that is.

We kept it, obviously, pretty quiet while that acquisition was still heated. And now, we're happy to talk about some of the results, at least from a preliminary perspective. We're very pleased, as we said in the call this morning, where we are positioned relative to competitor wells and to the early analysis that we've done, but it's too soon for us to talk about a lot of detail. We're still looking at all the technical work that has to go on.

But the 167 sections in Willesden Green is a pretty contiguous land block and gives us very good leverage going forward. We are looking at some activity a little bit further north as well. And in the meantime, we'll watch and see how our competitors go about drilling and completing these big wells.

And we're in no rush. We can see how results come in from surrounding competitors. So it's kind of a -- we're cautiously optimistic and we're going to be very prudent in the way that we go forward with development.

Yes, and I'll just chime in on that, Michael. One of our experiences on all of the plays we've entered into is that the early phase is the expensive phase. That's where you pay for your learning on the bleeding edge when you're trying to figure out one of these plays.

Frankly, we are happy to have those that don't have the depth of inventory that we have go out and learn on the Duvernay and really bring it to what the commercial practices will be before we get in the game. So we're not going to be pushing a lot of dollars in this. We've got turns, we've got time, we're going to wait.

Sorry, was that a horizontal well or a vertical well?

No, this is a vertical well.

Vertical.

An exploratory vertical well.

So it's fair to say the next catalyst would be more industry activity versus a price [type] driven event?

Yes.

Absolutely.

Thanks a lot.

Jonathan Fleming, Cormark Securities.

I was primarily going to ask about your Duvernay development plans, but it sounds like that's widely been answered. Could you talk a little bit about service costs and how you see that developing through the back half of the year?

Sure. I'll maybe jump on that one. Quick to go up and sticky to come down, I guess is the first comment.

What we are seeing, though, is the inventory from Q1 for pretty much the whole industry is still being worked through, so there are some areas where we're seeing greater downward pressure on costs than others, areas that are largely driven by oil sands activities, so on the fabrication side, [skips, tanks], those kinds of things, so it's tougher because the oil sands is the competition.

For day rates, we're seeing relief there on some of the equipment and services, hauling, water hauling, [mud], directional, those kinds of things. We're starting to see some softening in prices.

For us, one of the greatest components of leveraging is the size and scale of our operation. And then, the efficiencies that come from repeating our drilling programs, completion programs, and the like over and over again.

So when we can reduce drill days, it has about the biggest impact on our overall costs, and that's what we're seeing pretty much across the board now, Swan Hills, the Alder Flats, the Waskada, Otter. We're seeing improvements in our actual drill times, and that's where, obviously, you cut two or three days or sometimes a week off drilling, and that's where you're going to get your biggest cost savings.

Good stuff. Thank you very much.

Gordon Tait, BMO Capital Markets.

You touched on this earlier in your comments, your opening comments, Murray, and that was on the differentials, both heavy/light and Canadian/US. Now some companies are accessing rail lines to help now with differentials or to mitigate them. Can you talk about what you're doing to try and mitigate the impact of these fluctuating differentials? And maybe a little more specifically on where you see them going in the next 12 months?

Okay, I'll take it from the specific, and then broaden out, I think, to the general.

On the specifics, what we've seen -- we've really seen some bouncing around. In fact, we're seeing two forward months right now on some light crudes, we've actually seen a positive. And just a minus 250. So we're not at a point where we're squeezed continuously.

So the trick really, then, is we've gone to direct marketing to the refineries ourselves. Probably over 80%, 85% of our crude is handled that way. And it's really working continuously, selectively, in a variety of different locales in the US, not just pad two, but really broadening out that effort. So I think, first and foremost, is having that eye for opportunity in this volatile market is, I think, the number one tool you've got on this [year] through here.

And onto rail, I think there's some selective areas we're looking at rail. We see rail as really a short-term solution. You are not going to put 100,000 barrels on rail cars, 700 barrels at a time, and really make a dent for an extended period. Refineries aren't set up for that. So selectively in areas where pipeline access isn't there and there's good rail corridors, that will work.

So that's, in the short term, I think, your two key things.

Then as we move into the longer term, when we look at the supply pipeline infrastructure balance, we really see the key events in Q2 and Q3 next year of the balance of the Seaway completion and the southern portion of Keystone completion really being trigger events to where we move to excess capacity in the system for Canadian crudes and crudes in the center portion of North America. That doesn't mean just a tie to west Texas prices; that also means a potential tie, from our perspective, to world prices that are in the Gulf Coast.

And in that light, we've tied up 35,000 barrels a day of transportation starting in late [zero] -- a small portion starts in late 2013, then the balance kicks in in 2014 and will give us access right through. So, it starts to remove this issue in a big way.

I think the market will start to anticipate that in advance of it actually occurring because those projects are ongoing and active.

So, like you say, make your short-term maneuvers; position yourself; and then in the long run, I think by next summer, we'll be out of the shadow zone of the infrastructure problems.

And is that going to be, like if you look at your Seal development, which admittedly is years down the road, but that's heavy oil. Does it affect where you spend your money in the next couple of years, like on light oil versus heavy oil properties?

Yes, I think it's something we monitor, but as we said, the main bulk of Seal production is really tied to more a period of 2015, 2016, 2017. So for the interim, virtually our entire inventory is driven on light oils.

Okay, thanks.

Thanks, Gordon.

Brian Kristjansen, Canaccord Genuity.

Just a couple of questions for Todd. First, with respect to the G&A up over the quarter, about 13% over Q1, you were talking about higher staff and salaries. Is that something we should be forecasting go forward, the Q2 number?

I think that number, we'd expect that to be flat over the remainder of the year.

But we're continuously shuffling staff and trying to migrate staff. And as a result, you see the little bump that you note, but we believe that our second-quarter provision is representative of a reasonable go-forward G&A rate.

Thank you. And then, with respect to royalties, just the year-over-year commodity prices were down, and you've got an increase, and you've noted that the higher percentage of production weighted to liquids. But I was expecting with the bulk of horizontal activity that you'd probably see more credits. Is there anything within that number outside of the weighting to liquids or is that the primary (multiple speakers)

Really what you're seeing there is the effect of the differential. Because the Alberta oil royalty rate is 70% Canadian WTI, to the extent that we get hit by a differential, and we did get hit by higher-than-normal differentials in the second quarter, it has an effect on the overall royalty rate, which you correctly note there.

Okay. That's all for me. Thanks.

Okay, thank you.

Roger Serin, TD Securities.

First question, Murray, following up on what you said, have you nominated for capacity on Seaway, Keystone, or Trans [Louton]? Just remind me of where you're at.

We're tied up 35,000 barrels on Wrangler, which effectively is the Seaway route. So that's the main direction we've gone right now.

Okay. And unrelated, but trying to get some color, clearly gas prices have improved quite a bit from where they were just in Q2, but have you updated your strategy in terms of shut-in strategies? I know a lot of it is solution gas and, in some cases, through operated facilities, but when you look at gas prices at CAD2, netbacks are pretty skinny. So have you got any revisions to your strategy on shutting in gas if gas prices actually pull back again?

We've gone through everything and we -- basically two thirds of our gas is tied up with either associated or liquids-rich. So that's pretty much not something we're looking at.

We've got about 100 million cubic foot a day of dry gas. And then, when you start to narrow it down, we've got -- when you look at the operated portion where we control the valve and it's high working interest where it's easy for us to shut, we're really down to 50 million or 60 million.

The biggest trouble is, when we look at this, the general cost of shutting in for a short period. You really have to do it for an extended period to make it worthwhile. So just the operational shutdown, once you get into two to three months of this, of the cost of shutting down versus what you're losing, is a balanced question we'd have to ask ourselves.

So I think if we saw a persistent CAD2 heading for six months to a year, yes. We'd look at that portion of our production, but it would still be just, I think, in the range of 50 million to 75 million cubic foot a day max [end] that we would look at.

And I guess to be fair, your segmented statements put the NGLs with the light oils side, which really understates the revenue on the gas side.

Exactly.

Okay. I think that's probably all I have. Thanks very much.

Good. Thanks, Roger.

Jeremy Kaliel, CIBC.

I've got two questions today. First, can you give us any color on field operating conditions right now? And are you done with turnarounds or is that going to be affecting your Q3 production volumes as well?

And second question, given that you have JVs with Mitsubishi and CIC, is there any readthroughs here from the recent [nextiden] and Progress deals announced? And can you just give your general thoughts on asset valuations in this market?

Jeremy, I'll jump in and take the first one. Just in terms of operating conditions, breakup has been long. It's soggy up there. And it's pretty pervasive. It's every part of the basin.

So it's not been anything where we've been snorkels and flippers this year, but it's just been generally pretty soggy up there and it has had an impact.

As far as turnarounds are concerned, we have a big turnaround season coming up in Q3 as well. Peak volumes that will be shut in associated with those turnarounds are in the 14,000 barrels a day range. That's peak. So it's significant.

However, it's all been taken into account in our forecasts. It's not something unexpected. And part and parcel of our forecasting for average volumes is including that.

Onto your other question, Jeremy, around Mitsubishi, CIC, and asset valuations, I think there is a couple of pieces to address on that front.

I think, number one, I think it shows -- particularly the Progress deal underscores the value of the long-term resources that are being unlocked in western Canada. I don't think that can be lost on anyone. But I also think that points to asset valuations.

As technology has shifted, I don't think valuations in this market have fully moved in concert with them. I don't think there's a recognition. If you'd looked at a company like Penn West five years ago, you'd see an inventory of maybe two years' worth of projects. Now you see an inventory of 10 years' worth of projects or 15 years' worth of projects.

I don't think that valuation is fully in the market. I think as we described it, we've been in the Tom Clancey market. It's called The Sum of All Fears. And that's been the last quarter. So I don't think Canada and the Canadian markets have truly put those values on the table.

Now, what's curious is that others outside of Canada recognize that and recognize that opportunity exists and is there. And frankly, it -- so I don't think it matters what your scale is. If you're a junior or you're us, whether you're buying or selling, I think the valuations are going to be less driven by the cash flow multiples and more by the value of those underpinning resources that are available for the future. And that's where valuations are going to ultimately migrate to for good resource bases.

Great, thanks. That's good color.

Okay, thanks, Jeremy. I'd just like to thank everyone for attending on the call today. We do appreciate your time, especially if it's sunny wherever you are. Anyway, everybody, enjoy your weekend and thanks for your time today.

This concludes today's conference call. You may now disconnect.