Obsidian Energy Ltd (OBE) 2012 Q4 法說會逐字稿

Good morning and good afternoon. My name is Candace, and I will be your conference operator today. At this time I would like to welcome everyone to the Penn West Exploration Limited conference call.

(Operator Instructions)

Mr. Clayton Paradis, you may begin your conference.

Thank you, Candace, and good morning, everyone. Welcome to Penn West's 2012 fourth-quarter financial and operating results conference call. My name is Clayton Paradis, Manager of Investor Relations, and with me this morning in Calgary is our President and Chief Executive Officer, Mr. Murray Nunns; Chief Financial Officer, Mr. Todd Takeyasu; Executive Vice President, Operations Engineering, Mr. Dave Middleton; Senior Vice President, Development, Mr. Mark Fitzgerald; and Senior Vice President, Exploration, Mr. Rob Wollmann.

Before getting started this morning, I would like to quickly remind listeners of our customary conference call advisories. Penn West Exploration's 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 6-to-1 conversion ratio. All financials are reported under International Financial Reporting Standards, or IFRS. Certain information regarding Penn West and the transactions and results discussed during this conference call include management's assessment of future plans, and operations may constitute forward-looking statements under applicable securities laws and necessarily involved risks.

We will also be discussing Penn West's year-end 2012 reserves report in this morning's call. These reserves estimates have been calculated in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. I would direct people to our Penn West's fourth-quarter news release, and also ask that they review the advisory notices therein. This news release can be found on our website at www.pennWest.com.

Participants are also cautioned that the including list of risk factors contained within that release is not exhaustive. Official information detailing other risk factors that could affect Penn West operations or financial results are included in the reports on file with the Canadian and US securities regulatory authorities, and may be accessed through the SEDAR website at www.sedar.com and the SEC website at www.SEC.gov. During this conference call certain references to non-GAAP terms may be made. Participants are directed to Penn West's MD&A financial statements available on our website, as well as filings available on the websites noted earlier to review disclosure concerning non-GAAP items. I would now like to turn the call over to Mr. Murray Nunns, President and Chief Executive Officer.

Thanks, Clayton. This morning, after reviewing some 2012 highlights and key strategic directives for 2013, I'll turn the call over to Rob Wollmann, who will provide you with an update on our Q4 and 2013 capital programs. Mark Fitzgerald will then follow with a brief summary of our reserves report. Then we will open up the phone for questions.

Before we begin, I'd like to remind listeners that along with the Q4 results, we also announced the first-quarter dividend of CAD0.27 per share to be paid on April 15, 2013 to shareholders of record on March 28, 2013. We believe the dividend to be an appropriate component of our business model, as it provides a balance of immediate return as we prove the full resource potential and value of this company. We have an asset base that is unlike a lot of our peers. We have a vast array of light oil assets, which provide strong cash flow, and a resource base with significant upside, which demonstrates good ability to add economic reserves. In 2012, this asset base also provided the ability for us to significantly improve our balance sheet through the sale of non-core assets.

Just touching on some of the highlights of 2012 -- we generated CAD1.25 billion in cash flow, derived approximately 90% from oil and liquids. We averaged production of 161,195 BOE per day, that was weighted approximately 65% to oil and liquids. We replaced 190% of our total production on a proved plus probable basis, excluding economic revisions and A&D activity. We produced approximately 59 million barrels last year, 65% of which was oil and natural gas liquids. Now let's contrast that with the 2012 reserve additions, where we added 110 million BOE to the reserve books, 80% of which was oil and liquids. Proved plus probable planning and development costs, including FDC, improved by approximately 5% on a year-over-year basis, to CAD25.50 per BOE, or CAD23.12 per BOE excluding economic revisions largely related to natural gas.

In 2012, Penn West divested non-core properties producing approximately 16,500 BOE per day for net proceeds of approximately CAD1.6 billion. The net proceeds were used to pay down bank lines and resulted in a total debt-to-EBITDA ratio of 2.1 times at year-end. We expect asset rotation activity to continue in 2013, as a means of unlocking value inherent in our asset base as we divest non-core base assets and continue investing in our profitable light oil resources.

To maximize the value derived from our light oil resources, one focus area for 2013 is oil marketing. Reiterating what we have said previously, in 2013 Penn West has oil collars on 55,000 barrels per day of crude oil with an average floor price of CAD91.55 per barrel and a CAD104 ceiling. Where possible, we have selectively hedged the light oil differential. On the natural gas side, we have 125 million cubic foot per day hedged at CAD3.34 per MCF, Canadian. Penn West is selectively shipping crude oil by rail in certain areas and expects to reach the 5,000 to 7,000-barrel-a-day range in the second half of 2013. I do want to underscore that rail will not be a major component of our shipping in the long run, due to the nature and location of our assets throughout Western Canada. The majority of our volumes are already on or near existing pipelines, through which we have takeaway capacity.

One step Penn West has taken to ensure strong oil pricing in the future for its products has been to contract 35,000 barrels per day, or approximately 40% of our forecast 2013 net after royalty light oil volumes, on the Flanagan South pipeline to the Gulf Coast, beginning in the second half of 2014. In a broader sense, ongoing pipeline infrastructure projects are expected to add between 2 million to 3 million barrels of capacity in North America by the end of 2014. This is expected to have a significant impact on the current Edmonton light-to-WTI differentials.

Now turning to our highest priorities for 2013. Capital efficiency and production performance -- we are targeting improvements in capital efficiency through capital allocation and effectiveness in execution. For production performance, we are looking at all major functions in the operational and production interface to optimize cycle times and onstream performance. In addition, we've implemented organizational changes to obtain these objectives. Let me give you a little color on these changes. We've consolidated the senior team responsibilities. We have moved the organization into cross-functional teams, and have restructured key elements of planning and operations functions. We are well along on the COO search and have a good roster of candidates we are in discussion with.

We have been transitioning the company from a focus on oil resource growth to maximizing the effectiveness of our operations. This is an important change that will -- that we have implemented to fully realize the value inherent in our resources. And believe me, there is a strong sense of purpose around this imperative in the company. All 2013 plans are on-course with expectations. We are on-plan with respect to capital expenditures, and our operations and field teams are clearly aligned on obtaining our key objectives. I will now turn the call over to Rob Wollmann, our Senior VP of Exploration, whose shared responsibility it is to help deliver on the dollars, barrels, and times associated with our 2013 capital plan.

Thank you, Murray. The 2013 program is focused on delivering our production guidance efficiently with a light oil focus. We have learned a lot over the past several years, in where and how to best supply multi-stage frac horizontals to our vast light oil resource base. We are continuing to make, and will continue to make, material improvements in how to maximize the long-term value of these assets for Penn West shareholders through improved capital efficiency. Our capital programs over the past three years have targeted primary production and secondary recovery, significant land additions in both the Slave Point and Duvernay, and investments in major oil infrastructure expansion in the Spearfish, the Cardium, the Viking, and the Slave Point.

We have appraised large parts of our light oil inventory and built a solid, predictable foundation for development. 2013 capital allocation targets areas where we are generating strong economic returns, typically in excess of 2-to-1 recycle ratios on new oil development, where we have available infrastructure capacity, and where we are realizing ongoing cost savings. In addition, we are continuing to selectively invest in appraising optimum water flood recovery techniques, primarily in the Cardium and Slave Point, where we believe significant long-term value will be realized through a fully-integrated horizontal development of these large light oil resources.

The incremental capital added in late 2012 to kick off the winter program provided momentum as we entered 2013. To date, our 2013 program is ahead of schedule. We peaked with 20 drilling rigs in late January and are slowly releasing rigs on completion of the approved winter program. From a cost perspective, on average, to both the use of optimal equipment and crews, and improved drilling engineering programs, we have seen reductions in drilling costs and number of drilling days relative to both historic norms and our budgeted expectations. In many areas, timing of completion activities has been advanced to take advantage of our drilling performance and minimize the risk associated with an early breakup. Completion costs to-date, on average, are on to slightly below budget expectations. Our integrated teams remain on track to meet or beat our capital efficiency objectives and deliver the approved 2013 program.

As Murray mentioned, one of our key focuses in 2013 is on production performance. On that front, initiatives including -- repair and maintenance focus on shortening downtime; focusing field processes; proactively replacing at-risk pipelines; consolidating under-utilized facilities; and the ongoing positive impact of increasing volumes through our new facilities, are all showing early signs of success. This is an ongoing effort that our integrated field and office teams are all contributing to.

Now, moving on to project-specific updates. Firstly, on the Spearfish. In late November, we initiated our winter program, and have been operating with five drilling rigs in 2013. Year-over-year drilling days have dropped from on-average eight days per well down to five days per well, with costs coming in below expectations. Drilling operations are expected to conclude prior to the 10th of March, significantly earlier than previous years. Our winter program calls for a total of 73 wells to be drilled. Completion and time activities are largely on-track, despite days lost in late January, due to extreme cold in southwest Manitoba. Our natural gas liquids extraction plant remains on plan for startup during the second quarter of 2013. And is expected it provide an additional 500 to 700 BOEs per day to our current 13,500-barrel-of-oil per day infrastructure capacity. Note, recent throughput has been in the 6,500-barrel-a-day range.

On to the Slave Point. Our strong winter drilling program concluded in early February, well ahead of schedule, as drilling days dropped from an average of 28 days per well to 17 to 19. Per-well drilling costs are estimated to have averaged over CAD500,000 below budget. Completion activity is on schedule, with nine wells expected to be fracked by March 7. Production results from wells drilled in the new development area at Sawn continue to meet our expectations. Our original two wells brought onstream at the end of Q1 2011 have already produced on a combined basis over 250,000 barrels. The four new wells brought on in 2012 are producing between 100 and 500 barrels per day each, having been onstream for over six months. The Sawn oil and gas infrastructure expansion came onstream in December, and provides processing capacity through 2014. We have a large, defined development inventory available for the next several years at Sawn, and with additional appraisal, plans for 2014 of our large land base along the northwest extension of the Sawn trend, significantly more opportunity to add high deliverability light oil barrels.

At Otter, the remaining six 2012 wells are all expected to be onstream prior to the end of the first quarter. Penn West's initial Slave Point water flood pilots, located at Otter and Sawn, are anticipated to be onstream prior to the end of this year, and along with industry pilots, will provide key information to support future EUR investments.

On the Cardium, in 2013 our capital budget includes selective primary drilling in the Alder Flats area, and further progression on our water flood strategy, inclusive of two new horizontal water flood pilots at Willesden Green. Our drilling and completion techniques have evolved, and we are now seeing cost improvement in the order of 25%, driven by drilling efficiency and water-based fracs. Our existing horizontal water flood pilot at West Pembina provides evidence of the potential of the water flood strategy. Current production is in the 150 barrel of oil per day range, with essentially no water production from three previously shut-in legacy vertical wells offsetting our two horizontal water injectors. We believe the Cardium is the most significant asset in the company from a long-term perspective. The independent contingent resource study released in October identified an incremental 533 million barrels of potentially recoverable light oil. Notably, potential recoveries from horizontal multi-fracture water flooding are not reflected in the study. Primary development turns on projects in the Cardium are in the 20% to 30% IRR range. The integration of primary development and secondary recovery through water flood is expect to provide returns competitive with any play in the basin.

On the expiration and joint ventures front, industry activity now essentially surrounds our greater than 100,000 net acre Duvernay position in the Willesden Green area of west central Alberta. Our initial stratigraphic well was consistent with our geological studies, and in conjunction with released industry results, suggests our position is in the heart of this emerging liquids-rich play. Our activity plans for 2013 will remain modest, as we face no material land tenure issues until the end of 2014. We are continuing to closely monitor industry results, both from a productivity and cost perspective, as appraisal of this play accelerates.

In the Peace River Oil Partnership, plans for 2013 include continued primary multi-lateral drilling, startup of our second thermo pilot at Harmon Valley South, and continuing to progress our CO main commercial project through the regulatory process. Results from the Seal Main pilot exceeded expectations, with cumulative production through two cycles of over 150,000 barrels, with a steam-oil ratio of 1.4. Overall, the organizational changes and focus that Murray spoke of, with respect to capital efficiency and production performance, are beginning to bear fruit. At this point I will pass the call over to Mark Fitzgerald to provide year-end reserve highlights.

Thanks, Rob. As Penn West has appraised our asset base, and built the development programs that Rob highlighted under our light oil strategy, our Company has worked to reflect this growing inventory on our reserve book. In 2012, two major independent contingent resource studies were done for Penn West that really served to define the size of the prize in the Cardium and Peace River Oil Partnership. Combined then with our internally-generated inventory of horizontal wells, Penn West continues to see growth in the economic investment opportunities we have in our large light oil assets and other resource plays. Both Murray and Rob have highlighted the ongoing evolution of our strategy when they spoke to our focus in 2013 on the efficient development of those oil resources, thereby converting oil reserves to production and, of course, further defining new reserves for future booking.

In short, our strategy is to define the resource, recognize the value of the resource on the reserve book, economically and efficiently convert that resource to production, and reliably produce it over time. After another successful year, in which we have seen a high reserve replacement ratio, a large portion of our primary horizontal inventory across our core plays remains unbooked. Based on the independently-completed contingent resource studies, and our own internally generated inventory, less than 15% of our primary horizontal oil locations are currently reflected in our reserve book. Potential recoveries associated with our enhanced oil recovery opportunities provide us, then, with a second layer of potential future barrels, as declines are flattened and recoveries on our large-oil pools are potentially increased. Our high-level strategy continues to focus on recognition of the large intrinsic resource value of our plays on the reserve book over time.

Having highlighted the top-level strategy, I would like to walk through some of the highlights from our year-end 2012 reserve report. Note that these values are all as of December 31, 2012, and further detail, of course, is available in our recent release. Net of acquisition and disposition activities -- our reserve book continues to show growth, and we increased bookings in all key resource plays in 2012. On a proved plus probable basis, we added approximately 110 million barrels of reserves. I would like to highlight that approximately 80% of those barrels were crude oil and liquids, consistent with our ongoing oil focus. Of total proved reserves, 78% were in the developed category. And in addition, total proved reserved as a percentage of proved plus probable were 66%. Murray has highlighted that our 2012 reserve replacement ratio was 190%, excluding the effect of acquisitions, dispositions, and economic factors. If we focus solely on the oil and liquid component of our book, that reserve replacement ratio for oil and liquids increases to greater than 230%. Total working interest proved plus probable reserves were 676 million BOEs at year-end 2012, continuing to be weighted approximately 71% to crude oil and liquids. This is after the effect of the 87 million barrels of oil-weighted non-core asset dispositions.

And I just want to underscore the value of oil in this basin relative to natural gas. 90% of the NPV in our book in 2012 is driven by oil and natural gas liquids. Our light oil strategy continues to add high value, high net back, producing barrels to our operating base. Finding and development costs on a proved plus probable basis, including economic revisions, improved to CAD25.50 per BOE in 2012, a 5% improvement over 2011. With net backs on our new oil development in excess of CAD50 per barrel at current pricing, this represents an initial recycle ratio greater than two times a new light oil development. This reinforces Murray's earlier point regarding our asset rotation strategy, and the opportunity to continue to monetize non-core assets to fund our significant light oil programs. In addition, with 85% of our internal inventory not yet reflected on the book, we are well positioned to continue to transition our production base towards higher net back, high value light oil.

As we have highlighted, the combination of our light oil asset base with strong capital efficiency and production performance will maximize the value for our shareholders as we move through into 2013. I would now like it turn this call over to the operator, Candace, and open the phone lines to callers for questions.

(Operator Instructions)

We will pause for just a moment to compile the Q&A roster. Gordon Tait, BMO Capital Markets.

Hi, good morning. A couple of questions. Firstly, what are you targeting for asset sales this year? If you could maybe sort of quantify any production you expect to sell and proceeds from that.

We don't have a specific target level, Gordon. I think what we'll do is try to give you a flavor for the priority. I think our top priority, first, will be looking at some of our early life projects.

I think a case in point would be the Duvernay. We think there is tremendous value. We don't think there is recognition in the market for that. But more importantly, we believe an outside source of funding and extraction of some of the value, given that we have only invested about CAD100 million in the Duvernay as a total, we think that is a very good business proposition.

So, something like that would definitely be on the radar screen. We have looked at a variety of non-core assets that are -- or really don't have inventory that has a long-term impact. So we're looking at some mixtures of that.

We're very cognizant on the other side of the equation of not eroding our cash flow too much. So there is really a balance we're attempting to strike here.

As you've sold some production off, reduced your forward guidance, some of the numbers, G&A per BOE, for instance, has increased. Is that -- and are you target to see some cost savings in, or are you okay with where you're sitting there?

Basically, as we have sold assets, we have -- I think what we've done is made the appropriate moves with our personnel. I think we've brought the G&A down in approximately -- in a proportional manner from the dispositions. So we see that as a sort of a key -- let's call it a neutral point. We also see some other efficiencies on G&A, in terms of some relationships around office space and a few other things that we're doing to work on that side of the equation as well.

And then with the water flood in the Cardium, what sort of a pace of development do you see there? And that would be one question. Secondly, would be -- do have you to shut in some of producers and turn them into injector wells?

I am going to turn this over to Rob, and I'll maybe add some color at the end of that.

Sure. Gordon, on the Cardium, the initial pilots, at least, have been in areas where the existing producers have been shut in. So we've just been reactivating those well bores rather than having to shut in other well bores.

In general, what we're looking at in the next suite of water floods in the Cardium is converting one of the existing horizontals that we have drilled post it, recovering its low royalty oil into an injector and using it as an horizontal injector side-by-side with existing horizontal producers.

And then give a sense of how many injectors you would like to have, say, by the end of this year or next year?

By the end of this year, as I mentioned before, we will have three pilots ongoing. In 2014, we would anticipate -- I don't have a number for you, but we certainly anticipate a much broader program in the Cardium, with respect to water flood.

And just to add a little color to the longer-term development -- we ultimately believe horizontal-to-horizontal will be the way this is flooded. We also note with interest one of our competitors has initiated a pad, or several -- a couple of pads. And they are looking at flooding at eight wells per section, whereas we're only looking at four wells per section right now.

So the general thought processes around it are still evolving. But I think ultimately -- ultimately, the effectiveness that it's demonstrated in the old vertical world, and with the early experimentation, points to a large prize that really is not part of the equation at this stage.

Okay. One last question, on Seal. When do you see the Seal play contributing sort of meaningfully to Penn West's cash flow and production?

Yes. Gordon, right now we're continuing to drill our primary wells, our horizontal wells, but redo the step change, and we've always talked about Seal being that step change in oil production. You are going to see that in the last half of 2015.

And that's coming from the Seal Main commercial. That's the 10,000 barrel-a-day project which we currently have. We sent that into the ERCB and environment back in September for approval.

Okay. Thank you.

Good. Thanks, Gordon.

(Operator Instructions)

Brian Kristjansen, Dundee.

Thanks. First question for Rob. If you could comment on some specifics about the ten-day drill savings at Sawn?

Sure.

Brian, the savings really are reflected in a couple of veins. One, as we've gone into a development phase, we have not had to core as many wells. So that certainly is a savings.

A second savings is, our drilling group has made great progress in trying to figure out the shallow part of the section at Sawn, where historically there has been some uphold challenges. And we seem to have those largely behind us, and that is contributing to large savings in a number of drilling days.

Thanks. In the Cardium -- you mentioned water-based fracs. What percentage of your Cardium wells are getting completed with water-based fracs today?

At this point, virtually all of them.

Great. And then, with respect to corporate production being made up about 20%, I guess, today of horizontal drilled wells, do you still have a comfort level in your 22% corporate decline?

Yes. Overall, when we look at it -- part of is, we're now dealing with horizontals that are three-plus years old. They have gone past the flush decline. So that really has started to flatten out. And so we're very comfortable with the 22% estimate.

Great. Thanks, guys.

Roger Serin, TD Securities.

Good morning, everybody, I've got a few questions here. Hopefully, we can get through them all. So if I look at CapEx by area, some of it is in your IR presentation, some of it is not. Could you give me a sense or confirm CapEx for each of your, sort of, three light-oil plays -- Viking, Spearfish, Cardium, and Carbonates -- and you can lump or separate Swan Hills and Slave Point.

The guys are just leaving through to get the exact number, Roger. Why don't you bring us on to another question, and we will double back on that answer?

I was hoping you would ask that. (Laughter) So can you give me any color on the Duvernay tests that you guys did? You talked about it convincing you, or confirming that you're in the right spot. I am assuming you're thinking that's gas liquids?

That's correct. The way we look at it, Roger, is that our vertical well bore, which we did complete with one frac -- we've got the gas -- obviously, the gas now, the thermo-maturity information. And it clearly indicates that we're in the gas liquids window of the Duvernay.

Okay. Your IR presentation talks about a fair amount of work through 2012 expanding your fluid handling capacity in, really, most of your areas. Can you give me a sense of which of those areas you think could be constrained by fluid capacity, and also which of those areas, again those four, will actually be seeing growth year-over-year?

I'll take that one on, Roger. So in Waskada, or in the Spearfish play, we have just in excess of that -- 7,000 barrels of available handling capacity. And feel that will be adequate for 2013 development, with an expectation that that facility will be full by year-end.

In Sawn, we have more than enough capacity for both this year and certainly well into next year. In the Cardium, we invested heavily in new infrastructure in Willesden Green and in Alder Flats, both of which will provide adequate handling capacity for both this year and next year.

So my math tells me the Spearfish is growing. Sawn and the Carbonate is growing. Probably the Viking flats are growing. Are you expecting to see Cardium production growth this year, with the capital allocation?

No. More or less flat.

Okay. Do you have -- that you guys have calculated a [2P] FD&A? So not just F&D but also FD&A?

Roger, it's Mark. We don't really consider that one relevant this year, given the focus on the dispositions as we went through the year. As you can appreciate, the math gets a little bit funny.

From our perspective, if we look at the CAD25 F&D, that reflects -- with FDC, kind of what we're seeing in terms of delivery from these assets and the value of these assets as we move forward. The disposition on the book gets just a little bit funny as we move through it.

That's why I was asking because it was getting funny on my calculations, too.

Yes. It's just -- I think as we -- as Murray talked about, as we focus on the rotation of what we would consider non-core assets or assets that have we think good value and inventory that are not in areas that we are focused on right now. And as we continue to move those out at 2.5 to 3 times ratios, that we can inventory in core production on the core areas, that's what we'll continue to do.

Okay. I think I only got a couple. One is FDC. You see a change in FDC of maybe up about CAD600 million. Obviously, it seems like that's a bit of a function of your -- your mix is changing. Your proved-developed is down a little bit from last year.

Am I getting it? Is that the right way to think of it? Just a change in mix of proved-developed versus a larger component of puds and probables?

Yes. As you can appreciate, the dispositions took the 87 million barrels and a certain -- or a certain ratio off the book. The FDC that we've added is, we think, a continuation or reinforcement, again, of the potential resource that we have and the ability to continue to book that resource as we go forward.

You know, we highlighted a little bit that that addition of the FDC still only brings us to -- based on our internal numbers -- on the order of 15% of the horizontal inventory that we have onto that book. So, if the FDC comes on and increases the undeveloped bookings as we move forward, more closely in line with where the balance of our peers are at in terms of future bookings. We will continue to see that movement as we move forward.

Okay. But there was nothing as it related to well costs. If anything, they should have come down a little bit year-over-year?

We are certainly -- as Rob talked about, certainly seeing significant gains through Q4 into Q1, and we are pretty pleased with what we're seeing as we move forward. As the reserve book evolves through 2013 into 2014, we have that, of course, to bring to bear as we go forward.

Okay. Two other areas, and then I'll let you answer the question about allocation and CapEx. The restructuring charges -- is there any color beyond just, you have had a series of right-sizing going on and reallocation? Is that all I should read into that, or were there other costs associated with that?

That's correct, Roger. I wouldn't read any more into that.

Lastly, Q4 CapEx -- a little higher than we expected. Did you accelerate some capital to get a head start on the year, or was that always in your plans?

It was always in our plans, Roger. When we came out and did our slight guidance shift at the end of the third quarter, it was all with the intent of getting rigs on the -- rigs going into the plays, starting in the first or second week of December, in that range. And it just gave us that running start in the dead run towards a breakup that Rob spoke of a little bit earlier. There is nothing else, really, in that.

Okay. I'm not sure if you guys have got the CapEx by area, but that would be greatly appreciated.

Yes. It's Mark, Roger. We -- I can give you a sense of it, and then Clayton could probably follow up with the details for you.

You know, as we talk to -- the real focus in 2013 is on the Spearfish. As Rob said, we have seen very predictable results, very good efficiencies, good cost savings. Kind of CAD200 million to CAD250 million, including facilities and optimization and otherwise, will be in the Spearfish as we move through this year.

Other areas would be -- Rob talked about Sawn and the Slave Point, an area that we've seen very good results from on a tight curve. We have seen good efficiencies, we've seen good savings.

And then other areas that we will be active in are central in the Medicine River area, Swan Hills, we've talked about; a little bit in the Cardium, but that's primarily in natural recovery as we move through the year. So --very focused program, as we've talked to. And, as I say, Clayton can maybe follow up with some of the specifics to help you with that.

Okay. That would be appreciated. Thanks very much.

Cristina Lopez, Macquarie.

Hi, guys. Roger asked a bunch of my questions, but I've just got a couple more. With respect to exit volumes, are you able to sort of give us a sense of where exit volumes after the dispositions were for the year? And what you look for production profile for the remainder of the year?

In terms it of the exit volumes, and it's one thing we just -- we haven't commented on at all. I think you can kind of look at the average, and it roughly takes in 20% -- 25% of the dispositions at that point. But beyond that -- in terms of the profile going forward for this year, we anticipate being relative -- Q1, obviously, a little bit, will have some impact later in the quarter of tie-ins from the Q1 programs.

And then, moving into Q2, we'd anticipate a little softness towards the end of Q2, because we have significant turnarounds in the June-July period. Obviously, we are working to minimize their impact. But that is the turnaround season.

And then in Q3, we will have realized much -- the balance of the impact from the Q1 drilling. So we see volumes at that point. And then I think the important aspect for the balance of the year becomes whether we engage that extra tranche of capital that we have referred to in our budget discussions about a month ago.

So right now, planning on the CAD900-million case, we'd expect production, again, to be relatively flat on the full-year basis Q1 to Q4. Of course, that changes if we deploy further capital in Q3-Q4.

And that capital deployment is related to primarily whether or not the quantity price ends up holding in for the year, right?

We've underscored this -- and thanks for asking, and giving me the opportunity to underscore it again. That will depend on our overall production performance. On our capital efficiency, I believe there is also an aspect of that -- that differential and commodity price. And also what we do on the ND side of the equation, because we do have the ultimate aim of continuing to enhance the balance sheet.

And then, finally, on the reserves. We saw the probable heavy-oil number actually double this year. And is that related to additional probables at Seal, or is that a separate property?

That's a reflection of recognition on the enhanced oil or thermal side of Seal. So that's relative to our Seal Main pilot.

Perfect. Thanks so much, guys.

Thanks, Christina.

And we have no further questions at this time. I will turn the call back to Mr. Murray Nunns for closing remarks.

Thank you, everyone, for your time and attention today. We view the business as relatively simple.

We do have the advantages of a very large light-oil base. We have taken the time to add to those resources over the years. We also recognize that efficiency and effectiveness on production performance and on capital efficiency are going to be the keys going forward in unlocking the value of this asset base.

And in the interim, we do believe that the dividend remains and will remain a part of the equation for our shareholders. Thanks, everyone, for your time and attention.

And this concludes today's conference call. You may now disconnect.