Veren Inc (VRN) 2012 Q1 法說會逐字稿

Good morning, ladies and gentlemen. My name is Martina, and I will be your conference operator today. At this time, I'd like to welcome everyone to Crescent Point Energy's first-quarter 2012 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session for members of the investment community.

(Operator Instructions)

Thank you. This conference is being recorded today, and will also be webcast at Crescent Point's website. All amounts discussed today are in Canadian dollars unless otherwise stated. The complete financial statements and management's discussion and analysis for the period ending March 31, 2012 were announced this morning and are available at Crescent Point's website at www.crescentpointenergy.com and on the SEDAR website.

During the call, management may make projections or other forward-looking statements regarding future events or future financial performance. Actual performance, events or results may differ materially. Additional information or factors that could affect Crescent Point's operations or financial results are included in Crescent Point's most recent annual information form, which may be accessed through Crescent Point's website, the SEDAR website, or by contacting Crescent Point Energy. I would now like to turn the call of to Mr. Scott Saxberg, President and CEO. Please go ahead, Mr. Saxberg.

Thank you, operator. First I'd like to welcome everybody to our first quarter conference call for 2012. With me is Neil Smith, Vice President Engineering, Business Development, Greg Tisdale, our Chief Financial Officer, Trent Stangl, our VP of Marketing and Investor Relations. Neil will give an overview of our operational highlights, and then Greg will speak to our financial highlights. Crescent Point, we delivered another excellent quarter, record quarter, record production, record cash flow, strong per share growth numbers for Q1, and at the same time completed three strategic consolidation acquisitions within our core area, all highly accretive to our per share metrics and numbers.

I think one of the key points on our Q1 quarter is that we showed again that we can execute our growth and our drilling, and then at the same time we had a pretty significant acquisition quarter and consolidation of our Bakken assets with the PetroBakken deal, the Shaunavon assets in Southwest Saskatchewan, and then as well into Q2 with our more recent Viking acquisition. So I think it is a real highlight to our staff & our Company that we are able to add over 7000 barrels a day through the drill bit. We grew production to a record over 90,000 barrels a day. That's a 19% increase from first quarter 2011.

Again, it just really highlights the strength of our drill inventory and our ability to execute on our per share numbers. We have obviously upward revised our 2012 guidance several times this year. We are going to average over 88,500 for 2012. We are going to have an exit target of 97,500 for 2012. So far with spring breakup conditions, they are less severe than last year. However, and I was just out there recently in the last couple of weeks, the water table is still pretty high. There are some areas that are still -- look like lakes, and so we are very cautious as to our Q2 numbers at this stage, but within our guidance, we have 11,000 barrels per day shut-in for two months in Q2.

So far the way things are looking, with our consolidation acquisitions and coming into Q2, and then with our drilling success and where we left Q1 flushed up with our production, we look like we are going to have another strong quarter in Q2, and stronger than maybe we were predicting. After breakup, we are going to look at our capital expenditures of CAD1.25 billion, and depending on the market conditions, look to either expand that capital or maintain it.

Again, we look at the volatility in the market, just even in the last couple of weeks, and so we are cautious to jump too far ahead of ourselves in 2012. 2012, our budget is really focused on the water floods in our main core areas in the Bakken and Shaunavon, and then in several projects across all of our areas, whether it's Bakken in North Dakota, Viewfield Bakken, Shaunavon, Beaverhill Lake, the Viking, we are pushing technology and technological ideas, just furthering that, and improving our organic growth within the Company. And again, growing that large oil in place, rate recovery factors, and bumping those, and so we are pretty excited about several of those projects.

A lot of those are going to come in the second half of 2012. We are also continuing our hedging strategy, maintaining our balance sheet discipline, maintaining that low depth cash flow, we are less than 1 times right now. So we have lots of room in our bank line. We also are looking to diversify our markets with our rail facility now up and running, and we are looking to expand that from our current 10,000 barrels a day to 17,000, 18,000 barrels a day in Q3. So we are pretty excited about that.

Then as well, this first part of the year has been very active on the consolidation acquisitions in our core areas, and we are still looking to further consolidate in some of these areas, but we are very patient and we are looking for the right opportunities in this market, and again being very patient on that side. So with our first quarter, we had record production, strong operations. We are going strong into Q2, and Q2 looks really strong. We are well-positioned to exceed or meet our targets for 2012. Before I hand things over to Neil, I would like to thank the Crescent Point team, their hard work executing another fantastic quarter. We are very excited about our start to 2012 and what we achieved so far, and look forward for another outstanding year in 2012. So, Neil, we will get him to go through our operational highlights.

Thanks, Scott. On the operations side, we continue to execute on plans in first quarter. Overall, we spent CAD476 million on development capital activities in the first quarter, of which a record CAD388 million was on development drilling. We drilled 122 net oil wells, including 66 Bakken wells, 24 Shaunavon wells, 10 Beaverhill Lake wells, 2 unconventional Alberta Bakken wells, and 2 North Dakota wells. Drilling success accounted for roughly 7000 BOEs a day of our more than 9000 BOEs a day in production growth over Q4 2011 levels. In terms of acquisitions, we successfully integrated all new assets during the quarter.

All acquisitions were consolidations in core areas, which certainly simplify the process. Acquisitions completed in first quarter accounted for about 2000 BOEs a day of our production growth over fourth quarter 2011. Through the consolidation acquisitions' development drilling and water flood development, we continued to solidify our core Bakken and Shaunavon plays. By year's end, we expect to have 70 water injection wells in these two plays, with 60 in the Bakken and 10 in the Shaunavon. During first quarter we continued to build infrastructure in the Bakken and Shaunavon areas to accommodate production growth and success, including the construction of pipeline gathering systems and a new gas plant in Southwest Saskatchewan that we hope and expect to be up and running in Q2.

We are also building new batteries that we expect to be commissioned by the end of the year. Operations at our new rail facility in Stoughton are going well, and are allowing us to diversify our markets for Bakken crude oil, and to manage pipeline disruptions. We shipped about 6000 barrels a day to the facility in March, and we plan to ship up to 16,000 barrels a day by early third quarter. Those volumes don't include third-party terminals that afford us additional capacity. Before handing things to Greg. I would like to thank our field teams who have once again proven that we have the best field operations staff in Canada, and likely North America. Thanks to all of you for your hard work. Greg will now discuss financial highlights. Greg?

Thanks, Neil. I'm pleased to report that Crescent Point generated record cash flow in the quarter of CAD401 million or, CAD1.34 per share. This represents a 22% increase on a per share basis over the first quarter 2011. During the quarter, WTI oil prices averaged approximately $103 a barrel, which given our 91% oil weighting drove corporate netbacks to exceed CAD51 a barrel. These high netbacks, along with strong production, drove our cash flow in the quarter. Also in the first quarter, we closed [a BOT] deal financing with an over-allotment option for underwriters

Including the option, we raised gross proceeds of CAD604 million, which we used to fund a portion of the first quarter acquisitions and to keep our balance sheet strong. Our cash flow forecast for 2012 remains at CAD1.55 billion, based on the WTI price of $100 a barrel, and we continue to drive our payout ratio down and manage our price risk with our disciplined 3.5 year hedge book. We actively hedge commodity prices in the first quarter, capitalizing on high commodity prices throughout the forward curve. We are now 61% hedged for the balance of 2012, 52% hedged for 2013, 33% hedged for 2014, and 14% hedged for the first three quarters of 2015.

Shipping crude via rail also acts as a hedge to the volatile Canadian price differentials we have seen, and expect will continue throughout the year. We plan on increasing crude deliveries to our new Stoughton rail facility to expose our Bakken production to new markets and to protect against this price volatility. Our balance sheet is in excellent shape with projected average net debt to 12-month cash flow of less than 1 times, and significant unutilized credit capacity. Given the strength of our balance sheet and hedge portfolio, we are well-positioned to continue to generate further strong operating and financial results in 2012 and beyond. I will now hand things back over to Scott.

Thanks Greg. At this time I would like to pass it over for questions.

(Operator Instructions)

We have no questions in queue. I turn the call back to Mr. Saxberg.

Great. Thanks everybody, and we are very excited about 2012 and our start, and look forward to our next quarter. Thank you very much.

Thank you, ladies and gentlemen, for participating in Crescent Point's first quarter 2012 conference call. If you have more questions, you can call Crescent Point's Investor Relations Department at 1-877-403-1678. Thank you, and have a good day.