Penn West Petroleum's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar. 7.14 | About: Penn West (PWE)

Penn West Petroleum Ltd. (NYSE:PWE)

Q4 2013 Earnings Conference Call

March 7, 2014 11:00AM ET

Executives

Clayton Paradis – Manager-Investor Relations

David E. Roberts – President & Chief Executive Officer

Todd H. Takeyasu – Chief Financial Officer & Executive Vice President

Analysts

Cristina Lopez – Macquarie Capital Markets Canada Ltd.

Jeremy Kaliel – CIBC World Markets

Gordon Tait – BMO Capital Markets

Greg Pardy – RBC Capital Markets

Patrick Bryden – Scotia Capital, Inc.

Christopher Bolton – Perron & Partners Wealth Management Corp.

Operator

Good morning. My name is Sharon and I will be your conference operator today. At this time, I would like to welcome everyone to the Penn West 2013 Year End Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session (Operator Instructions)

Thank you. Mr. Clayton Paradis, Manager of Investor Relations. You may begin your conference.

Clayton Paradis

Thank you, Sharon, and good morning everyone. Welcome to Penn West’s 2013 fourth quarter and year end financial and operating results conference call. My name is Clayton Paradis, Manager of Investor Relations and I will be the speaker today. With me in Calgary is our President and Chief Executive Officer, Dave Roberts; Executive Vice President and Chief Financial Officer, Todd Takeyasu; Senior Vice President, Development, Mark Fitzgerald; Senior Vice President, Production, Gregg Gegunde, General Counsel and Senior Vice President, Corporate Services, Keith Luft and Vice Preident, Corporate Planning, Reserves and Analysis, Tony Horvat.

I would remind listeners that we will be referencing webcast presentation in conjunction with this call this morning. This presentation is available via the webcast and also on our Pennwest.com website if you haven’t already had a chance to review it.

Before getting started this morning, I’m required to review our customary advisories. Penn West’s shares are traded both on the New York Stock Exchange under the symbol PWE, and 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 6:1 conversion ratio. All financials are reported under the International Financial Reporting Standards. Certain information regarding Penn West and the transactions and results discussed during this conference call, include management’s assessments of future plans, operations and targets may constitute forward-looking information under applicable securities laws.

Our actual results could differ materially from any conclusions, forecasts or projections in such forward-looking information. Such material factors and assumptions were applied in drawing any conclusions and making any forecasts or projections reflected in such forward-looking information. Additional information about the material factors that could cause our actual results to differ materially from any conclusions forecasts or projections in the forward-looking information, and the material factors and assumptions that were applied and drawing any conclusions or making any forecasts or projections reflected in the forward-looking information.

This is continued in our 2013 fourth quarter and reserve results presentation, which is being webcast and is available on our website. Also contained in our fourth quarter press release and other reports on file with Canadian and U.S. Securities regulatory authorities, which may be accessed through the SEDAR website at sedar.com and the SEC website at sec.gov or on Penn West’s website.

During this conference call certain references of non-GAAP terms maybe made. participants are directed to Penn West’s most recent MDA and financial statements available on our website, as well as filings available on the websites noted earlier, to review disclosure concerning non-GAAP items.

With that all the way, I’d now like to turn to our financial and operational results for the fourth quarter of 2013. This marks the first quarter of operations following the strategic transition to the long-term plan that was announced with our third quarter results in November 2013. Average production for the quarter was 123,995 BOEs per day and was in line with analysts’ expectations that was previously announced in our fourth quarter operations update on January 21, 2014.

Funds flow of $216 million or $0.44 per share in the quarter and $1.1 billion or $2.17 per share for the full year we’re in line with consensus and we realized that 12% improvement in our annual impacts year-over-year. On the cost side, through organizational changes implemented primarily in the back half of 2013 in dispositions, we reduced operating expenses by approximately $116 million - $166 million, and G&A expenses by approximately $12 million year-over-year. Our of $166 million in operating cost reduction, approximately 60% of attributable to dispositions over this period. With staff reductions and other cost reduction initiatives in 2013 aimed at streamlining our operations accounting for the balance. As we continue to execute on a long-term plan, focusing on reducing these costs further and improving the overall profitability of the enterprise remains critically important.

We recorded $790 of impairments in the quarter, consisting of non-cash, property, plants, and equipment impairment charges of $742 million, and a goodwill write-down of $480 million. These write-downs related to lower estimated reserve recoveries at Manitoba and limited plant capital allocation and certain natural gas liquids properties. I would point out, these are unusual charges and the assets affected are not essentially an integrated essential of a long-term plan.

I’m going to correct myself, the goodwill write-down was $48 million. We improved include the balance sheet quarter-over-quarter, with $425 million reduction in debt, plus working capital excluding the FX of $62 million of currency translation. I will review our fourth quarter debt bridge in a little more detail shortly. For 2013 the sustainability ratio, the ratio of cash expenditures of our funds flow generated was 112%, and compares to 172% in 2012 and the long-term plan target was of 110%. Capital expenditures in the quarter were $208 million, 99% of which were related to development activities and included the drilling of 56 net wells with a success rate of 98%.

For the full year, capital expenditures of $816 million were 99% allocated to development activities, including the drilling of 206 net wells at a 99% success rate. It is important to note, that 2013 capital expenditures came in under the $900 million guidance, primarily due to the cost reduction realized across our core light-oil areas, predominantly in the second half of 2013. As previously announced, we completed non-core asset dispositions in December of 2013 of approximately 10,800 BOEs per day for gross proceeds of $486 million prior its customary closing adjustments. Improving our balance sheet position, and more importantly focusing Penn West portfolio on key light-oil plays and improving the profitability of our business by removing higher cost production. During 2013, by executing Phase 1 of our asset disposition plan our decommissioning liability was reduced by approximately by $90 million net of additions.

With respect to the dividend, the Board of Penn West has declared the first quarter 2014 dividend in the amount of $0.14 per share to be paid April 15, 2014 to shareholders of record on March 31, 2014. Fourth quarter average production volumes came in as expected at approximately 124,000 BOEs per day. Looking closer at quarter-over-quarter production bridge, I’d like to point out that the uneconomic certain volumes were actively reviewed and purposefully suspended based on economic analysis. Simply put, if we – if that would cost us more capital that have been the disruptive production back online and we expect it to recover in the future, we made the decision not to spend on dollars.

In 2013, the peak volume impact was approximately 3,200 BOEs a day which resulted in an average of 920 BOE per day impact in the quarter. We will continue to conduct this type of economic analysis in our operations, a reflection of our commitment to continuously improve the profitability of the enterprise. Having said this, we would not expect to see this peak level repeating and moving forward.

A quick comment on the outages and operational disruptions. We experienced third-party outages and extremely cold weather disruptions in the quarter. Third-party outages were primarily located in the Swan Hills in Central Alberta regions and cold weather disruptions were primarily experienced at our Saskatchewan and Manitoba operations. Where temperatures were recorded below minus 50 degrees Celsius in late December and now that’s minus 58 degrees Fahrenheit impacting facilities and production lines. Currently, 75% to 80% of disruptive production volumes have been restored.

Looking at the funds flow impacts in the quarter. Clearly, the main driver moving our funds flow lower was the $91 million change attributable to commodity prices. And in particular, the discount in the benchmark differential between WTI and Canadian light crude increasing to over $15 per barrel from $4.80 per barrel in the third quarter. This widened differential persisted into 2014, averaging approximately $13 per barrel discount for the month of January, before moderating into February with the margin that’s supporting in the $5 per barrel discount range. In addition to this differential improvement, Canadian and U.S. currency exchange has been favorable to our 2014 budget, which assumes CD$103 to U.S. exchange rate.

Looking at that this next slide, the net debt bridge illustrates all the puts-and-takes with respect to our debt structure in the quarter. Most important takeaways is the fact that our debt plus working capital in the quarter, was reduced by $425 million, excluding the impact of $62 million of currency translations. Excluding the foreign exchange facts, 88% of the net proceeds received from the dispositions that closed in December went to debt reduction.

The outstanding notes of $2.1 billion as of December 31, 2013, include the full effect of translation at year end swap currency rates. We have swaps at fixed exchange rate on the repayment of $641 million or 39% of U.S. denominated notes at par Canadian to U.S. dollars. These swaps partially offset the currency translation with the mark-to-market gain of $50 million at year end 2013, recorded as risk management asset and not an offset of stated debt levels. The currency effects on all Euro and Pound denominated notes are fully hedged.

Looking at cash costs. We are very pleased to report that quarterly cash costs in terms of dollars have decreased approximately 26% over $135 million year-over-year. We have provided the split on how these costs break out and we will continue to report on these trends as we move forward. I will remind you, that we’re referencing quarterly figures here and these are not to be confused with the annual costs, in particular the decrease as mentioned early on the presentation with respect to annual amounts in operating and G&A costs.

Referencing the pie-charts in the right-hand side of this next slide Penn West’s 2013 reserve book is comprised of high quality reserves with proved developed producing reserves representing 72% of our proved book. And proved reserves in total representing 67% of our total proved and probable reserve book, providing Penn West a higher degree of certainty in our business capability.

Some highlights from our solid reserves performance in 2013 include reporting total proved and probable reserves of 625 million BOE, of which liquids accounted for approximately 70%. Before tax and discount of 10% net present value of our 2P reserves remains relatively constant at $8.9 billion even considering asset sales that closed in 2013. Excluding the impact of dispositions, we replayed 97% of 2013 production on a 2P basis. Future development costs or FDC in 2013 was significantly reduced reflecting the realized declines at our drilling and completion costs, removal of certain capital costs associated with properties no longer carrying reserves and technical revisions to our current reserved base. As a result, we reported the 2P finding and development costs including FDC of $9.47 per BOE. Excluding FDC, our 2P F&D costs was $17 and $0.17 per BOE.

On the next slide before riding this information to put into context, with a size of the resource potential is that existed to Penn West as we focused on the development of light-oil areas through the long-term plan. In the bottom left half – left of each graph is what reserves are booked at year end for each of the Cardium, Viking and Slave Point areas.

And the fourth and the top left-hand corner is the aggregation of just these light-oil areas. The middle bar represents our view of what reserves will be developed through the execution of a long-term plan, and the right-hand bar represents the relative size of the remaining sources in each of these areas.

At year end 2013 approximately 40% of our $625 million BOE of 2P reserves are represented our three core light-oil areas, Cardium, Slave Point and Viking. Through the execution of a long-term pardon me, through the execution of our long-term plan we expect two things, first, we expect total reserves to grow over the next five years by approximately 10% to 15%. Second, we expect these three core areas will represent approximately 60% of total reserves at the end of your pie.

Well the last slide focused on long-term value potential that existed in Penn West. I’d now like to focus on our performance today. We look at these numbers, when we look at these numbers it’s easy to understand why we’re excited about the progress we’ve made in a very short period of time. Referring first for the drilling and completion costs in the table at the bottom of the slide, it’s the top-line in that table that I’m referring to. We’ve laid out the drilling and completion or D&C costs assumptions we’ve made when we put our 2014 budget together, which in each instance are already vastly improved from similar costs in prior years. And what you’ll see is the current D&C costs in the Cardium and the Viking are already below our 2014 costs assumptions and then in the case of the Viking below our long-term target costs assumption. We continue to do – as we continue to operate and deliver in a continuous manner, we expect to drive further efficiencies, anticipate being able to advance drilling activities above plans for 2014.

Turning to the Cardium, we provided an update on our production performance from the fourth quarter 2013 program at Crimson Lake and Lodgepole. While early days, clearly these programs are performing with that expectations under significantly reduced cost structure as represented by the green curves on the respected type curve graphs. As we continued to find some performance-driven culture here focused on the development teams in the Cardium moving to 2013 is the preparation and advancement of future inventory to support increased activity in the 2015 and beyond.

Moving onto the Viking, and similar to the Cardium production performance curves, production performance for the fourth quarter of Viking program is provided and is performing within expectations as illustrated by the green curve on the type curve graph. You will notice that the first half 2013 program continues to outperform type curve expectations and we believe the Q4 program has the same delivered potential. However, has experienced increased backpressures associated with new infrastructure installed in parallel with the drilling program. This is a reflection of a continued strength and deliverability of our Viking wells and once that debottlenecking efforts are completed here, in the early quarter of 2000 – early in the second quarter of 2014 we anticipate well performance comparables to first half 2013 program out of our Q4 wells. In both cases I’d like to highlight that our well performance is best-in-class in the Viking, relatively to the quality of our reservoir and inventory here.

In the Slave Point, the focus of that two years with our evaluation and testing of different drilling and completion techniques in the carbonates. We plan to transition to more developed drilling in the Slave Point in years three through five, and with success here we would expect this asset to become a real driver of value for Penn West in the future. We expect to provide more color on our results in this area with our first quarter 2014 results in early May.

This is an exciting time at Penn West. We have stated previously, we clearly understand this is, that as we move through 2014, it will be a year of some transition for the business. However, as we focus on our high performance delivery culture, we improved constantly on our ability to deliver all our metrics.

Our strategic plans focus on what we believe are four key drivers of shareholder value. Production per share growth, funds flow per share growth, net backed per barrel growth and solid capital structure in debt funds flow metrics. All other – all other inputs we are driving operating costs, G&A costs, capital efficiency and portfolio rationalization are tied to these outcomes.

With that sharing, that concludes our formal remarks. We’d now like to open the call to questions please.

Question-and-Answer Session

Operator

(Operator Instructions) We’ll pause for just a moment to compile the Q&A roster. Your first question from Cristina Lopez from Macquarie. Your line is now open.

Cristina Lopez – Macquarie Capital Markets Canada Ltd.

Taking my call. With respect to the cost from the booking so far in the Cardium and the Viking obviously you’re seeing good cost improvements, what other reserve evaluators recognizing on a per well basis in the Cardium and the Viking if you have those numbers?

David E. Roberts

Well Cristina thanks, good morning and thanks for your question. I think we’ve included an additional chart there that basically shows where we think the EURs for the wellbore and so right now they’re consistent with our expectations. One other thing that I would point out here is, as we made the dramatic improvements in our drilling cost performance, we’re really focused on now building better wells and so I think what you’ll see across the enterprise Cardium is a great example more lateral length, more stages and we would expect those to have commensurate the facts in terms of improving our type curves, EORs and rates of return.

Cristina Lopez – Macquarie Capital Markets Canada Ltd.

Excellent, and then obviously posterity [ph] on prop being officially marketed. Anything that you can call it further on asset sales and to the compression of the asset sales so far?

David E. Roberts

Well, I guess I would say that I’ll be a little bit expansive here. We find ourselves in a pretty good plays coming out of 2013 I think we emphasized the debt reduction power of the deal that we had done late in 2013. We really are showing the businesses is very closely balanced in terms of our expenditures versus the funds flow that we’re able to take out of operations. And so we’re making progress on that particular front. We got several things running in the marketplace, we have said that, that we’re going to be patient and see what the market does for us. We’re actually growing in confidence, because candidly there’s not a lot of stuff on the marketplace and nothing that’s comparable to the quality of the assets that we have in the space right now. So, processes are ongoing, we’ve said that pretty categorically that we’re going to get back to operating and we’ll continue to look the A&D market, but we expect results in 2014.

Cristina Lopez – Macquarie Capital Markets Canada Ltd.

Excellent. And then last question from me, is there any more color you can give around the write-downs and Manitoba specifically at Waskada?

David E. Roberts

We’ve been pretty candid about taking a close look at the results that we had out there and essentially we had a type curve reduction on a per well basis down into the 40 MBOE range in Waskada which was lower than we had carried that previously. We’ve also increased our spacing length and we’ve become little bit more educated about the drawdown power of the horizontal wells that we’re putting out there. And so, we’ve just reflected the reality of what the reservoir is giving us out there. Now having said that, Waskada is clearly not a focus area for us, but it remains an area even at 40 MBOE a well with our ability to drill these well that close to $1 million now that still provides outstanding economics. And so, it’s something that we had to recognize the realities, but in no means are we disappointed with the asset and aggregate.

Cristina Lopez – Macquarie Capital Markets Canada Ltd.

Excellent. Thank you so much.

David E. Roberts

Yes, thank you Cristina.

Operator

Your next question comes from Jeremy Kaliel from CIBC. Your line is open.

Jeremy Kaliel – CIBC World Markets

Thanks, guys. Good reserve metrics. Just a follow-up on Cristina’s first, a question on the non-cash impairment charge. So, this is a non-cash charge, did it – it was not reflected in any reductions or negative revisions or reserves as well?

David E. Roberts

Yes Jeremy, good morning and thanks for the question. We obviously had a revision downward in our reserves in Waskada as well, which in my view makes the reserve metrics we put up all the more impressive, because we had to take a write-down there, but the power of the overall asset base was able to offset it, still deliver what we think are our top guess on our metrics.

Jeremy Kaliel – CIBC World Markets

Okay. Okay, great. And, just on a smaller number here of future development capital. Can you talk about the causes of the reduction in your future development capital came down quite a bit?

Todd H. Takeyasu

I think there was two areas that generally we looked at, the quantum that’s up $15 million would have come out as a result of the cost improvements that we’ve seen in our drilling program. So obviously very excited about that. And then, I think one other things the company engaged and quite diligently this year was very thorough review of our reserve book, beginning with the continued resource studies that we’ve published in the summer, but also going through our reserves in detail as you might expect with the management change and we’re able to remove circa $300 million or $400 million from assets that did not have reserves, but had capital allocated to that. So, that’s a positive as well. And again, I think that points to strength of the overall numbers, because we were able to remove certain reserves, those costs and still report to what are very strong metrics in this area.

Jeremy Kaliel – CIBC World Markets

Okay, great. That’s all I had.

Todd H. Takeyasu

Okay.

Operator

Your next question comes from Gordon Tait from BMO Capital. Your line is open.

Gordon Tait – BMO Capital Markets

Could you maybe give us a couple of reasons maybe the two or three things that you’ve done in the Viking and Cardium that account for that big cost reduction in your drilling completion costs?

Todd H. Takeyasu

Yeah, good morning, Gordon. Good to hear from you. Yes, I think the thing I would say first and foremost is, we paid attention to what our competitors were doing, we finally said let’s look at what these other people are doing in these areas and see if we can mimic them which speaks to some of the culture shift that we’re seeing in Penn West in terms of wanting to be competitive. And I think the other thing is, we basically issue the challenge to our drilling and completion group to say go get these changes and they delivered it for us. So again, another culture change for us is we’re empowering people to make the decisions to actually drive things forward. And then, I said this what they did is basically simplified some of our designs with back to basic on some of our drilling principles, but again speaks to the strength and talented people that we have here at Penn West.

Gordon Tait – BMO Capital Markets

Okay. And initiated number of waterfloods in a few areas, a couple of things like when do you expect to see a production response in some of these floods and if you look down the road what you think the impact might be of these floods on your overall decline rates?

Todd H. Takeyasu

Yeah, it’s a great question I think in majority most of the flood that we would have put on in the back half of last year we should probably start seeing inklings of thing in the back half of this year. So, just to kind of put that in perspective, because we are being very measured making sure that we do this in a technically correct fashion. I think in general, and we are still doing the work on this, but we would not be do other thing with some of our other competitors in Canada that are talking about lessening decline rates 2% to 3% through act of waterfloods that’s certainly in our key areas. So, we’ll continue to keep a track on that, but that’s kind of what we’re looking for is an ability to shallow out our clients in the Cardium, Slave and Viking areas.

Gordon Tait – BMO Capital Markets

And presumably you might get some reserves as it does?

Todd H. Takeyasu

Well, there is no question. I fully expect that and we, one other things we’re blessed with is a rich opportunity to increase of EOR pressure maintenance activities and it should help us on the production side and definitely add reserves and as you know waterflood barrels are of substantially cheaper than drill bit barrels and so we’re looking forward to that effect in our F&D in the future as well.

Gordon Tait – BMO Capital Markets

All right, thanks.

Operator

Your next question comes from Greg Pardy from RBC Capital Markets. Your line is open.

Greg Pardy – RBC Capital Markets

Thanks, good morning. Couple of quick ones for in and I wanted to ask a strategic question, but maybe just on the decline rates question where would you peg the, your corporate decline rate now and then the other number I wanted to still I get from you is just the reduction that you see now in the number of wellbores company-wide producing versus non-producing I guess as of yearend or March 31 wherever you want to use?

Todd H. Takeyasu

Yeah, good morning, Greg. Thanks for that. I think we’re still going to, we’re going to talk about our corporate declines being 20% to 22% and I think generally I’ve always used this is that’s kind of the Cardium metric and since this is the Cardium-centric company that’s a number that I wouldn’t expect for us to be off until we actually start seeing our waterflood result.

The second question, generally what I would say is that, with the previously announced closed sale at the end of last year and the one that we’ve got expected to close by the end of this quarter, we will have seen a reduction of roughly 20% of our total wellbores so round numbers and that things are going to – the total well counts going to be circa 19000 to 15000. And of that a third of those plus, minus or inactive so it kind of gives you an idea of we’ve reshaped this company in a meaningful way with a couple of also important financial transactions for us.

Greg Pardy – RBC Capital Markets

Okay, thanks for that. And then, I think you already addressed this but, we’ve seen in other companies now stepping out of Canadian light-oil into the U.S. and so forth obviously that U.S. is still your backyard you know that area well. Strategically do you see any likelihood there that once Penn West gets the balance sheet in better shape and so on that potentially look outside of Canada in the lower 48?

Todd H. Takeyasu

Well actually I like the view out of the front door in Canada and I think one other things that we are blessed with the Penn West as one other things that we tried to show with that slide on contingent resources is we’re unique among I think among companies, our size in terms of the running room potential that we have with 600 plus million barrels in the Cardium we think Slave is going to be a significant contributor in that area. And so when I think about our business it will be some years before I run out of opportunities here and I continue to believe that there are continued opportunities for outstanding operators in the Western Canadian Sedimentary Basin. So I don’t have to go slug it out with in faraway places like South Texas.

Greg Pardy – RBC Capital Markets

Got it. Okay, thanks very much.

Operator

Your next question comes from Patrick Bryden from Scotia Bank. Your line is open.

Patrick Bryden – Scotia Capital, Inc.

Good morning everyone, and thanks for making time today.

David E. Roberts

Good morning Pat.

Patrick Bryden – Scotia Capital, Inc.

Good morning. Just I really appreciate the bridge slides you put in at the presentation today. Just curious if you can sort of talk about slide 4 where you’re showing us your decline rate, so if I do math on that, that kind of confirms the 22% you had mentioned that in terms of corporate decline rate. When I look across that scale in a CVM production additions I guess the decline is still outpacing production adds by about 3 times and I’m just wondering in your view when we might see a normalizing or an equalization of those numbers are in fact inflection point up?

Todd H. Takeyasu

Yes, Pat thanks for the question it’s a good one. And because that, it allows me to speak one other important things here is, happy to put these Q-to-Q bridges in, but one other things people should remember is that, the Q4 increased number is tied to Q3 CapEx numbers which was less than $70 million which I would argue is probably the lowest quarterly spend this corporation had and arguably in the last half decade.

Now that being said, just one other things that we’re looking at I think you’ll start to see a little bit more possible on connection on those two curves certainly in Q1 but clearly as we ramp up our program, our drilling programs in Q3 and Q4 of this year we expect to close that gap.

Patrick Bryden – Scotia Capital, Inc.

Okay, appreciate that. Thank you. And then, I don’t know if you can may be elaborate a little bit more on the laterals and the frac stages and mainly the completion design that you’re trying to evolve in your key plays and, I guess hand-in-hand with that we’ve been showing some specific areas whether it’s Crimson Lake, or Lodgepole or Dodsland, can we extrapolate the success you’re seeing in those pockets or are you trying to really focusing on sweet spots for the time being?

David E. Roberts

I’m going to put that to Mark Fitzgerald and because he’s got a good color on that.

Mark P. Fitzgerald

Surely Pat. I think Dave talked earlier about we have certainly seen great cost reductions across the plays, drilling what we anticipated early in the plan. Stage 2 and that is exactly what you talk about which is better wellbores and more productivity from the same investment. What we’ve seen if I start with the Viking, as you’re well aware, we are best-in-class right now we believe in our drilling completion cost structure as well as the deliverability from that area that’s a reflection of the quality of the reservoir that we have. And we’ll continue to work to drive those costs down.

We used a little more nitrogen in our completions which reflects we think the response we see from the reservoir given the type we have and we’ll continue to play with that. Cardium we’ve seen some real successful gains as we move from generally 1200 to 1400 meter laterals for example, in Crimson too we’ve been as long as 2200 meter and we’ll target 2400 meter. Stage movement from 17 to 22 and have seen at many of response thus far in terms of productivity per stage. The most exciting part to me and that as we’ve seen an ability to increase lateral length and stage counts in some of the investment levels that we anticipated in the five year plan. So longer reach, more stages for comparable dollars rich. We’re starting to see responses in those type curves.

Similar story in Lodgepole, have moved from 17 to 21 stages, we’ll continue to reach further for at similar costs. And then as we go into Slave Point, we tested two longer reach laterals in order on the 2200 meter to 2400 meter length, that will open up significant inventory for us outside the core that played and have been very, very pleased with what we’ve seen in those wells right now as they come on stream in the first quarter here.

So, overall I think we made a significant step change in the organization in driving down just the execution costs of what we had and are starting to see response as we pushed to these longer laterals and higher stages throughout those plays.

Patrick Bryden – Scotia Capital, Inc.

I appreciate that Mark. And maybe you want to leave more details on the Slave Point to the preview you know you would expect to provide in Q1, but is it possible to get a sense for what you think you might be doing there that’s different than what industry has done in the past?

David E. Roberts

Well I’ll jump in here, I think we’re – it is early days and we’ve always set up 2014 as a kind of a learning queue. But clearly the two things that you’re going to hear from us is, model board designs in terms of drilling our wells. We are drilling longer wells and other people have drilled out there and we’re testing some new completion techniques that we think are going to be a change event for us on a go-forward basis. So, given the few more months Pat we’ll fix you up with all the detail.

Patrick Bryden – Scotia Capital, Inc.

Great, thanks. And one more if I might, then I’ll get out the way. Slide 7 where you’ve shown that 26% reduction in operating costs, do you think you have a lot more to squeeze there or how are you feeling in the progression of that curve?

David E. Roberts

I think what we would say is, that we’re very early days, we’ve candidly kind of hit this plays with a sledge hammer in the first six months that we’ve been here. And I think now we’re going to go after this stuff with a lot more precision and I do believe that there are a lot more costs savings that we can take out of the business, both on our operating side and the G&A side.

Patrick Bryden – Scotia Capital, Inc.

Okay, thank you. Much appreciated.

Mark P. Fitzgerald

Yes.

Operator

Your last question comes from Chris Bolton from Perron & Partners. Your line is open.

Christopher Bolton – Perron & Partners Wealth Management Corp.

Good morning. How is your net back on new production in the Cardium and Viking, compared to you corporate average during the quarter?

David E. Roberts

Can you repeat the question Chris?

Christopher Bolton – Perron & Partners Wealth Management Corp.

Your net back on new productions here in the Cardium and the Viking, how that compares to your corporate average?

David E. Roberts

Well I mean obviously net backs are driven by the commodity prices of a day, but in our previous view of what the corporate long-term plan was, we’ve given you an idea of how the net backs have progressed against essentially a flattish commodity deck. And so, we would say that there is still consistent with those projections. So and obviously since the wells are drilling cheaper they’re economically more powerful.

Christopher Bolton – Perron & Partners Wealth Management Corp.

Okay, great. And what time period do you think you’ll be able to finish these assets sales and sort of return to going production on a quarterly basis?

David E. Roberts

Well I think what’ve said is, we want 2014 to be the transition year for the portfolio and so similar to the comments I made to Cristina’s questions to start is, we’re in a much better plays financially than we were at this time last year. We’re going to see what it is we have to do here but we clearly understand we need to get this behind to this year, so we can start showing the growth projections that people want to see out this enterprise. In Canada we do as well. So I’m going to stick with my story of 2014 is the year we’re going to get this done.

Christopher Bolton – Perron & Partners Wealth Management Corp.

That sounds great. Thank you.

David E. Roberts

Welcome.

Operator

And we have no further questions at this time.

Clayton Paradis

Thank you all for your participation this morning. We look forward to speaking with you again when we report our first quarter 2014 results in early May. Good bye.

Operator

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

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Penn West Petroleum Ltd. (PWE): Q4 EPS of -$1.49 may not be comparable to consensus of -$0.06. Revenue of $613M (-23.3% Y/Y) misses by $44.54M.