Penn West Petroleum's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Penn West Petroleum Ltd (PWE)

Q2 2012 Earnings Call

August 10, 2012, 12:00 pm ET


Jason Fleury - Senior Manager, IR

Murray Nunns - President & CEO

Hilary Foulkes - EVP & COO

Todd Takeyasu - EVP & CFO


Greg Pardy - RBC Capital Markets

Kate Minyard - JP Morgan

Michael Zuk - Stifel Nicolaus

Jonathan Fleming - Cormark Securities

Gordon Tait - BMO

Brian Kristjansen - Canaccord Genuity

Roger Serin - TD Securities

Jeremy Kaliel - CIBC



Good afternoon. My name is Nick and I will 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. All lines have been placed on-mute to prevent any background noise. After the speakers remarks there will be a question-and-answer. (Operator Instructions) Thank you.

Jason Fleury, you may begin your conference.

Jason Fleury

Thank you and good morning. Welcome to Penn West 2012 second quarter financial and operating results conference call. My name is Jason Fleury and I am 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 Office, Hilary Foulkes; and our Chief Financial Officer, Todd Takeyasu and other members of the 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 in 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 the results discussed during the 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 second quarter news release and are also asked to review the advisory notice therein. This news release can be found at 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 operations or financial results are included in reports on file with Canadian and U.S. Securities Regulatory Authorities and maybe accessed through the SEDAR website at and the SEC website at or at our own website

During this conference call certain references to non-GAAP terms may be made. Participants are directed to Penn West 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?

Murray Nunns

Thank you, Jason and good morning, everybody. Penn West strategies over the past five years 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 assets.

Two years ago less than 2% of Penn West production came from well bores using horizontal multi frac technology. By the end of this year, we anticipate 30% of our production will come from horizontal multi-frac wells.

These new light oil wells deliver significantly higher rates of returns in the long run. The value of this technology has added to our asset base and will only continue to grow in the future. Over the years Penn West has assembled and unlocked some of the most valuable plays in this basin.

Additionally, our portfolio includes a broad inventory of oil related properties which are not critical to our go forward strategies. We have demonstrated the abilities 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 sales. Hilary will give you more color on this later in the call, but make no mistake we have the best of inventory and the ability to transact with a broad spectrum of potential buyers.

Commodity pricing is cyclical and is impacted by broad economic factors as well as obviously speculative volatility. We are mindful of these impacts on our business and we exercise prudent strength in 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 $25 a barrel. While this has narrowed considerably since Q2, the volatility of this differential is persistent and has a significant impact on our netbacks. In both the US and Canada, active pipeline projects in various 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 the transportation refining access limitations in North America in the longer-term, but they are 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 and on our price realizations, we have adjusted our capital plans accordingly for the remainder of 2012.

Read the rest of this transcript for free on

If you liked this article you might like

Penn West (PWE) Stock Spikes, Announces New CEO

Penn West (PWE) Stock Spikes, Announces New CEO

Penn West Petroleum (PWE) Stock Surges on Asset Sales

Penn West Petroleum (PWE) Stock Surges on Asset Sales

Penn West Petroleum (PWE) Stock Soars, Asset Sale Attracts Potential Bidders

Penn West Petroleum (PWE) Stock Soars, Asset Sale Attracts Potential Bidders

The Week Ahead: How Long Can the Stock Market Defy Gravity?

The Week Ahead: How Long Can the Stock Market Defy Gravity?

Here’s Why Penn West Petroleum (PWE) Stock is Plunging Today

Here’s Why Penn West Petroleum (PWE) Stock is Plunging Today