Penn West Petroleum Earnings Call NUGGETS: Asset Dispositions, CapEx Cut
On Friday, Penn West Petroleum Ltd (NYSE:PWE) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
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 rate now? Then with respect to the asset dispositions, just curious how granular you could get at this stage, how formal is the process you are 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? The last question is just, what would you be looking at in terms of optimized debt metrics post the asset sale?
Murray R. Nunns – President and CEO: 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, lot of that’s pad drilling, it will be completed and tied in second half or spread other cost for second half as we complete and tie in. the difficultly in giving single number is that the second half although was a smaller portion of the well count are actually is the bigger wells, they are dominated by well on the Slave Point, Swan Hills and Cardium play and were much lighter on the shallow plays. So well counts alone really are actually misleading and in fact a lot of the wells slate – I’m going to put a ballpark out there, there is 25 to 30 tie-in the second half, most of those are duals, so they actually add up to significantly more volumes, so really that’s why we are staying away from giving individual numbers. Could you just refresh on your other two questions?
Greg Pardy – RBC Capital Markets: Yes, sure, why don’t we just right to the debt metric question, so just Murray, post the asset sales then, what you want your balance sheet to look like from metric standpoint?
Murray R. Nunns – President and CEO: I’ll throw that one to Todd.
Todd Takeyasu – EVP and CFO: Really, our view what the balance sheet should be hasn’t changed in a low pricing environment we like to see 1.5 to 2 times and a higher pricing point in the commodity price cycle we like to see something inside of 2.5. So, we are looking to do relatively significant balance sheet reset here such that we can get it to a more continuous mode of operations. We stop really worrying about the balance sheet. We think that commodity prices are looking much more favorable that of two or three weeks ago and we are pretty optimistic. And we’ve talked a lot about the asset sales and they are also a significant part of resetting our balance sheet.
Greg Pardy – RBC Capital Markets: And then just the last question was what’s the potential production impact you could see or is this just too early?
Todd Takeyasu – EVP and CFO: Probably too early to call it. I think it really depends. 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 are obviously concentrating on ones that will yield the highest for the least, and that’s the general formula. I don’t think you’d see us going pass 10,000 in any form or fashion.
Katherine Minyard – JPMorgan: Just a couple of quick questions. First of all, just on the CapEx cut you guys have trimmed 100 million to 150 million. I am just kind of curious as to where that might be it looks like there is a little bit of 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 are still pursuing EOR. So, is it maintenance CapEx that you’re cutting in some of the less profitable areas or where is that trim?
Hilary Foulkes – EVP and COO: Kate, this is Hilary here. The cuts really are pretty much little bit across the board. So there is no one area that we’re targeting. We know that – I mean there is a 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 that complete and tie-in the inventory that we drove in the first half of the year.
Katherine Minyard – JPMorgan: Then just a question on the dispositions and kind of the strategic rationale. It looks like you’ve mentioned, not only you are pursuing asset for sale, but you also mentioned the potential for JVs. 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 kind of more focused on core areas. So, my assumption is that if you were looking at JVs you would retain operatorship. So, how do you kind of balance the two objectives in the dispositions program?
Hilary Foulkes – EVP and COO: There is a couple of things. First of all, we look at our asset bases giving us the leverage per 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 disposition. On the joint venture side, for areas that are still very early in their kind of evolution from a value perspective and we don’t want to design what the ultimate value is through a cash disposition. So then it makes much more sense for us to retain operator ship, for us to get kind of cash as a down payment if you like and then that’s a reason, which what we have done in some of our previous joint ventures. So it’s a combination of the two that we are looking at as the levers that we can pull here in the relatively near-term.
Katherine Minyard – JPMorgan: Okay, and I realize it might be a little bit early but do you have kind of a notion as to the breakdown in kind of that total amount as to rough percent that might be sale versus JV or is too soon to tell?
Hilary Foulkes – EVP and COO: Kate it’s too soon to tell. What we have done, we want to make sure that we have choices and so we thought a lot potential transactions that we can do, and what we’ll do is at the appropriate time we will narrow it down to probably one or two. So really it’s too soon for us to define what that’s going to look like.