Penn West's Board of Directors has approved a capital budget of $900 million for 2014, with two thirds of the investment directed toward light oil opportunities resulting in the drilling of 210 net wells. The development program also includes integrated enhanced oil recovery (“EOR”) investments across our core areas.
In 2014, Penn West will be transitioning to a more “even-flow” approach to our investment profile during the year. It was certainly true in 2013 and in the past that Penn West might commit as much as half of its annual capital budget in the first quarter – an approach that limits effectiveness, learning transfer and the ability to adjust programs as situations warrant. Generally, in 2014 and in subsequent years, we expect our development capital flow will approximate 25% to 30% of total year spending in quarters one, three and four with the small remainder dedicated to the spring break-up period in the second quarter.
- With approximately $270 million allocated in 2014 (including EOR capital), and approximately $2.5 billion over the next five years, the Cardium represents the future of the company. We expect to drill 67 wells in the Cardium in 2014 focused in the Pembina and Willesden Green areas. Our focus in the Cardium is to improve per well cost performance and reduce cycle times to become the benchmark operator as we ramp activity progressively over the next several years.
- The Viking play will feature early in our long-term plan and provides a solid, high return, near term growth platform for the company. We expect to spend approximately $150 million (including EOR capital) drilling 108 wells in 2014. Penn West is a leader in the Viking with well costs under a million dollars, very short cycle times and production performance that is 25% - 30% higher than industry average.
- The Slave Point Carbonates represent a significant step forward for Penn West if successful because of the resource potential in the area. Because of individual well costs and carbonate reservoir risk, our capital allocation to this program is more slowly ramped over the next several years. This reflects both capital discipline as a core value in the company but also the careful planning we are undertaking as we plan for the bright future of this asset base. The capital budget for 2014 in the Slave area is expected to be approximately $145 million (including EOR capital) with activities largely focused on low risk drilling (17 net wells) to drive cost improvements, some work with longer laterals, water flood development and a 3D seismic shoot to expand our play fairway.
- Enhanced oil recovery remains an important cornerstone of long-term resource development and value creation. In 2014, Penn West will continue to advance with an integrated EOR strategy in each of these core areas, which is expected to lead to further recovery improvements and mitigate declines.