Good morning, ladies and gentlemen. Welcome to the Baytex Energy Corp. First Quarter Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Brian Ector, Vice President, Capital Markets. Please go ahead, Mr. Ector.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us today to discuss our first quarter 2014 financial and operating results. With me today are Jim Bowzer, our President and Chief Executive Officer; Marty Proctor, our Chief Operating Officer; as well as Rod Gray, our recently appointed Chief Financial Officer; and Derek Aylesworth, our former Chief Financial Officer, who will be retiring from Baytex in June of this year. While listening, please keep in mind that some of our remarks will contain forward-looking statements within the meaning of applicable securities laws. I refer you to our advisories regarding forward-looking statements and non-GAAP financial measures contained in today's press release. I would now like to turn the call over to Jim.

Thanks, Brian, and good morning, everyone. I'm going to break my comments into 3 parts for you today. First, I'll comment on our first quarter results; second, I'll provide you with an update on our operations and marketing; and third, I'll give you a brief review of the pending Eagle Ford acquisition. Before I get into the specifics of the quarter, I want to reiterate our guidance for 2014, which remains unchanged at 60,000 to 62,000 BOEs per day with a budgeted exploration and development expenditures of $485 million. This guidance does not include the integration of the Eagle Ford acquisition, which was announced on February 6 and is expected to close in the first half of June. Revised guidance for 2014 will be provided a few weeks after the closing of the acquisition. With respect to our first quarter results, we generated production of 59,500 BOEs per day, 89% weighted toward crude oil. Production was up 2% over the fourth quarter of 2013, and up 15% over the first quarter of 2013. We delivered funds from operations of $171 million or $1.36 per basic share, an increase of 16% over the fourth quarter of 2013, and 68% over the first quarter of 2013. Our payout ratio in the first quarter net of dividend reinvestment remained conservative at 37%. Due to mainly stronger pricing, our operating netback in the first quarter of 2014 of $36.85 per BOE is up 21% versus the fourth quarter of 2013, and is 48% higher than the first quarter of 2013. We ended the quarter with total monetary debt of $832 million, representing a debt to funds from operations ratio of 1.2x, based on a funds from operations for the trailing 12 months. At March 31, we have $549 million in credit capacity in our…

[Operator Instructions] Our first question is from Gordon Tait with BMO Capital Markets.

I was wondering if maybe you could give us your overview of how you see heavy oil pricing setting up in the year going forward? We looked at all the volatility last year in the industry, can you talk about any changes you've seen, and how you see these heavy light diffs playing out in the next year or 2?

Certainly, Gord, and thank you for your question. As we come into 2014, I think the public is well aware that there are 3 major drivers to the improved differential market we have, which is unlocking the bottleneck which has caused the differential blowouts we've had in the past. Although, we do expect continued volatility, we expect it to occur at lower levels than we've seen in the past, not to be quite as high as differential changes. And we're seeing that as we enter 2014 with increased refinery uptake in Padd II in particular, which is a significant benefit to Canada. The second is the expansion of the unit trains and additional rail capacity relieving the use of, and need for, pipe. And lastly, the planning in pipeline system, which is going to help unlock Canadian crudes to head into Cushing and, of course, as we well know there's been plenty of projects to keep Cushing volumes and inventories low and it's essentially at -- I wouldn't call an all-time low, but it's cleared out for sure, and has helped bring the price -- pricing of crudes back in line. In addition, it's turning out to be a pretty good economic season. As a whole, over the past 18 months, the North American economy has shown continued small improvements. There's, I think, there's a fair amount, if you saw the differentials as we go into Q2 here, they are headed down towards $17.00, it's kind of where Q2 is right now. The anticipation for a healthy driving vacation season, with refineries coming off of turnarounds as we come out of April here and May, should also bode well for the crude markets in general and continue to take inventories down. And in particular for heavy. I think that's going to be helpful as we finish out the year here.

And then so for your long-term planning purposes, do you look at these differentials being sort of just above 20% or below 20%? What side of that line would you sit on?

If you take a look at removing the bottlenecks from the system, Gord -- the crude, based on its value, Western Canadian select crude will trade on par with the refining products that it produces in transportation fuels. And that ought to lead you to about a 15% to 18% differential over time. Given the fact that there are some still potential bottlenecks as production volumes increase over the long term, and hopefully, pipeline and rail capacity will continue to keep pace with that, you will see kind of times where those don't match perfectly, which creates the volatility. And as a result of that, on average, you're probably up in the 18% to 20% type on an average basis.

[Operator Instructions] Our next question is from Dirk Lever with AltaCorp Capital.

Jim, I wonder if you could just touch on what the near-term expected impact of the federal government taking the cars off, is this going to make the market a little bit more tight, i.e, you're going to end up paying a little bit more? And what we should be thinking about on your rail costs as we look at 2014?

Thank you, Dirk. It's a pretty complicated question, to tell you the truth. We give it a lot of thought here to try to project what might happen with all this. There's, I think, there's a couple of things that need to be considered. First of all, the transportation options need to be done in a safe manner. The first set of reactions that have taken place were around procedures in the operations and, of course, we're not in the rail business, and don't own any cars or track. But as a result of that, we do rely on that sort of transportation as we rely on pipeline. And then the second has been around the so-called DOT 111 cars. And then the other bifurcation you have is the packing group qualifications between a heavy crude versus a light crude and, of course, we move heavy crude, which is at a lower packing group. The focus has been on those D-111 cars. In summary, let me -- I would say it this way, there will be some costs associated with all of this that will get into the system, and no matter what crude you're moving, I would have to believe that there'll be -- you'll be impacted in some albeit maybe a small way across the board of all rail transportation as we move forward. But it's pretty hard to put a number on that at this stage.

We do have a question from Menno Hulshof with TD Securities.

I just have one quick question. To what extent does the heavy differential drive your rail activities? And then, at what heavy differential would you decide to dial it back if, in fact, that's the right way to think about it?

Yes, Menno, it's definitely part of the equation. If you start getting -- if you just look at the overall macroeconomics associated with the transportation costs versus the diluent savings and the quality discount that you save by putting heavy crude on rail, you kind of get -- you need to kind of get and see that you're going to sustain below 15%, or $15 differential in order to substantially try to move off of pipe and, of course if you get there, the pipe is going to be available or the differential wouldn't be available. So the bottleneck has been removed and we're seeing more of that as we go forward. That doesn't lead directly into specific contract situations that we're in. Because we want to keep the availability of some rail available at each of our sites. So it may have to get lower than that in order to actually pull it off for any given time, but that gives you a window of what you would do there, in our opinion, anyway. So I don't know if that answers your question completely, but it kind of gives you the ballpark of how we look at it. But there are quite a few factors involved in it.

There are no further questions registered at this time. I would like to turn the meeting back over to you, Mr. Ector.

All right. Thank you, operator, and thanks everyone for participating in our first quarter conference call. Have a great day.