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Good morning, everyone, and welcome to Parex Resources' fourth quarter and year-end earnings call and webcast. Yesterday, Parex released its audited financial and operating results for the quarter ended and year ended December 31, 2017. Like all Parex disclosure documents, the complete financial statements and related MD&A are available on the company's website at www.parexresources.com and on SEDAR.Before turning the meeting over to Mr. Dave Taylor, President and CEO of Parex Resources Inc., I would like to mention that this call is being recorded so it will be available for playback on the company's website. Parex would like to remind everyone that remarks made during this session are subject to forward-looking statements, which involve significant risk factors and assumptions and have been fully described in the company's continuous disclosure reports. The information discussed is made as of today's date and time, and Parex assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law. [Operator Instructions]I would now like to pass on the meeting to Parex's President and CEO. Please go ahead, Mr. Taylor.
Thanks, operator, and thank you for joining us today for Parex's 2017 fourth quarter and year-end earnings conference call. With me today are Ken Pinsky, Chief Financial Officer; Eric Furlan, Chief Operating Officer; Mike Kruchten, VP of Capital Markets and Corporate Planning; and Ryan Fowler, Senior VP, Exploration and Business Development.The format for today's conference call will be a question-and-answer session with our audience, so we are opening the line to questions right away.
[Operator Instructions] The first question is from Darrell Bishop from Haywood Securities.
Just 2 questions here. First, with respect to Cabrestero and the Totoro-1 well, you indicated that the lower pressure could indicate that the well or I guess the finding is related to Bacano or the Jacana field. Could you provide a little more insight into what that read-through could look like and what else you guys are doing to, I guess, delineate that theory?
Okay. It's Eric Furlan speaking. So when we tested the Totoro-1 well, we tested the well and we found the pressure to be approximately 25% lower than the normal pressure in the area, which to us indicates that it is, in fact, connected to a nearby pool and is seeing the pressure interference from nearby production. So it suggests that the Totoro-1 well is part of a larger accumulation, either connecting to Bacano to the west or Jacana to north are the most likely scenarios that we see. And so additional -- we'll have to do some additional delineation and testing to confirm the connectivity. But generally, it suggests that it's part of a large pool.
And are you concerned with the lower pressure in terms of deliverability from that portion of the block or that part of the pool?
No. The pressure from a deliverability or recovery factor perspective is not that important because we will drive the oil out with the natural water drive or supplemental injection. So the lower pressure only impacts this initial test. So we were about -- the production from the well was reduced about 50% because of the lower pressure, but the lower pressure does not indicate that the recovery factor or any long-term impact.
Okay. My second question is just related to, I guess, your balance sheet and excess cash flow outlook for 2018. I know that you guys have an NCIB in place. Just wanted to get a little more insight with respect to, if current prices hold, how aggressive do you see you guys being in buying back shares this year?
Hi, Darrell, it's Ken. We've got a plan to buy back 3 million shares until our NCIB needs to be renewed in September of 2018. And in the forecast is to buy another 1 million shares, so about 4 million in total this year. And that will more than offset any LTI that adds to the share count. So we think that our share count -- our expectation of the share count will decrease from beginning of the year to the end of the year. And as we unfold the capital program and we see what commodity prices do longer term this year, we may adjust it. But for now, we're sticking with our plan to buy 4 million shares back and to invest our $275 million into the ground and on our assets.
The next question is from Ian Macqueen from Eight Capital.
So a follow-up on Darrell's question about Totoro. Obviously, that would be outside the 3P boundary. So from a reserve perspective, it would be positive to get reserves there at Totoro. But I guess the question to some extent is, if it's somewhat depleted, the first question would be, would you expect some depletion because generally, I would expect the water drive, a naturally strong water drive to basically offset pressure depletion. So is it a weaker water drive in the Totoro area? Secondly, you probably do have to drill more wells in the area to figure out the extent of the reservoir and also to drain the reserves from those area -- from that area, but how should I think of your change in interpretation going forward? You just have to keep on drilling until you figure out where there is and isn't reservoir and what it's connected to?
It's Dave, Ian. So Bacano and Totoro are both the most updip portions of this pool from what we can determine so far. They're a long way away from the water. So the response that we're seeing from the water itself, the natural water drive hasn't reached up that far. We actually started to see a bit of depletion in the Bacano area. And to counter that, we actually do have a couple of injectors that we're putting in. So Totoro actually looks like it's just even a bit more depleted. So maybe it's more directly connected to the larger accumulation at Jacana, which just means it's a little more pressure depleted. And therefore, it'll also need a bit of injection. But the good news is that because it's connected to Jacana or it appears to be, it's a fairly large area. And you're right, it would have been an exploration well, so there would have been no reserves at all assigned to this region. So the next thing we need to do is obviously drill a couple more delineation wells, probably on both sides of the boundary, the Cabrestero side and on the Block 34 side. And those locations we're just looking at for future bottom hole targets now.
And is there a natural kind of break that you would say we expect reserves up until this point or you still have to keep on drilling and figure it out?
Well, if you look at the math, there's a couple of different ways you could connect it up to Bacano, and I think we need to drill the appropriate wells to determine which is the right plumbing there.
Okay. So there will be a plan to drill at least a few more appraisal wells in that area?
Yes, well, actually in the budget, our partner had one planned for sure anyways. And so we will be drilling one on Block 34. And now that we've got the result on Cabrestero, we'll look at what another one might look like to add to the budget on that side of the fence.
And just to be clear, like even though there's pressure depletion, you would really need more wells in that area to fully drain the reserves? The existing wells are probably not adequate to drain reserves and...
Yes, I mean, just -- you've seen our maps and you know how many wells we've got into Bacano. We've got 5 in there now. So probably need at least a few more and we'll determine how many more as we drill some appraisals.
Just to add to Dave's comments, Ian, the pressure we encountered at Totoro would not be unexpected had we had it mapped as part of the larger accumulation. It's what we see in Bacano and it is -- as I've said, the natural water or a supplemental injection will facilitate the recovery. That's the way we see. That's the way our auditor sees it too. So it's just a matter of understanding how exactly the plumbing comes together, as Dave said, and what wells we need to drill to optimize the development.
[Operator Instructions] The next question is from Shahin Amini from Pareto Securities.
Encouraging to see that your Capachos activities are back on. Could you just provide more details on what's giving you comfort that it's safe to go back in there? And perhaps on the same theme, give an update on your Llanos-10 activities?
So just on Capachos, we suspended activity just because of the security situation post the ending of the ceasefire in January. And our contractors were uncomfortable at the time working there. We had about 200 people employed. Since then, we've been keeping an eye on things with the local, the military, the local government agencies, so the governors and the mayors, and also the people on the ground that are working there. And our measure of whether it's safe to go back and start work again is when the contractors and the local people who live in the communities are comfortable going back to work. And we've had numerous dialogues with the communities and the military and the local government. And when they felt it was comfortable and we felt it was comfortable. So that we've reached a situation where everyone is ready to go back to work, and so that's what we decided to do. With Block 10, we're still in discussions with the local community there as to moving forward, so we're not doing anything at this point in terms of actual activity on the ground.
The next question is from Jenny Xenos from Canaccord Genuity.
I have a quick question about your interest in Llanos-32. I see that you acquired some additional working interest in the block in October of last year. At the same time, though, I saw that you farmed out the drilling of the Zamuro exploration prospect, that interest, to GeoPark. So is that prospect just something that you're not interested in and you see potential elsewhere on the block or how should we think about it?
Yes. We've seen that prospect on the seismic a little while. Without having a high working interest, the size of the prospect and the chance of success for us to drill it at the higher working interest, we weren't that excited about it. Our partner is -- was in the opposite situation where they had a very low working interest. They liked the prospect a little bit better. And so we reached a transaction whereby basically they carry us and we end up with 47.5%, I think, in a success case. So it's kind of a win-win for both sides.
[Operator Instructions] There are no further questions registered. At this time, I would like to turn the meeting back over to Mr. Taylor.
Thank you, operator. I'd like to take this opportunity to thank you for your interest in Parex and your continued support of the company. For further information, we invite you to visit our website or call us. Thanks, again, and have a good day. Operator?
That concludes today's -- this morning's conference call and webcast. If you would like to replay the call, please visit the Events page on the company's website under Newsroom. Thank you and goodbye.