Good afternoon, ladies and gentlemen. My name is Neil Roszell. I'm the chairman of Baytex Energy Corp. I would like to welcome everyone here today and those who are listening on the webcast to the two thousand and nineteen Annual and Special Meeting of the Shareholders of Baytex. Joining me at the front today is Ed LaFehr, our President and Chief Executive Officer, and James MacLean, our General Counsel and Corporate Secretary. Our meeting today will be comprised of three parts. First, we will attend to the formal portion of business of the meeting. Second, Ed will provide you with an update on Baytex's activities, and third, we will open the floor to questions. Before proceeding with the business of the meeting, I would like to introduce the directors and officers of Baytex that are in attendance with us today. Please stand when your name is called.
Mark Bly, Trudy Curran, Naveen Dargan, Greg Melchin, Kevin Olson, and David Pearce, along with Ed LaFehr and myself, who you've already been introduced to. I would like to now introduce the other members of the management team at Baytex. Please stand when your name is called. Rod Gray, Jason Jaskula, Brian Ector, Kendall Arthur, John Grimwood, Chad Kalmykov, Scott Lovett, Chad Lundberg, and Scott Rideout. The meeting will now come to order. I will act as chairman of the meeting. James MacLean will act as our secretary, and representatives of Computershare Trust Company of Canada will act as the scrutineers. To ensure that the meeting covers all of the business for which it is convened within a reasonable period of time, we have prearranged with certain employees to move and second certain motions.
For each item of business placed before the meeting today, an opportunity will be provided to raise any question you may have. If you have a question, please raise your hand and a microphone will be brought to you so everyone can hear your question. I have received a confirmation from Computershare Trust Company of Canada as to the due mailing of the meeting materials to shareholders. This confirmation will be kept with the minutes of this meeting. Quorum and scrutineers report. Business may be transacted at this meeting if two or more persons are present, holding or representing by proxy, not less than 25% of the shares entitled to vote at the meeting. The scrutineers' report has been received, and it shows that there is a quorum of shareholders present at the meeting.
I declare that there is a quorum present at the meeting, is regularly called and properly constituted for the transaction of business. We will conduct each vote by way of a ballot other than termination of the meeting. I understand that the scrutineers have collected all the ballots. If you still have a ballot, please provide it to the scrutineers now. Particulars of the votes cast on all matters may be obtained from the secretary after the meeting. The first item of business is a presentation of the audited financial statements for the year ended December thirty-first, two thousand and eighteen. There are extra copies of the financial statements available upon request. If any shareholder has a question about the financial statements, please ask it during question and answer session following the presentation. Next item of business is the election of directors.
In accordance with Baytex's advanced notice bylaw, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in Baytex's information circular. Therefore, as directed by the board and in accordance with the information circular, Mark Bly, Trudy Curran, Naveen Dargan, Ed LaFehr, Greg Melchin, Kevin Olson, David Pearce, and Neil Roszell are nominated for election as directors of Baytex Energy Corp to hold office until the next annual election of directors or until their successors are elected or appointed, subject to the provisions of the Alberta Business Corporations Act and the bylaws of Baytex. Is there any discussion or questions from any registered shareholder or proxyholder? I've been advised by the scrutineers that those nominated have been duly elected directors of Baytex Energy Corp. The next item of business is the appointment of auditors. May I please have a motion?
I move that KPMG LLP, Chartered Professional Accountants of Calgary, Alberta, be appointed auditors of Baytex until the next annual meeting of shareholders, or until their successor is appointed, and that their remuneration be fixed by the board of directors.
Thank you, Greg. Is there a seconder for the motion?
I second the motion.
Thank you, Jennifer. Is there any discussion on the motion? I'm advised by the scrutineers that the motion has been approved. Next item of business is the advisory vote on executive compensation. The board of directors considers this to be a very important part of the ongoing process of engagement between the shareholders and the board. May I please have a motion?
Mr. Chairman, I move that the non-binding advisory resolution concerning Baytex's approach to executive compensation, as set forth in Baytex's information circular, be approved.
Thank you, Brody. Is there a seconder for the motion?
I second the motion.
Thank you, Mark. Is there a discussion? Any discussion on the motion? I've been advised by the scrutineers that the resolution has been approved by more than the requisite majority. Accordingly, I declare the motion carried. Next item of business is to consider an ordinary resolution to approve the unallocated awards under the Share Award Incentive Plan. May I please have a motion?
Mr. Chairman, I move that the ordinary resolution to approve the unallocated awards under Baytex's Share Award Incentive Plan, as set out in Baytex's information circular, be approved.
Thank you, Brad. Is there a seconder for the motion?
I second the motion.
Thank you, Brianne. Is there any discussion on this motion? I have been advised by the scrutineers that the resolution has been approved by more than the requisite majority. Accordingly, I declare the motion carried. Unless there are any questions from the floor, the chair would entertain a motion that the formal portion of this meeting be terminated.
This meeting be terminated.
Thank you, Ryan. Is there a seconder for the motion?
I second the motion.
Thank you, Kyle. Is there any discussion on the motion? Hearing none, would all those in favor signify by raising their right hand? Contrary, if any? I declare the motion carried. I will now call upon Mr. Ed LaFehr to provide you with an update on Baytex's activities.
Thank you, Mr. Chairman, and welcome to everyone to our annual and special meeting today. This is a pretty exciting time. It's a challenging time, and I wanna walk through what the Baytex plan is this year, how we're performing, and some of the changes that have been made over the last year. I think it's pretty exciting. Welcome, first of all, to our board of directors. Secondly, to all employees in the room who are also large shareholders in the stake of this company. And thirdly, and importantly for this meeting, our shareholders who have come and traveled in to see us today, and also all of those on the webcast, both employees and shareholders.
So I'll start with the first slide here, which, after I touch on the advisory statement around forward-looking statements that we do make as a company, and oil and gas information pertinent to the presentation, I'll start with the macro picture. That's part of the frustration. It's also part of the huge opportunity that underlies all of what we're doing in Baytex in North America. So I'm gonna start with the macro first before I get into the 2019 plan, our Q1 results, which have just been announced about a half an hour ago, and walk through a bit of the future. So the first point is, global demand, for avoidance of doubt, is as strong as it's ever been for petroleum products. This is liquids petroleum products here.
So as you can see, we've crossed over 100 million barrels per day of usage around the world of liquid petroleum products. Yes, it's a jagged curve. There's seasonality every year, but we're growing at 1% per year, greater than 1% per year, and have been for decades. And that's a linear trend if I ever saw one. It's going to continue. Our products are needed. The people who can produce them environmentally, responsibly, safely, ethically, and support the rest of the world, and pulling people out of poverty around the world, is a critical and noble pursuit of everybody in this room and all of our field personnel. The second point is that the inventories are tightening around the world. They're tightening in the OECD world, where we can measure these sorts of things very well.
In North America, we're a little bit above the five-year average, in the rest of the world, OECD countries, a little bit below the five-year average. The point here is that global inventories of crude oil, when we're producing 100 million barrels a day, are tight, and the price, I don't believe, fully reflects it, and I'll talk a little bit about why here in a minute. The second point around the macro is there have been a couple of big negatives that have gone against the industry and against our particular company, and then a large number of positives, and then a whole bunch of stuff in the middle that I would call uncertainties.
But around the positive-- negatives that are driving poor sentiment in oil price are, number one, Permian volumes continue to grow at around one and a half million barrels per day and have continued on that red line now for three years running. So it's surprised people in terms of oil price to the downside. It's the only place in the world that's growing at this sort of rate. And the question is: How long can that continue? That's one negative. Another negative is, I think special interest groups primarily have taken over the narrative for the business. And on the positive, you'll see, and in this room, you'll see, that these -- the hoodies that people are wearing and the T-shirts that people are wearing are not just a fad that Baytex has created.
Oil and gas in Canada is some of the best, cleanest, most socially responsible, energy efficient, low cost, abundant resource we can find in the world. We should be boasting about that resource and talking to the rest of the world about utilizing more of the best resource in the world rather than less of it. So we've got all of these things going on. There were about 20 logos we could have put on the right-hand side of the page around a positive narrative that's trying to offset and overtake the negative narrative that's definitely caused a lot of the negative sentiment today. There are a whole lot of uncertainties facing us right now. The first one, I would say, is the Canadian federal election in October. So I would encourage everyone to be out there and supportive of whatever your beliefs are.
If your beliefs are aligned to our beliefs, this resource is necessary for the world, and we're one of the best in the business at delivering it... The second thing is, there are three pipelines that are in the queue to be built. If one or two of those pipelines are built, that's a very positive future. So we could see a couple of these things moving to the right. All we need is a couple of key catalysts moving to the right into this positive category, and the sentiment could turn and offset a lot of the negativity that's taken over the narrative, as I said. Crude by rail, I think, will ramp up. It had been running about 300,000 barrels a day in Western Canada.
It will ramp up again, and I believe it will go to 300-400 thousand barrels a day. That's another big positive catalyst, and then you can see the new government that's in place now, which is the first positive on the right-hand side of this chart, is now taking dead aim at stopping some of these bills that are very much anti our industry and are getting in the way of progress of something that we do really, really well. That's a positive, beneficial need for the rest of the world. A couple other things on the positive side. U.S. global demand has never been greater than it is today, as I mentioned. The Alberta provincial election, very positive. Government curtailment was needed. We had a government problem here. We advocated very strongly.
We needed to create a bridge until we did have pipeline egress out of the WCSB. And we've gotten that, we've secured that, and we believe the new administration will continue with that bridge. And then lastly, energy advocacy in Canada. Everybody in this room, including and especially myself and everybody on our board and in our staff, are advocating for this great industry that we're in. So with that, I'll move off of the macro, but I see more of the uncertainties potentially moving to the right than to the left, and we don't need everything in the middle to move to the right to have a very favorable future. So where are we today as Baytex? We're running about CAD 1.5 billion in market cap and CAD 2.2 billion in net debt on the top of the page.
Our intent as a company that I'm gonna talk about in a minute is to flip that. We're gonna be paying down debt and see that coming back into our market cap. So we'll, I'll address that in a moment, and our guidance for the year is now increased to 95-97 thousand barrels a day. So we've raised our production as of 30 minutes ago, when we hit the wire with our Q1 press release, by 1,000 barrels a day, so about 1%, and we're holding our capital tight to the midpoint at CAD 600 million. How is the company positioned, and how do we think about our priorities? The first part of this wheel is financial liquidity and the strength of the financial position of the company.
We're in a stronger position than many people give us credit or will look into in depth. We've got 50% of our revolver credit facilities undrawn. Our first long-term maturity is 2021, and we have a plan to reduce our debt, which I'll talk about. On the right-hand side of the wheel, we've been focused internally in the organization on our competitive cost structure and our capital efficiency. We're running an $11-a-barrel OpEx business and a $1.30 G&A. These are some of the best cash costs in an oil business, certainly in our peer group and globally. On capital efficiencies, we're running 16,000-17,000 dollars a flowing barrel. Very capital efficient, 10-year inventory, lots of running room in all of our core plays.
We're holding tight to our capital discipline around CAD 600 million. What is the shareholder proposition? It's down in the lower left-hand slide, part of the slide. First. Now for the. I could not have said this last year or the year before. We're a self-funded business model at $50 WTI. We're cash neutral at $50. Anything above $50 WTI, we're in positive cash flow territory, free cash flow, and holding the business flat at 95,000 barrels a day. That equates to about a 7% debt-adjusted production per share growth, and it's through paying down debt. The free cash flow yield on the company right now today is 22%, which is one of the largest in the peer group. It says one of two things.
One is you spin off a large amount of free cash flow, but the other is that your equity may be undervalued, which is the reason that number is so high. It would historically be a lot lower than that. So that's the proposition that gives us the vision and the ability to see our way to 10%-15% annual returns to shareholders. A bit of organic growth, think about 7%-9% organic growth and 7%-9% free cash yield. We're a light oil company now with a really compelling heavy oil component within it. So you can see on production or on operating cash flow, we're two-thirds to three-quarters light oil. With the bolt-on of Viking and Eagle Ford, those are two very strong netback, very high profitability and strong operating regions.
We're in the core of the core of those two plays. And then secondly, heavy oil. Heavy oil is very important to us. It's got a lot of operational torque, not just price torque, which I'll talk about in a moment. So what did we do in Q1? We just put out the press release 45 minutes ago. And we delivered in Q1, 101,000 barrels a day, exceeding our high end of guidance. Capital expenditures were tight, as I said, CAD 154 million on Q1, which is historically our biggest quarter. And that, by four times, is around our 600 at the midpoint. So we think we're targeted right at the midpoint, but a great start to the year on physical production volumes and our capital expenditures. Adjusted funds flow of CAD 221 million.
This is our largest quarter of adjusted funds flow since 2014. It's a big number. And Q1 wasn't all great. It was an average price of $55 WTI, with a January heavy oil differential that was quite high. Since that time, it's come in much better, and obviously, WTI was sitting up in the 60s. Today, it's probably 60, 61. But we're substantially higher in our pricing regime in Q2 than we were in Q1. And we reduced debt by $90 million. So our plan is starting now. It's not starting in fourth quarter, it's starting now in terms of real debt reduction, that will then give some line of sight to the larger institutional investors, seeing us as investable and wanting to be in Baytex again. The Eagle Ford underpinned this beat.
Forty thousand barrels a day, actually forty-one thousand barrels a day, strong performance, very active quarter of completions activity, driving the business. Canadian operations were as strong as we've ever seen. Heavy oil was twenty-nine thousand barrels a day, Viking, twenty-three thousand barrels a day, steady pace of activity. The teams did a phenomenal job of delivering on our capital programs, and our operating reliability was very high. Our uptime in the fields, very high. And we continue to advance the evaluation of the Duvernay. The East Shale play is really exciting to us. We've drilled five wells in the Pembina region of the East Duvernay. I'm gonna talk about that later. And we've just drilled another two this quarter, drilling our third today, and we believe, geologically, we're extending the play to the south, and this could have material consequences to...
Positive consequences to our future, and then we've also extended the maturity of our revolving credit facilities, roughly one year out to April 2021. So I'll go through this fairly quickly. Again, I talked about guidance, tight capital at CAD 600 million to the midpoint, delivering a little higher production than what we budgeted, around 96,000 barrels a day to the midpoint. Current forward strip would have us delivering in excess of CAD 300 million in cash flow, so free cash flow. So it's a 900-plus million dollar full-year estimate on our adjusted funds flow, which yields in excess of CAD 300 million in free cash flow. The Viking, as I said, running strong, 23,000 barrels a day, and on the full year, CAD 90 million of free cash flow.
Eagle Ford, running strong at 40,000 today, but an average of 37,000 on the year, delivering $240 million of free cash flow. Heavy oil, delivering $130 million of free cash flow on the year at 29,000 barrels a day. So heavy oil is a very important part of this business. And here's our latest estimate. As of a couple days ago, it moves around a little bit, but we budgeted around this number here, at $50 WTI. We budgeted that $585 million level at $50 WTI, $20 heavy differentials, and $10 MSW. So we budgeted at that level. We wanna keep our discipline around that level. Anything in excess of that, in terms of our cash flow, will move to pay down debt.
I can fairly confidently say, given our risk management profile and our hedge book, that we'll deliver in excess of CAD 900 million in cash flow this year, which is that CAD 300 million of excess free cash flow to serve the balance sheet. So what else, in terms of balance sheet? Where is that CAD 300 million of excess cash flow gonna be deployed? And you can see here, I just wanna, it's a busy slide, but I wanna focus on that middle chart to the right. We've got two bonds coming due in 2021. Both are callable at par today, and we do plan. Our intent definitely is to retire the $150 million U.S. bond later this summer.
As soon as we see cash flow come in in 2Q, and we get comfortable, we'll go ahead and take that bond out well early, and start that march down the debt reduction path. We'll have excess cash above and beyond taking out that bond, as I mentioned earlier. We'll have optionality around how to restructure the rest of the debt profile and whether to refinance some of these long-term notes and/or downsize and refinance. We're pretty excited about $60 WTI, and the differentials where we're at today work really well for this company. You can also see on the bottom right chart that I came in in 2016. Our CFO, Rod Gray, came in just ahead of me.
We're the guys with our new team that are taking the debt profile, that moved from a historical one times debt to cash flow at Baytex, moved to six times debt to cash flow. And we've already marched it down this year. Over the last couple of years, we've marched it down closer to that two and a half times debt to cash flow, and at the end of this year, we're planning to be two times debt to cash flow. We'll be almost within reach of our vision, which is one and a half times debt to cash flow. We're doing it very aggressively and very methodically as well. So that's the debt picture. The part of the reason we're confident we've got a lot of this volatility around WTI pricing, heavy oil differentials, but we've got a fantastic hedge book in place right now.
We have almost half of our WTI hedged at fixed swaps and also three ways. They're well in excess of the pricing we're seeing today. So we have a positive hedge book in place, without getting into all the details. We started to layer in some hedges in 2020. As you can see, we've got 15% of our volumes in 2020 now hedged at a decent number, and we'll continue to layer that in as we see peaks in WTI and the differentials. We're really excited to put more capital to work in our assets. We're not quite there this year, which is why we're running a sustaining, very disciplined capital, but we do have assets.
If you look at the price we're at today, roughly $60, on this chart, $60, and that, if you read the footnote there, roughly a $20 heavy oil differential. These economics are 50%-75%. If you move up towards $65, you can see heavy oil crossing over and being one of the best assets that we'd want to invest in. But nonetheless, we would have three core assets running between 50% and 100% rates of return in the kind of price levels we're seeing today. But we've got the brakes on. We're holding back. We're not investing for two reasons. One is we've got plenty of good pricing, we've got a good hedge book, but we need to see those uncertainties around egress out of the Western Canadian Sedimentary Basin.
We've got to see more tangible evidence of egress, and we've got to get our debt picture down just a little bit before we put the gas pedal down a little bit to drive growth. But we certainly have the potential, the quality, the economics, and the depth of inventory to go faster, to go harder for growth. It's just today is not the right time for it. Eagle Ford is running as well as it's ever run in its history, and it's been online for, you know, seven, eight years. Baytex has owned it now for four years, four-plus years. And in 2018, we saw the best well performance we have ever seen in that asset. After 2017 was the prior best year we had seen, even though we've been at this for some time.
We just delivered record volume at 41,000 barrels a day on a quarter in the Eagle Ford. I can't say enough good things about how that asset is performing and how we're doing. We're in the core of the core of what our JV partners is operating there. In the Viking, we have had a phenomenal business for a number of years. It built a company that we just merged with, and we're super excited that, we're in this play, and we're seeing underneath it now for the first time. These are some of the highest netbacks in all of Western Canada. Today, they're running about CAD 45-CAD 47 a barrel. Very high light oil operating netbacks. We're moving to extended reach horizontal wells.
85% of our drilling now is into ERH wells, so that's another differentiator, and we're starting to move into secondary recovery and have water flood underway in three or four areas in the field. So couldn't be more excited about what's happening here, holding it flat at 23,000 barrels a day on a whole lot less activity and less capital. Peace River, we've been running about 17,000 BOEs per day there. It's running exceptionally well, and we completely moved away from the asset in at the end of the fourth quarter because of the differential blowout.
By February, we were moving all that stored inventory, all those shut-in barrels, and three wells we didn't complete, big wells, a 900-barrel-a-day well, a 650-barrel-a-day well, and a 350-barrel-a-day well. We brought those on in March this year. We didn't bring them on for five months because of the volatility of the WCS differential. So, those are now online. We're railing out of this area now, 8,500 barrels a day. We just signed another contract yesterday for 1,000 barrels a day, and we've moved from 7,500 barrels a day to 8,500 barrels a day out of a rail terminal that sits right in the middle of our
Right in the middle of our, the heart of our lands, and it's very attractive, and we now have three grass points. We have a pipeline we own, we have trucking that we can pull to different points, and we have a rail terminal sitting right in our backyard. So we're seeing some pretty good netbacks in Q1 and Q2, and it's part of the reason we're generating the profitability and the heavy oil that we are so far this year. And likewise, in Lloydminster, I'd say the same thing. Fantastic, 12,000 BOE a day production, very strong netbacks, very light activity. So we will add a rig,
in Peace River and two rigs in Lloydminster in June, July, assuming the pricing and the differential is right for us, and we'll move forward a modest program in order to sustain those businesses, but very modest. We're not going anywhere near the full capacity we could on these assets. We're applying multilateral drilling now, and Lloyd is almost a regular way of doing business with fantastic results, and our SAGD production down at Kerrobert has ramped up to 2,500 barrels a day. So really exciting performance there. And then my last asset slide, second to last slide, I promise, is the East Shale play, particularly on the Pembina side. We have decided to hold back and not drill any further wells for the time being in the Ferrybank area and the Gilby area.
We've drilled five wells in the northern part of Pembina and averaged five hundred and seventy-five BOEs per day per well. So these were very good results, but all clustered in one township. So now what we've done is drilled two wells on the Southern Star, and we're drilling a third well today up in the other star, and we plan to de-risk the entire corridor of prospectivity from that northern set of successes that we've had all the way to the south, and tie that into some competitor trends here that we're seeing, where we'll have an oil-rich window all the way down the Leduc Reef trend, the edge of the Leduc Reef trend of the Duvernay Shale, and we'll break open a new play for ourselves. But we've got. We're gonna go slow here. There's no reason to go fast.
We're gonna hold our lands, we're gonna de-risk, we're gonna find out how big this thing is, and then if it's a five hundred well development, it's very different than if it's a hundred and seventy-five well development, which we already announced in fourth quarter. So some big, new breaking information coming in there over the next couple of quarters when we frack these wells. And then lastly, I'm gonna end with where I started. We take corporate responsibility to a whole new level, and this is not just new for Baytex. This is the sixth year that we've put out a corporate responsibility, social responsibility report. We measure environmental prudence in a number of different ways.
We measure it in spills and outputs, but we also measure it in reductions and have taken measurable steps to contain our gas in Peace River, to contain our odor management, where we're around landowners. We've gone through a major transformation over a six-year period in terms of gas conservation. And I think Saskatchewan is a little behind in terms of where Alberta is on the regulatory front, but you can see what we're doing. If anybody wants to come see Baytex, we're very transparent in our corporate social responsibility report on safety, environment, what we do with respect to communities and stakeholders, and what we do in respect to business compliance.
In fact, last year, around this time, we were one of the top three intermediate oil, one of the only three intermediate oil producers on the Globe and Mail Corporate Knights Sustainability Awards group. So we, you know, we're proud of that. We've won some awards, but we're not sitting on our laurels, and ESG is the way of the future. So, yes, we're in this for profitability and growth and shareholder returns, and we think one of the best ways to do this is to be a leader in environment, corporate social responsibility. So we're taking all aspects of governance and social responsibility very seriously. You get that in Western Canada. I've worked around the world in a number of places, and you don't get that in other places.
So, I'm really proud to be here, proud to be with Baytex. I'm really looking forward to working with my new board of directors, and thank you very much for coming to the AGM today, and I'll be happy to address any questions. Thank you very much. If there are no questions, Mr. Chairman, I think I'll turn it over to you to close the meeting. It is already closed, but the informal part. We'll go ahead and close the informal part. Thank you very much for coming over on a late afternoon. Really appreciate it.
Thanks, Ed. That was a great update. Thanks, everyone, for coming. We look forward to continued success, improved commodity prices, improved political environment that we're starting to witness and see. Hopefully, that continues. And we, as an executive and board of directors, are committed to continuing to do our utmost to create shareholder value. That's what we're all about, and teams here, and everyone's here to support you. Thank you very much.