Advantage Energy Ltd.

Good morning, ladies and gentlemen, and welcome to Advantage Energy Limited's June 1, 2026 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Friday, May 1, 2026. And I would like to turn the conference over to Brian Bagnum, Vice President of Please go ahead, sir.

Thank you, Sylvie, and welcome everybody to today's conference call to discuss Advantage's first quarter 2026 results. Before we begin, I'd like to remind listeners that our remarks today will include forward-looking information and references to specified financial measures. Advisories on these items are contained in our news release, MD&A, and annual information form, which are available on our website and on CDAR. I'll also note that we posted an updated corporate presentation on our website. I'm here today with Mike Bilenki, President and CEO of Advantage, Craig Blackwood, our CFO, and the other members of our executive team. We'll start today by speaking to some of our financial and operational highlights. Once Mike is finished speaking, we'll pass it back to the operator for questions. And as usual, I'd like to ask that if you have any detailed modeling questions that you follow up with us individually after the call. And with that, I'll turn the call over to Mike Belenke.

Thank you, Brian, and thanks, everyone, for joining us today. It's my pleasure to discuss our results from the first quarter of 2026, and the year is off to a great start. The damage generated to adjusted funds flow of $121 million, or 73 cents per share. It was a highly active quarter with capital spending of $136 million, which is almost 50% of our full-year capital budget just in the one quarter. We offset a portion of our spending by selling an unutilized infrastructure asset, or $12 million, plus assets in kind worth an additional $7 million. And this helped us keep debt levels relatively flat at $556 million. Production averaged 81,375 BUEs per day in the quarter, which was a 2% increase from the fourth quarter of 2025. And liquid continued to play an increasingly important role in our business. generating 44% of total sales revenue during the quarter, at an average realized price of $84 per barrel. So even in a quarter with weak gas prices and an intensive spending profile, the business continues to generate strong cash flows. We drilled 12 gross wells in Glacier and Valhalla, and 13 gross wells were recently brought on production. Our oil-weighted Charlie Lake asset continues to exceed expectations, with five wells brought on production in the first quarter. We're forecasting the asset will deliver over $120 million of free cash flow this year, reinforcing the benefits of diversification. Meanwhile, our recent wells in Valhalla, Maunee, delivered strong initial rates and well and condensate ratios exceeded 185 barrels per million cubic feet, which is in line with the greater Wembley play, though this is early data, and we will be keeping an eye on the decline profiles. Most significantly during the quarter, construction of our new 75 million cubic foot per day Progress gas plant reached mechanical completion and commissioning is now underway. The Progress gas plant is perfectly located at the intersection of three of our liquids-rich plays, the Valhalla Maunee, the Progress Maunee, and the Cherry Lake. Not only will this plant drive the next phase of growth for advantage and help reduce operating costs, But it's also a realization of a regional development strategy we've been pursuing for the last 15 years. The last pieces of the puzzle have now fallen into place, with Glacier Valhalla progress and the overlapping Charter Lake assets all the way up to Gordondale now forming one massive contiguous resource block with a network of owned and operated strategic infrastructure. This is a significant milestone for us, and I'd like to take a moment to thank our team, for their hard work finishing this important project on time and on budget. With spending on progress behind us, we're entering a period of highly efficient capital development with escalating free cash flow. We don't plan to spend any capital on capacity expansions for at least two years, with almost all spending aimed at high rate of return wells into existing infrastructure. We have less than $100 million of capital planned in the second half of 2026. This has brought us to an important inflection point in our capital efficiency and free cash flow profile. Beginning in the third quarter of 2026, we expect production to average approximately 90,000 BUs per day, and it should stay there through to the end of 2027 and beyond. And that will deliver production growth in 2027 of about 7% over 2026. Now looking forward, Our corporate strategy remains the same, to maximize cash flow per share without compromising our balance sheet. This means a laser-like focus on picking the highest rate of return wells with every penny of discretionary capital. Naturally, our liquids place at superior returns right now, with ACO hovering around $1 per GJ and WTI at $100. This is a historical disconnect. At these prices, we expect our forecasted oil and NGL volumes to average approximately $100 Canadian dollars per barrel, and account for 58% of sales between the second and fourth quarters of 2026. We're reallocating approximately $25 million of capital this year from Glacier gas targets, which at Strip would be expected to have payouts of about a year and a half, to Wembley oil targets, which are expected to have payouts of about eight months. Our Charlie Lake wells currently have payouts of about six months. Although the BOE volumes for oily wells are typically lower than gassy wells, and when I say that, I'm speaking about the IP30s and so on, the impact of shifting to oily wells in our 2026 program will be minor on our total production forecast. So there is no need to adjust our 2026 production guides. Depending on how long oil prices remain strong, we may shift additional capital the liquids drilling later this year. Debt reduction remains a top priority. We expect to achieve our net debt target range of about $400 to $500 million during the second half of 2026, with cash flows supported by our hedging program and market diversification, even if natural gas pricing remains weak. Given our proximity to that target, it manages opportunistically allocating a portion of free cash flow to share buybacks through the second quarter and into the summer. That approach is consistent with our long-standing capital allocation framework, especially given our current trading dynamics, with Canadian gas producers trading at a significant discount to the greater market and advantage at a discount within that group. We have hedged approximately 41% of our forecasted natural gas production in 2026, as well as 29% of our production in 2027 and 18% in 2028. As a result of our hedging and downstream market diversification, our acre exposure has now fallen to approximately 18% for the remainder of 2026. We have also hedged approximately 42% of our crude and NGL production this year and 26% in 2027. These steps have been important to reduce the volatility of our cash flows by reducing exposure to localized pricing weakness. As we look a little further into the future, we expect to continue our 5% to 10% annual production growth for the foreseeable future, although this growth is always carefully tuned to suit the commodity price outlook. We have owned and operated a gas capacity that exceeds 500 million cubic feet per day, plus the midstream service, and this is adequate for us to grow our production to 100,000 BUs per day without any major infrastructure expansions. Depending on commodity pricing, we could be approaching this 100,000 BV per day milestone as early as year-end 2028. And there's one more thing. We also have an additional 100 million cubic feet per day of capacity ready to be reactivated at Conroy in British Columbia when market conditions are supportive for us to enter the province. I also want to briefly touch on entropy. Construction of the Glacier CCS Space 2 project is almost complete and commissioning is expected to begin in the coming months. This project is intended to substantially decarbonize the Glacier facility and drive a positive step change in operating income, which comes from contracted power sales and contractually guaranteed carbon pressing. All funding for the project is being provided by Brookfield and the Kennedy Growth Fund. Overall, our message today is straightforward. The first quarter, like the business that continues to perform well through the commodity price cycle, while approaching a major step change in capital efficiency. We are bringing the progress of gas plants into service, improving our commodity exposure through hedging and market diversification, and moving towards a period of strong and free cash flow, driving debt reduction and ramping share buybacks. So with that, I'd like to thank our employees, our board, and our shareholders for their continued support. And I'll pass it back to Brian for questions.

Thank you, Mike. Sylvie, we'll pass it over to you to see if there are any questions from the phone line. Thank you.

Thank you, sir. Ladies and gentlemen, if you do have any questions from the phone, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. And currently, sir, it appears we have no questions registered from the phone line.

Thank you, Sylvie, and thank you, everybody, for joining the call today. If you have any questions, please feel free to follow up with us after the call. Thank you very much.

Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have yourselves a good weekend.