Baytex Energy Corp.

Thank you for standing by. This is the conference operator. Welcome to the BATEX Energy Corp first quarter 2023 financial and operating results conference call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Brian Echter, Vice President, Capital Markets. Please go ahead.

Thank you, Ariel. Good morning, ladies and gentlemen, and thank you for joining us to discuss our first quarter 2023 financial and operating results. Today, I am joined by Eric Greger, our President and Chief Executive Officer, Chad Kalmacaw, our Chief Financial Officer, and Chad Lundberg, our Chief Operating and Sustainability Officer. 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 the advisories regarding forward-looking statements, oil and gas information, and non-GAAP financial and capital management measures in yesterday's press release. All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified And following our prepared remarks, we will be taking questions from the analysts. In addition, if you are listening in today via the webcast, you will have the opportunity to submit an online question, and we will do our best to answer all questions submitted. With that, I would now like to turn the call over to Eric.

Thanks, Brian. Good morning, everyone. I'd like to welcome all of you to our first quarter conference call. Before discussing our Q1 results, I want to provide a brief update on the Ranger acquisition, which is expected to close late in the second quarter. The transaction materially increases our Eagleford scale while building a quality operating capability in the premier Texas Gulf Coast basin. We believe the combined company will deliver a powerful combination of substantial free cash flow and increased shareholder returns on per share basis. Importantly, on a pro forma basis, we will be in a strong financial position that is supported by significant liquidity and a balanced note maturity profile. Since announcing the transaction on February 28th, we've achieved a number of key milestones. On April 10th, we filed our information circular and merger proxy statement for our annual and special meeting to be held virtually on May 15th, and these documents can be found on our website. We encourage all shareholders to vote in advance of the cutoff date of May 11. On April 12, we announced a proposed US $750 million private offering of senior unsecured notes due 2030. We subsequently upsized the offering to US $800 million on strong demand. Closing occurred on April 27, and the notes bear interest at a rate of 8.5% per annum. This was a key part of our financing strategy for the Ranger acquisition, and we are very pleased with the support we received from fixed income investors. Lastly, April 13th was the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, which satisfied one of the conditions of the merger. I'm also pleased to announce that TJ CEPAC will join Jeff Wojan as one of the two independent directors from Ranger, we intend to appoint to the Baytech's Board of Directors. Behind the scenes, we are working seamlessly with Ranger to ensure a smooth integration at closing and beyond. We remain committed to allocating capital efficiently to generate meaningful free cash flow. For Baytech standalone, excluding Ranger, our 2023 production guidance range is unchanged at 86,000 to 89,000 BOE per day. with budgeted exploration and development expenditures of $575 million to $650 million. Based on the forward strip for 2023 for BATEC standalone, we expect to generate approximately $115 million of free cash flow in Q2 2023 and approximately $325 million of free cash flow for the full year 2023. Following closing of the merger, we will provide revised guidance for 2023. I'll now shift to our Q1 results, where we continued to deliver on our operating and financial targets, which included strong results from our Peavine Clearwater development. Production during the first quarter averaged approximately 86,800 VOE per day, which was up 7% from Q1-22. We delivered adjusted funds flow of $237 million of $0.43 per basic share and net income of $51 million, or $0.09 per basic share. Exploration and development expenditures totaled $234 million. In Q1 2023, 38% of our budgeted full-year expenditures, and we participated in the drilling of 118 gross, 96.6 net wells. Our 2023 exploration and development program is heavily weighted to the first quarter, which is expected to drive strong free cash flow generation over the balance of the year. Operationally, the highlight continues to be our clear water development. We generated production of just under 12,000 barrels per day in Q123. The first 12 wells from our 2023 drilling program at Peavine generated an average 30-day initial production rate of 661 barrels per well. barrel per well per day. In the Pembina Duvernay, we drilled four wells of a planned six-well program. The remaining two wells will be drilled during the second quarter. Completion activities for the two three-well pads will commence late in the second quarter. This is an early-stage, high-net-back, light oil resource play. I now want to spend a couple of minutes discussing our shareholder return framework. In 2022, we made a commitment to return 25% of free cash flow to shareholders through a share buyback program. We executed on this program in 2022, repurchasing 4.3% of our shares outstanding. Upon closing of the merger, we intend to increase direct shareholder returns to 50% of free cash flow generated by the combined company, allowing us to increase the value of our share buyback program and introduce a dividend. Our share buyback program was placed on hold at the beginning of the year due to the pending merger, but will recommence following closing. To meet our shareholder return commitment, we intend to include 25% of the free cash flow generated from January 1, 2023 until closing in our 2023 share buyback program. Our existing normal course issuer bid is set to expire on May 8, 2023, following closing of the merger We intend to file an updated NCIB application with the TSX for a share buyback program representing approximately 10% of our public flow. In addition, we will recommend that Batex pay a quarterly dividend of 2.25 cents per share or 9 cents per share annualized. The initial dividend is expected to be paid in October 2023. To summarize, We delivered strong operating and financial results during the first quarter, consistent with our full-year plan. We are on track to deliver substantial free cash flow in 2023, and we are excited to progress the Ranger acquisition as we build an even stronger North American energy company with a high-quality, diversified, oil-weighted portfolio across the Western Canadian sedimentary basin and the Texas Gulf Coast. And now, operator, we are ready to open the call for questions.