Cavvy Energy Ltd.

Good day, ladies and gentlemen, and welcome to the CABI Energy Q4 and full year 2025 Financial Results Conference Call. Please be advised, today's proceedings are being recorded. Following the presentation, we'll conduct a question and answer session. If you have a question you are viewing on the webcast, please use the Ask a Question button in the top right-hand corner and type your question in at any time during the presentation. If you are participating via telephone and would like to ask a question, please dial star 1 1 at any time. You will then be in the question You will then be in the queue for question and answer session at the end of the call. I would like to turn the meeting over to Mr. Dallas McConnell, Vice President of Corporate Finance. Please go ahead, Mr. McConnell.

Thanks, Kevin, and good morning. I would like to welcome everyone to CAVI's fourth quarter and full year 2025 conference call. With me today are President and Chief Executive Officer Darcy Redding, Chief Financial Officer Adam Gray, Chief Operating Officer, John Emery, and Chief Commercial Officer, Paul Kunkel. Darcy and Adam will begin today with a review of our operating and financial results and certain other company developments. Following their prepared remarks, we will turn the call over to the conference coordinator for your questions. Before Darcy begins, I would like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by CAVI with Canadian securities regulators on cdarplus.ca. With that, I will now turn the call over to President and CEO, Darcy Redding, who will provide more detail on our performance along with recent developments.

Thank you, Dallas, and thank you to all for your participation today and for any questions you may have at the end of this session. We're extremely pleased with our fourth quarter and full year 2025 results. Our commitment to our long-term business strategy is key to our corporate performance, and 2025 was a milestone year for CAVI. In 2025, we continued with our focus on the runtime reliability of our gas processing facilities, third-party processing revenue growth, cost structure reduction and operational excellence, and debt reduction. Our strong conviction to optimize assets and continuously improve cash flow and business performance delivered solid quarterly and annual 2025 outcomes. Additionally, we reached the end of the fixed price sulfur sales arrangement on December 31st of last year. This fixed pricing contract, applicable to the majority of our sulfur production, was in place since the Southern Foothills assets were purchased from Shell in 2019. The arrangement often limited our sulfur sales revenue to below market values, particularly in 2025 as we witnessed a significant and steady increase in the price of sulfur sold at Vancouver. We continue to see strong Vancouver sulfur pricing so far through the first quarter of 2026, generating tailwinds to our cash flow expectations this year. Adam and I will elaborate further on these matters over the next few minutes of the quarterly call. However, before we step into those details, I'd like to refresh the compelling reasons to invest in CAVI Energy. CAVI's low base production decline of approximately 6% annually is amongst the lowest of all Western Canadian producers. This means that only low capital investment is required to offset this natural decline. And conversely, production growth can be achieved with modest capital investment versus peers. Nearly 9,000 BOEs per day of dry gas production that is tied into a non-owned third-party facility remains voluntarily shut in due to the weakness in eco-natural gas price through last year and now into 2026. Most of this shut-in production is contractually dedicated to the third-party facility through 2027, after which time CAVI will be able to process the well production at the facility of our choice. I also note that approximately 300 metric tons per day of sulfur production is associated with this shut-in gas, which can help offset stubbornly low natural gas prices. The company's production capability, including shut-in volumes, is approximately 33,000 BOE per day, and our identified drilling inventory provides organic growth potential to achieve corporate volumes in excess of 50,000 BOE per day. We have materially grown our annual revenue stream from processing the third-party production at our owned and operated infrastructure. In fact, we corporately processed more than 136 million cubic feet per day in the fourth quarter of 2025. a key reason the company generated nearly $40 million of revenue from our midstream services in 2025. We expect continued growth in this revenue stream in 2026 and beyond as we strive to fill the remaining unutilized capacity of our gas processing facilities. And, as I mentioned a moment ago, our significant sulfur production, which is derived from the removal of hydrogen sulfide from our raw gas processing done at our facilities, has opened up an exciting and larger revenue stream for the company in 2026. We believe the potential value of this revenue stream is underappreciated and creates a very compelling investment opportunity on its own, with our guidance sulfur production expecting to deliver approximately 25% of our revenue stream in 2026. These attributes, along with our guidance to deliver $40 million to $50 million of debt reduction in 2026, creates an extremely compelling investment opportunity. Later in the call, Adam will provide additional detail on our per share net asset value that also strongly supports this. My case that CAVI represents an undervalued and attractive investment opportunity can be summarized by capturing the primary share price catalysts on this slide that I've already mentioned. In addition, CAVI is extremely well positioned to capture new business opportunities related to power generation and data center partnerships due to our significant natural gas production. Power generation from natural gas combustion remains the simplest, quickest, and most cost-effective means for generating power, which is the most important feedstock for data center development. In fact, CAVI's suitability for data center partnerships is even further enhanced because of the proximity and access of our facilities to power grids, fiber optic networks, existing water use permits, paved road and rail access, and to the City of Calgary and its international airport. I'd like to now focus on the highlighted accomplishments of the fourth quarter and full year 2025. We generated net operating income of nearly $21 million in the quarter and just over $110 million for the full year. AECO natural gas seasonal price strength did not materialize in the fourth quarter as anticipated, and particularly after most of 2025 experienced near unprecedented sustained lows, this was very disappointing. Fortunately, our strong commodity hedges resulted in realized hedging gains of nearly $13 million and $80 million in Q4 and for the full year, respectively. Our 23,000 BOE per day of fourth quarter production and almost 24,000 BOE per day of annual production was in line with our 2025 guidance and consisted of 80% natural gas and 20% natural gas liquids. This is a slightly higher liquid weighting than the 15% contribution that is typical when all of our shut-in dry gas production is online. Notable for 2025, but even more notable as we look forward to 2026, the company produced almost 1,100 metric tons per day of sulfur in 2025, despite approximately 300 metric tons per day of unrealized sulfur production associated with the shut-in dry gas previously mentioned. Of note, both hydrocarbon and sulfur production were slightly lower in the fourth quarter as compared to the full year, due primarily to the two and a half week planned outage at the Waterton Gas Processing Facility in October. This outage was a proactive decision to incur maintenance downtime in Q4 2025 when AECO gas pricing was weak and sulfur contract prices were low. Cash flow impact was thus minimized rather than if the downtime was deferred to early 2026 when much higher sulfur prices and cash flow impacts were anticipated. Net debt was reduced by $27 million in 2025, continuing a long-term trend of debt reduction that has totaled over $100 million since 2022. Adam will speak to our successful track record of debt retirement over the past couple of years in a few minutes. Subsequent to year end, an additional US dollar $27 million or approximately $37 million in Canadian funds of debt repayment was made year to date in 2026. This was done with cash realizations from the prepayment for a portion of our 2026 sulfur sales per the terms of our 2026 Sulphur Pricing Agreement. Additionally, $3.5 million of funds received from the March exercise of approximately 5.1 million warrants that were due to expire at the end of the month were used to supplement the debt repayment. I'll speak more about our 2026 Sulphur Pricing Agreement in a few moments and Adam will provide additional commentary on our debt management so I'd like to highlight a few details on the growth of our third-party processing business. Revenue derived from third-party processing and other services provided by CAVI will continue to be an important contributor to the company's long-term success. This revenue stream helps provide diversification away from relying solely on hydrocarbon sales revenue, since the fee revenue from these midstream services is largely independent of commodity price and is sourced from reliable counterparties. The chart in the upper left of this slide shows the steady growth in quarterly revenue generated from our customer-facing business, climbing to approximately $11 million in Q4 2025 and representing a compound annual growth rate of approximately 40% over the past two years. The chart in the lower right of this slide shows that approximately 65% of corporate third-party processing volumes were handled at our Caroline gas facility in the fourth quarter, with our Jumping Pound facility accommodating another one-third. Our Waterton gas processing facility primarily processes CAVI gas at this time. A quick look at the chart in the upper right of this slide shows the same third-party volumes represented by the lowermost blue segment of the bar. CAVI-owned volumes are depicted by the brown-colored segment, which show a slightly lower volume corporately in the fourth quarter as a result of the previously mentioned Waterton maintenance downtime. In aggregate, CAVI's three core operated gas processing facilities have raw gas processing capacity of approximately 420 million cubic feet per day. CAVI typically utilizes nearly 50% of this available capacity, while third-party volumes utilize another one-third. Filling the remaining 15% to 20% of currently available capacity remains a focus for CAVI as we consider investment in our own drilling inventory and strive to continuously grow our midstream business. I'd like to also note that CAVI has evaluated several de-bottlenecking and expansion opportunities for our highest utilized facility, Caroline, since we anticipate filling it through growth in raw gas feedstock. These opportunities will require capital investments with the magnitude of capital being dependent on the scale of the de-bottlenecking or expansion. We intend to secure appropriate volume and fee-based revenue commitments prior to investing in any type of capacity expansion, and the company's objectives will continue to focus on generating attractive returns on any capital deployed to enhance the facility's gas handling capabilities. As we first communicated in the third quarter 2025 earnings call back in November, CAVI entered into a forward sulfur pricing agreement for a one-year term beginning January 1, 2026. Calendar year 2025 witnessed a steady increase in the Vancouver sulfur price, which was virtually unprecedented, except for a sharp increase in price as a result of Russia's invasion of Ukraine in 2022. This price spike was followed by a remarkable and near instant drop back to breakeven pricing that materialized prior to the end of 2022. This 2022 event is shown with the yellow curve in the chart located in the lower right-hand side of this slide, which also shows the past 15 years of Vancouver sulfur price history, which has averaged about $150 per metric ton over that time. CAVI's original pricing arrangement, which was in place since 2019, expired at the end of 2025, providing much improved sulfur price exposure beginning in 26. The 26 pricing is based on a combination of the agreement that applies to two-thirds of our sulfur production and exposure to open Vancouver pricing on the remaining one-third. The Vancouver sulfur price has remained at or near $500 per metric ton into the first quarter of 2026, and recent geopolitical events in the Middle East are expected to support strong sulfur prices for the foreseeable future. We are currently exploring opportunities for sulfur price certainty for a portion of our sales in calendar years 2027 and 2028, and are optimistic that recent world events may generate favorable pricing conditions for these time periods. One point worth noting as it relates to CAVI's sulfur price exposure. Our benchmark is FOB Vancouver pricing. CAVI retains the costs incurred to handle and ship the sulfur product to Vancouver as stipulated in the 2022 agreement that governs this benchmark price. These terms apply through 2028 with an additional one year extension if the purchaser meets certain conditions. Finally, on this slide, we have updated the pricing matrix as compared to previous versions you may have seen in our previous corporate presentations. The matrix has been extended to capture higher Vancouver sulfur prices up to $525 per metric ton. This matrix, located in the lower left of this slide, shows the net after royalty sulfur sales revenue derived for the calendar year including the terms of our arrangement, at various combinations of sulfur production and Vancouver price. Illustratively, at CAVI sulfur production guidance of 1,000 to 1,150 metric tons per day, and at an average Vancouver price of $450 per metric ton, CAVI will generate approximately $100 million in net revenue from sulfur production. representing approximately 30% of the company's revenue stream. Turning now to our year-end 2025 reserves, which were independently evaluated by Deloitte, we realized a year-over-year increase in our total proved plus probable or 2P reserves of 7% to 261 million barrels of oil equivalent. Waterton is our largest reserve region with 42% of the corporate reserves assignment. The net present value of our 2P reserves at a 10% discount increased 20% year over year to $1.5 billion based on January 1st, 2026 consensus pricing. This data is displayed in more detail along the left-hand side of the current slide. As I mentioned earlier in this call, our approved developed producing or PDP production decline based on this evaluation is approximately 6% among the lowest of all natural gas producers in Canada. This extremely low decline and our large reserve base means our 2P reserve life index is nearly 26 years. These are clearly long life reserves with material development upside potential. Using our year-end independent reserve evaluation as the basis, I would like to now draw your attention to our net asset value calculations, obviously referred to as NAV on this slide. All of this information is shown in detail on the table in the middle of the slide. Given our NAV calculations incorporate the impacts of our debt and hedge positions, which Adam will be speaking to in more detail, this is a good time to turn the floor over to him. Adam will provide additional commentary on our NAV and on our operating and financial results.