MEG Energy Corp.

Good morning, my name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to the MEG Energy's 2024 Q3 Results Conference Goal. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the start button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the start button followed by the number two. Thank you. Mrs. Darlene Gates, CEO, you may now begin your conference.

Thank you, Kelvin. Good morning, everyone, and thank you for joining us to review MEG Energy's third quarter 2024 financial and operating results. With me on this call this morning are Ryan Kubik, our chief financial officer, Lyle Udebski, our senior vice president of legal and corporate development, and Eric Olson, our senior vice president of marketing. I'd like to remind our listeners that this call contains forward-looking information. Please refer to the advisories in our disclosure documents filed on CDAR and our website for more on these disclaimers. I'll keep my remarks brief today. If you'd like further detail on our third quarter results, please refer to yesterday's press release. Our team's unwavering focus on safety, operational excellence, and disciplined capital allocation has delivered another quarter of solid results. May's success comes from doing what we do best, maximizing value from our world-class Christina Lake asset while maintaining cost discipline and operational reliability. We achieved two important milestones this quarter, reaching our net debt target and announcing our inaugural quarterly dividend. Combined with our commitment to return 100% of free cash flow to shareholders, These actions demonstrate our focus on delivering enhanced shareholder returns. A continued focus on strengthening our safety culture was present throughout the third quarter as our team and contractor partners delivered safe, reliable, and predictable performance. The third quarter production averaged approximately 103,300 barrels per day and was delivered at a top tier steam to oil ratio of 2.36. We began steaming the second of our 2024 SeGD well pads, and the pad is scheduled for startup in December. Despite a one-month delay due to the July wildfire evacuation, we progressed from completion of drilling in June to first steam injection in September, which demonstrates the shorter cycle time of our new pad design. It also is reflective of the exceptional efforts and collaboration of our drilling, projects, commissioning, and operations teams. Operating expenses net of power revenue in the third quarter continued to be industry leading at $5.82 per barrel, which included non-energy operating costs of $5.18 per barrel. Low natural grass pricing and our cogeneration units continue to benefit our business with power sales revenue offsetting 62% of the energy operating costs. Capital investments for the quarter totaled $141 million directed towards field development activity as well as increasing investment in moderate capacity growth projects. We remain focused on delivering on our 2024 commitments. And while guidance remains unchanged, production is trending to the low end of the range due to the cold weather and wildfire impacts earlier this year. Third quarter revenue reflects the first full period of TMX operations providing reliable access to global markets and delivering on its promise of improved market diversification. The increased egress capacity provided by TMX has contributed to a meaningful reduction in WCS volatility with November differentials settling near U.S. $12 per barrel representing roughly U.S. $9 per barrel improvement over the same period last year. With relatively low inventories of heavy crude in North America and reliable egress pipeline operation, we expect differentials to remain narrow in line with our expected US 10 to 15 per barrel range. To date, we are pleased with TMX's performance and its fundamental improvement to Canadian heavy oil pricing. The project demonstrates Canada's commitment to responsible energy development helping meet global demand while driving economic growth. Our strong operational performance generated $362 million of adjusted funds flow in the quarter. After $141 million in capital expenditures, MEG generated $221 million of free cash flow, facilitating the repayment of our remaining 2027 notes and the repurchase of 4.1 million MEG shares returning 108 million to shareholders. Year-to-date share repurchases totaled over 11 million meg shares or 303 million. With our remaining notes now maturing in 2029, our strengthened balance sheet supports sustainable shareholder returns through the commodity cycle. The successful execution of our balance sheet strategy marks the beginning of an enhanced capital return framework for shareholders. As part of this framework, MAG's board of directors has declared our next quarterly dividend of 10 cents per share for payment on January 15, 2025. Moving to Pathways Alliance, this project continues to advance its proposed foundational carbon capture storage project. The alliance is working with federal and Alberta governments to obtain sufficient levels of fiscal support and the required regulatory approvals and certainty necessary to make this project a reality. This support is needed to de-risk the investments required to build a competitive clean economy and help meet Canada's climate goals. As I bring my remarks to a close, I want to recognize everyone on the MEC team for their continued commitment to safe, reliable, and predictable operations. This quarter, our team demonstrated clear focus on our operational priorities, which ensure the safety of our people, the safety of our communities, and the performance of our business. With strong operating performance and financial strength, Meg is well positioned to continue delivering long-term value to our shareholders. We look forward to sharing more details about our multi-year plan when we release our budget. On behalf of Meg's board of directors and our management team, I want to thank you for your continued support. With that, I'll turn it back over to Kelvin to begin the Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star button followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star button followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Greg Pardue, RBC Capital Markets. Please go ahead.