Pieridae Energy Limited

Good day, ladies and gentlemen, and welcome to the Para Day Energy second quarter 2023 and year-end financial results conference call. Please be advised that today's conference is being recorded, and at this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If you have a question and you are viewing on webcast, please use the Ask a Question button in the top right-hand corner to type your question at any time during the presentation. If you are participating by telephone and would like to ask a question, please dial star 11 at any time. You will then be in the queue for the question and answer session at the end of the call. I would now like to turn the meeting over to Mr. Dallas McConnell, Vice President, Corporate Finance, Please go ahead, Mr. McConnell.

Thanks very much, Michelle, and good morning, everyone. I would like to welcome everyone to Paraday's second quarter 2023 conference call. With me today are President and Chief Operating Officer, Darcy Redding, and Chief Financial Officer, Adam Gray. 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 Paraday with Canadian securities regulators on cdarplus.ca. With that, I will now turn the call over to our President and COO, Darcy Redding, who will provide more detail on our performance last quarter and other corporate developments.

Thank you, Dallas. We are extremely excited to speak today about our second quarter results and accomplishments, where we successfully achieved one of the more significant milestones in the execution of our strategic plans. In mid-June, the company closed a $150 million U.S. dollar refinancing of long-term debt, materially reducing the cost of capital, while providing additional liquidity via a revolving credit facility and a delayed draw term loan. Adam will be providing additional commentary on this refinancing in a few minutes, while further detail can also be found in our second quarter MD&A. I would also refer you to our original news release of June 15th, which provides ample information on the terms of this exciting new financing. Our second quarter financials were bolstered by our strong commodity hedge position, realizing a hedging gain of nearly $14 million, while successfully mitigating general pricing volatility and continued tepid ACO natural gas pricing that our unhedged portion of production was exposed to. Notably, approximately 60% of our total production was unhedged in the quarter. Pear Day continues to view hedging as an important risk management tool to support our strategy, while also satisfying the requirements of our new senior loan facility. We also benefited from a one-time Alberta Crown royalty rebate that materialized in the second quarter. This was the result of a favorable gas cost allowance adjustment for the 2022 calendar year and the related overpayment of 2022 Crown royalties. While pleased with our second quarter financial results, we experienced production interruptions that negatively impacted our quarterly volumes by over 6,300 BOE per day, correlating to a nearly $12 million impact to net operating income. Approximately 75% of this production impact resulted from unscheduled outages of approximately five weeks at each of our Jumping Pound and Caroline gas plants in April and June, respectively. The remaining 25% of this production impact is resulting from the wildfire situation in Alberta and Northeast British Columbia, with the BC wildfires continuing to impact our operations. I will have some additional commentary on these items in a few moments. Moving to our second quarter operating results, our production volumes were just over 31,000 BOE per day, but as I mentioned, we experienced over 6,300 BOE per day impact due to unscheduled gas plant outages and wildfire impacts. Both the Jumping Pound and Caroline plant outages were initiated as a result of corrosion-related failures of heat exchanger tubes within the sulfur recovery facilities. Although these failures do not present material risks to human health, safety, or the environment, the operational reliability of the process was affected, and in each case, this necessitated a shutdown to complete the required repairs to ensure long-term operational reliability. Of note, there was a silver lining to our Caroline gas plant outage as an opportunity was presented for the company to conduct critical equipment servicing and maintenance during the outage for a nominal additional cost. By doing so, the full maintenance turnaround originally scheduled for the Caroline plant in 2024 has been successfully deferred for an additional year until 2025 without detrimental impact to operational reliability or safety risk. We see this as an opportunistic initiative and an excellent example of the innovative culture we continue to foster at Pear Day. and we thank our field leaders and field staff for continuing to innovate and deliver enhancements that are materially improving our operating cost structure and reliability. On a last note related to our production, after an unscheduled outage in early July at a non-operated gas processing facility in West Central Alberta, significant outages were resolved by the second week of July. Since then, production has largely been restored to pre-outage volumes, averaging approximately 35,500 BOE per day since then, and currently our production is approximately 37,000 BOE per day. We have ongoing production outages of approximately 1,700 BOE per day, with just over half of that caused by the ongoing impact of wildfires near our Equan property in northeast B.C. The remainder is a result of a voluntary temporary shut-in of high variable cost production in West Central Alberta. We expect these Alberta volumes to remain voluntarily shut-in until ACO natural gas prices are sustained at greater than $3 per MCF. Our second quarter operating expense totaled $49 million, or just over $17 per BOE. As a result of most of our operating costs at our operated processing facilities being fixed, the previously mentioned second quarter volume outages tend to increase our per barrel operating expense. We anticipate and look forward to reporting operational results in the third quarter that we are optimistic will be more representative of better runtime and less volatile operating conditions. For those of you accessing our slide deck through the webcast this morning, I'd like to draw your attention to the operating expense trend chart in the top right hand corner of this slide. I'd like to point out that our reported operating expense excludes both third party income and sulfur sales revenue. These revenue streams are made possible primarily through the ownership of our gas processing facilities. In the second quarter, these two income streams combined for $8.4 million, or nearly $3 per BOE, and are reflected in our adjusted operating expense as represented by the red line in the previously mentioned chart. We will continue to report these adjusted operating expenses since we feel our gas plant ownership creates a significant competitive advantage for the company. Our strong second quarter net operating income of $44 million, or $15.50 per BOE, was enhanced by the previously mentioned one-time royalty adjustment and hedging gain While capital spending was primarily directed toward repair work associated with the gas plant outages and development development spending to finish up planned completion and tie in activity on our two well winter drilling program in the Brown Creek area of central Alberta. Adam will be providing an update to our revised guidance, including changes to net operating income and capital spending in a few moments. I'd like to provide a very brief update on the status of our two wells from our Foothills Winter Drilling Program. The first well at Brown Creek 6 of 35 continues to produce at a restricted raw gas rate of approximately 5 million cubic feet a day and 1300 psi flowing surface pressure. The second well at Brown Creek 6 of 29 remains shut in as it awaits stimulation and production testing to better evaluate the potential of the completed mountain park zone. The timing of stimulating and evaluating this well is dependent on resolution with an offsetting well owner to mitigate perceived frac stimulation communication risk and the allocation of available funds flow. And finally, as we look towards the third quarter, we look forward to a successful execution of the first phase of our Waterton gas plant turnaround, which commences in earnest next week. This first phase will address key equipment inspection and repairs, and we anticipate a cumulative capital expenditure of approximately $13 million by the end of the turnaround in mid-September, along with an expected five-week outage. The remainder of the turnaround scope is anticipated for completion in the spring of 2024. Pear Day continues to focus on its operational strategic priorities, including improving runtime reliability, implementing cost reduction initiatives, and optimizing infrastructure. I would like to now hand things off to Adam for a brief review of our financial results, new financing, and our revised guidance.