Pieridae Energy Limited

Good day, ladies and gentlemen, and welcome to the Para Day Energy Q3 2024 Financial Results Conference Call. Please be advised that today's conference is being recorded. 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 via 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.

Thank you very much, Tonya, and good morning, everyone. I would like to welcome Everyone to Paraday Energy's third quarter 2024 conference call. With me today are President and Chief Executive Officer Darcy Redding, Chief Financial Officer Adam Gray, Chief Commercial Officer Paul Kunkel, and Chief Operating Officer John Emery. 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 CEO, Darcy Redding, who will provide more detail on our performance last quarter along with recent corporate developments.

Thank you, Dallas. Good morning and thank you for your time today. As usual for those following along on the webcast, the PowerPoint slides will provide information you may find useful. The third quarter of 2024 was highlighted by the achievement of several key milestones in our corporate strategy, at a time when our realized natural gas price continued to be plagued by ongoing ACO price weakness. As has been the theme in the company results for several consecutive quarters, our strong natural gas hedges continued to mitigate these poor natural gas prices. Additional details on pricing, commodity revenue and hedging will be discussed later in this session. We were extremely pleased to close the sale of our Goldboro, Nova Scotia liquefied natural gas assets during the quarter. Completing this transaction was a key event that effectively closes the chapter on Paraday's LNG business and historical roots. We are extremely pleased with the $12 million of cash proceeds from the sale as these funds were instrumental in successfully achieving a second important milestone in our corporate strategy this quarter, repayment of the bridge loan. The bridge loan was scheduled to mature in December 2024, at which time any remaining amounts would be convertible to common share equity. With the Goldboro proceeds, assisted by a $4.5 million equity raise via a private placement of common shares, Paraday was able to fully retire the bridge loan principal and accrued interest. Shedding the high 18% fixed interest rate on the bridge loan has decreased the company's cost of debt. Along with the Goldboro sale, achieving these two significant milestones has simplified Paraday's business by reducing our lending complexity and providing an opportunity to streamline our corporate structure, which is yet another part of our corporate strategy and an endeavor we have already initiated. Despite the AECO natural gas price averaging only 64 cents per gigajoule in the third quarter, The company realized net operating income of nearly $20 million, largely on the back of a healthy commodity hedging gain of nearly $27 million in the quarter. Although the company maintains a hedge position on condensate, this hedge gain is almost entirely attributed to our approximately 100,000 gigajoules per day of hedged natural gas. A particular note in the quarter, the company shut in additional volumes of natural gas production. In aggregate with the shut-ins prior to the third quarter, Paraday has now proactively shut in nearly 9,400 BOEs per day of uneconomic volumes. This is just over 25% of the company's total production capability. Nearly all of this is dry natural gas that produces to third-party gas processing facilities. Operating costs were favorably improved with these shut-in volumes since a significant portion of operating expense is tied to the raw gas processing fees paid to third parties. In this low ACO gas price environment, these fees exceed the value of the sales gas and other products derived via the processing facility. These shut-in volumes are forecasted to remain shut-in through the end of 2024 and through 2025 based on current forward curve pricing. Keeping these uneconomic volumes shut-in will continue to enhance our net operating income while preserving the value of our hydrocarbon resource for our shareholders. Production volumes of approximately 23,100 BOEs per day in the quarter were affected significantly by the previously mentioned voluntary shut-ins, as well as our scheduled Waterton gas plant maintenance turnaround that kicked off in early September and was completed on budget in October. Lastly, our backstopped rights offering announced in the quarter raised $29 million in common share equity from existing shareholders, including officer and director insiders. This rights offering closed in early October bringing in an aggregate of $33.5 million of new equity into the company, including the private placement that closed early in the third quarter. Providing additional detail now, prior to closing the rights offering at the end of the third quarter, the company's $207 million net debt, which includes cash and working capital deficit, contributed to an enterprise value of $250 million, as shown in the leftmost numerical column. The $29 million of equity raised through the rights offering was partially allocated to reducing both the balance on our revolving loan and our working capital deficit, leaving approximately $15 million of available cash from the rights offering. Subsequent to the end of the third quarter and upon closing of the rights offering, the company's net debt on a pro forma basis was $178 million on an unchanged enterprise value of $250 million. which includes a $21 million cash position. This pro forma summary is shown in the far right column of this slide. Beginning immediately in the fourth quarter of 2024, approximately $15 million of this pro forma cash position is being allocated to investment into highly accretive, low risk optimization projects that will deliver an attractive combination of short payout, incremental net operating income, and a robust rate of return. These optimization investments will carry over into the first half of 2025 until the full allocation of funds is complete. These investments will deliver meaningful improvements to key performance indicators, including net operating income and leverage ratios. Deploying these funds as described enables acceleration of the corporate strategy since free cash flow from the business is anticipated to remain too low in 2025 under current forward curve pricing to fund these optimization opportunities without the additional funds from the rights offering. Turning now to our third quarter operating results, I'd like to start with a high level overview before I pass things off to Adam Gray, our Chief Financial Officer, for a more thorough review of quarterly performance. As previously mentioned, we initiated further action to shut in substantial volumes of dry, uneconomic gas processed at third party facilities in the quarter. This greatly reduced our sales production, but at the same time reduced total operating cost expenditures, primarily due to the elimination of processing fees paid to these third parties. The resulting improvement to net operating income and net back in the quarter, as shown in the chart located in the lower right portion of this slide, illustrates the positive impact of these decisions to shut in. We continue to successfully execute on our strategy of growing our midstream raw gas processing business, and our third quarter delivered a year-over-year increase in third-party processing volumes of 49% at the Caroline gas plant. The Caroline plant remains a focus area for midstream business growth because of the ongoing robust development drilling occurring in the region surrounding the gas plant. This drilling of liquids rich targets continues to provide attractive returns for a number of mineral rights lessors that are active in the area, and we anticipate continued growth opportunity for our processing business as a result. Capital expenditures for the quarter were directed almost exclusively towards completion of the Waterton gas plant turnaround project and a small debottlenecking project at the Caroline gas plant that enables the company to seamlessly accommodate the growth we anticipate in our processing business, as just mentioned. I'd like to note that a portion of the approximately $15 million in total cost for the Waterton turnaround was invested in prior quarters for upfront planning and to procure long lead time materials. As we move forward, it is noteworthy that we have not scheduled nor do we anticipate any significant maintenance turnaround activity or expenditures at our large facilities in 2025. We will continue to explore options to reduce future turnaround costs while maintaining safe, responsible and regulatory compliant operations. At this time, I'd like to hand things over to Adam Gray for additional detail on our operating and financial results, guidance and commodity hedging status.