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Operator
Good day, ladies and gentlemen, and welcome to the Para Day Energy Q4 and Full Year 2023 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're viewing on the webcast, please use the Ask a Question button on 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.
McConnell
Thanks very much, Daniel, and good morning. I would like to welcome everyone to Paraday Energy's fourth quarter and full year 2023 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 Paraday with Canadian Securities Regulator 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.
Darcy Redding
Thank you, Dallas, and good morning. We appreciate your time and interest as we close out our 2023 results and look forward to 2024 and some of the exciting opportunities that we have in front of us. The 2023 year was one where we achieved a number of milestones on our strategic journey, while at the same time successfully managed through unexpected and challenging events that I'll elaborate on more in a few minutes. In the first half of 2023, we successfully refinanced our long-term debt with a US$150 million funding that provided a material reduction in our cost of capital and added financial flexibility with both the revolver and delayed draw component. Commensurate with this financing, we entered into significant hedge positions on our natural gas and condensate production that span approximately a four-year time period ending in mid-2027. Of note, and as a reference point, the 2024 calendar year component of our hedge position sees approximately 65% of our budgeted natural gas sales volume hedged at an attractive average price of approximately $3.32 per gigajoule. This natural gas hedge has added a significant layer of protection to our 2024 cash flow and is largely responsible for a material mark-to-market hedge gain given the sustained low ACO natural gas pricing expectation through most of 2024. Adam will provide additional commentary on our hedges later in our call. Our intent to divest our LNG business was previously communicated, and we advanced the planned sale of the Goldboro Nova Scotia LNG assets in the fourth quarter of 2023. While we are unable to disclose more specific information at this time, we remain confident in the probability of closing a successful sale transaction in the first half of 2024, as we communicated in our last quarterly investor call back in November 2023. Consistent with our strategic plan and prior communications, disposition of our LNG assets reinforces our commitment to growing our natural gas processing business and enables focus on the continued maturation of our upstream and new venture business opportunities. 2023 also brought a few unexpected challenges. In what was arguably an unprecedented wildfire season in northern Alberta and northeast British Columbia, the company experienced both intermittent and sustained voluntary production outages in these regions as we prioritized the safety of our workers and shut down our production operations in these areas. By October, the imminent wildfire threat had passed, but it left us with damaged infrastructure in our Equan property in Northeast BC. We have since repaired and replaced most of the damaged equipment and resumed most production at Equan, and we are working within our insurance coverage as it relates to business interruption and property damage. Low natural gas pricing also drove our decision to shut in approximately 750 BOEs a day of uneconomic dry gas production in West Central Alberta in the fourth quarter. This production is tied into a third-party gas plant, so there is no impact to our own processing facilities. With persistent low natural gas pricing, this production remains shut in so far in 2024. Adam will speak to our 2024 corporate guidance in a few minutes. The scheduled Waterton gas plant maintenance turnaround concluded in the fourth quarter of 23. The turnaround inspections identified unexpected repairs in the sulfur unit's waste heat boiler which extended the turnaround time by approximately one month, detrimentally impacting anticipated 2023 production and cash flow. However, catching these repairs and addressing them at the time the facility was shut down for its turnaround has significantly mitigated the risk of a future unexpected outage at the Waterton facility. We also experienced an unplanned outage spanning parts of Q2 and Q3 at the Caroline gas plant due to a sulfur unit condenser failure. Consistent with our strategy of looking for opportunity in unexpected events, we utilized that unplanned outage to address additional maintenance requirements that would normally be done during a scheduled turnaround. This gave us the ability to extend the next scheduled Caroline gas plant maintenance turnaround by two years to 2026. Despite these challenges, we generated a respectable $131 million of net operating income supported by our aforementioned strong hedge position. Turning now to our fourth quarter 2023 operating results, average production was just over 33,300 BOE per day with $53 million of operating expense delivering a net operating income of $25 million. which was bolstered by a $10 million hedging gain. These Q4 numbers were negatively impacted by the previously discussed unplanned outages, but our December exit rate production was significantly higher at approximately 37,500 BOEs per day. This exit rate is a strong indicator of our corporate production capability when abnormal outages are eliminated. Our strong production volumes have continued through early 2024, and even the cold snap of January proved to be far less impactful to the company than what was experienced by other operators in our core areas. A quick look at our operating expense trends, as shown by the graph in the lower right corner of the slide for those that are video connected, highlights the relatively flat trend of our costs over the past two years despite significant inflationary cost pressures coming out of the COVID pandemic. As we move into 2024, we have further sharpened our focus on cost structure and are confident that as the year progresses, we will report additional cost improvements as general optimization and fuel gas reduction initiatives attract even more scrutiny in a low natural gas pricing and escalating carbon tax environment. As always, We believe it is worth noting our adjusted operating expense depicted by the red line on this same chart. Adjusted operating cost accounts for the additional complexity of our deep cut sulfur recovery gas plants that have significant capacity to provide custom processing services. By including sulfur revenue and custom processing revenue to offset operating expenses, our resulting adjusted operating expense in the fourth quarter was under $13 per BOE, a nearly $5 per BOE improvement compared to our reported operating expense. As we expand our timeframe and look at full year 2023 results now, production volumes of approximately 32,800 BOE per day with operating expense of $224 million resulted in the $131 million net back I mentioned earlier. which included a sizable hedge gain of $61 million. Capital expenditures of $59 million were dominated by maintenance investments in our facilities, including our Waterton gas plant turnaround, and finishing the drilling completions and tie-in work associated with our two-well drilling program in the Brown Creek area of central Alberta that was kicked off in late 2022 and carried into 2023. Worth mentioning is that we spent approximately $7 million of capital on optimization opportunities in 2023. This successful investment yielded a return on capital in excess of 200% and contributed to the strong exit production of 37,500 BOEs per day that I previously mentioned. We continue to see the benefit of these optimization efforts in the first quarter of 2024. This result also puts an exclamation mark on why we are excited to continue our focus on optimization as a means to mitigate our already low base decline of approximately 8% down to approximately 5%, which is amongst the lowest decline rate of all well production owners in Western Canada. I'd like to spend a few minutes now on our net asset value and year end 2023 independent reserve evaluation completed by Deloitte. For those able to view our slide showing the supporting data, the right hand side shows our current market capitalization of approximately $55 million. Our net debt of $204 million and a resulting financial liability calculation of $198 million. Further down the right side of the slide, the NPV10 of our Deloitte reserves evaluation shows a PDP value of $614 million and a 2P value of nearly $1.4 billion. By offsetting those reserve values with the full accounting of our corporate ARO, along with the previously mentioned financial liability, we calculate a net asset value of $267 million on a PDP basis and just over $1 billion on a 2P basis. Converting that calculated net asset value to a per share equivalent shows a PDP value of $1.68 per share and a 2P value in excess of $6 per share. These values are slightly reduced on a fully diluted basis as shown in the chart. Similarly, Our current share price as a ratio to this net asset value results in approximately a 0.2 share price to NAV ratio falling to a paltry 0.05 on a 2P NAV basis. From our analysis, we believe it is clear our current share price is extremely undervalued and does not adequately reflect the underlying value of our reserves, infrastructure, and additional unbooked upside opportunities. The chart in the middle of the left-hand side of this slide shows our success in largely maintaining our reserves and the associated net present value of those reserves over the past several years. I'd ask you to make a mental note of that chart, as I would like to come back to it in my concluding remarks in a few minutes. So at this time, I would like to hand the floor over to Adam Gray, our Chief Financial Officer, for a financial overview of the Q4 and full year 23 results, along with some additional detail and commentary on our corporate hedges and guidance.
Adam Gray
Thanks a lot, Darcy. I'll begin my comments with a very brief overview of our Q4 results, during which, as Darcy mentioned, we had the benefit of two full months of our Waterton gas plant and associated production back online, with the associated improvements in production and net back. As a result, various financial metrics rebounded strongly from the third quarter. Considering that the supportively strong winter gas pricing did not materialize this year, and in fact, commodity pricing in both a benchmark and realized basis were weaker in Q4 than in Q3, Paraday delivered a very strong quarter. Net income rebounded from a $16 million loss in Q3 to a $7.5 million income in Q4. Cash flow from operations similarly increased from $7.6 million in Q3 to nearly $28 million in Q4. Additionally, operating expense and G&A per BOE were both lower in the fourth quarter than the annual average, reflecting ongoing cost containment and reduction initiatives, which will continue into 2024. G&A on an absolute basis was the lowest parity has achieved in recent memory. Third-party processing revenue was particularly impactful in the fourth quarter, again recognizing our efforts to attract third-party development volumes, specifically into the Caroline plant. As we have previously discussed, our three sour gas processing facilities are operating at around 70% capacity, leaving lots of available capacity for our growing custom processing business. Caroline's liquids recovery capability electrification and location are all ideal to attract producers developing deep basin resources within the reach of our existing gathering system. Building a meaningful midstream business within our existing largely fixed cost infrastructure will greatly improve our overall business economics. Capital expenditures of $9.3 million in the quarter were again nearly fully allocated to completion of the Waterton turnaround with smaller amounts allocated to seasonal abandonment and reclamation activities and ongoing optimization projects. Turning your attention to the bar graph on the lower left of your screen, we demonstrate the very beneficial impact of our hedge program in Q4 and for 2023 as a whole, which I'll speak to more fulsomely in upcoming slides. All right, turning our attention to 2023 year results, the year was highlighted by a strong NOI of $131 million, which includes realized physical and financial hedge gains of $60 million net between gas and liquids, and an additional $31 million of operating expense savings as a result of our physical power hedge position. We consume about 55 megawatts of power between our processing facilities and field compression. and our hedge has been extremely impactful and beneficial in recent years. Power prices in Alberta have come down recently, and while we continue to expect the power hedge to support the business, it will contribute a little less during 2024 than in past years. Finally, G&A was down by 17% year-over-year, and finance expense was down 28% year-over-year, normalized for a one-time debt extinguishment loss recognized in Q2 when we completed the debt refinancing transaction. Overall, these translated into $86 million of flow of funds from operations. Speaking of debt, the refinancing transaction was a significant milestone for us in 23, significantly reducing debt service cost, setting up the company with a very supportive lender, and providing a fit-for-purpose structure that greatly increases flexibility. During the year, we reduced net debt by $10 million to $204 million and doubled our available liquidity to $45 million at the end of December 2023. Available liquidity includes our cash position, as well as U.S. $12 million available on the revolving credit facility and U.S. $10 million available on the delayed draw component of our term loan, which we will likely draw later this year. I'll reiterate that absolute debt reduction remains my number one priority, and we will continue to prioritize debt reduction until we are comfortably below 1x on a debt to EBITDA basis. Depending on how the next couple of quarters look from a commodity pricing perspective, we may be targeting the fourth quarter of 2024 and into 2025 before material deleveraging is possible. As a final note on deleveraging, And as Darcy mentioned, the process to monetize our Goldboro physical land as well as associated licenses and permits continues to progress well. And if successful, we will allocate proceeds towards repayment of the convertible bridge loan, otherwise due at the end of 2024. Okay, turning to our guidance and forward hedge position now. On a production basis, We are hedged between 55% and 60% overall for 2024, 2025, and into 2026, which translates to 75% of PDP natural gas and C5 production basis net of royalties, which is our lending covenant. This hedge position provides very supportive cash flows over the next three years and adds greatly to Paradise's resilience during the challenging North American gas market fundamentals. The mark to market on our gas and liquids hedge book at December 31st, 2023 was about $71 million to the positive. The vast majority of that benefit is expected to be realized in calendar 2024 as the ACO strip is forecast to rebound strongly during the winter of 24-25. We added marginally to our liquids hedge production in the first quarter of 2024 for production between Q2 2024 and Q2 2026 at prices which slightly increased the weighted average effective hedge price shown here on the chart. Finally, we issued 2024 guidance on December 7th last year. Current forecasting suggests that Pear Day is well within guidance on all parameters for 2024. Our capital guidance of roughly $30 million is allocated approximately 50% to the second phase of our Waterton turnaround, contemplated for four weeks in Q3, with the remaining 50% split between facility and field maintenance, well and facility optimization projects, and reclamation and abandonment. As Darcy mentioned, our optimization program has been and is expected to continue to be highly successful in mitigating production declines However, we're going to hold back on some optimization projects while gas prices remain low, while still planning to meet our 2024 production guidance. At this time, I'll turn the presentation back over to Darcy to speak to our 2024 and strategic priorities. Thank you, Adam.
Darcy Redding
For my concluding remarks, as I alluded to, I'd ask that you go back in time a few minutes to my net asset value and reserves information materials. I believe we have laid out a very compelling picture demonstrating the significant undervaluation of our shares. Our historical reserves trend shows our ability to largely maintain both reserves volumes and values. We have amongst the lowest, if not the lowest, production decline in the industry. These attractive reserves and production scenarios are delivered despite our minimal investment of development capital primarily as a result of the low natural gas pricing, reduced cash flow, and our highly leveraged, though improving, balance sheet. We own and operate three major deep cut liquids recovery gas plants with sulfur recovery, and we are amongst the largest sulfur producers in Western Canada at over 1,300 metric tons per day. We have excess custom processing capacity at these facilities and we are actively soliciting new volumes and new customers at these facilities to enhance our custom processing business. We believe successfully advertising and growing our processing business will provide our customers with a preferred option to meet their gas processing and other business needs while generating a significant stream of incremental revenue for Pear Day. We believe in offering win-win opportunities to our customers and we've already made significant headway on that initiative within the last six to nine months. The incremental processing revenue growth will ultimately supplement our ability to fund our capital plans, which include developing the upside from our drilling inventory that currently numbers in excess of 230 identified net drilling locations in and adjacent to the Alberta foothills. We continue to explore new venture business ideas particularly those associated with power generation and carbon capture and sequestration. We are actively engaged in counterparty discussions to explore several of these opportunities and are confident we will be in a position to disclose detailed information on them as they mature. We remain bullish on medium and long-term natural gas and sulfur pricing, and our strong hedge position has afforded us an opportunity to better weather the low pricing we are currently experiencing on both of these commodities. In a nutshell, my concluding remarks lay out our multi-year strategy. We are extremely excited about our existing opportunities as well as those new ideas we are continuing to generate for our shareholders. And now I will hand the podium back to Dallas for some concluding remarks and to prepare for questions.
McConnell
Thanks, Darcy. The conference coordinator will now manage the question and answer portion of our call, starting with any questions that are coming in over the phone. Darcy and Adam will answer any questions you have. Go ahead, Daniel.
Operator
Thank you. We will now take questions. If you have a question and you're viewing on webcast, please use the Ask a Question button in the top right-hand corner to type your question. If you have a question and you are participating via telephone, please press star 11 on your telephone keypad. There will be a brief pause while the participants register.
spk00
Thank you for your patience. Thank you.
Operator
I'm not showing any telephone questions at this time. I'd like to turn it back over to Mr. McConnell.
McConnell
Thanks, Daniel. We do have a couple questions on the webcast. The first question is, what is the book value of the Goldboro assets that are currently held for sale? I'll turn that one over to Adam.
Adam Gray
Thanks, Dallas, and thanks, Mark, for asking the question. We don't have very much book value. Pear Day, between 2012 and 2022, spent about $100 million developing its Goldboro export facility. However, only about $3.5 million of that is on the balance sheet as raw land value. The rest was expense to the P&L. And certainly, our view is the majority of value in that Goldboro package is in the intangible permits and licenses associated with it.
McConnell
Thanks, Adam. We do have one more question on the webcast. The question is regarding what are the plans for major turnarounds in 2025? I'll turn that one over to Darcy. Yeah, thanks, Dallas.
Darcy Redding
And again, thanks for the question, Mark. Yeah, there is one major turnaround scheduled for 2025, and it's actually phase two of the Waterton gas plant turnaround. Oh, sorry, in 2025, I misunderstood the questions. In 2025, we have scheduled a turnaround at the Jumping Pound facility. I read 25, but my brain worked as 2024. Thank you, Adam, for correcting me. So 2025, we have a scheduled turnaround at the Jumping Pound facility. As we normally do, we always are looking for opportunities to try to push out that maintenance and extend our turnaround activity where we can do it. We are still in the throes of doing that analysis. We're not committing to being able to extend that turnaround past 2025 at this point in time, but just to leave you with the mindset that that's our continuous improvement exercise as we look at our maintenance requirements.
Adam
Thank you, Darcy.
McConnell
That is all the questions we have at this time. Thanks to all of you for participating today and for your interest in Paraday. Oh, wait, we have one more. I'll just jump back. to questions. This question is regarding drilling locations. With 230 drilling locations, are you looking for partners to help fund the CAPEX as natural gas price recovers? I'll again turn this one to Darcy.
Darcy Redding
Yeah, that's a great question, Bill. Thank you. We are always open to exploring opportunities with potential partners. As you know, our drilling inventory is consisting of fairly high cost per well type opportunities. And so we believe that we can better distribute our available capital investment across more opportunities to reduce the risk, the overall risk of our program. So we'd always be open to opportunities that potential partners might be looking to help us fund.
McConnell
Thanks, Darcy. Thanks to everyone for participating today. We very much appreciate your interest in Paraday Energy. If you have any further questions, you can call us at 403-261-5900 or email at investors at paradayenergy.com. Thanks again, and we look forward to speaking to you soon. Thank you.
Operator
The conference call has now ended. Please disconnect your lines at this time.
spk00
We thank you for your participation. you Thank you. Thank you. Thank you.
Operator
Good day, ladies and gentlemen, and welcome to the Para Day Energy Q4 and Full Year 2023 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're viewing on the webcast, please use the Ask a Question button on 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 one one 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.
McConnell
Thanks very much, Daniel, and good morning. I would like to welcome everyone to Paraday Energy's fourth quarter and full year 2023 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 Paraday with Canadian Securities Regulator 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.
Darcy Redding
Thank you, Dallas, and good morning. We appreciate your time and interest as we close out our 2023 results and look forward to 2024 and some of the exciting opportunities that we have in front of us. The 2023 year was one where we achieved a number of milestones on our strategic journey, while at the same time successfully managed through unexpected and challenging events that I'll elaborate on more in a few minutes. In the first half of 2023, we successfully refinanced our long-term debt with a US$150 million funding that provided a material reduction in our cost of capital and added financial flexibility with both the revolver and delayed draw component. Commensurate with this financing, we entered into significant hedge positions on our natural gas and condensate production that span approximately a four-year time period ending in mid-2027. Of note, and as a reference point, the 2024 calendar year component of our hedge position sees approximately 65% of our budgeted natural gas sales volume hedged at an attractive average price of approximately $3.32 per gigajoule. This natural gas hedge has added a significant layer of protection to our 2024 cash flow and is largely responsible for a material mark-to-market hedge gain given the sustained low ACO natural gas pricing expectation through most of 2024. Adam will provide additional commentary on our hedges later in our call. Our intent to divest our LNG business was previously communicated, and we advanced the planned sale of the Goldboro Nova Scotia LNG assets in the fourth quarter of 2023. While we are unable to disclose more specific information at this time, we remain confident in the probability of closing a successful sale transaction in the first half of 2024, as we communicated in our last quarterly investor call back in November 2023. Consistent with our strategic plan and prior communications, disposition of our LNG assets reinforces our commitment to growing our natural gas processing business and enables focus on the continued maturation of our upstream and new venture business opportunities. 2023 also brought a few unexpected challenges. In what was arguably an unprecedented wildfire season in northern Alberta and northeast British Columbia, the company experienced both intermittent and sustained voluntary production outages in these regions as we prioritized the safety of our workers and shut down our production operations in these areas. By October, the imminent wildfire threat had passed, but it left us with damaged infrastructure in our Equan property in Northeast BC. We have since repaired and replaced most of the damaged equipment and resumed most production at Equan, and we are working within our insurance coverage as it relates to business interruption and property damage. Low natural gas pricing also drove our decision to shut in approximately 750 BOEs a day of uneconomic dry gas production in West Central Alberta in the fourth quarter. This production is tied into a third-party gas plant, so there is no impact to our own processing facilities. With persistent low natural gas pricing, this production remains shut in so far in 2024. Adam will speak to our 2024 corporate guidance in a few minutes. The scheduled Waterton gas plant maintenance turnaround concluded in the fourth quarter of 23. The turnaround inspections identified unexpected repairs in the sulfur unit's waste heat boiler which extended the turnaround time by approximately one month, detrimentally impacting anticipated 2023 production and cash flow. However, catching these repairs and addressing them at the time the facility was shut down for its turnaround has significantly mitigated the risk of a future unexpected outage at the Waterton facility. We also experienced an unplanned outage spanning parts of Q2 and Q3 at the Caroline gas plant due to a sulfur unit condenser failure. Consistent with our strategy of looking for opportunity in unexpected events, we utilized that unplanned outage to address additional maintenance requirements that would normally be done during a scheduled turnaround. This gave us the ability to extend the next scheduled Caroline gas plant maintenance turnaround by two years to 2026. Despite these challenges, we generated a respectable $131 million of net operating income supported by our aforementioned strong hedge position. Turning now to our fourth quarter 2023 operating results, average production was just over 33,300 BOE per day with $53 million of operating expense delivering a net operating income of $25 million. which was bolstered by a $10 million hedging gain. These Q4 numbers were negatively impacted by the previously discussed unplanned outages, but our December exit rate production was significantly higher at approximately 37,500 BOEs per day. This exit rate is a strong indicator of our corporate production capability when abnormal outages are eliminated. Our strong production volumes have continued through early 2024, and even the cold snap of January proved to be far less impactful to the company than what was experienced by other operators in our core areas. A quick look at our operating expense trends, as shown by the graph in the lower right corner of the slide for those that are video connected, highlights the relatively flat trend of our costs over the past two years despite significant inflationary cost pressures coming out of the COVID pandemic. As we move into 2024, we have further sharpened our focus on cost structure and are confident that as the year progresses, we will report additional cost improvements as general optimization and fuel gas reduction initiatives attract even more scrutiny in a low natural gas pricing and escalating carbon tax environment. As always, We believe it is worth noting our adjusted operating expense depicted by the red line on this same chart. Adjusted operating cost accounts for the additional complexity of our deep cut sulfur recovery gas plants that have significant capacity to provide custom processing services. By including sulfur revenue and custom processing revenue to offset operating expenses, our resulting adjusted operating expense in the fourth quarter was under $13 per BOE, a nearly $5 per BOE improvement compared to our reported operating expense. As we expand our timeframe and look at full year 2023 results now, production volumes of approximately 32,800 BOE per day with operating expense of $224 million resulted in the $131 million net back I mentioned earlier. which included a sizable hedge gain of $61 million. Capital expenditures of $59 million were dominated by maintenance investments in our facilities, including our Waterton gas plant turnaround, and finishing the drilling completions and tie-in work associated with our two-well drilling program in the Brown Creek area of central Alberta that was kicked off in late 2022 and carried into 2023. Worth mentioning is that we spent approximately $7 million of capital on optimization opportunities in 2023. This successful investment yielded a return on capital in excess of 200% and contributed to the strong exit production of 37,500 BOEs per day that I previously mentioned. We continue to see the benefit of these optimization efforts in the first quarter of 2024. This result also puts an exclamation mark on why we are excited to continue our focus on optimization as a means to mitigate our already low base decline of approximately 8% down to approximately 5%, which is amongst the lowest decline rate of all well production owners in Western Canada. I'd like to spend a few minutes now on our net asset value and year-end 2023 independent reserve evaluation completed by Deloitte. For those able to view our slide showing the supporting data, the right-hand side shows our current market capitalization of approximately $55 million, our net debt of $204 million, and a resulting financial liability calculation of $198 million. Further down the right side of the slide, the NPV10 of our Deloitte reserves evaluation shows a PDP value of $614 million and a 2P value of nearly $1.4 billion. By offsetting those reserve values with the full accounting of our corporate ARO, along with the previously mentioned financial liability, we calculate a net asset value of $267 million on a PDP basis and just over $1 billion on a 2P basis. Converting that calculated net asset value to a per share equivalent shows a PDP value of $1.68 per share and a 2P value in excess of $6 per share. These values are slightly reduced on a fully diluted basis as shown in the chart. Similarly, Our current share price as a ratio to this net asset value results in approximately a 0.2 share price to NAV ratio falling to a paltry 0.05 on a 2P NAV basis. From our analysis, we believe it is clear our current share price is extremely undervalued and does not adequately reflect the underlying value of our reserves, infrastructure, and additional unbooked upside opportunities. The chart in the middle of the left-hand side of this slide shows our success in largely maintaining our reserves and the associated net present value of those reserves over the past several years. I'd ask you to make a mental note of that chart, as I would like to come back to it in my concluding remarks in a few minutes. So at this time, I would like to hand the floor over to Adam Gray, our Chief Financial Officer, for a financial overview of the Q4 and full year 23 results, along with some additional detail and commentary on our corporate hedges and guidance.
Adam Gray
Thanks a lot, Darcy. I'll begin my comments with a very brief overview of our Q4 results, during which, as Darcy mentioned, we had the benefit of two full months of our Waterton gas plant and associated production back online, with the associated improvements in production and net back. As a result, various financial metrics rebounded strongly from the third quarter. Considering that the supportively strong winter gas pricing did not materialize this year, and in fact, commodity pricing in both a benchmark and realized basis were weaker in Q4 than in Q3, Paraday delivered a very strong quarter. Net income rebounded from a $16 million loss in Q3 to a $7.5 million income in Q4. Cash flow from operations similarly increased from $7.6 million in Q3 to nearly $28 million in Q4. Additionally, operating expense and G&A per BOE were both lower in the fourth quarter than the annual average, reflecting ongoing cost containment and reduction initiatives, which will continue into 2024. G&A on an absolute basis was the lowest parity has achieved in recent memory. Third-party processing revenue was particularly impactful in the fourth quarter, again recognizing our efforts to attract third-party development volumes, specifically into the Caroline plant. As we have previously discussed, our three sour gas processing facilities are operating at around 70% capacity, leaving lots of available capacity for our growing custom processing business. Caroline's liquids recovery capability electrification and location are all ideal to attract producers developing deep basin resources within the reach of our existing gathering system. Building a meaningful midstream business within our existing largely fixed cost infrastructure will greatly improve our overall business economics. Capital expenditures of $9.3 million in the quarter were again nearly fully allocated to completion of the Waterton turnaround with smaller amounts allocated to seasonal abandonment and reclamation activities and ongoing optimization projects. Turning your attention to the bar graph on the lower left of your screen, we demonstrate the very beneficial impact of our hedge program in Q4 and for 2023 as a whole, which I'll speak to more fulsomely in upcoming slides. All right, turning our attention to 2023 year results, the year was highlighted by a strong NOI of $131 million, which includes realized physical and financial hedge gains of $60 million net between gas and liquids and an additional $31 million of operating expense savings as a result of our physical power hedge position. We consume about 55 megawatts of power between our processing facilities and field compression. and our hedge has been extremely impactful and beneficial in recent years. Power prices in Alberta have come down recently, and while we continue to expect the power hedge to support the business, it will contribute a little less during 2024 than in past years. Finally, G&A was down by 17% year-over-year, and finance expense was down 28% year-over-year, normalized for a one-time debt extinguishment loss recognized in Q2 when we completed the debt refinancing transaction. Overall, these translated into $86 million of flow of funds from operations. Speaking of debt, the refinancing transaction was a significant milestone for us in 23, significantly reducing debt service costs, setting up the company with a very supportive lender, and providing a fit-for-purpose structure that greatly increases flexibility. During the year, we reduced net debt by $10 million to $204 million and doubled our available liquidity to $45 million at the end of December 2023. Available liquidity includes our cash position, as well as U.S. $12 million available on the revolving credit facility and U.S. $10 million available on the delayed draw component of our term loan, which we will likely draw later this year. I'll reiterate that absolute debt reduction remains my number one priority, and we will continue to prioritize debt reduction until we are comfortably below 1x on a debt to EBITDA basis. Depending on how the next couple of quarters look from a commodity pricing perspective, we may be targeting the fourth quarter of 2024 and into 2025 before material deleveraging is possible. As a final note on deleveraging, And as Darcy mentioned, the process to monetize our Goldboro physical land as well as associated licenses and permits continues to progress well. And if successful, we will allocate proceeds towards repayment of the convertible bridge loan, otherwise due at the end of 2024. Okay, turning to our guidance and forward hedge position now. On a production basis, We are hedged between 55% and 60% overall for 2024, 2025, and into 2026, which translates to 75% of PDP natural gas and C5 production basis net of royalties, which is our lending covenant. This hedge position provides very supportive cash flows over the next three years and adds greatly to Paradise's resilience during the challenging North American gas market fundamentals. The mark to market on our gas and liquids hedge book at December 31st, 2023 was about $71 million to the positive. The vast majority of that benefit is expected to be realized in calendar 2024 as the ACO strip is forecast to rebound strongly during the winter of 24-25. We added marginally to our liquids hedge production in the first quarter of 2024 for production between Q2 2024 and Q2 2026 at prices which slightly increased the weighted average effective hedge price shown here on the chart. Finally, we issued 2024 guidance on December 7th last year. Current forecasting suggests that Pear Day is well within guidance on all parameters for 2024. Our capital guidance of roughly $30 million is allocated approximately 50% to the second phase of our Waterton turnaround, contemplated for four weeks in Q3, with the remaining 50% split between facility and field maintenance, well and facility optimization projects, and reclamation and abandonment. As Darcy mentioned, our optimization program has been and is expected to continue to be highly successful in mitigating production declines However, we're going to hold back on some optimization projects while gas prices remain low, while still planning to meet our 2024 production guidance. At this time, I'll turn the presentation back over to Darcy to speak to our 2024 and strategic priorities. Thank you, Adam.
Darcy Redding
For my concluding remarks, as I alluded to, I'd ask that you go back in time a few minutes to my net asset value and reserves information materials. I believe we have laid out a very compelling picture demonstrating the significant undervaluation of our shares. Our historical reserves trend shows our ability to largely maintain both reserves volumes and values. We have amongst the lowest, if not the lowest, production decline in the industry. These attractive reserves and production scenarios are delivered despite our minimal investment of development capital primarily as a result of the low natural gas pricing, reduced cash flow, and our highly leveraged, though improving, balance sheet. We own and operate three major deep cut liquids recovery gas plants with sulfur recovery, and we are amongst the largest sulfur producers in Western Canada at over 1300 metric tons per day. We have excess custom processing capacity at these facilities, and we are actively soliciting new volumes and new customers at these facilities to enhance our custom processing business. We believe successfully advertising and growing our processing business will provide our customers with a preferred option to meet their gas processing and other business needs while generating a significant stream of incremental revenue for Pear Day. We believe in offering win-win opportunities to our customers and we've already made significant headway on that initiative within the last six to nine months. The incremental processing revenue growth will ultimately supplement our ability to fund our capital plans, which include developing the upside from our drilling inventory that currently numbers in excess of 230 identified net drilling locations in and adjacent to the Alberta foothills. We continue to explore new venture business ideas particularly those associated with power generation and carbon capture and sequestration. We are actively engaged in counterparty discussions to explore several of these opportunities and are confident we will be in a position to disclose detailed information on them as they mature. We remain bullish on medium and long-term natural gas and sulfur pricing, and our strong hedge position has afforded us an opportunity to better weather the low pricing we are currently experiencing on both of these commodities. In a nutshell, my concluding remarks lay out our multi-year strategy. We are extremely excited about our existing opportunities as well as those new ideas we are continuing to generate for our shareholders. And now I will hand the podium back to Dallas for some concluding remarks and to prepare for questions.
McConnell
Thanks, Darcy. The conference coordinator will now manage the question and answer portion of our call, starting with any questions that are coming in over the phone. Darcy and Adam will answer any questions you have. Go ahead, Daniel.
Operator
Thank you. We will now take questions. If you have a question and you're viewing on webcast, please use the Ask a Question button in the top right-hand corner to type your question. If you have a question and you are participating via telephone, please press star 11 on your telephone keypad. There will be a brief pause while the participants register.
spk01
Thank you for your patience.
spk00
Thank you.
Operator
I'm not showing any telephone questions at this time. I'd like to turn it back over to Mr. McConnell.
McConnell
Thanks, Daniel. We do have a couple questions on the webcast. The first question is, what is the book value of the Goldboro assets that are currently held for sale? I'll turn that one over to Adam.
Adam Gray
Thanks, Dallas, and thanks, Mark, for asking the question. We don't have very much book value. Pear Day, between 2012 and 2022, spent about $100 million developing its Goldboro export facility However, only about $3.5 million of that is on the balance sheet as raw land value. The rest was expense to the P&L. And certainly, our view is the majority of value in that Goldboro package is in the intangible permits and licenses associated with it.
McConnell
Thanks, Adam. We do have one more question on the webcast. The question is regarding what are the plans for major turnarounds in 2025? I'll turn that one over to Darcy. Thanks, Dallas, and again, thanks for the question, Mark.
Darcy Redding
Yeah, there is one major turnaround scheduled for 2025, and it's actually phase two of the Waterton gas plant turnaround. Oh, sorry, in 2025, I misunderstood the question. In 2025, we have scheduled a turnaround at the Jumping Pound facility. I read 25, but my brain worked as 2024. Thank you, Adam, for correcting me. So 2025, we have a scheduled turnaround at the jumping pound facility. As we normally do, we always are looking for opportunities to try to push out that maintenance and extend our turnaround activity where we can do it. We are still in the throes of doing that analysis. We're not committing to being able to extend that turnaround past 2025 at this point in time.
Adam
But just to leave you with the mindset that that's our continuous improvement exercise as we look at our maintenance requirements. Thank you, Darcy.
McConnell
That is all the questions we have at this time. Thanks to all of you for participating today and for your interest in Paraday. Oh, wait, we have one more. I'll just jump back to questions. This question is regarding drilling locations. With 230 drilling locations, are you looking for partners to help fund the CAPEX as natural gas price recovers? I'll again turn this one to Darcy.
Darcy Redding
Yeah, that's a great question, Bill. Thank you. We are always open to exploring opportunities with potential partners. As you know, our drilling inventory is consisting of fairly high cost per well type opportunities. And so we believe that we can better distribute our available capital investment across more opportunities to reduce the risk, the overall risk of our program. So we'd always be open to opportunities that potential partners might be looking to help us fund.
Adam
Thanks, Darcy.
McConnell
Thanks to everyone for participating today. We very much appreciate your interest in Paraday Energy. If you have any further questions, you can call us at 403-261-5900 or email at investors at paradayenergy.com. Thanks again, and we look forward to speaking to you soon.
Operator
Thank you. The conference call has now ended. Please disconnect your lines at this time. We thank you for your participation.
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