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Operator
Good day, ladies and gentlemen, and welcome to the Para Day Energy Annual General Meeting and Q1 2024 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 formal business of the meeting and management 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 in 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 will now turn the meeting over to Mr. Dallas McConnell, Vice President of Corporate Finance. Please go ahead, Mr. McConnell.
McConnell
Thank you, Victor. Hello and welcome to the annual meeting of shareholders of Paraday Energy Limited. My name is Dallas McConnell and I am the VP of Corporate Finance for Paraday and I will be the moderator for today's meeting. Before commencing, we would like to acknowledge our operations are in Treaty 6, Treaty 7 and Treaty 8 Territory, the ancestral and traditional territory of many First Nations, the many districts within the Peace River Territory, the North Saskatchewan River Territory and the Battle River Territory of the Otepemeswak Métis Government of the Métis Nation of Alberta and the Northeast Region 7 in the Métis Nation of British Columbia. We recognize the land as an act of reconciliation and gratitude to those whose territory we reside in. I would now like to take this opportunity to review the logistics for today's meeting. In addition to the in-person portion of this meeting, We are being streamed by live audio webcast and telephone. Participants attending via the webcast or telephone may listen to the meeting and ask questions, but will not be able to vote on items of business. Only registered shareholders of record as of March 25, 2024, and duly appointed proxy holders present in person at this meeting are entitled to vote on items of business. The procedure for asking questions will be addressed at the outset of the meeting. Please note that today's meeting is being recorded, and if you participate and disclose personal information, you will be deemed to consent to the recording, transfer, and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant that you first obtained all required consent for that disclosure, recording, transfer, and use of such personal information from all appropriate persons before your disclosure. It is now my pleasure to turn today's meeting over to Patricia McLeod, Chair of the Board of Directors for Paraday. Patty?
Patricia McLeod
Thank you, Mr. McConnell. Good afternoon, and welcome to the 2024 Annual Meeting of the Shareholders of Paraday Energy Limited. My name is Patricia McLeod, and I am the Chair of the Board of Directors for the Corporation, and I will act as your Chair for today's AGM. Before we proceed with the formal business of the meeting, I would like to take a moment to introduce the other directors of the corporation, as well as all senior officers of the corporation, all of whom are participating in this meeting. The directors and director nominees include Charles Boulanger, Richard Couillard, Doug Dreisinger, Gail Harding, Andrew Judson, myself, Kiran Singh, and Darcy Redding. Mr. Redding also serves as the corporation's president and chief executive officer. The other senior officers of the corporation are John Emery, chief operating officer, Adam Gray, chief financial officer, and Paul Kunkel, chief commercial officer. Darcy Redding and Adam Gray will provide a corporate presentation on the corporation's 2024 Q1 financial results following the formal segment of today's annual general meeting of shareholders. I invite you to stay for their presentations. We will now proceed with the formal part of the AGM. The meeting of shareholders of the corporation will now come to order. In accordance with the bylaws of Parity Energy Limited, I will preside as chair of this meeting. Michelle Coos, the corporation's general counsel and corporate secretary, will act as recording secretary of the meeting. Thank you, Michelle, for agreeing to act in such capacity. Paul Bedard, the corporation's representative with Odyssey Trust Company, will act as scrutineer for the meeting. to report on the shareholders participating in person and the number of shares represented in person or by proxy at the meeting and to compute votes on any poll taken at the meeting or any adjournment thereof and to report there on to the chair. Thank you, Mr. Bedard for agreeing to act in this capacity. The notice calling this annual meeting of shareholders was sent on April 9th, 2024 to all shareholders of record as of March 25th, 2024, being the record date of the meeting and to intermediaries as required by securities legislation. A declaration as to such distribution is available for inspection by any shareholder. The meeting will append the declaration as a schedule to the minutes of the meeting. The notice calling this meeting was also sent to the directors of the corporation and to Ernst & Young LLP as auditors of the corporation in accordance with the Canada Business Corporations Act. Pursuant to the corporation's bylaws, business may only be transacted at this meeting if two people Holding or representing by proxy at least 5% of the shares entitled to vote are present. I will now confirm with the scrutineer whether we have quorum. Mr. Bedard, do we have quorum?
Bedard
Yes, Madam Chairwoman.
Patricia McLeod
Thank you. I direct the scrutineer's report be kept with the minutes of the meeting. Notice having been served in accordance with the bylaws of the corporation and a quorum being present, I now declare that the annual meeting of the shareholders of the corporation has been duly called and is properly constituted for the transaction of business. The purpose of this meeting is to allow shareholders to receive the audited consolidated financial statements of the corporation for the year ended December 31st, 2023, together with the report of the auditor thereon and the management discussion and analysis. Fix the number of directors of the corporation to be elected as eight. Elect the directors of the corporation for the ensuing year. appoint Ernst & Young LLP as the auditors of the corporation for the ensuing year, and authorize the board of directors of the corporation to fix the remuneration of the auditors, accept the corporation's approach to executive compensation, and transact any other business which may be properly brought before the meeting. All as more particularly outlined in the management information circular of the corporation dated March 25, 2024, which was Available via the notice and access regime to all shareholders of the corporation with the notice calling this meeting Now I will review the procedure for voting at this meeting each item of business to be covered in today's meeting Will be voted on by shareholders other than the receipt of the financial statements and accompanying materials every shareholder of the corporation as at the record date is entitled to vote on such items of business and Has one vote in respect of each common share held by that shareholder Each item of business to be voted upon requires that the resolution be passed by majority of votes cast. As previously mentioned, only registered shareholders and duly appointed proxy holders present in person at this meeting are entitled to vote on such items of business. Pursuant to the Corporation's bylaws and the Canada Business Corporations Act, all items of business must be decided by a show of hands unless a ballot is required or demanded by a shareholder or duly appointed proxy holder.
McConnell
Madam Chair, my name is Adam Gray and I am a shareholder. In the interest of ensuring the meeting is timely and efficient, I demand that voting on all items of business be taken by ballot instead of by show of hands.
Patricia McLeod
Thank you, Mr. Gray. Pursuant to the Corporation's bylaws and the Canada Business Corporations Act, registered shareholders and duly appointed proxy holders will vote on all items of business by ballot. The form of proxy or voting instruction form delivered to shareholders in connection with today's meeting provided shareholders with the option of appointing Darcy Redding or alternatively Adam Gray as such shareholders proxy. As a result, Mr. Redding and Mr. Gray will be voting on their own behalf and on behalf of all shareholders who appointed either of them as their proxy. I will now review the procedure for asking questions at this meeting. We encourage all shareholders to ask questions. However, we ask that questions unrelated to the matters to be voted upon be held until after the formal portion of the meeting. All participants who wish to ask a question are asked to state their name, the entity they represent, if applicable, and whether they are a registered shareholder or duly appointed proxy holder. Registered shareholders and duly appointed proxy holders attending this meeting in person may ask a question by raising their hand. Participants on the phone can initiate a question by dialing star 11. Participants on the webcast can submit their questions by clicking the ask a question button on the top right corner of the webcast. Questions received via phone or the webcast will be read or summarized by the moderator along with the name of the person asking the question and the entity which they represent if applicable. In each case, the chair of the meeting, myself, will respond to the question or direct the question to the appropriate person. So, as the first matter of form of business, I placed before the shareholders at this meeting the audited consolidated financial statements of the corporation for the year ended December 31st, 2023. Copies of such financial statements, the auditor's report thereon, and the management discussion and analysis have been made available to all shareholders. As is customary, we do not intend to conduct a vote on these financial statements. I declare that the audited financial statements of the corporation for the year ended December 31st, 2023, together with the report of the auditors thereon and the management discussion and analysis have been received. As previously indicated, there will be a brief corporate presentation following the formal portion of the meeting. It is now in order to proceed with the election of directors of the corporation. I will entertain a motion to fix the number of directors to be elected at this meeting at 8 and invite any such motion to be seconded.
McConnell
Adam Chair, my name is Adam Gray. I'm a proxy holder and I so move.
Adam Chair
Adam Chair, my name is Paul Kunkel.
Bedard
I'm a shareholder and I second the motion.
Paul Kunkel
Thank you both. Is there any discussion?
Bedard
There are no questions.
Paul Kunkel
Thank you.
Patricia McLeod
As there is no further discussion, I now call for a vote on the motion before the meeting to fix the number of directors of the corporation at eight. I ask that all registered chair holders and duly appointed proxy holders that have not yet voted to please complete a ballot. Is there any to collect? We're good. All right. The scrutineer has confirmed tabulation of the voting results. and I am informed that a majority of the votes submitted were in favor of the motion and therefore I declare the motion carried. I now declare the meeting open for the election of directors. The articles of the corporation allow for a minimum of three and a maximum of 11 directors. The corporation has also adopted bylaw number three, which establishes the nomination procedures. Bylaw number three requires, among other things, that any notice of nomination, if given by or at the direction of the board, must be included in the notice of meeting and, if given by any nominating shareholder in the case of an annual meeting, must be delivered to the corporate secretary of the corporation no later than the end of the 10th day following April 9, 2024. I am informed by the corporate secretary that no such notice has been delivered by any nominating shareholder. The corporation has given notice of the nomination for election to the board of directors of eight individuals whose names and biographic information are included in the management information circular. I will now entertain a motion placing the names of those nominees before the meeting for election as directors of the corporation and invite any such motion to be seconded.
McConnell
Madam Chair, my name is Adam Gray. I'm a proxy holder and I nominate each of Charles Boulanger, Richard Couillard, Doug Dreisinger, Gail Harding, Andrew Judson, Patricia McLeod, Kiran Singh, and Darcy Redding for election as director of Paradise Energy Limited to hold office until the next annual meeting of shareholders or until their successors are duly elected or appointed.
Charles Boulanger
Madam Chair, my name is John Emery. I am a shareholder, and I second the motion.
Patricia McLeod
Thank you. Is there any discussion?
McConnell
Madam Chair, there is no discussion at this time.
Patricia McLeod
Thank you. As timely notice has not been received of the nomination of any other individual for election as a director of the corporation, and as the number of individuals nominated pursuant to this motion is equal to the number of vacancies on the board of directors, I now declare the nominations closed. I now call for a vote on the motion before the meeting to elect the aforementioned individuals as directors of the corporation to hold office until the next annual meeting of shareholders or until their successors are duly elected or appointed. unless their office is earlier vacated pursuant to the articles or bylaws of the corporation or the Canada Business Corporations Act. Each director nominee will be voted on individually rather than as a slate. I ask that all registered shareholders and duly appointed proxy holders that have not yet voted to please complete a ballot by selecting for or against for each director nominee listed on the ballot. And the scrutineer will collect that from you. Okay. I am told that the scrutineer has all of those results and tabulated them. I am informed that each of the director nominees has received a majority of the votes submitted. Therefore, I declare the motion for election of each of the director nominees as directors carried. I declare that Charles Boulanger, Richard Teilhard, Doug Dreisinger, Gail Harding, Andrew Judson, Patricia McLeod, Kiran Singh, and Darcy Redding are each duly elected as the director of the corporation to hold office until the next annual meeting of shareholders, or until their successors are duly elected or appointed. I'd like to congratulate the board of directors and thank them for their service. It is an honor to have this role with you. The next item of business is the appointment of the auditors of the corporation. corporation proposes the appointment of Ernst & Young LLP as its auditors to hold office until the next annual meeting of shareholders at such remuneration as may be fixed by the corporation's Board of Directors. May I have a motion please and a seconder of that motion?
McConnell
Madam Chair, my name is Adam Gray and I'm a proxy holder and I move that Ernst & Young LLP be appointed as auditors of Paraday Energy Limited to hold office until the next annual meeting of shareholders. as such remuneration as may be fixed by the Board of Directors of Paradise Energy Limited.
Adam Chair
Madam Chair, my name is Paul Kunkel. I am a shareholder and I second the motion.
Paul Kunkel
Thank you. Is there any discussion?
Bedard
Madam Chair, there is no discussion at this time.
Patricia McLeod
As there is no further discussion, I now call for a vote on the motion before the meeting to appoint Ernst & Young LLP as auditors of the corporation to hold office until the next annual meeting of shareholders. at such remuneration as may be fixed by the corporation's board of directors. I ask that all registered shareholders and duly appointed proxy holders that have not yet voted to please complete a ballot and provide to the scrutineer. Okay, the scrutineer has advised that all the votes are tabulated and I am informed that a majority of the votes submitted were in favor of the motion and therefore I declare the motion carried. The next item of business is the non-binding advisory vote on executive compensation, also known as, say, on pay. May I have a motion, please, and a seconder of that motion?
Charles Boulanger
Madam Chair, my name is John Emery. I am a shareholder, and I move that on an advisory basis, and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the Magnificent Influencer Code.
McConnell
Madam Chair, my name is Adam Gray. I am a proxy holder and I second the motion.
Patricia McLeod
Thank you. Is there any discussion?
McConnell
Madam Chair, there is no discussion.
Patricia McLeod
As there is no further discussion, I now call for a vote on the motion before the meeting. I ask that all registered shareholders and duly appointed proxy holders that have not yet voted to compete a ballot and provide to the scrutineer. Who near and tabulated the voting results, I'm informed that a majority of votes submitted were in favor of the motion and therefore I declare the motion carried.
Paul Kunkel
I now ask if there's any other business to be brought before this meeting.
Patricia McLeod
Hearing no other business that is to be brought before this meeting, I now declare the formal part of this meeting to be terminated at 1.48 p.m. and I really thank you all for attending and participating over the I will now ask Darcy Redding to provide the corporation presentation, and Adam Gray will then present our recently released 2024 Q1 results.
Bedard
Okay, thank you, Patty. Good afternoon and thank you for joining us today.
Patty
With our annual general meeting completed, I'd like to take a moment to recap a few items before we briefly discuss our first quarter 2024 results. As usual, for those connected via the webcast, we have supporting PowerPoint slides that you can follow along with. First, a quick reintroduction of Paradise Senior Management Team. Aside from Adam and I, who will carry the bulk of the load during this presentation today john emery our chief operating officer was officially appointed to his role on january 1st of this year john previously was our interim chief operating officer and vice president of operations prior to that in addition paul kunkle was appointed to his role as chief commercial officer simultaneous to my own appointment as president ceo and director on september 1st of last year Our leadership team is extremely excited about the future of Pear Day, and we feel we are very well positioned with our leaders and staff to successfully execute our corporate strategy. For several sequential quarters, we have emphasized the pivot away from East Coast LNG and towards an Alberta-focused natural gas production and processing business. Our previously disclosed information on our efforts to dispose of the Goldboro LNG asset remains valid and on track. and we look forward to disclosing further information in the first half of 2024 on this topic. Taking a deeper dive into our corporate strategy now, our shorter-term focus remains embedded in maximizing the extensive opportunity provided by our strategically located gas processing facilities and infrastructure. Although we remain excited about the potential of our more than 230 identified mostly conventional foothills net drilling opportunities, Continuing low eco-natural gas pricing on our 85% gas weighted business has reinforced our belief that our path to improved shareholder value must continue to focus on facility consolidation to deliver better cost structure and efficiency. Simultaneously, advertising the available excess processing capacity at our gas plants will grow our processing business and provide our customers with a preferred option to meet their business needs while generating a significant stream of incremental revenue for parity. Customer volumes also help to dilute fixed operating expenses that do not materially increase with higher gas plant throughput while also helping to reduce carbon emissions intensity at our facilities because these higher feedstock volumes do not materially increase the required energy for processing. Our focus on both absolute emissions reduction and emissions intensity reduction must continue, particularly as the escalating federal carbon tax and more stringent parameters under the Alberta Tier Program result in cost pressures for the company. Although we already generate significant third-party processing revenue, growth in that business will also help to generate additional free funds flow to direct towards deleveraging our debt which we expect will create more access to capital and even acquisition opportunities to supplement our business. Finally, we will benefit from the combination of debt reduction, increased fund flow, and improved access to capital markets coinciding with strong tailwinds supportive of better natural gas pricing. These coinciding factors will provide opportunities to invest into our extensive and still growing drilling inventory, thereby creating cash flow and further reducing unit operating costs, sustaining the company over the long term, and providing a robust return to shareholders.
Bedard
Next slide, please.
Patty
As mentioned, our midstream infrastructure is key to our strategic execution, and this slide summarizes the geographic layout and available capacities of our three major gas processing facilities at Caroline, jumping pound and waterton as usual we like to point out that these three facilities all recover sulfur have deep cut natural gas liquids recovery and two of the three plants fractionate these deep cut ngl products all three facilities are also efficiently connected to pipeline trucking and or rail transportation networks the bar and pie charts on the right hand side of this slide summarize the extensive third-party raw gas volumes at each facility. So far in 2024, we have averaged 69 million cubic feet a day of third-party processing, with the majority of that volume at the Caroline and Jumping Pounds facilities, where third-party volumes deliver approximately 40% of the total feedstock to the two facilities combined. Caroline third-party volumes consist of owner and non-owner production, But with Paraday owning a working interest of approximately 75%, we continue to focus on capturing the growing production from the region surrounding our gas plant and gathering infrastructure. Using the next slide to drive home my point on the importance of our midstream third-party processing business, the chart in the upper right shows third-party volumes at each of our three major gas processing facilities. The chart shows we are approaching 100 million cubic feet a day of aggregate third-party gas at our facilities in 2023 with a few interruptions for outages at Jumping Pound and Caroline in Q2. The scheduled maintenance turnaround at Waterton that also began in late Q2 and some intermittent flows directed to Caroline by another area gas plant operator during their outages. The significance of third-party volumes is really demonstrated on the second chart on this slide, showing our adjusted operating costs. They're materially lower by as much as 44%. As a refresh, we utilize revenue from third parties and the value of our sulfur sales against our reported operating expenses to calculate what we refer to as our adjusted operating costs, which we believe is a better benchmark for the cost of running our business. I'd like to leave the discussion of our midstream business with one final slide that I believe supports our tremendous excitement around the midstream opportunity, especially as it pertains to our Caroline gas plant and the surrounding region. The Caroline infrastructure is ideally located to capture the significant new production volumes being developed primarily in the Manville, Glauconitic and Ellerslie formations. With our intense focus on ensuring area producers know that we are open for business, we have successfully added incremental non-owner third-party gas to the Caroline gas plant in 2023, and we have continued to do so in 2024. The map shows the effective capture area of our Caroline infrastructure, while the production graph shows the total industry raw gas production within that capture area. Even with the significant first-year declines typically observed on new Manville wells, raw gas production from the area has been slightly growing, and is expected to enter a period of significant growth in 2024 and beyond. Faraday is extremely well positioned to capture this opportunity, and we continue to work with those investing in man-built drilling to ensure that we are the processor of choice in the area. Not shown on this slide is the tremendous amount of sour gas processing at other regional gas plants. A few minutes ago, I spoke about our corporate strategy being tied to infrastructure consolidation. And the Caroline area is extremely well positioned to receive sour gas volumes currently being processed at those other facilities. We will be continuing our discussion with these other area gas plant operators to effect a consolidation of the redundant sour gas processing capacity that exists in the region. And we look forward to presenting future results reflective of these consolidation efforts. Turning attention now to our Q1 2024 results, we were able to generate a solid quarter despite the ongoing pressures of low agonatural gas pricing. Our ongoing relentless focus on reducing cost structure delivered an operating cost in the quarter of just over $51 million, or $16.35 per BOE. Net operating income of $23 million was bolstered by our strong natural gas hedges which Adam will provide more details on in a few moments. Production of approximately 34,600 BOEs per day was negatively impacted by the unscheduled outage at the jumping pound gas plant, which was necessary to repair the super close sulfur condenser, which will maintain the sulfur recovery efficiency stipulated by our regulatory operating license. The jumping pound plant is scheduled to be running normally once again by the end of May. Of note in relation to the jumping pound plant outage, a full tube replacement of nearly 2,000 tubes is being conducted on the sulfur condenser, which is effectively a shell and tube design heat exchanger. Doing so means 100% of the approximately 18-year-old tubes in the vessel will be replaced, significantly minimizing future operational reliability risks on this vessel. Furthermore, a regular maintenance turnaround is scheduled for the facility in 2025, and the condenser repair work during the current outage can obviously be eliminated from the scope of the 2025 turnaround work. This will reduce both the expected cost of the turnaround and the risk of a more extensive outage period in 2025 when we anticipate natural gas pricing to be more robust than it is today. Partially as a result of this unscheduled outage, We have revised our production guidance range down by 1,500 BOEs per day to reflect both the outage and our ongoing voluntary shut-in of our clear water field due to poor economics at low gas pricing. Our new annual production guidance of 31,500 to 33,000 BOEs per day will be covered by Adam again in a few minutes when he provides a more complete overview of our guidance revision. I've already covered some of our key quarterly numbers, but want to once again highlight our operating cost improvement to $16.35 per BOE as we continue to benefit from our laser-focused cost structure reduction strategy. I also further note our adjusted operating cost for the quarter was $14.11 per BOE, reflecting over $5 million of processing and marketing revenue, along with nearly $2 million of sulfur sales. The adjusted operating cost trend is shown by the red line in the chart located in the lower left of the supporting slide. We remain highly weighted to natural gas, with 84% of our sales volume sold at ACO in the quarter, with our remaining 16% of sale volumes equally split between condensate and NGLs, as depicted in the first of the two pie charts on the supporting slide. Fortunately, low gas pricing was mitigated in the quarter by our robust hedges, which provided a gain of over $9 million, adding nearly $3 per barrel to our operating net back. Capital expenditures for the quarter remained low at approximately $9 million, with capital being directed primarily to well-abandonment commitments, required capital maintenance work on physical assets, and optimization projects. These optimization projects serve to both mitigate our low natural annual production decline to approximately 5% to 6%, and they provide a means to continue to reduce our cost structure. Cost reduction optimization is often independent of natural gas pricing, since cost savings can be generated regardless of commodity price. So we typically focus any available capital funds on cost optimization in times of low pricing. I would now like to hand over the floor to our Chief Financial Officer, Adam Gray, to speak to our quarterly financial results and elaborate on our hedge position and updated guidance.
McConnell
Thanks a lot, Darcy. I'm going to speak to a few specifics of our Q1 financial results, which include the adjustments we've made in response to weak forward ACO pricing, the impact of the jumping pound condenser retubing operations, which began in mid-March, Our activity in Northeast BC on both abandonment and repair work from the summer 2023 wildfire damage, and most importantly, across the board reductions in operating expense. First, on gas prices, we realized an average market price of $2.53 a GJ during the quarter, which increased to $3.21 per GJ on a hedge basis. As a reminder, we have roughly 70% of our natural gas production hedged at the moment, and through 2025. Pricing in the quarter was slightly higher than our budget, primarily as a result of the cold snap in January, which caused a short-term but very significant price dislocation in ACO. As we enter spring with gas storage levels in North America and Alberta near historic highs, we anticipate downward price pressure to continue into the summer months and have responded, as you'll see in our revised guidance, by shutting in certain production where it makes sense to do so, and deferring capital allocated to production increases. While we were successful in adding meaningful third-party volumes to Careline near the end of the quarter, overall our third-party processing volumes were slightly lower than expected, both due to the downtime at Jumping Pound, which impacted our processing customers as well as ourselves. and the unexpected reduction in truck-in sulfur volumes into our Shantz sulfur-forming facility. Truck-in sulfur volumes fluctuate primarily in response to the sulfur market prices, which were quite low through February and January. Customers will often choose to store their sulfur in anticipation of more supportive market pricing. In Northeast BC, you'll recall we shut in our equine field in the early summer of 2023 as a result of the Donny Creek fire, which burned through most of the year. Once we built the ice road in late December, crews were able to get into that area and repair the damage, which we expected we expect to be largely recovered by an insurance claim. Production in that area is largely restored at this time. We also chose to take advantage of that ice road to accelerate planned abandonment and reclamation activities in the area. and incurred approximately $4 million in ARO expenditures while doing so. This is the majority of our planned 2024 annual ARO activities, and the remainder of the year will be focused in our Alberta assets on ARO. Finally, across-the-board operating cost reduction efforts have clearly begun to bear fruit, with year-over-year operating expense down by $3.90 per BOE, or over 20%. As Darcy discussed, these reductions were pervasive throughout all our operating areas and many elements of our operating expense categories, but were particularly impactful to carbon taxes, where field management efforts to reduce the amount of fuel gas burned in our operations both increased the volume of natural gas available to be sold and reduced the carbon intensity of our processing facilities. Total debt remained very nearly flat from December 2023, as higher than planned CapEx on ARO and at jumping pound limited the free cash available to apply against our revolving credit facility. As we continue to forecast aggressive deleverage reduction while natural gas prices recover near the end of the year. I'll move to the final slide now. I'll briefly update you on our hedge book, which is largely unchanged from our last investor call back in late March. We added a small number of WTI swaps throughout the hedge period in mid-April of this year as crude prices strengthened, and we also slightly increased our gas hedge book in 2026 and 2027 at supportive pricing. Since May of 2023, when the bulk of those hedges were placed, The WTI curve has improved significantly in the near term, and as we all know, the ACO price curve has weakened materially in the near term, while the strip for both commodities in 2025 and beyond has remained largely stable. Our gas book today is approximately $60 million in the money, with the vast majority of that positive mark-to-market weighted towards the remainder of 2024. Our WTI book is approximately $8 million out of the money today, again with the majority of that negative mark-to-market weighted towards 2024 and 2025. Finally, and as Darcy mentioned, we chose to adjust our guidance this quarter primarily as a result of a decrease in our production forecast and the knock-on effects of that. There are three reasons for this reduction, all of which have already been discussed. First, as mentioned, we voluntarily shut in our Clearwater gas producing field in central Alberta. We will resume production from that area once AECO recovers in a meaningful way closer to $3 per GJ. Second, we had a number of field and facility optimization capital projects planned for the first and second quarter, which would have increased production and which we have decided to defer until that production resulting from the expenditures can net a higher price. Finally, there's about a 1,200 BOE per day impact to the jumping pound outage being rectified now, which is expected to last for approximately eight weeks. Changes in the rest of the guidance categories, being NOI, net back, and capital, are all tied to these production forecast updates and to slightly weaker expected gas pricing this summer. That concludes our Q1 financial update. Thank you very much for spending time with us this afternoon. and to the various speakers throughout today's AGM and presentation. I will now hand things back to the operator, who will be standing by to take any questions you might have for us.
Bedard
Thank you, Darcy and Adam. We will now take any questions from the room. Thank you. We do have a question in the room. Yeah, go ahead. I'm just wondering, cool federal policy, Has the train left the station or what's the cause of maintaining that road?
Patty
Yeah, so the question, if it was not heard online, was what is effectively what is the status of the Goldboro project? Has the train left the station? Was the actual words used? Is it too late? Is the project, could it ever be resurrected? I think is what you're asking. The simple answer is we are involved in a process and attempting to sell that asset as we speak. We are confident that the sale transaction will occur, although it is still conditional upon several things that need to be met. And we expect in the first half of this year that we will conclude that transaction. So we don't see it as a strategic part of our business looking forward. We're focusing instead on our Western Canadian upstream and midstream operations, and we think that's where our value lies today. So we're trying to materialize as much value out of that asset as we can through the aforementioned process.
McConnell
I guess the meaning of this trend adaptation is that you consider like maybe next year there's some change in the government direction. Yes, so the question was... Just one more year before you make the loss of it.
Patty
The question was, have we considered the fact that there could be a change in presumably the federal government, who's in power and who's making decisions, and would that potentially change the value of that project and could it change the company's mind in terms of pursuing that project? The short answer is there's many challenges that exist in front of that project. It's not just whoever is in power from a federal government perspective. There's a tremendous amount of resistance to building large infrastructure projects, especially if they're pipeline projects. There are pipeline expansions that are required in order to get Western Canadian gas to the East Coast to supply a proposed facility. And the project itself requires a huge amount of capital, and we don't believe that it's a strategic project for a company the size of Paradig given all those challenges.
Bedard
Thank you.
Patty
You're welcome.
Bedard
I do have one more question. I noticed the sulfur production has probably gone up from last quarter. There is a $6, I think somewhat of $6, like with the shell. Yes.
McConnell
Have you looked, is it optimized so that we don't produce as much sulfur down so that you keep it in the ground?
Patty
I believe the question was there's been an observation that sulfur production fluctuated this quarter compared to previous quarters. Have we considered given the contractually low price we received for sulfur production through the shell contract, is there a way that we could limit the sulfur production, keep more of it in the ground for a better day when prices are higher conceivably for the company. So sulfur production is a function of gas production because sulfur production comes from the hydrogen sulfide that's contained in the raw gas so to the degree that we produce raw gas and raw gas of a certain hydrogen sulfide concentration we have to extract virtually 100 percent of the sulfur equivalent out of that raw natural gas we don't have the option of not producing the sulfur the sulfur comes with the natural gas so it's a byproduct of natural gas production And at low prices, which we have in the sulfur contract with Shell, also market prices are quite low, we don't generate, as you've observed, a lot of revenue from that. But we still generate revenue from the natural gas liquids that we produce, and ultimately the sales gas, methane volumes that we produce. So we can't preferentially not produce the sulfur with that. So we kind of have to be a price taker.
Bedard
Right, so there's not...
Patty
No, the only thing that we would be able to do if we wanted to keep sulfur in the ground, if that was the right decision, would be to shut in the natural gas production containing that hydrogen sulfide. And that's not an option when we look at what the total revenue stream is from the produced product.
McConnell
I would just add that the actual operation of our facilities requires the throughput of that H2S gas. It's critical to the operation of the gas plant. I understand that. But you are not able to get more from other owners?
Bedard
No. Okay. It's a good question. I was wondering if this is being all looked into, basically, so that you can draw more customers.
McConnell
Yeah, as we approach the end of 2025, we're working with our marketing partners. We have about 150,000 tons of storage capacity between the sites. That right now is outside of our control, but it's something we look forward to being able to optimize.
Bedard
We can store sulfur on the ground to some extent.
Patty
and then market and sell that sulfur at a later time when pricing is better. There is some optionality to do that. We do have a significant amount of sulfur on the ground at a couple of our plant sites. Effectively, it does, yes. But there's a cost storing sulfur and whatnot. So there's also, sulfur is not a great availability of, forward-looking sulfur pricing information, so it's highly speculative. And so to try to take advantage of those arbitrage opportunities to sell in a higher environment is a bit of a gamble sometimes.
Bedard
Thank you for the question. Thank you. I will now ask the operator if there are any questions over the telephone.
Operator
Thank you. We will now take questions. If you have a question and you are viewing on webcast, please use the ask 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 101 on your telephone keypad. There will be a brief pause while the participants register.
Bedard
Thank you for your patience. I'm currently not showing any questions over the phones.
McConnell
Thank you. I do have questions on the webcast, so I will read the question and then ask one of the executives to respond. So first question is from a shareholder, from Bob. Canadian Utilities Limited, a subsidiary of Calgary-based holding company Atco Limited, plans to build a new $2 billion natural gas pipeline in Alberta. This was announced yesterday. Do you have any thoughts as to the impact on parity of this project?
Patty
I personally am not familiar with the project itself. I must have missed that one. So I can't comment on that in particular. It's in the Fort Saskatchewan. I just had somebody whisper in my ear what the project was. I think anytime there's an offtake for natural gas, in the form of power generation that's good for our industry and it's good for the company we would certainly welcome any development of that nature we are also looking simultaneously at some of our own power generation projects mostly tied to our major gas plant facility sites we have ongoing discussions with a number of partners and synergistic providers of services and and whatnot um we continue to evaluate those opportunities and we believe that there's some substance to those opportunities moving forward uh can't really say too much more than that on that particular project that was being asked about sure a second related question the canadian energy regulator announced recently that major oil export pipelines from western canada transmountain keystone
McConnell
and the Enbridge mainline are running at or near 100% utilization. Your thoughts, please.
Patty
We're not an oil producer currently, so that's not really our business. It doesn't directly impact us. Could we be an oil producer in the future? It's possible. As far as the industry goes, of course, there's a strong demand for oil production, particularly from the oil sands. prices remain as robust as they are. The fact is, is we need pipeline capacity to get to tidewater. That's been an ongoing challenge for our industry for a number of years. The Trans Mountain expansion, which is right in the process of coming online right now, is going to alleviate some of that bottleneck. But I would say that there's really just an overall comment that I would apply, which is we welcome expansion of pipeline capacity out of Alberta. It's required.
Bedard
Thank you. Next question is from shareholder Mark.
McConnell
I think this is a Paul question. Can you please provide an estimate of the total opportunity available to Paraday if the excess processing capacity was all contracted to third parties?
Paul
Yes, specifically with regards to the Caroline facility, we have the potential to bring in roughly 3,000 E3 M3 a day additional of volumes from third parties and we also have some additional ability to bring in volumes into the jumping pound facility we could handle 300 to 400 e3 m3 a day in that facility as well great uh one more question on sulfur but i believe it was answered previously from the question in the room uh and then one final question um are you able to provide any color on the likelihood timing or materiality of a transaction
McConnell
for the production assets being marketed in Northern Alberta and Northeast BC? Paul, why don't you take that?
Patty
I can take that question. Paul, please supplement as you see fit. So yes, we are, as we've previously announced, in the middle of a public process with those non-core assets. The bid due date is May 16th, so it's coming up very soon. And until that date has come and we have an opportunity to evaluate what kind of offers or proposals were put in front of us. There's not much more we can say in that regard. Thank you, Darcy.
McConnell
Lots of great questions. Thanks, everyone, for submitting them and asking them. Great to have some interaction. Seeing no further questions at this time, I would like to thank everyone for their participation in our AGM this afternoon and for your interest in Paraday.
Bedard
Have a good day. Operator, back to you.
Operator
Thank you. The conference call has now ended. Please disconnect your lines at this time. We thank you for your participation. Everyone have a great day.
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