Pieridae Energy Limited

Good day ladies and gentlemen and welcome to the Para Day Annual General Meeting and Q2 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 presentation we will conduct a question and answer session. If you have a question and you are viewing on webcast, please use the ask a question button in the top right hand corner to type your question at any time during the presentation. If you are participating via telephone and would like to ask a question, please dial star 11 at any time. You will then be in the queue for the question and answer session at the end of the call. I would now like to turn the meeting over to Mr. Dallas McConnell, Vice President, Corporate Finance. Please go ahead, Mr. McConnell.

Thanks very much, Daniel, and good morning, everyone. I would like to welcome you to Pear Day's second quarter 2024 conference call. Apologies for the error in the operator script. This is not, in fact, an annual general meeting. With me today are President and Chief Executive Officer Darcy Redding, Chief Financial Officer Adam Gray and Chief Commercial Officer Paul Kunkel and Chief Operating Officer John Emery. Darcy and Adam will begin today with a review of our operating and financial results and certain other company developments. Following their prepared remarks, we will turn the call over to the conference coordinator for your questions. Thank you, Dale. Sorry, before Darcy begins, I would like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by Paraday with Canadian securities regulators on cdarplus.ca. With that, I will now turn the call over to our President and CEO, Darcy Redding, who will provide more detail on our performance in the second quarter, along with recent corporate developments.

Thank you, Dallas. Good morning and thank you for your time today. For those of you following along on the webcast, the PowerPoint slides will provide additional details you may find useful. The second quarter of 2024 was marked by the continuance of historically low ACO natural gas prices, with the ACO benchmark languishing below $1.50 per gigajoule for most of the quarter and below $1 per gigajoule for the last half of the quarter. Fortunately, our strong natural gas hedges continue to mitigate the negative impact of this pricing, resulting in a commodity hedging gain in the quarter of nearly $20 million and helping us post a net operating income of just under $8 million. We will continue to benefit from our natural gas hedges for the foreseeable future. with approximately three quarters of our forecasted natural gas production for the remainder of 2024 and 2025 hedged at $3.32 per gigatool. In a few minutes, Adam will provide additional details on our commodity hedges. Sales production for the quarter was approximately 31,900 BOEs per day. This reflects the impact of both the unscheduled dumping pound gas plant outage during the first half of the reporting quarter to repair a tube leak in a sulfur condenser heat exchanger, as well as the shut-in of production in northern British Columbia in early May and in northern Alberta in the third week of June. Both of these areas produce dry gas with no natural gas liquids. Consistent with our strategy to build and strengthen our customer-centric raw gas processing business, a bright spot was the increase in third-party processing at the Caroline Gas Plant. Third-party volumes were up 40% in the quarter, largely on the back of two new multi-well pads drilled in 2024 by an area operator developing their sweet Manville liquids-rich gas near the Caroline Gas Plant and gathering systems. We are extremely pleased to offer our customers an opportunity to process their raw gas at a competitive cost with the benefit of deep cut liquids recovery. Our focus will remain on growing this business as we strive to fill our ample processing capacity at this facility. Subsequent to the quarter end, additional dry gas volumes in central Alberta that produce into a third party gas processing facility were shut in. Along with the previously mentioned production shut-in during the second quarter, we have elected to withdraw our production guidance for 2024, given the uncertain duration of these low ACO gas prices. It is important to note that we now have approximately 9,400 BOE per day of production shut-in, virtually all of it being uneconomic dry gas producing to third-party facilities. This represents more than 25% of our corporate production capability, which exceeds 36,000 BOE per day. While we are confident in longer term tailwinds that will strengthen eco gas pricing, we will only resume production from these shut in areas when natural gas prices recover to levels that support sustainable economics. Furthermore, with respect to our corporate guidance, We have also revised our net operating income and net back guidance to reflect the low actual and forecasted natural gas prices for the calendar year. Adam will elaborate on our corporate guidance in a few moments. I'm extremely pleased to highlight a couple of additional events that occurred subsequent to the end of the second quarter, as noted on this second quarter highlights slide and detailed on the next slide. As our news release of July 25th stated, we have successfully closed the sale of our Goldboro, Nova Scotia property and assets, marking a milestone where we have completed the pivot to our strategically focused upstream and midstream business. We are tremendously excited by the opportunity to simplify our corporate structure and concentrate on our core business. Simultaneous to our Goldboro sale, we also announced a private placement of 12.8 million common shares to AIMCO, an existing shareholder in Paraday. Using the proceeds from the Goldboro sale, the approximately $4.5 million raised through the private placement, along with existing company liquidity, we were able to successfully pay back our highest cost debt in July. This high-interest bridge loan was repaid in full including principal and accrued interest totaling $24 million. The table on the right shows our resulting market capitalization of approximately $60 million pro forma with the additional 12.8 million private placement shares. With the supplemental funds from our existing liquidity, we have successfully extinguished this $24 million bridge loan reducing our net debt by approximately $17 million, or 20 cents per share, to $203 million. Also notable is the significant reduction in the cost of debt servicing, with the revolving loan coupon being approximately 600 basis points lower than the bridge loan. We are very pleased with the ongoing support of AIMCO and our lenders through this transaction and as we continue to execute our strategic plan to deleverage our balance sheet. This is an appropriate time to take a moment to summarize the status of our strategic plan. Over the past three years, management has focused on strengthening our company skill sets, implementing efficient processes, and initiating our performance excellence strategy. While these require ongoing maintenance and continuous improvement, heavy lifting has largely been successfully completed. In 2023, we announced our strategy to pivot away from East Coast LNG to focus on our upstream and midstream business in Western Canada. With our July 25th announcement, we have successfully completed this pivot while repaying our bridge loan, which was scheduled to convert to common share equity in December 2024 without repaying. At present, we continue to concentrate on our strategic priorities of asset optimization, cost structure improvement, and building a more robust midstream gas processing business while maintaining our priority on emissions reduction and responsible energy production. We also continue to make inroads on several new venture opportunities that may include the implementation of electrical power generation, carbon sequestration, or renewable energy development. As we look beyond 2024, the continued improvement in our core business, our unique and strategically located infrastructure ownership, and our pursuit of new opportunities synergistic with that infrastructure, we are confident in our ability to drive improved cash flow, deleverage our balance sheet, and ultimately deliver robust returns to our shareholders. Returning now to our focus on second quarter results, Production of approximately 30,900 BOE per day was negatively impacted by the previously mentioned unscheduled jumping pound gas plant outage and the shut-in of non-economic dry gas production. Operating costs of $53 million in the quarter experienced upward pressure on a per BOE basis due to the resultant lower production in the quarter, given the majority of our costs are not significantly rate dependent. As previously stated, net operating income in the quarter of approximately $8 million was bolstered by $20 million of commodity hedging gains. Capital expenditures for the quarter were a modest $5 million, concentrated primarily on the capital maintenance required to remedy the jumping pound gas plant outage. We continue to defer discretionary capital spending given the ongoing challenges to free cash flow generation at current pricing, but we continue to allocate funds to maintain our safety and operational reliability standards. Referencing the chart in the lower left of the supporting slide, operating expenses in the green bars continue to trend flat to slightly improving. while per barrel operating expenses shown in the green line remain flat to slightly inclining as the impact of production outages and shut-ins reduce the volumes available to dilute our high proportion of fixed operating expenses. It is again worthwhile pointing out that our adjusted operating expenses shown in the same chart by the red line are approximately $2.50 per BOE lower than our unadjusted operating expenses. As always, the adjusted operating expense is calculated by including third party revenue and sulfur sales revenue to offset the unadjusted operating expenses. This third party and sulfur sales revenue is only possible through our ownership in our facilities and infrastructure. At this time, I would like to pass things over to our Chief Financial Officer, Adam Gray, to speak to our quarterly financial results and provide insight to our corporate guidance and current hedge book. Thank you, Darcy.