Pine Cliff Energy Ltd.

Good morning and thank you for joining the Pinecliffe Energy fourth quarter and year end results conference call. Today we will open with remarks from President and CEO Phil Hodge. Mr. Hodge is joined today by Terry McNeil, Chief Operating Officer, Christopher Zak, Chief Financial Officer, Austin Newdorp, Vice President Finance, and Dan Keenan, Vice President Exploitation. Questions for the management team can be registered on the webcast. Prior to starting, we'd like to remind participants that this call may contain comments on or discussion of forward-looking information. As such, we refer participants to the cautionary statements on forward-looking information included in the presentation on our website, www.pinecliftenergy.com. With that, we'll turn the call to Mr. Phil Hodge, President and CEO. Thanks, Chris.

Thanks for those joining in and for those who will be listening on the replay that will be on our website. As we've been doing on these webcasts in the past, our intent is not to reread the president's message or the press release that you already got access to. Many of you already received my quarterly email also that went out last night, which focuses a bit more on the macro, how we see the environment. We received several questions last night, and so I think we'll work through those. But if you've got any other questions, please send them along and as we're speaking and we'll be happy to address them. One of the probably the the most questions I got last night and this morning have been just looking for a little bit more clarity on our Glock well that we drilled. And we totally understand the curiosity around that because we haven't done any drilling for a couple of years. Everybody's well aware of how much we think of that area and that we're very positive and that we've actually increased the number of Glock locations that we have in that area to now being 22 net locations. And for a company of our size, that's significant because these locations are highly valued. That being said, anyone who's been following Pinecliffs or has been a shareholder of ours for some time knows that we're not a neon lights type of company as I sometimes refer to it. We're not going to be out there with 24-hour type IP rates We want to make sure we're giving the market a very clear picture of the well. Maybe what I'll do is I'll hand this over to Terry and let him give you a bit more detail on the well. But again, we're not intending to give a lot of production information until we know that we have a more consistent production history.

Thanks, Phil. Good morning, folks. Yeah, with regards to the well itself, execution went well, drilled ahead of schedule. Overall costs came in consistent with our expectation. The well has been on production for almost two weeks now, and it's still in very, very early cleanup, so really hasn't reached a stabilized rate. We're quite encouraged by the early results, but it's really too soon to draw any firm conclusions on any long-term productivity or performance. So we keep an eye on it regularly, and that's probably the best update we can give at this time.

Thanks, Jerry. Yeah, our intent will be to, once we do have a consistent longer-term production history, to be able to update the market at that time. But as Terry said, we're quite encouraged by it. But we just don't want to be in a case where we're giving out information that's either positive or negative on the results. It's just too early to say. One question we did get last night was around the infrastructure spend in Q4 around that well. So the 423 well is the block well that we drilled in December and brought on in mid-February. At the time, we also put in a sales pipeline and other infrastructure that not only assisted getting the production from that well on, but also will be able to be utilized for other wells in the area. We're pretty happy with where the cost came in at. We're essentially on budget for what we expected to do in that area for both the well and the infrastructure. Our well is set up for You know, as we look at the back half of this year, I mean, we've got right. Our intent would be to go back to drilling, drilling in the in the central Alberta area of the Glock Glock and I Wells later this year. But we haven't like we say, well, the flexibility that we have is something that's, I think, an advantage. Pricing is an echo is starting to strengthen here over the last couple of weeks. That's a good thing. We'll see how that plays out through the summer. Our plan would be, you know, if we are going to drill and that's our intent, we would be looking at kind of Q3, Q4 as to when we would go back to the sundry area. One of the questions I got, you know, we've had several questions around the data center update. And so, again, those of you that follow the Pine Cliff story know that we announced, we're I think the first natural gas producer to announce a an arrangement with a data center in our central Alberta. That has not, I mean, we're, let me back up. We are a gas provider on all of these types of projects. And so in that situation, that group that we're dealing with, it seems to be very close to finishing their financing, but it is not within our control for them to get the final financing put in place. so that they can launch construction on the site. There to date has been no construction started on the site, but we're still encouraged that that's going to happen here in the next couple of quarters. And so that's still something that we're working very closely on. In the meantime, we've had a lot of interest on other sites that we've got in the province of Alberta and even in Saskatchewan about data centers and about power generation. in general for various uses. We continue to talk to all groups about this. I mean, our goal is really to try to get a premium price for the molecules that we produce. And how we do that and where it gets used and how it gets used, that's all part of these discussions because it kind of varies among the parties. But our goal would be for the same production that we have today to be able to get a more premium pricing on it. And so those we will, you know, as projects get put in place, we'll update the market. The fact that we've got as many groups interested in some of the sites that we have, which we think are very conducive to these types of projects, where they've got good natural gas, they've got fiber availability in several of the sites, we own the land. So therefore, it could be co-located with our existing industrial facilities. So there's a lot of reasons why we think that, you know, this is an area that has got potential for Brian Cliff. But it's, you know, it's a slow, everybody's figuring out the regulatory process. Everybody's, again, you know, a lot of these groups are getting their financing put in place. The province of Alberta has announced that they want to attract $100 billion of data center development to the province. which is great. And there's been a lot of announcements. I referred to a lot of them in my email that you would have received last night if you're on the email list. But there's only so many projects that actually have started construction. Again, that's not surprising. These are, in many cases, multi-billion dollar type projects. And so there's a lot of steps that need to be done before they're actually going to break ground. That said, it's quite encouraging on how much activity there is in this area. Another question receives, got a couple of people asking me about kind of what's the impact of the European situation and with the Iran war. Right now, all of the natural gas that can come out of North America really is already allocated. In other words, the LNG capacity That's what prohibits us from sending more gas over to Europe when there's clearly a strong demand right now for gas in Europe. Pricing's gone back over $12 an MCF, whereas here in Canada, it's at $2 an MCF. That arbitrage really can't get closed without more LNG export capacity. And there's lots of, as many of you know, Canada, the LNG Canada is now well on its way to getting its phase one reaching its capacity of two BCF a day. That's great. Hopefully we'll see a positive investment decision on phase two sometime in 26. That will take it to hopefully four BCF a day. There's other projects underway. But in the really short term, there's really nothing that the North American producers or the North American LNG can do to send this, to send more gas to Europe. So I think the issue that the Europeans are having is right now with the Strait Hormuz shut in, a lot of LNG that's coming out of Qatar, a lot of other, you know, the supply chain for LNG has been disrupted. And therefore there's a concern that they're not going to be able to put gas into storage, not so much for this winter, because we're already kind of through this winter. It's about getting ready for next winter because they had a fairly cold winter. And so their storage got was depleted. And now if they don't, aren't able to fill it, there's going to be a real panic on, um, for natural gas in Europe for next year. And you can see it that already, there was some headlines this morning about Putin, um, uh, threatening that he could cut off. Natural gas to Europe. If they don't allow, uh, oil and natural gas exports, if there's any kind of embargo put on Russia. That's a significant threat because the European nations still use a lot of Russian gas. They don't use as much as they did before, but they still use a lot of Russian gas. So there's a lot of dynamics. What it does do is that, and there was a piece that came out this morning, just looked at the chart about how many new LNG projects have been announced. You know, you'll see in our presentation, all the LNG projects that are currently in operation and those ones under construction. Well, there's another wedge on top of that, which is new announced production and future capacity builds on LNG that would take it to well beyond 40 BCF a day coming out of North America, which is a massive number. Today, that number is around 20 BCF a day. That's been a huge increase from where it's at. I think all of this global dynamic pricing really does have an impact on the future viability of more LNG projects coming on. This is why our prime minister is traveling around the globe right now. It's also why we're seeing more and more requests for Canadian energy around the LNG. The one thing I would say about the impact of the war, I mean, when we saw oil prices, the spot price, $78, $79 this morning, you'll see in our financial statements that about every dollar increase in WTI equates to about a $1.4 million increase in annual cash flow tasks. So we are a pinecrest, even though we are 80% gas, That move in WTI, move in oil prices, does have an impact on our cash flow statements of a pretty material nature. I think the only other question that I kind of got from last night was just on our hedging. I think our hedging is pretty well set out. Chris has done a good job, and it's in our press release. You can see that we're fairly well hedged going into 26th. um protecting the summer prices uh but also like i say locking in some some pretty some prices that we're pretty comfortable going forward i don't know chris if you want to comment just generally on our on how we kind of look at hedging going forward i would i would just only add that we'll continue to hedge where where where possible to continue to protect um our cash flow against near-term volatility so again just to reiterate what's in the press release

37% of our gross natural gas production has hedged an average price around 319 for 2026, and around 31% of our crude oil production at around 63.45 US dollars.

Thanks, Chris. So I think that covered all the major questions that we've received either this morning or last night. I mean, you've always got access to us if anybody wants to talk further. um you know it is a it's been a uh challenging quarter because it's q4 as you saw in the numbers was actually pretty good echo was moving up nicely that has a big impact we're obviously highly correlated to the echo price moves q1 echo was uh that was you know it came down and the reasons for that was primarily because the warm weather in western canada but also the lng canada delays because there were some technical issues. But as that ramps back up, as we head into the back half of this year, where we're going to hopefully see LNG Canada back to kind of get to their capacity around 2 BCF a day, there's a lot of reasons for us to be positive. And our goal will be to continue to allocate capital to the best we can. to both continue to lower our debt, which is something that we think that just makes us more flexible going forward for potential opportunities, but also to continue to finance the drill program. Because we think having such strong locations that can deliver such positive returns, that's something we should be allocating capital towards. So, and all in the backdrop of all of that, we continue to keep the dividend rolling. I mean, very proud of the fact that a company of Franklin's size has been able to pay over $100 million of dividends, which is almost 30 cents a share since we started the program in summer of 20, sorry, the summer of 22. Okay, well, if there's no further questions, we won't take any other time away from you. Thank you very much for your attention and for your ongoing interest in Pinecliffe. Have a good day.