Pine Cliff Energy Ltd.

Good morning, and thank you for joining us on the Pinecliffe Energy first quarter webcast. We will open with remarks from President and CEO Phil Hodge. Today, Mr. Hodge is joined by Christopher Zak, Chief Financial Officer, Austin Newdorf, Vice President Finance, and Dan Keenan, Vice President Exploitation. Questions for the management team can be registered online during the webcast. Prior to starting, we would like to remind participants that the 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 will turn the call over to President and CEO, Phil Hodge.

Thanks, Chris. Thanks, everybody, for attending or listening in on the recording after the fact. Keeping with past tradition on these webcasts, we're not going to read the press release, and I will assume that you've already looked at the information on our Q1. We've got several, actually, we've got more questions we typically have got in these past quarters, so I think we'll just jump right into the questions. For those of you that received my email, because you've subscribed to the email list, you will have seen a lot of comments and graphs on the macro. Some of the questions kind of touch on that, but we'll get into a little bit more detail on the questions. The first question we had was with regard to the natural gas to the southern California market. And the reduction on gas, because we showed some graphs in my email showing that there were about one BCF a day less gas went into the California market this last winter during the first quarter. That had a huge impact on on ACO prices because that's a BCF a day. Keep in mind, the one number I always repeat to people is keep in mind that all of Canada makes BCFs. 18 to 20 BCF a day of natural gas. Today, it's around 18 BCF a day. Typically, it's around 19 BCF a day. But the point being is that when we talk about these projects, the LNG projects, or when we talk about there being a curtailment in gas exports like this of BCF, that's a big number. These numbers make a real impact on the market because the market, unlike the US, which is running around 107 BCF a day, can absorb these impacts a little bit better. So what happened this last winter is it was warm in California. And so therefore they didn't need as much natural gas as they typically need for heating. That led them to taking less gas from Canada. So because of that, that gas then, if it's not going down to the U.S. market, it stays in the Canadian market and therefore it keeps our storage levels higher. And as we've explained in the past, the storage levels really are showing you kind of what's going on between the supply and demand. Because we had that warmer winter, and that was also in Western Canada as well, we're now entering into this summer with higher storage levels than we did last year. Not much, about 7% higher, but that's still higher than last year, which was already on the high end. The one, and I pointed this out in my president's letter, the one thing that's different this summer is we've got LNG Canada up at full operation. And they hit a record in April for the first time they sent out a million metric tons of LNG from Kitimat, B.C., off the West Coast. So that was a significant milestone. We expect and hope that that's going to continue to be the pace of exports all throughout the remainder of 2026. And that will be very interesting because we've never had two BCF a day of LNG exports in the market at the same time. Again, keeping in mind that we only make 19 BCF a day. So there was a question about the warmer weather impacts on our natural gas. And I think that ties into that same comment about the SoCal market. The one ramification of a warmer winter is that, yes, you use less natural gas for heating of homes, However, when you have the warm winter, that probably means you didn't get as much snow and therefore snowpack is down and therefore there's a potential issue with hydro. And so that usually comes to fruition during the summer months if you don't have as much hydro and you still need all the power and electricity that's required for air conditioning. So we're already seeing signs that it could be a warmer summer, which would mean we'll have more natural gas in the summer. And at the same time, hydro may not be able to keep up with that extra demand. Again, keeping in mind is that in the background, you also have the LNG exports that are going to be taking natural gas off the market. So keep a close eye on storage as we go through this summer and into the fall. Because if storage continues to kind of moderate and start to drop down below the averages of the past few years, that's going to make up for a fairly... bullish setup for natural gas going into this winter. I think that's a key point because we've seen all of the massive amount of AI construction around data centers that's happening. And at some point, you're going to start to see the natural gas that flows into those projects start to show up as another piece of demand. The one thing that I've pointed out to shareholders before is that unlike You know, we've been doing this now for this is our 15th year running Prinecliffe. In the past, in the early years, it was all about weather. How hot was it going to be in the summer? How cold was it going to be in the winter? And that was what really drove natural gas demand. These new demand pieces that are entering into the market now in the forms of LNG and in data centers, These are 24-7, 365 demands. They are not weather-related. These things, you know, barring any mechanical issues, they're going to continue to be every day drawing down natural gas demand. So we're adding a lot more bulky, sustainable, and very predictable demand. And so we've seen this in the U.S. when they went from zero LNG exports to 20 BCF a day of exports. it has a huge impact on the drawing of natural gas. So we'll keep an eye on all of that as we head into the summer and the fall. One question was also asked about the natural gas production related to the rig counts. The rig counts had kind of come down, and yet natural gas production had not decreased much. One of the things that we've seen over the years, and a few years ago it wasn't really fair to look at rig counts because they've become so much more efficient. And that efficiency continues today, but now when you look back year over year, I think you're starting to see a little bit more consistency that you are comparing apples to apples. You're not comparing the old drilling techniques to the new ones, because I think we're now in an age where almost all the new wells are horizontal, and in most cases are fracked wells, The one thing we've seen in the Montigny and the Duvernay is that these wells can come on with a lot of initial production. And so the rig count becomes less of a barometer or a measure for activity for production as meters drilled, for instance, because a lot of these rigs are able to go a lot deeper. A good example is even the glauconite well that we did. which was almost a six-kilometer well all in, so two miles down, two miles out. So these wells are very, very technically impressive, and the amount of gas that they're able to access is very large. So we keep a close eye on meters drilled, on frack crews, those types of things, because they seem to be a little bit better indication of where production is going to be going as opposed to just looking at the rig count. One of the questions we had was on our debt and where we expect to see the debt. I'll hand that over to Chris.

Yeah, thanks, Bill. So the question revolved around targeted for year-end debt reduction. We continue to make our scheduled debt payments. So all else being equal, you'll see a continued reduction in our term debt at the end of the year. The decision to accelerate debt repayment will continue that will be assessed in comparison to the returns on reinvestment into our assets. So we're going to continue to assess that on a forward basis. Obviously, with the success that we've seen in the 423 well, we continue to evaluate other opportunities for drilling in the area. So we will continue to balance off those capital allocation decisions in the context of the market.