Pine Cliff Energy Ltd.

Good morning, and thank you for joining us on the Pinecliffe Energy second quarter webcast. We will open with remarks from President and CEO Phil Hodge. Today, Mr. Hodge is joined by Chief Financial Officer Christopher Zak, Chief Operating Officer Terry McNeil, and Vice President Finance Austin Neudorf. 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'll turn the call over to Phil Hodge, President and CEO.

Thanks, Chris. Good morning, everybody. As we've done in the past, we're not going to bother to read the press release or kind of give kind of scripted answers. We've had lots of questions, so thank you very much. A lot of the people that might be listening get our quarterly update that I do, and that's stimulated a bunch of different questions, kind of more around the macro on natural gas and what's happening, and we're happy to address those, so I think we'll get to those pretty quick. I think just on a summary on the quarter, it was a case of natural gas prices being much better than last year, but still not at the level that we expected. would like to see them at. I guess maybe we always want to see them higher. But I think a big reason for that is around the LNG. We've had LNG Canada on now for a year, but it's not been a consistent draw on the system. And that was problematic in July and August, which is when storage levels started to rise again because LNG Canada Phase 1 wasn't at its full capacity. We're starting to see indications again that it's heading back to full capacity like it was in June when it set export records for Canada for LNG. So ideally, you're wanting to see the tanker leaving every couple of days out of LNG Canada Phase 1. And that hasn't been the case for the last six or seven weeks. But the two things we watch pretty closely is we watch the draws coming out of the Willow Valley and the Sunset Creek. And I don't want to get too technical, but for those of you who are interested, just send me an email afterwards and I'll send you the link. The TC Energy has got a public website availability that you can actually see when Willow Valley is drawing. What that means is if Willow Valley has got gas flowing through it, then that means that they're drawing off the – NOVA system, and therefore natural gas is going to Kitimat, which is where the site for LNG Canada is. That's not always the case. When it's at lower than full capacity or even lower than mid-capacity, so if it's under a BCF of exports, they tend to just be using gas directly from the producers that own LNG Canada and therefore not drawing gas off the system. So we really watch that closely because as they ramp up their capacity, They then start to draw off the system, and then that impacts the rest of the entire natural gas infrastructure because you're now pulling gas off that otherwise would be going into a crowded system and a crowded storage system. So you can really see that if you look at the storage – for the last summer, you really saw it in June. Because in June, LNG Canada was at pretty much full capacity. So they were almost, they were like about 1.8 BCF a day was what they were exporting. And you saw that storage then started to drop. And as long-time followers of the natural gas landscape know, storage is kind of the scoreboard as to what's happening between supply and demand. And so you do not want to see storage at its peak It's a good thing. It's positive. which is why gas prices are well over a dollar higher at MCF in Western Canada than they were this time last year. So we're optimistic that things are turning the corner on that. And that's, as I've mentioned before in these webcasts and in interviews, that 1.8 BCF a day up to 2 BCF a day, that's a big, big number when our entire country only produces 19 BCF a day. So we're talking about 10% of all of our production coming on or off on demand. That's going to make a material swing. So that's something we're watching pretty closely. We had some questions about that. One of the things we had, another question was kind of just around our CapEx because we just announced the CapEx increase. This is something that shouldn't be a surprise to our shareholders or people who have been following us. The glauconite inventory that we picked up in the December 23 acquisition, we've been wanting to get after that, those well locations, ever since we've owned those assets. And that's been now two years. Now, prices were weak, and therefore prices are weak. We're very highly correlated to ACO pricing, and therefore our cash flow weakened with the lower ACO prices. We managed to drill the one well earlier this year. These wells are typically between $8 and $9 million all in when you drill and you complete and you tie them in. And so we've got that one well, and I'll turn it over to Terry to talk about how it's doing. But we wanted to get another well done this fall. And luckily, our cash flow has improved this summer, as we talked about. ACO's been a little bit stronger. WTI's definitely been stronger. With the Middle East crisis and war situation, we've seen that WTI rise, and that's had a big impact on us. I know we're definitely thought of as a natural gas producer, as we should be, since about 80% of our production is natural gas. But in the last quarter, more than 50% of our revenue actually came from liquids. And a big part of that was the 423 well from the Glock. So we'll pass over to Terry to talk a little bit about the well results to date.

Sure. Thanks, Phil. Appreciate it. Yeah, the 423 well came on in the middle of February, was cleaning up sort of towards the end of February. It's been on pretty well continuously from March until right today, despite some third-party maintenance going on in the quarter. But we've had it on almost 100% of the time. From a financial perspective, from March until June, so over that four-month period, those are the latest financial reports or financials we have. It's averaged 1,100 BOE a day, and it's pretty well flat month to month, and it's performing very, very well. It's in accordance with our type curve. It exceeds our engineering type curve. And I guess more importantly, it's 50% gas, 50% liquid. So the liquid exposure makes a considerable difference to Pinecliffe. And the volumes do too. I mean, it's pretty well 5% of our corporate production. So it's a good well. We're excited. It's performing well. And we'd like to do more.