PrairieSky Royalty Ltd.

Good morning, ladies and gentlemen, and welcome to the Prairie Sky Royalty Limited announces their second quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to hand the conference over to your host, Mr. Andrew Phillips, President and CEO. Thank you, sir. Please go ahead.

Thank you, Whitney. Good morning, and thank you for dialing into the Prairie Sky Royalty Q2 earnings call. On the call from Prairie Sky are Cam Proctor, COO, Pam Cazell, CFO, and myself, Andrew Phillips. While Q2 represents the traditionally slow activity quarter in the field due to spring breakup, our team has been very busy in the office. Leasing remained strong as we entered into 34 new leases with 32 different counterparties. This generated $2.3 million in bonus consideration for both natural gas and oil opportunities. We also executed on our largest acquisition since 2017. We stood in the batter's box for three years and finally saw the perfect pitch. This asset is the quickest payout, lowest cost oil asset in the Basin. It currently produces 10,000 barrels per day. and will double by 2024 without the need for external capital. Individual wells payout in months, produce to 100% owned and operated battery, and are pipeline connected. Secondary recovery initiatives are planned on this asset. The addition of this asset will see us exit 2021 at over 1,000 barrels per day of clear water production. This is funded with our bank line and we'll write off the interest and can take leverage to zero at the end of 2022 with cash flow on top of the recently increased dividend. The 38% dividend increase rewards shareholders that have allowed us to make capital allocation decisions based on what is best for long-term shareholders. Our industry low payout ratio has allowed us to cancel 5% of the outstanding shares below $10 per share over the last 18 months, execute on an acquisition that will be 5% of our production in a few years, and become the dominant Clearwater Royalty company in terms of both production and undeveloped land, which will provide future growth at no cost to Prairie Sky. The new dividend will still be a payout ratio below 50% in 2022 at $50 WTI. This will allow us to continue to pursue acquisitions that improve our business and cancel shares below intrinsic value, giving owners a bigger share in the company. Prairie Sky is the best way to profit from the increasing capital spending in the Western Canadian sedimentary basin and will continue to work hard at leasing land, controlling costs, ensuring compliance, making quality acquisitions, improving our ESG scores, which will continue to differentiate our business. I will now pass the call to Pam to walk through the financials.

Thank you, Andrew. Good morning, everyone. Prairie Sky generated funds from operations of $56.5 million, or $0.25 per share in the quarter. up 16% from Q1. Royalty production revenue totaled $64.9 million, generated from average production volumes of 19,723 BOE per day. Oil royalty revenue totaled $42.9 million, an 8% increase over Q1, primarily due to strong WTI benchmark pricing and narrowed light and heavy oil differentials. Revenue was generated from oil volumes of 7,028 barrels per day, which were down 3% from Q1, as new wells brought on stream and incremental production from the acquisition in Q1 only partially offset natural declines and downtime at Onion Lake due to a turnaround. Natural gas revenues totaled $13.7 million, which was 8% above Q1 due to increased production combined with strong ACO and Station 2 benchmark pricing. Natural gas volumes totaled $60.5 million a day, up 5% due to incremental volumes from the Q1 deep basin acquisition and the resumption of production that was shut in during Q1 due to cold weather freeze-offs. NGL royalty revenue increased 11% from Q1 due to strong benchmark pricing and a 4% increase in royalty production volumes to 2,612 barrels per day. NGL volumes increased due to production from new wells on stream and incremental volumes from the acquisition. There were 919 VOE per day of prior period adjustments, which were 38% liquid, and included 163 BOE a day from compliance activity, and an additional 756 BOE a day of other prior period adjustments related to new wells on stream and better well performance. The compliance period continued to recover missed and incorrect royalties through Forensica County and collected $1.1 million in the quarter. There were 89 well spuds, which were 98% oil. The Viking was the most active play, with 47 well spuds, And in addition, there were 13 Mississippian, 7 Lindbergh-Sagdee oil wells, 7 Clearwater oil wells, 3 Cardium and 2 DuVernay oil wells spread in the quarter. Other revenue totaled $4.9 million and included $2.3 million of bonus consideration. It was an active quarter and we entered 34 new leases with 32 different counterparties. We also earned $2.3 million in lease rentals and $0.3 million of other income. Cash administrative expenses total $4.8 million or $267 per BOE. Cash administrative expense was 16% lower than Q1, which included the annual long-term incentive expense of $700,000 that was paid to staff. There will be no incremental staff required to manage the new Martin Hills Royalty acquisition that Andrew discussed, so the additional production will reduce G&A per BOE go forward. During Q2, Prairie Sky declared dividends of $14.5 million, with a resulting payout ratio of 26%. Year-to-date, Prairie Sky has generated $105.3 million in funds from operations, which were used to fund dividends of $29 million, repurchase shares of $13.2 million, make acquisitions totaling $51.7 million, and repay debt of $8.8 million. At June 30, 2021, Prairie Sky To fund the Martin Hills acquisition, we increased our revolving credit facility by $50 million using the permitted increase under our current agreement. Debt upon closing of the acquisition was approximately $190 million. Since IPO, Prairie Sky has generated approximately $1.5 million in funds from operations and returned $1.4 billion to shareholders through dividends and buybacks. We will now turn it over to the moderator to proceed with the Q&A.