PrairieSky Royalty Ltd.

Good morning and thank you for standing by. Welcome to the Prairie Sky Royalties announces their first quarter 2022 financial results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Phillips, President and CEO. Please go ahead.

Thank you, Catherine, and good morning, everyone, and thank you for dialing into the Prairie Sky first quarter 2022 earnings call. On the call from Prairie Sky are Cam Proctor, COO, Pam Cazell, CFO, and myself, Andrew Phillips. Before we start, there's certain forward-looking information in my notes today, so I'd ask investors to review the forward-looking statements qualifier in our press release and MD&A for Q1 2022. The basin-wide resurgence in activity levels that resulted in strong Q4 2021 per share liquids growth continued into the first quarter of 2022. Excluding acquired royalty barrels from 2021, the company achieved 13% oil royalty growth when compared with the quarter one year ago. Combined with an almost double-digit free cash flow yield and some of the strongest growth rates in industry, Prairie Sky provides a strong total return proposition at a very low risk. Two new major oil discoveries were announced subsequent to quarter end on our undeveloped Clearwater acreage. These include Uticama Lake and McLeod Lake. This further highlights the optionality associated with large undeveloped land bases that is a differentiating factor when owning Prairie Sky shares. On that front, we received $3.5 million in lease issuance bonus and entered into 52 different leasing arrangements with 43 different companies. Leasing activity on the newly acquired Heritage Fee Title was particularly active, with one leasing transaction covering numerous sections of land targeting a Clearwater opportunity using low-cost multilateral technology. In 2022, we will have exploration wells drilled for both helium and lithium carbonate. Both opportunities are on Prairie Sky Fee Title lands. Our large-scale CCUS project in Meadowbrook received initial approval from the Alberta government. and we look forward to continuing to advance this opportunity with our project partners. Q1 drilling activity remains strong, with 194 wells spud on Royalty Acreage, almost double last year's Q1 total. Private operators represented approximately 50% of the spuds. Spuds were broadly distributed across the basin and included both oil and natural gas targets. notable increase in work over activity was also evident across our already drilled 43 000 well portfolio a notable increase in new oil and gas startup companies was observed over the last six months as m a activities have picked up prairie sky offers newly capitalized entities consolidated undeveloped lands and a significant high-quality seismic database that can allow them to shorten cycle times and lower upfront costs, which can help them accelerate activity to take advantage of the strong pricing environment. Existing clients of Prairie Sky are also looking to expand their inventory in their existing core areas and uncover new plays. Along with our 33% dividend increase in February, debt levels are dropping faster than anticipated which will allow both stronger dividend increases in the future and the ability to execute on accretive M&A, provided it improves the quality of our business on a per share basis. We are seeing the benefits of an inflationary activity environment and an unhedged energy portfolio with 98% operating margins. I will now turn the call over to Pam to summarize the financial results.

Thank you, Andrew. Good morning, everyone. As Andrew mentioned, there are certain forward-looking information in the notes today, so I would remind investors to review the forward-looking statements qualifier in our press release and MPA for Q1 2022. Curry Sky generated record funds from operations again in Q1 of $105 million, or 44% per common share, more than double Q1 of last year, and about 3% above Q4 2021, which included a $12.4 million tax recovery. The increase was driven by our 23,892 BOE per day of royalty production and strong commodity pricing, which combined to generate 134.7 million of royalty revenues. This is $78 million above Q1 and $40 million ahead of Q4. Prairie Sky's oil royalty production grew to 11,188 barrels per day in Q1 2022, 54% above Q1 last year and 35% above Q4. Backing out all acquisitions made in 2021, organic growth totaled 13% over Q1 and 6% over Q4. Prairie Sky anticipated strong organic growth given our active leasing program and the number of spuds across our acreage in the second half of 2021 and into Q1 2021. Natural gas royalty volumes averaged $60.5 million a day at 5% over Q1 and in line with Q4. Natural gas royalty revenue totaled $22.9 million, driven primarily by strong ACO pricing, which averaged $4.67 per MCF in the quarter. Prairie Sky's 10,000 BOE per day of natural gas is unhedged, and we will benefit from the improvement in ACO pricing, which is currently over $7 per MCF. NGL royalty volumes averaged 2,621 barrels per day, which was up 5% over Q1 and 29% over Q4, when volumes were negatively impacted by ethane curtailment. NGL royalty revenue totaled 13.1 million in Q1, driven by strong benchmark pricing and increased NGL volumes. There were 1,433 VOE per day of prior period adjustments in the quarter, of which 1,078 VOE a day, or 75%, were from new wells on stream and better well performance. There was an additional 355 VOE per day from compliance activities. Overall, PPAs were 58% liquids. The compliance group recovered missed and incorrect royalties through forensic accounting, collecting $1.5 million in the quarter. There were 194 wells spud in Q1, which were 87% oil. The Viking was the most active play with 68 wells spud followed by the Clearwater and 35 with 35 wells and the Madville with 22 well spud. Additional oil focused activity took place across the portfolio, including well spud in the Cardium, Devonian, Duvernay, Mississippi and Montney and Nisku. There were also 26 natural gas well spud in the Montney, Madville and Cardium. Activity in the quarter was well above Q1 2021 when there were 100 well spud and higher than Q4 2021 when there were 166 well spud. Other revenue totaled $5.2 million and included $1.2 million in lease rentals, a half a million of other income, and $3.5 million of bonus consideration for entering into 52 new leases with 43 different counterparties. New leasing is a leading indicator of field activity, and we anticipate near-term drilling on many of these new leases. As mentioned on our year-end conference call, Prairie Sky is forecasting other revenue in the range of $20 million in 2022, including lease rentals, bonus consideration, and other revenues. Compliance recoveries will be incremental to this amount. Cash administrative expenses total $10.3 million or $4.79 per BOE in Q1. As in prior years, Q1 is always the highest quarter as long-term incentives best and are paid in this quarter. We expect cash administrative expenses to be below $3 per BOE again in 2022. Prairie Sky recorded a current tax expense of $18 million in Q1 due to our record royalty production revenue. Entering into 2022, Prairie Sky had $1.75 billion of tax pools to offset future taxable income. So in 2022, the first $175 million of cash flow is tax-free, with the remainder taxed at a statutory tax rate of approximately 23.5%. During the quarter, Prairie Sky declared dividends of $28.7 million, or 12 cents per share, with a resulting payout ratio of 27%. Access funds from operations above the dividend were used primarily to repay bank debt. Net debt at March 31st, 2022 was $568.9 million, down $66.1 million in three months. We will apply to the TSX to renew our NCIB, which we may use opportunistically. As previously communicated, Prairie Sky's current focus is retiring the bank debt used in connection with the acquisition of the heritage royalty asset in December 2021. Since IPO, Prairie Sky has generated approximately 1.8 billion in funds from operations and returned 1.5 billion to shareholders through dividends and buybacks. We will now turn it over to the moderator to proceed with the Q&A.