PrairieSky Royalty Ltd.

Good day, and thank you for standing by. Welcome to the Prairie Sky Royalty Limited third quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. 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 Chief Executive Officer. Please go ahead, sir.

Thank you very much, and good morning, everyone, and welcome to the Prairie Sky World TQ3 2022 earnings call. On the call from Prairie Sky are Cam Proctor, COO, Pam Gazelle, CFO, and myself, Andrew Phillips. There's certain forward-looking information in my commentary today, so I'd ask investors to review the forward-looking statements qualified in our press release in MDMA. Before passing the call over to Pam to walk through the financials, I will provide an operational update. Strong third quarter activity of 286 FUDs and an average royalty of 8.9% should result in a strong finish to an already excellent year and a tailwind for 2023. Activity was spread across the base and the numerous walls were exploratory, testing new concepts and play ideas. Third quarter leasing was very strong as we entered into 58 leasing arrangements with 46 different companies, resulting in lease issuance bonus of $5.9 million throughout the quarter. The compliance group also had a productive quarter and brought in $3.3 million in compliance revenue. Given the confidence in our organic growth profile, our low payout ratio and the pace at which the debt incurred for the acquisitions in 2021 has been retired. The Board of Directors has made the decision to double the current $0.12 per quarter dividend to $0.24 or $0.96 per share per year. This will be effective for the Given our continued low payout ratio and organic growth opportunities, investors can expect rateable annual dividend increases in future years. This low payout ratio will allow us to retire the current debt and have significant liquidity available for opportunistic acquisitions or shareholder purchases, whichever provides the best long-term return for shareholders. The significant investment that we have made in the large heavy oil and place accumulations across the Western Canadian sedimentary basin at the inflection point of a new technology used to significantly increase recovery factors will provide our owners with per share reserve growth over the next 5, 10, and 15 years. Our once every two-year investor day is scheduled for the morning of May 17, 2023. with a range of outcomes over the medium and longer term for the business. Thank you to our owners and staff for patiently allowing us to improve our business over the last five years. I will now turn the call over to Pam to walk through the financials.

Thank you, Andrew. Good morning, everyone. As Andrew mentioned, there's certain forward-looking information in our commentary today, so I'd remind investors to review the forward-looking statements qualifier in our press release in MD&A for Q3 2022. Royalty production averaged 24,986 BOE per day in Q3 and generated another strong quarter of funds from operations, which totaled $123.5 million, or 52 cents per share. Prairie Sky's oil royalty production averaged 11,376 barrels per day in Q3. Excluding all acquisitions, oil royalty volumes increased 20% over Q3 2021 due to strong third-party drilling activity across our land base. Oil royalty revenues totaled $107.6 million in the quarter, as we realized $102.80 per barrel, which is up approximately $30 per barrel over Q3 2021. As expected, oil royalty volumes were lower than Q2 2022 following seasonal breakouts when third-party field activity slowed down and fewer new wells are drilled and brought on stream. Oil royalty revenue lagged Q2 primarily as a result of lower WPI benchmark pricing and wider light and heavy oil differentials, partially offset by a stronger U.S. dollar. We anticipate higher oil royalty volumes into Q4 in 2023 due to the level of activity on our lands in the quarter, when 268 oil wells were spud, including 107 Viking wells, 48 Clearwater wells, and 49 light and heavy Madville oil wells. Natural gas royalty revenues totaled $24.2 million in the quarter, which was up 55% over Q3 2021, as royalty production volumes averaged $65.7 million a day and benchmark pricing improved. Volumes increased due to acquisition volumes as well as 5% organic growth. Natural gas royalty production volumes remained flat with Q2, but natural gas revenue declined 34% due to lower ACO and Station 2 benchmark pricing. During the quarter, there were 18 natural gas wells split on our royalty lines, including five Spirit River wells and four Manville wells. NGL royalty revenue totaled 14.2 million, which was up 41% from Q3 2021 due to strong benchmark pricing and flat average NGL production volumes of 2,660 barrels per day. NGL royalty revenue decreased 20% from Q2, primarily due to lower benchmark pricing. Prior period adjustments totaled 1,257 VOE per day in the quarter, with 798 VOE per day related to new welcome streams and 459 VOE per day related to compliance activities. Overall, PPAs were 40% liquid. The compliance group recovered MIPS and incorrect royalties through forensic accounting, collecting $3.3 million in the quarter. During Q3, other revenues totaled $8.7 million and included $1.6 million of lease households, $1.2 million of other income, and $5.7 million of bonus consideration. Year-to-date, we have entered into 164 new leases as compared to 91 leases in the first nine months of 2021. New leasing is a leading indicator of field activity, and we anticipate near-term drilling on many of these new leases. Cash administrative expenses total $4.9 million, or $2.13 per BOE in quarter. We anticipate cash administrative expenses will be well below $3 per BOE for the full year. Current tax expense total $20.4 million in Q3. Entering the year for FSI has $1.75 billion of tax goals to offset future taxable income. So in 2022, the first $175 million of cash flow is tax-free, and the remainder will be 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 payout ratio of 23%. Excess funds from operations above the dividend and our $2.5 million of acquisitions was used to repay bank debt. Net debt at September 30th was $364.2 million, Prairie Skies has reduced net debt by 43% of $270.8 million since December 31, 2021. We are pleased to announce a 100% increase in our quarterly dividend to $0.24 per share, or $0.96 per share annualized, effective for the December 30, 2022 record date. Since IPO, Prairie Skies generated approximately $2 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.