PrairieSky Royalty Ltd.

Good day, and welcome to Prairie Sky Ruralty Limited announced their second quarter 2023 financial results. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call is being recorded. I would now like to hand the call over to Andrew Phillips, President and CEO. You may begin.

Thank you, and good morning, and thanks for dialing into the Prairie Sky Q2 2023 earnings call. On the call from Prairie Sky are Cam Proctor, COO, Pam Cazale, 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 qualifier in our press release in MD&A. I'll walk through the operations report and then turn the call over to Pam to summarize the financials. Q2 is another solid quarter for Prairie Sky operationally and financially. Oil royalty volumes grew organically to 12,607 barrels per day, and are now 6% higher over the first six months of 2023 when compared with the first six months of 2022. There were 148 wells spud in Q2, which were 92% oil. Although activity in the corridor was moderated by seasonal breakup, the number of wells drilled was up 21% from 122 wells spud in Q2 2022. The Viking was the most actively drilled play with 43 wells spud, followed by the Clearwater with 33 wells, 32 light and heavy manville oil wells, and five manville wells at Lindbergh. Additional oil activity took place across the portfolio, including well spud in the Duvernay and Mississippian. There were also 11 Montney natural gas well spuds. The average royalty rates for well spud in the corridor was 5.8%. Leasing activity remains robust, and the company received $5.7 million in bonus revenue and entered into 39 new leases with 37 counterparts. A number of large leasing arrangements are part of this total, including a significant light oil arrangement with well commitments where an inflection in recent well results has been noted. We leased 167 sections of land this quarter versus 82 sections a quarter ago as companies are looking to expand their inventory, and numerous new startups have been active on the leasing front. $15 million was spent on undeveloped land in the Manville stack play. There is large oil in place on the lands, and multilateral drilling will see this play continue to expand. With narrow differentials and thick pay packages, there is significant potential on both our fee title and newly acquired lands. As profitability of Canadian oil producers continues to grow and producer balance sheets remain healthy, we see growing capital expenditures in the Western Canadian sedimentary basin over the next five years. Thank you, and I'll turn the call over to Pam to walk through the financials.

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 MD&A for Q2 2023. First, as oil royalty production volumes grew to a record 12,607 barrels per day in the quarter and drove 83% of our royalty revenues. This 3% increase in production over Q1 was predominantly from oil volumes in the Viking, Manville Heavy Oil, and Clearwater Plays, which more than offset natural declines and the negative impacts of the Alberta wildfires, which we estimate lowered average royalty production for oil by 135 barrels per day and revenue by $900,000 in the quarter. Prairie Sky's realized price was $78.05 per barrel, which combined with our record oil production generated oil royalty revenues of $89.6 million. Natural gas royalty revenues average $53.8 million a day below Q1 2023 as a result of operational downtime due to the wildfires, which we estimate reduced volumes by $2.5 million a day and revenue by $400,000, and the impact of a one-time prior period adjustment, which reduced quarterly volumes by $4.5 million a day and reduced revenue by $400,000. Prairie Skies realized natural gas price was $2.23 per MCF and generated natural gas revenue of $10.9 million. NGL royalty volumes averaged 1,943 barrels per day in the quarter. NGL royalty volumes were lower due to the wildfires, which we estimate reduced volumes by 200 barrels per day in the quarter and revenue by 500,000. The one-time prior period adjustment I discussed for natural gas lowered NGL royalty volumes by 370 barrels per day and revenue by 1.6 million. After accounting for these adjustments, NGL royalty revenue totaled $7.9 million with a realized price of $44.77 per barrel. Total royalty production averaged 23,517 BOE per day and generated $108.4 million of royalty production revenue. We anticipate that the wildfire volumes will be back on production for Q3. Also, the prior period adjustment I described has a one-time impact on revenue and volumes. During the quarter, the compliance group also collected $2 million in underpayments, which offset the full revenue impact of the prior period overpayment. Other revenue totaled $9 million and included $2.6 million in lease rentals, $700,000 of other income, including $600,000 of potash revenue, and $5.7 million of bonus consideration for entering into 39 new leases with 37 different counterparties. New leasing is a leading indicator of future field activity and we anticipate near-term drilling on many of these new leases. Cash expenses in the quarter were production and mineral taxes of $1.4 million and cash administrative expenses, which totaled $7.2 million or $3.36 per BOE. Cash administrative expense was higher than Q2 of last year due to the payment of a deferred share unit to a retiring director. Prairie Sky recorded a cash tax expense of $13 million in the quarter. Entering the year, we had $1.55 billion of tax pools to offset future taxable income, so in 2023, the first $155 million of cash flow is tax-free, with the remainder taxed at a statutory tax rate of approximately 23.5%. Prairie Sky generated quarterly funds from operations of $91.3 million, or $0.38 per common share. During the quarter, Prairie Sky declared dividends of $57.3 million, or $0.24 per share, with a resulting payout ratio of 63%. Access funds from operations above the dividend and our $15.2 million in acquisitions was used to retire bank debt. Net debt at June 30th, 2023 was $275.9 million. Prairie Sky has generated approximately $2.4 billion in funds from operations and returned $1.7 billion to shareholders through dividends and buybacks since our IPO nine years ago. We will now turn it over to the moderator to proceed with the Q&A.