PrairieSky Royalty Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to Prairie Sky Roll. TLTV announces their annual and fourth quarter 2023 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Andrew Phillips, President and Chief Executive Officer. Please go ahead.

Thank you, Operator, and good morning, everyone, and thank you for dialing into the Prairie Sky year-end conference call. On the call from Prairie Sky are Pan Cazale, CFO, Dan Bertram, CCO, Michael Murphy, BP Geosciences and Capital Markets, as well as myself, Andrew Phillips. There's certain forward-looking information in my commentary today, so I would ask investors review the forward-looking statements qualifier in our press release in MD&A. As we approach our 10th year as a publicly traded company, our team continues to strive to improve our business over the next 10 years. The industry-leading organic growth rates in our liquids portfolio are the result of assets acquired years ago. 2023 was another great year on multiple levels, Organic oil growth was approximately 6%, and the 4.5 million barrels of produced royalty oil were organically replaced by drilling. Of note, our $14 million fee title acquisition, which closed near year-end, was not included in the 2023 reserve report. During the quarter, there were 197 wells spot on our lands, bringing total wells spot to 804 wells in 2023. This included 147 clearwater wells, 139 Manville heavy oil wells, and 236 hiking wells. We also saw our first helium well drilled in our acreage. We estimate that $2 billion of gross capital and $112 million of net capital was spent on Prairie Sky Realty lands in 2023. Based on an estimated $26.7 billion of gross capital on conventional oil and gas assets spent in 2023, approximately 7.5% of industry capital was spent on Prairie Sky lands. Net capital increased 38% year over year. Although this is partially inflation-related, the increase led to Prairie Sky's strong oil royalty production growth. Leasing activity remains at high levels. Throughout the year, we entered into 202 new leasing arrangements with 110 separate counterparties. This resulted in $26 million in bonus consideration over 2023 and $11.2 million in Q4. Leasing activity was strong across the basin, primarily for oil targets. Strong recent well data and lower costs have resulted in stronger producer interest in the Duvernay shale, and we expect light oil growth from this play over the next 10 years. The moat around our business is our irreplicable fee mineral title land base. We also have seen stronger interest in viewing our large seismic database as operators are conducting exploration to expand their drilling inventory. Prairie Sky controls 54,200 linear kilometers of 2D seismic, and 20,100 square kilometers of 3D seismic. Our seismic data is continually improving as we receive a copy when a producer reprocesses the data. This data is available to third parties leasing our lands, and we also use it to develop prospects for industry, which we can then lease. Our compliance group, who are always busy, returned land to inventory and brought in $6.6 million throughout 2023. As we look into 2024, our team will continue to focus on controlling costs compliance, leasing our large undeveloped land base, and executing on high return acquisitions. We are pleased to announce a 4% increase to our annual dividend, bringing it to $1 per share and $0.25 per share quarterly. This increase is effective for the March 29, 2024 record date. We will use excess cash flow above the dividend to retire bank debt and execute on high return on invested capital acquisition opportunities, if available. I'd like to thank our staff for the continued hard work and our shareholders for their support. I'll 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 the notes today, so I would remind investors to review our forward-looking statement qualifier in our press release and MD&A for Q4 and the year ended December 31, 2023. Prairie Sky had a strong Q4, which closed out another year of organic oil royalty production growth and momentum in leasing activity. Prairie Sky's Q4 royalty production averaged 25,608 BOE per day and included a record 12,844 barrels per day of oil, 6% higher than Q4 of 2022. NGL royalty volumes averaged 2,697 barrels per day, Flat with Q4 2022 and natural gas royalty volumes averaged 60.4 million a day, down 9% from Q4 2022. Annually, royalty production averaged 24,857 VOE per day with a record oil royalty volumes of 12,438 barrels per day, an increase of 6% year-over-year with growth primarily in the Clearwater and Manville heavy oil plays. Praise Sky's Q4 royalty production revenue totaled $122 million, generated 90% from liquids royalty volumes. Annually, royalty production revenue totaled $474.6 million, 88% from liquids. In 2023, realized oil pricing of $82.52 per barrel was 82% of Edmonton PAR, and NGL realized pricing of $47.60 per barrel was 47% of Edmonton PAR pricing. We anticipate 2024 price realizations to be in line with 2023. Realized natural gas pricing was $2.60 per MCF, with approximately 90% of our volume sold at monthly and daily ACO pricing and approximately 10% being sold at UMass pricing. Other revenue totaled $14.6 million in the quarter and included $11.4 million of bonus consideration. This brought annual bonus consideration to $26 million and total other revenues to to $38.6 million, the highest total since 2017. Prairie Sky is forecasting other revenue in the range of $25 to $30 million in 2024, including lease rentals, bonus consideration, and other revenue. Compliance recoveries will be incremental to this amount and included in royalty revenue. Looking forward, Prairie Sky's 2024 annual pricing sensitivities, which are all net of taxes, are as follows. A $5 per barrel change in U.S. dollar WTI would increase or decrease funds from operations approximately $22.5 million. A $0.25 per MCF change in ACO would increase or decrease funds from operations approximately $4 million. A $0.01 change in the U.S. to Canadian FX rate would increase or decrease funds from operations approximately $4 million. And if the WCS oil differential moved by $1.00, we would see an increase or decrease in funds from operations of approximately $2.5 million. This impact would be the same for a $1 move in the MSW differential. Cash administrative expenses total $5.1 million, or $2.14 per BOE in the quarter. We expect 2024 cash administrative expense to be in the range of $35 to $40 million due to strong stock performance impacting share-based compensation. Current income tax expense totaled $14.4 million in Q4, bringing 2023 current tax to $58.8 million. Entering 2024, Prairie Sky has $1.4 billion of tax pools to offset future taxable income, which is primarily deductible at 10% per year. For 2024, that means the first $140 million of pre-tax cash flow is tax-free, with the incremental cash flow tax at 23.6%. During the quarter, Prairie Sky's funds from operations totaled $111.1 million, and we declared dividends at $57.3 million, or $0.24 per share, with a resulting payout ratio of 52%. Annually, Prairie Sky generated $382.5 million in funds from operations, which were used to fund dividends of $229.2 million, with remaining cash flow used primarily to reduce Prairie Sky's bank debt. At December 31, 2023, Prairie Sky's net debt totaled $222.1 million, a decrease of 30% from December 31, 2022. Once again in 2024, Prairie Sky will receive the full pricing reduction related to our sustainable credit facility based on the evaluation by third-party rating agency Sustainalytics, which included Prairie Sky in its list of the Global 50 top-rated ESG companies for 2024. We will now turn it over to the moderator to proceed with the Q&A.