PrairieSky Royalty Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to Prairie Sky Royalty announces their first quarter 2024 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 very much, Operator, and good morning, everyone. Thank you for dialing into the Prairie Sky Q1 2024 conference call. On the call from Prairie Sky are Pam Cazell, Dan Bertram, Mike Murphy, and myself, Andrew Phillips. Before we begin, there is certain forward-looking information in my commentary today, so I would ask investors to review the forward-looking statements qualifier in our press release in MDA. First quarter of 2024 saw Prairie Sky receive 13,142 barrels of royalty oil volumes, a record for the company. Natural gas and NGL volumes remained steady. 50 new leases with 42 counterparties marked another strong quarter for leasing and generated $4.2 million in bonus revenue. Two notable developments took place over the first quarter. Firstly, our largest royalty payer added two new polymer and water floods and commercialized and went to the development of a secondary recovery in its two core areas. The significance of this from a royalty owner is a potential doubling of the recoverable oil per section at no additional capital for our business. These are now in the money call options. Secondly, new discoveries in a variety of Manville heavy oil stack zones grew our inventory of royalty development wells. For context, from 1994 to 2014, approximately 1,500 cold flow heavy wells were drilled per year. This kept production steady around 350,000 barrels per day. From 2014 to today, less than 250 wells per year were drilled, and production dropped to 150,000 barrels per day. Given the stack pay, lack of bottom water, individual well economics, and total oil in place, the area should be able to grow back to its previous highs and potentially surpass them. Prairie Sky shareholders are now positioned with the largest royalty position in the region. Our 2025 Investor Day will provide a deep dive into this play and also highlight all of the active water and polymer floods across our asset base. These are important assets as they lower our base declines and enhance the durability of our asset base. I will now pass the call to Pam to walk through the financial results.

Thank you, Andrew. Good morning, everyone. As Andrew mentioned, there is certain forward-looking information in the notes today, so I would remind investors to review the forward-looking statements qualifier in our press release in MD&A for the three-month end of March 31, 2024. Prairie Sky delivered another record quarter of oil royalty production, which averaged 13,142 barrels per day. This represents an 8% increase in oil royalty volumes over Q1 2023 and demonstrates a strong level of activity across our land base. NGL royalty volumes averaged 2,535 barrels per day, and natural gas averaged 62.1 million a day, bringing total royalty volumes to 26,027 BOE per day, up 5% over Q1 2023. We did see lower spuds in the quarter as compared to the prior year. Based on licensing, commodity pricing, and current third-party capital budgets in the Manville and Clearwater, we anticipate drilling activity on our oil assets to remain robust in 2024. Oil royalty production volumes in Q2 will be negatively impacted by the unplanned outage at a third-party gas plant, which is impacting producers in the Nipissi area. The estimated net impact to Prairie Sky is 500 barrels per day. The current timing of a restart of the plant is unknown, and our key producer in the area is reviewing alternatives to bring production back online. Royalty production revenue totaled $113.2 million, which was 91% from liquids. Other revenue totaled $7.5 million in the quarter and included $4.2 million of bonus consideration from entering into 50 new leases with 42 different counterparties. Leasing was primarily focused in the DuVernay Light Oil and Manville Heavy Oil regions. Prairie Sky is forecasting other revenue in the range of $25 to $30 million in 2024, including lease rentals, bonus consideration, and other revenue. Cash administrative expenses. Administrative expenses in the quarter included annual employee, officer, and director payments for the year. As mentioned on our year-end call, we expect 2024 cash administrative expenses to be in the range of $35 to $40 million due to strong stock performance impacting share-based compensation. With retirements from our Board of Directors this year and last year, we anticipate certain payments under the Deferred Share Unit Plan, which are incorporated into our estimates. Directors that retired at the AGM yesterday have until December 15, 2025, to redeem their DSUs. Current income tax expense totaled $14.7 million in Q1. Entering into 2024, Prairie Sky has $1.4 billion of tax pools to offset future taxable income, deductible at 10% per year. For 2024, that means the first $140 million of pre-tax cash flow is tax-free, with incremental cash flow tax at 23.6%. During the quarter, Prairie Sky's funds from operations totaled $83 million, and we declared dividends of $59.7 million, or $0.25 per share. Prairie Sky's net debt at March 31, 2024, totaled $208.3 million, a decrease of 6% from December 31, 2023, when net debt totaled $222.1 million. We will now turn it over to the moderator to proceed with the Q&A.