Topaz Energy Corp.

Good morning. My name is Operator Roussel, and I will be your conference operator today. At this time, I would like to welcome everyone to the TULPAS Energy Corp. 3rd Quarter 2024 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the star, followed by the number two. This call is being recorded on November 5th. I would now like to turn the call over to Mr. Staples, President and CEO. Please go ahead.

Thank you, Razelle, and welcome everyone to our discussion of Topaz Energy Corp's results as at and for the period ended September 30th, 2024. My name is Marty Staples, and I'm the President and CEO of Topaz. With me today is Cherie Stevenson, CFO and BP Finance. Before we get started, I refer you to the advisories on forward-looking statements contained in the news release, as well as the advisories contained in the Topaz Annual Information Form and within our MD&A, available on CDAR and our website. I also draw your attention to the material factors and assumptions in those advisories. We will start this morning by speaking to some of the recent and third quarter 2024 highlights. After these opening remarks, we will be open for questions. Topaz completed the previously announced acquisition from Termini Oil Corp. November 1st, which added royalty interest over 3 million gross acres across our existing northeast BC Montney, Alberta Deep Basin, and Peace River High core royalty areas for a total consideration of $278.2 million. This strategic acquisition increased Topaz's royalty acreage by 50%, including a 38% increase to Topaz's premium money rights acreage, and provides 100% alignment to Tourmaline's future identified growth projects. Notably, we saw our Tourmaline-operated drilling rigs across our acreage increase from 13 rigs in Q3 2024 to 16 dedicated rigs in Q4 2024, driven by our expanded acreage position. On October 22nd, we closed the previously announced bought deal equity finance and concurrent private placement. Topaz issued a total of 8.26 million shares at $25.05 per share. The financing proceeds were used to fund the tourmaline royalty acquisition, in addition to approximately $80 million funded through our existing credit facilities. Popad's third quarter and year-to-date 2024 average royalty production was 18.7 and 18.9 thousand BOE per day, which includes 9% and 11% growth in crude and heavy oil royalty production, respectively. Beginning in November, the tourmaline royalty acquisition is estimated to provide 12% immediate royalty production growth with additional growth potential as tourmaline continues to develop the acquired acreage. The value of our royalty portfolio continues to be demonstrated through the strong, reliable level of operator activity and investment in enhanced recovery techniques across our acreage. During the third quarter, a record 216 gross wells were drilled on our undeveloped royalty lands, representing 17% of the total wells drilled across the WCSB, which increased from 15% during the prior quarter. In addition, approximately 20% of our clearwater production is currently under water flood, where we're seeing both lower decline rates and enhanced recovery rates. Operators split 216 gross wells and reactivated one gross well in our acreage during the third quarter, with drilling diversified across the royalty portfolio as follows. 59 Clearwater, 46 Northeast BC Montney, 39 Deep Basin, 31 Peace River, 26 Central Alberta, and 15 Southeast Saskatchewan. 49% of Topaz's third quarter drilling activity was in Topaz's high growth royalty areas, Northeast BC and the Clearwater. Since the beginning of 2023, 43% of all Clearwater new wells drilled and 25% of all Northeast BC Montney new wells drilled were on Topaz royalty acreage. Based on operator drilling activity, we expect that 29 to 31 active drilling rigs on Topaz acreage will be maintained through the fourth quarter of 2024. At the end of the third quarter, 60% of the 216 total new wells drilled in Q3 were not yet brought on production. We expect strong activity in Q4, particularly the new natural gas focus drills, which are scheduled to be completed and or tied in during the winter season, in anticipation of egress improvements with the plan commissioning of LNG Canada Phase 1 during 2025. HOPEZ's third quarter royalty revenue of $52.7 million represented 72% of total revenue and generated a 99% operating margin. Third quarter processing revenue and other income of $20.9 million from our infrastructure assets represented 28% of Q3 total revenue and was 15% higher than both the prior quarter and the prior year attributed to our 2024 Alberta money infrastructure acquisitions. Our infrastructure assets realized 100% capacity utilization in the quarter and generated an 89% operating market. The previously announced Clearwater Natural Gas Gathering infrastructure project is nearly complete with an anticipated on-street date during December 2024, upon which Topaz will fund the $26 million estimated construction cost. Topaz expects to generate 4.3 million higher process revenue and incremental natural gas royalty revenue beginning in January 2025, following the project completion. Topaz generated Q3 total revenue and other income of 73.6 million, cash flow of 67.0 million, and free cash flow of 64.8 million. Topaz distributed 47.8 million in quarterly dividends, 33 cents per share, during Q3 representing a 5.2% dividend yield on an annualized basis and generated $17 million of excess free cash flow, which was allocated to debt repayment. Third quarter earnings per share was approximately two times higher than the prior year due to higher realized and unrealized hedging gains and lower marketing interest and amortization expenses. We have updated our 2024 guidance estimates, which include the previously announced royalty production range of 19.1 to 20,000 BOE per day and processing revenue and other income range of 75.5 to 78 million. Based on current commodity pricing and before any additional acquisitions, TOPA is expected to end 2024 with net debt ranging between 460 and 470 million or 1.5 times net debt to EBITDA. which includes the net debt attributed to funding the remainder of the Tourmaline Royalty acquisition, as well as the Clearwater Natural Gas gathering infrastructure. The 2024 dividend represents a 69% payout ratio and remains sustainable through the end of 2025 at $0 ECO and $55 US WTI, attributed to the fixed revenue provided by our infrastructure portfolio and our hedging contracts in place, which are available in our most recently filed MD&A. We're pleased to answer any questions at this time.

Over to you, Operator. Thank you, Mr. Morty.