Topaz Energy Corp.

Good morning. My name is Ina and I will be your conference operator today. At this time, I would like to welcome everyone to the Topaz Energy Corp. 4th 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 star, then the number two. Thank you. Mr. Staples, you may begin your conference.

Thank you, Ina, and welcome everyone to our discussion of Topaz Energy Corp's results as at and for the period ended December 31, 2024. My name is Marty Staples and I am the President and CEO of Topaz with the Today of Sri Stevenson CFO and VP 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 Forum 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 fourth quarter 2024 highlights. After these opening remarks, we will be open for questions. 2024 marked another year of transformational growth for Topaz. During the year, 430.6 million of royalty and infrastructure acquisitions were completed, which contributed to a 38% increase in annualized processing revenue, an 11% increase to year-end 2024 royalty production, and a 52% increase to our year-end royalty acreage. Topaz's fourth quarter royalty production averaged 20.3 thousand BOE per day, 8% higher than Q3 2024, while year-end 2024 royalty production of 21.4 thousand BOE per day increased 14% over 2023 annual production. driven by 13% higher liquids royalty production and 14% higher natural gas royalty production from our recent acquisitions. COPAZ's fourth quarter royalty revenue of $60.2 million represented 73% of total revenue and generated a 99% operating margin, while fourth quarter processing revenue and other income achieved a new company record of $21.9 million, which was 19% higher than Q4 2023. Our infrastructure portfolio generated 100% utilization and a 93% operating margin in the quarter. Our full year 2024 profitability was driven by record liquids production, 18% higher processing revenue, and $11.5 million natural gas hedging gain, or $0.40 in MCF. In 2024, operators spot a record 630 gross wells, 23.2 net, across our royalty acreage. which increased 9% from 2023 and represents 15% of the total rate releases across the Western Canadian sedimentary basin during the year. In 2024, operators spent approximately $2.5 billion of capital, a 4% increase from the prior year. This operator-funded development was demonstrated through our annual reserve report, which evaluates Topaz's proved developed producing and probable developed reserves before any future undeveloped locations. Topaz's year-end 2024 total approved plus probable reserves of 59.5 million BOE increased 23% from year-end 2023, which includes the impact of 2024 royalty production volume of 7 million BOE. For approved plus probable developed reserves, operators generated 10.5 million BOE of drilling extensions and improved recovery. Relative to the 7 million BOE produced in 2024, this represents a new company record production replacement of 1.5 times at no cost to PES. During the fourth quarter, operators spot 175 gross wells in our acreage, which was diversified across our portfolio with 57 in the Clearwater, 33 in Northeast BC Montney, 42 in Deep Basin, 16 in Peace River, 6 across Central Alberta, and 21 in Southeast Saskatchewan and Manitoba. In 2024, 55% of the gross wells spread across Topaz's Royalty acreage were in the Clearwater and Northeast BC. Topaz's high-growth Royalty areas, since the beginning of 2023, 44% of all new wells drilled across the Clearwater area in Alberta and 26% of all new wells drilled across the Northeast BC-Montney area. We're on Topaz royalty acreage, where Topaz average royalty production has increased 34% and 11% respectively. Based on our plan operator drilling activity, we expect the current 30 to 32 active rigs on our acreage will be maintained through the first quarter of 2025. Topaz generated Q4 Total revenue and other income of $82.1 million, cash flow of $73.9 million, and an 87% free cash flow margin, providing $71.4 million of free cash flow. Cash flow of $0.49 per diluted share and free cash flow of $0.47 per diluted share both increased 7% from Q3 2024. Topaz distributed $50.6 million in quarterly dividends, $0.33 per share during Q4, representing a $4.8 percent trailing annualized dividend yield to the fourth quarter average share price and generated 20.8 million of excess free cash flow was allocated to acquisition growth. During the fall, the full year of 2024, Topaz paid 191.2 million in dividends, 68 percent payout ratio, which included two dividend increases, growing the dividend seven percent since year end 2023. We've announced our 2025 guidance ranges of 21,000 to 23,000 BOE per day average royalty production and 88 to 92 million of processing revenue and other income. Topaz expects to exit 2025 with net debt to EBITDA of 1.2 times and generate a 63% payout ratio, which remains sustainable through the end of 2025 at $0 ACO 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. Additionally, through our recent acquisitions in 2024, the incremental $400 million of tax pools have deferred Topaz's cash horizon, further enhancing our expected 2025 profitability. Thanks very much, and at this time, we're pleased to answer any questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star 4 by the 2. If you are using a speakerphone, please lift the handset before pressing any keys.