Topaz Energy Corp.

Good morning, everybody. My name is Kelsey and I will be your conference operator for today. At this time, I would like to welcome everyone to the Topaz Energy Corp first quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the two. Thank you. Mr. Staples, you may begin your conference.

Thank you and welcome everyone to our discussion of Topaz Energy Corps results as at and for the period ended March 31st, 2025. My name is Marty Staples, and I am President and CEO of Topaz. With me today is Sri Stevenson, CFO of 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'll start this morning by speaking to some recent and first quarter 2025 highlights. After these open remarks, we'll be open for questions. Topaz had a strong first quarter marked by several new records achieved, including royalty production, quarterly drilling activity on our lands and infrastructure revenue. Our board has approved a 3% quarterly dividend increase to $0.34 per share, marking our ninth dividend increase and 70% dividend per share growth since inception. Topaz's first quarter royalty production was 22.4 thousand VOE per day and increased 10% from the prior quarter and 17% higher than the prior year. Natural gas production increased 13% and total liquids production increased 4% from the prior quarter. Topaz's first quarter royalty revenue of 68.7 million represented 75% of total revenue and generated a 99% operating margin. while first quarter processing revenue and other income achieved a new company record of $23.5 million, which was 7% higher than the prior quarter. During the first quarter, operators spud a new quarterly record of 218 gross wells across our Royalty acreage, representing 19% of the Western Canadian sedimentary basin drilling activity, which increased significantly from 12% in the first quarter of last year. Drilling activity was diversified across our portfolio with 50 in the Deep Basin, 49 in the Montney, 46 in the Clearwater, 37 in southeast Saskatchewan and Manitoba, 27 in Peace River, and 9 across central Alberta. During the quarter, 191 total gross wells were brought on production, which increased 57% from the prior year. We remain extremely confident in the price resiliency of the plays and the quality of the operators that make up our portfolio, with approximately 93% of our current royalty production volumes generated from five well-capitalized operators. Based on operator drilling plans, 14 to 16 rigs will remain active across our royalty acreage through spring breakup, a record level for Topaz, and expect this will increase to 28 to 30 rigs through the second quarter. Topaz generated first quarter total revenue of $92.2 million, cash flow of $81.7 million, and free cash flow of $80.8 million. Our free cash flow margin increased from 85% to 88% for the first quarter. Cash flow of $0.53 per share and free cash flow of $0.52 per share both increased 13% from prior year. COPA has distributed $50.7 million in quarterly dividends during Q1, representing a 5.2% trailing annualized dividend yield to the first quarter average share price. and generated $30.1 million of excess free cash flow, part of which was allocated to fund the Alberta-Montney royalty acquisition, which was completed in January. Based on our revenue growth, our dividend has been increased, which represents $1.36 per share on an annualized basis, or a 5.9% yield to our current share price. We have reconfirmed our 2025 guidance ranges for $21,000 to $23,000 BOE per day of average royal 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 66% payout ratio. As a reminder, our 2025 dividend remains sustainable down to $0 ECO and $55 WTIUS, 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. Back to you, Operator.

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. And again, if you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Michael Harvey from RBC Capital Markets. Please go ahead.