Topaz Energy Corp.

Good morning, my name is Hannah and I will be your conference operator today. At this time, I would like to welcome everyone to the Topaz Energy Corporation second quarter 2026 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. Thank you. Mr. Scott Kerker, you may begin your conference.

Thank you, Hannah, and welcome everyone to our discussion of Topaz Energy Corp.'s results as of June 30, 2026. My name is Scott Kerker, and I'm the General Counsel for Topaz. Before we get started, I'd refer you to the advisories on the forward-looking statements contained in the news release as well as the advisories contained in the Topaz AIF and its MD&A available on CDAR and on the Topaz website. I hope to draw your attention to the material factors and assumptions in those advisories. I'm here with Marty Staples, Topaz President, the Chief Executive Officer, and Cheree Stephenson, Vice President, Finance, and Chief Financial Officer. They will start by speaking to some of the highlights of the last quarter of the year so far. After the remarks, we will be open for questions. Marty, should we go ahead?

Thank you, Scott. Good morning, everyone. Topaz had a strong second quarter marked by a record share of quarterly drilling activity in the WCSB, records liquid drill production, and a core area tuck-in acquisition. Topaz's second quarter of realty production was 24,233 BOE per day and increased 9% over the prior year. Q2 2026 royalty production included record total liquids production of 7,178 barrels per day, 6% higher than prior year, driven by strong operator drilling activity on our Clearwater Royalty acreage. Topaz generated the total second quarter revenue, another income of $111.2 million, 66% from total liquids royalties, 13% from natural gas royalties, and 21% from our infrastructure portfolio. Processing revenue of $20.7 million increased 3% from Q2 2025, with total processing revenue and other income of $22.3 million, while the infrastructure assets generated 96% utilization in the quarter, providing a 92% operating margin. Drilling activity on our acreage was strong with 160 gross wells, or 6.6 net wells, and Jordan Q2, representing the highest quarterly share of WCSB drilling activity in the company's history at 22%. Activity was diversified across our portfolio with 78 wells in the Clearwater, 40 in Northeast BC and Alberta Montane, 22 in the Deep Basin, 7 in Peace River, 9 in Southeast Saskatchewan and 4 in Central Alberta. Our growth plays in the Clearwater and Northeast BC continue to attract a meaningful share of activity with 69% and 45% of the total spuds in each respective area occurring on the Royalty lands. During Q2 2026, 126 total gross wells were brought on production, and based on Operator Drilling Plans, we expect that 26 to 31 drilling rigs will remain active across our Royalty Acres through the third quarter. generated second quarter total revenue and other income of $111.2 million, cash flow of $88.4 million, or $0.57 per share, increased 9% over the prior year, while free cash flow of $86.6 million, or $0.56 per share, increased 17% over the prior year. Total cash distributed $54.2 million in quarterly dividends at $0.35 per share during Q2, representing a 4.5% trailing annualized dividend yield to the second quarter average share price and generated $32.4 million of excess free cash flow which was allocated to our core area tuck-in realty acquisition during the quarter. On June 30, 2026, Topaz completed a $38.7 million acquisition of 300,000 gross acres across Topaz's northeast BC money and deep basin core realty areas. The acquisition lands featured acquired royalty interest in over 500 gross future drilling locations, multi-zone, liquid-risk natural gas and oil-focused exploration outside optionality, and incremental royalty production. After the acquisition, Tokaj exited the second quarter with $497.4 million of net debt, equating to 1.2 times net debt to Q2 2026 annualized EBITDA. Reflecting the strong performance and increased activity as seen through the first half of 2026, Topaz has increased its annual average royalty reduction guidance to a range of 23,900 BOE per day to 24,300 BOE per day. Based on updated estimates, including the second quarter royalty acquisition, Topaz's 2026 exit net debt is now estimated between 435 and 440 million before consideration of incremental acquisition. Topaz expects to maintain a payout ratio at the lower end of the 60% to 90% long-term target range, providing financial flexibility for future acquisition growth. We're pleased to answer any questions at this time. Operator, pass you.