Q3 2019 Earnings Call

After the speaker presentation will be a question answer session. That's good question during the session you'll need to press star one on your telephone. Please be advised to today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, and you Philips President and CEO . Please go ahead Sir.

I think you and good morning, and thanks for dialing into the Q3 2019 praise Guy earnings call.

On the line comprised guy or pass because all the CFO Cam Proctor CEO and myself under Philips.

Before handing the call over to Pan to walk through the financials I'll provide an operational update.

Free cash flow for the quarter totaled $40.8 million. This was allocated to 45.5 million in dividends and 3.9 million was spent on adding approximately 85000 Clearwater acres would drilling commitments.

The total Clearwater lines over 840000 acres. The Clearwater plays recently been independently recognizes the best piano play in North America.

190 wells were spot in the third quarter up from 112 in Q2, but down 21% from Q3 of 18, where praise God praise Guy thought 242 wells spud.

Production decline resulted from low Q2 drilling activity in shut ins of both oil and natural gas.

This resulted in P. A's of 308 Boe per day versus 951 Boe per day in the prior quarter.

We expect PPH return to more normalized levels over the next two quarters.

Realized natural gas price for Q3 was 72 cents.

They go spot recently touching two dogs and 50 cents per gig a jewel we expect from shut in natural gas ones to resume production and an increase in cash flow from this part of the portfolio.

Leasing activity remains strong at 25 transactions were entered into with 19 Counterparties the duvernay biking, Mannville scottrade inside the represented the majority of the leasing arrangements.

Additions bonus for the quarter totaled $4.4 million.

Kashi any per barrel was $2.49. We continue to expect a sub $3 per barrel number for 2019.

Long term incentive payments for all 60 stuff and executive totaled 2.2 million for fiscal 2019 down 57% from.

5.1 million in 2018, which helps costs in a challenging commodity and activity environment.

Compliance teams remain busy cluckey 1.8 million for the quarter and bringing went back into our inventory through active management of our contracts.

These lines can now be rework buyer technical team and made available for leasing Byerlein negotiators.

At least assignments were up to 447 for the quarter, which is a leading indicator about that's working their way through bankruptcy processes as long as additionally in E N D activity by producers.

The number of these assets and number of these assets have been shut in but some orders in production in Q4, 19 and Q1 2020.

We recently reviewed the tenure cash flow outlook for price Guy.

In $1.58 go with $55 W.T.I. environment with the board of directors.

The approximate after tax after Genie cash flows $2 billion over this period. This is 58% of our current market capitalization.

I'll now turn the call over to Pam to walk through the financial results.

Thank you Andrew good morning, everyone.

Hi, Scott generated funds from operations, and 48.8 million or 21 cents per share basic and diluted in the quarter.

Cash flows generated primarily from royalty production revenue was 51.9 million on average production volumes at 20512 Bcf per day, which for 50% liquid.

There were 190 wells, but in Q3, which included 185, all wells and find natural gas Wow.

This is down from 242 wells, but in Q3 2018.

The decrease in the number of wells, but is indicative of the slowdown in activity across Western Canada with the Q3 rig count down approximately 35% year over year.

The average royalty rate precise in Q3 was 8.1% consistent with 8% in Q3 2018.

[noise] royalty revenues were predominantly from liquids production.

Oil royalty production volumes were 8011 barrels per day down 8% from Q2.

We saw declines in old production from both this is catch one in Alberta biking, due to reduced activity as well as declines in high rate Cardium out that came on late in 2018.

The combined impact from the Viking and Cardium was approximately 200 barrels per day.

Lower activity has also resulted in fewer oil price paid adjustments related to new wells on stream and due to timing. We also had fewer oil complaints recovery.

The impact of lower price could adjustments was 262 barrels per day.

The remaining decrease in production relate to natural declines that way new wells on stream in the quarter due to lower activity in the basin overall as well as a result uncertain commodity pricing, Alberta production curtailments and the seasonal impacts the breakup in Q2.

Our average W.G.I. pricing and wider height heavy oil.

And wider heavy oil differentials also contributed to a decrease in oil royalty revenue, which totaled 43.4 million in the quarter down from 52.1 million in Q2.

NGL royalty production volumes of 2334 barrels per day were down 13% from Q2 and generated an additional 4.4 million in revenue down from 6.5 million in Q2.

NGL volumes were impacted by selectivity for natural gas as well as operational downtime.

Natural gas volumes totaled 61 million a day down 6% from Q2, primarily due to limit to natural gas activity and operational downtime.

Natural gas world. He production added 4.1 million of revenue, which is down from Q2 routes revenue 4.5 million due to lower volumes and reduced eco benchmark pricing.

Hi, Scott precise production volumes in the quarter included 308 Boe per day of prior period adjustments, which were 13% liquids and included 179 BOE a day from compliance activities and an additional hundred 29 barely a day of other prior period adjustments related to new wells on stream and better well performance.

The compliance group continues to recover missed any crack royalties. Your friends accounting question 1.8 million in the quarter, bringing year to date collections to 5.6 million.

Other revenue totaled 6.9 million, including 1.2 million or lease rentals 1.3 million and other revenue and 4.4 million bonus consideration on entering into 25 leasing transaction with 19 different counterparty.

Production in rental taxes totaled 1.2 million in cash administrative expenses totaled 4.7 million before $2.49 Privia we.

Cash administrative expense is expected to believe to be below $3 per be are we in 2019.

Current tax expense for the quarter totaled 2.6 million.

During Q3 prescribed declared 45.5 million in dividends with resulting payout ratio of 93% and repurchased and canceled approximately 200000 common shares for 4.2 million.

The sky closed the quarter with a minor working capital deficiency of 7.4 million.

Since IPO precise generated approximately 1.2 billion in funds from operations and returned 1.1 billion to shareholders through 987 million, a dividend and the repurchase and cancellation of 5 million common shares.

We'll now turn it over to the moderator to proceed with acuity.

Thank you as a reminder to ask a question you need to press star one on your telephone to withdraw your question press the pound Keith. Please press mute. Once your question has been stated.

Our first question comes from Aaron Borkowski with TD Securities. You May proceed with your question.

Hi, good morning, guys.

Touched on this a little bit Pam, but could you.

Right, a little bit more color on how the <unk> themselves are derived what contributed to the decline in liquids PPH this quarter and why you're confident we'll return to historical levels going forward.

So p. piece I really have two components, there's the components, that's driven from compliance activities and as we've always said those compliance a p. It can be lumpy, we don't record them until collection is certain so even though there may be a lot of work being done the timing of that really depends on when we settle.

Both those issues with the counterparty.

So those those were down in Q2, but you know we continue to work on compliance activities and continue to expect to recover recover on paper LT from the other piece is really a PPH related to trending.

And what happens with those training P. P eight days that.

We see wells come on production, we may record the initial production in the quarter, but we may see you know when increasing production when actually come in so as you know Aaron as a royalty producer two thirds of the quarter are actually based on accrual because we haven't seen actual cash paid.

It's come in so training PPH are generally the result, a improved production from a from new wells I'm as well as new wells that we may not have known that came on stream. The second quarter was very slow in terms of activity. We can see a lot of wells come on production, we know that the third quarter was a with busier we did see hundred.

90 wells release, so we expect to see you know.

Higher trending PPH than we saw in this quarter. The quantum of that you know I don't want to speculate but just given the level of activity, we would expect it to be higher than Q2.

Okay.

Thank you very much.

Thank you and as a reminder to ask a question you'll need to press star one on your telephone. Please stand by we've compiled the kuni roster.

And I'm not showing any further questions at this time I would now like to turn the call back over to Andrew Phillips for any further remarks.

Thank you all for dialing into the price Guide Q3 conference call and please call either Pam or myself with any questions.

We'll be around all day. Thanks.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.