Q1 2021 Prairiesky Royalty Ltd Earnings Call

380 Boe per day in late February we closed our previously announced de Basin royalty acquisition for cash consideration of 45 million dollars before adjustments.

This acquisition consolidates into prayers guys six hundred and forty Thousand Acres of royalty Labs, including one hundred and seventy Thousand Acres of female titles and adds approximately 650 Boe per day of production package, which we will see the full impact of in Q2.

Q120 Q121 oil oil royalty revenue of 36.5 million increased 30% over Q4 due to strong WTI Benchmark pricing Revenue was generous on oil volumes of 7278 barrels-per-day, which were flat with Q4 as New Wealth brought on stream + 1 month of production from the acquisition offset natural declines.

Natural Gas

Revenue of 12.7 million was 27% above Q4 do too strong a Cohen station to Benchmark pricing which more than offset. The modest decline in natural gas volume to 57.6% volumes were negatively impacted by seasonal cold weather freeze off which offset incremental production from New Wells on stream and the acquisition

NGL Revenue, increased 34% from Q4 due to strong Benchmark pricing and a 9% increase in in royalty production volumes to 2502 barrels a day in jail volume increase due to production from New Wells on stream and incremental volumes from the acquisition price guides production volumes in the quarter included 1167, Boe per day of Prior period adjustment switch were 50% off and included $362 a day from compliance activities and an additional $805 per day of other prior. Adjustments related to New Wells on stream and better well Performance Off the compliance group continues to recover missed an incorrect royalties through forensic accounting collecting $800,000 in the quarter.

There were one hundred well spent in the quarter of which 86 were oil oil activity included 4615 Wells 13 Clearwater Wells and eight cardium Wells there were also fourteen natural gas Wells including nine montney Wells although drilling activity improved in the quarter compared to the back half of twenty-twenty. It remains significantly below levels. We we saw before the onset of COVID-19 off other Revenue totaled 1.8 million, including seven hundred thousand dollars in a lease rentals $700,000 in other income and one point four million in bonus consideration on entering into 33 leasing arrangements with 29 different counterparties.

Cash administrative expenses total 53 total 5.7 million or $3.27 per Boe cash administrative expense was 19% lower than Q12020 and off the annual long-term incentive expense of $700,000. This is a 59% reduction compared to the incentive payments in January 2020.

During q1 prairiesky. I declare dividends a 14.5 million dollars with the resulting payout ratio of 30% with remaining cash flow allocated to funding the deep bass and acquisition at March 13th. I think that was $61 since IPO price guys generated approximately 1.5 billion in funds from operations and returned 1.3 billion to shareholders through dividends and BuyBacks off. We will now turn it over to the moderator to proceed with the Q&A.

Thank you. As a reminder. You ask a question. You will need to press star one on your telephone to withdraw your question. Press the pound key, please standby we can pause and a roster.

Our first question comes from Jeremy McMurray with Raymond James. He may proceed with your question. Yeah. Hi guys. I was wondering two questions. If you could give a bit of a sneak preview of your life as a play book and some of the biggest things that will probably see this time around versus a couple of years ago. And then just with the acquisition and the fries Ops coming back where current production roughly is, assuming like a thousand billion in compliance, you know be ways from the debates and acquisition.

Yeah, thanks for the questions Jeremy.

Investor day will be similar to the previous to where we're going to obviously put out our new asset handbook and kind of detail the intrinsic value the business with just what we know correctly currently economic locations and just show ambassadors why we like to cancel shares because of where we trade relative to intrinsic value also kind of focus on returns or return on Equity return on Capital employed with your which paralleled each other s. Levels and and really highlight some new plays new opportunities in play extensions that industry has developed over time and I think you know, the most powerful thing is even in this challenging two year. Specifically last years. We've had our proved reserves day roughly flat and with no Acquisitions with other people's capitals so that that kind of just shows why you want to own relatives over the long term. It's all about Capital available for free cash flow and then on the current production level, obviously, we don't give any guidance and we get trailing data as well. But I but I will say that a lot of the big wage

Programs on the Clearwater would have kind of partial data for the first quarter. We still have 475 barrels of shut-in or curtailed oil production and we're working through a lot of those with aphthous ulcers and I think you know, some of it will be permanently impaired just because the costs of re-entering Andre completing are putting those valves back on production might be higher than the net present value of the remaining reserves and some of the month later in life. Well, but I do think some of that at least half of that should come back on over the next two quarters. So I think you know and then on the gas side you obviously had that are very very cold February and our Shell Gas portfolio with the 20 to 30 barrels per million see some freezing issues at the Wellhead. So I think you'll should see slightly strong production ahead. But I I I'd hate to give numbers around that.

Yep. Yep. Okay. Thanks guys.

Thanks for calling Germany.

Thank you. Our next question comes from Erin Bukowski Securities. May proceed with your question. Thanks. Good morning. I guess my questions are on the ncib and as we look ahead, how do you how do you think about the the DC price guy using the Tactical tool like in Q3 or do you see a return to a more regular systematic repurchase on a quarterly basis?

Yeah, it's it's a good question Aaron and thanks to the question. I think we'll we'll Implement a regular program with the option of being tactical in the back half of the year. And I think the reason we structure is that way is we can kind of just chip away the Share account see how the progress is. Obviously we'll have the debt repaid in a short amount of time and be done to death row and then have access cab app to continue to cancel shares with but I think we would just want to see how the m&a market shapes up and if there's quality assets that makes sense that are accretive short medium and long-term then potentially could take precedence over the ncib but whatever creates the most value on a per-share basis to shareholders is how will decide that and and part of the reason we don't give any guidance or outlook on our tactical approach is because we wouldn't want people front-running the trade I guess so

So hopefully that's question. It does if I could ask a follow-up question on many friends. Are you seeing any emerging opportunities on the carbon capture and storage initial?

Yes, and I guess do you see prairiesky ultimately participating in this space?

Yeah, that's actually you know, that's a really you kind of gave a preview to invest your day there. We've actually got a big part of the presentation to talk about carbon capture an underground storage. But as well carbon sequestration into miscible oil reservoirs where there's a lot of remaining Force Base and also recover the remaining light oil reserves. Our first deal was done with enhance their thoughts on one of their first pools that looks like it's starting to show first oil and it's a looks pretty successful and they're obviously taking a lot of cars off the road and there's a lot of this potential in central Alberta where we have our checkerboard acreage and took a look at that chart. I always like to show which shows the duration of our offset, um, in our presentation you can see that our production was almost triple what it is today from an oil perspective and it's all the old wreaths and what's interesting is most of them still have in the range of a third of the light oil remaining and there were just no real way with technology in the past to get those last oil change.

Phil bertels out but now with a carbon dioxide floods you could get some of these reservoirs back up to Peak Productions. So we think it'll be a big um, a big part of our royalty project and ten years from now, so it's and light oil it's all infrastructure connected and it'll be some of the lowest scope one two, and three oil produced in the world. So I think it is something we're focused on an investor going to show a hundred different reservoirs eighty-seven. I believe of which are going to be admissible. So just for carbon dumps the remainder of which have some potential for recovery, but that'll be a significant section of our asset. Uh Play Books.

Thank you very much.

Thanks for watching.

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

Thank you everybody for dialing in thank you very much to all our shareholders for their support and our employees for their hard work. And please call Pamper myself if you have any follow-up questions.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. I mean, I just connect.

Jeff