Q4 2023 Baytex Energy Corp Earnings Call

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Operator: Music Thank you for standing by. This is the conference operator. Welcome to Baytex Energy Corp.'s fourth quarter and full year 2023 Financial and Operating Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad.

Thank you for standing by this is the conference operator, welcome to the Bay checks Energy Corp, fourth quarter, and full year 2023 financial and operating results conference call.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

I joined the question queue, you May Press Star then one on your telephone keypad.

Brian G. Ector: You may also submit questions in writing at any time using the form in the lower section of the webcast frame. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Brian Ector, Senior Vice President, Capital Markets and Investor Relations. Please go ahead. Thank you, Gaylene. Good morning, ladies and gentlemen, and thank you for joining us to discuss our fourth quarter and full year 2023 financial and operating results. Today I am joined by Eric Greager, our President and Chief Executive Officer, Chad Kalmakoff, our Chief Financial Officer, and Chad Lundberg, our Chief Operating Officer. While listening, please keep in mind that some of our remarks will contain forward-looking statements within the meaning of applicable securities laws.

You May also submit questions in writing at any time using the form in the lower section of the web cast spring.

Should you need assistance during the conference call you May signal, an operator by pressing Star then zero.

I would now like to turn the conference over to Brian Ector, Senior Vice President capital markets and Investor Relations. Please go ahead.

Thank you Gail and good morning, ladies and gentlemen, and thank you for joining us to discuss our fourth quarter and full year 2023 financial and operating results.

Today, I am joined by Eric Greg <unk>, our President and Chief Executive Officer, Chad <unk>, Our Chief Financial Officer, and Chad Lundberg, our Chief operating officer.

While listening please keep in mind that some of our remarks will contain forward looking statements within the meaning of applicable securities laws.

Brian G. Ector: I refer you to the advisories regarding forward-looking statements, oil and gas information, and non-GAAP financial and capital management measures in yesterday's press release. On the call today, we will also be discussing the evaluation of our reserves at year-end 2023. These evaluations have been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects to United States or other foreign disclosure standards.

I refer you to the advisories regarding forward looking statements oil and gas information and non-GAAP financial and capital management measures in yesterday's press release.

On the call today, we will also be discussing the evaluation of our reserves at year end 2023.

These evaluations have been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects to United States or other foreign disclosure standards.

Brian G. Ector: Our remarks regarding reserves are also forward-looking statements. All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified. And following our prepared remarks, we will be taking questions from analysts. In addition, if you are listening in today via the webcast, you will have the opportunity to submit an online question, and we will do our best to answer all questions submitted. With that said, I would now like to turn the call over to Eric. Thanks, Brian. Good morning, everyone.

Our remarks regarding reserves are also forward looking statements.

All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified.

In Poland, our prepared remarks, we will be taking questions from analysts. In addition, if you are listening in today via the webcast you will have the opportunity to submit an online question and we will do our best to answer all questions submitted.

With that I would now like to turn the call over to Eric.

Thanks, Brian Good morning, everyone and welcome to our year end 2023 conference call.

Eric Greager: And welcome to our year-end 2023 conference call. I'm excited to discuss our 2023 results, and in particular, our results over the past two quarters, which demonstrate the merits of the Ranger acquisition and the strength of our oil-weighted portfolio before diving into our results in a little more detail. I want to take a moment and recognize the hard work of our passionate team of high-quality professionals in Houston and Calgary. Our teams have come together to create a new and stronger organization that we are all proud to be a part of. I would like to give a shout out in particular to our field staff who work under extraordinary conditions at times. We were reminded of that in January with extremely cold temperatures across North America, which was followed by heavy rainfall in Texas.

I'm excited to discuss our 2023 results and in particular, our results over the past two quarters, which demonstrate the merits of the Ranger acquisition and the strength of our oil weighted portfolio.

Before diving into our results in a little more detail.

Want to take a moment and recognize the hard work of our passionate team of high quality professionals in Houston and Calgary.

Our teams have come together to create a new and stronger organization that we are all proud to be a part of.

I would like to give a shout out in particular to our field staff, who work under extraordinary conditions at times, we were reminded of that in January with extremely cold temperatures across North America.

Which was followed by heavy rainfall in Texas, we are grateful to our employees and contractors for their commitment to safe operations and their tireless effort to provide reliable energy to fuel People's lives.

Eric Greager: We are grateful to our employees and contractors for their commitment to safe operations and their tireless efforts to provide reliable energy to fuel people's lives. Now, let's turn to 2023. On June 20th, we closed the acquisition of Ranger, adding quality scale in Eagleford along the U.S. Gulf Coast and reinforcing a resilient and sustainable business. In conjunction with the acquisition, we increased direct shareholder returns to 50% of free cash flow, which allowed us to increase the value of our share buyback program and introduce dividends. The remainder of our free cash flow was allocated to debt reduction.

Let's turn to 2023.

On June 20th we closed the acquisition of Ranger, adding quality scale in the Eagle Ford along the U S Gulf coast, and reinforcing a resilient and sustainable business.

In conjunction with closing we increased direct shareholder returns to 50% of free cash flow, which allowed us to increase the value of our share buyback program and introduce a dividend.

The remainder of our free cash flow was allocated to debt reduction.

Eric Greager: In 2023, we will return $260 million to shareholders through our share buyback program and dividend. Additionally, our normal course issuer bid allows for the purchase of up to 68.4 million common shares during the 12-month period ending June 28, 2024. Through December 31, 2023, we repurchased 40.5 million common shares for $222 million, representing 4.7% of our shares outstanding. In addition, we declared two quarterly dividends, each of two and a quarter cents per share, totaling $38 million.

In 2023, we returned $260 million to shareholders through our share buyback program and dividend.

Our normal course issuer bid allows for the purchase of up to $68 4 million common shares during the 12 month period, ending June 28 2024.

Through December 31, 2023, we repurchased 45 million common shares for $222 million, representing four 7% of our shares outstanding.

In addition, we declared two quarterly dividends, each up two and a quarter cents per share totaling $38 million.

Eric Greager: In 2023, we increased production per basic share by 16% over 2022. Production in Q4-23 averaged just over 160,000 BOE per day, exceeding our guidance for the quarter and up 6% from the third quarter. Production for the full year 2023 averaged 122,000 BOE per day compared to 83,500 in 2022. For the second half of 23, exploration and development expenditures totaled $608 million, consistent with our plan following the Ranger acquisition. Capital spending during the fourth quarter was 10% below guidance, demonstrating our commitment to Disciplined Capital Allocation.

In 2023, we increased production per basic share by 16% over 2022.

Production in Q4 twenty-three averaged just over 160000 Boe per day exceeding our guidance for the quarter and up 6% from the third quarter.

Production for the full year 2023 averaged 122000 Boe per day compared to 83005 hundred in 2022.

For the second half of 'twenty, three exploration and development expenditures totaled $608 million consistent with our plan following the Ranger acquisition.

Capital spending during the fourth quarter was 10% below guidance, demonstrating our commitment to disciplined capital allocation.

We generated free cash flow of $291 million or 35 cents per share in the fourth quarter and $544 million or 77 cents per share for 2023.

Eric Greager: We generated a free cash flow of $291 million, or $0.35 per share, in the fourth quarter and $544 million, or $0.77 per share, for 2023. Our business improved structurally through the Ranger acquisition with increased exposure to premium U.S. Gulf Coast pricing and improved margins. In Q4'23, over 40% of our liquids production received a WTI-equivalent price. In addition, we improved our cash cost structure, which consists of operating, transportation, and general administrative expenses, by 12% on a BOE basis compared to Q4'22. On December 11th, we completed the divestiture of Viking assets at Foragan and Plato in southwest Saskatchewan for proceeds of $160 million.

Our business improve structurally through the Ranger acquisition with increased exposure to premium U S Gulf coast pricing and improved margins.

In Q4, 23 over 40% of our liquids production received W. T I equivalent pricing.

In addition, we improved our cash cost structure, which consists of operating transportation and general administrative expenses in Q4, 23 by 12% on a Boe basis compared to Q4 'twenty two.

On December 11th we completed the divestiture of Viking asset set for again and play Doh and southwest Saskatchewan for proceeds of $160 million.

Eric Greager: Production from the assets at the time of the sale was approximately 4,000 BOE per day. During the fourth quarter, we reduced our net debt by 10% due to a combination of free cash flow generation, net proceeds from the Viking divestiture, and the impact of a strengthening Canadian dollar relative to the U.S. dollar. We maintain balance sheet strength with a total debt-to-EBITDA ratio of 1.1 times.

Production from the assets at the time of the sale was approximately 4000 Boe per day.

During the fourth quarter, we reduced our net debt by 10% due to a combination of free cash flow generation net proceeds from the Viking divestiture and the impact of the strengthening Canadian dollar relative to the U S dollar.

We maintain balance sheet strength with a total debt to EBITDA ratio of one one times.

We employ a disciplined commodity hedging program to help mitigate the volatility in revenue due to changes in commodity prices.

Eric Greager: We employ a disciplined commodity hedging program to help mitigate the volatility in revenue due to changes in commodity prices. In 2023, our hedging program generated realized gains of $36 million. For 2024, we have entered into hedges on approximately 40% of our net crude oil exposure, utilizing two-way collars with an average floor price of U.S. $60 per barrel and an average ceiling price of U.S. $96 per barrel. At year-end 2023, we recorded non-cash impairments on our legacy non-operated Eagleford and retained Viking assets of $834 million. This non-cash impairment resulted in a net loss of $627 million, or $0.75 per share, in Q4'23 and $235 million, or $0.33 per share, in 2020.

In 2023, our hedging program generated realized gains of $36 million.

For 2024, we have entered into hedges on approximately 40% of our net crude oil exposure utilizing two way collars with an average floor price of U S $60 per barrel and an average ceiling price of U S $96 per barrel.

At year end 2023, we recorded noncash impairments on our legacy non operated Eagle Ford and retained Viking assets of $834 million.

This noncash impairment resulted in a net loss of $627 million or 75 per share in Q4, 23, and $235 million or 33 cents per share in 2023.

Operationally the integration of the Ranger assets has progressed well and we continue to deliver strong results across the black oil volatile oil and condensate thermal maturity windows.

Eric Greager: Operationally, the integration of the Ranger assets has progressed well, and we continue to deliver strong results across the black oil, volatile oil, and condensate thermal maturity window. In Q4 2023, nine operated wells were brought on stream, bringing the total operated wells on production since closing Ranger to 22. The nine wells brought on stream during the fourth quarter generated an average 30-day initial production rate of approximately 1,600 BOE per day, 80% of which is oil and NGL per well. On our non-operated acreage, there were no new wells brought on stream during the fourth quarter.

In Q4 2023 nine operated wells were brought on stream, bringing the total operated wells on production since closing Ranger two to 'twenty two.

The nine wells brought onstream during the fourth quarter generated an average 30 day initial production rate of approximately 1600 Boe's per day, 80% of which is oil and Ngls per well on our non operated acreage there were no new wells brought on stream during the first during the fourth quarter.

Yeah.

Eric Greager: When we compare these results to a data set of over a thousand Eagleford wells sourced from public data, our second half performance ranks in the top quartile of all 2023 wells drilled in the Eagleford. And because of longer laterals, on a production per lateral foot basis, we're in the top of the second quartile. So I'm very pleased with our performance. We continue to optimize base performance and remain focused on strong drilling and completion performance. For 2024, we are targeting an 8% improvement in our operated drilling and completion costs per lateral foot over 2023. In the Pembina Duvernay, we commenced drilling operations in January and, to date, have drilled three of seven wells planned for 2024. Completion activities are scheduled to commence in May.

When we compare these results to a dataset of over a thousand Eagle Ford well are sourced from public data our second half performance ranks in the top quartile of all 2023 wells drilled in the Eagle Ford and.

And because of longer laterals on a production per lateral foot basis, we're in the top of the second quartile.

So I'm very pleased with our performance.

We continue to optimize based performance here and remain focused on strong drilling and completions performance for 2024 were targeting an 8% improvement in our operated drilling and completion costs per lateral foot over 2023.

Yeah.

Independent of Duvernay, we commenced drilling operations in January and to date have drilled three of seven wells planned for 2024.

Completion activities are scheduled to commence in may.

We continue to advance our understanding of the reservoir and believe the asset offers significant economic inventory and growth potential.

Eric Greager: We continue to advance our understanding of the reservoir and believe the asset offers significant economic inventory and growth potential. In our heavy oil business, our clear water production averaged over 16,000 BOE per day during the fourth quarter, up 48% from Q4 2022. At Peavine, we brought 31 wells on stream during 2023, and initial well performance continues to outperform expectations. In 2024, we will see continued exploration across our heavy oil portfolio with up to 14 stratigraphic test wells planned. With respect to reserves, our year-end report reflects the Ranger acquisition with a meaningful increase in high-value light oil production along the U.S. Gulf Coast. Proved developed producing reserves increased by 49% from 124 to 185 million BOE. Proved reserves increased by 55% from 264 to 410 million BOE, and Proved Plus Probable Reserves increased by 51%, from 438 to 663 million BOE. In Eagleford, proved and proved plus probable reserves increased 117% and 130%, respectively. Reserves associated with the Ranger assets were consistent with our assessment of the Ranger reserves that year in 2022.

In our heavy oil business, our Clearwater production averaged over 16000 Boe per day during the fourth quarter up 48% from Q4 2022.

At P. Vine, we brought 31 wells on stream during 2023 and initial well performance continues to outperform expectations.

And 'twenty 'twenty four we will see continued exploration across our heavy oil portfolio with up to 14 stratigraphic test wells planned.

With respect to reserves our year end report reflects the Ranger acquisition with a meaningful increase in high value light oil production, along the U S Gulf Coast.

Proved developed producing reserves increased by 49% from 124 to 185 million Boe.

Proved reserves increased by 55% from 264 to 410 million Boe.

And proved plus probable reserves increased by 51% from 438 to 663 million Boe.

In the Eagle Ford.

Proved and proved plus probable reserves increased 117% and 130% respectively.

Reserves associated with the Ranger assets were consistent with our assessment of the range of reserves at year end 2022.

In Canada, we replaced 131% of production on a proved plus probable basis net of the divestiture of our Viking assets.

Eric Greager: In Canada, we replaced 131% of production on a proved plus probable basis net of the divestiture of a biking asset. Overall, we generated a PDP recycle ratio of 1.7 times based on a 2023 operating net back of $41 per BOC. As a responsible energy producer, we are committed to reducing the intensity of greenhouse gas emissions from our operations. Our corporate objective is to reduce our GHG emissions intensity, measured as kilograms of CO2 equivalent per BOE, by 65% by 2025, relative to our 2018 baseline set on our Canadian assets. And I'm pleased to report that in 2023, we reduced our GHG emission intensity by 9% and achieved our 65% target two years earlier. We're in the process of road mapping 2030 GHG reduction targets.

Overall, we generated a PDP recycle ratio of one seven times based on a 2023 operating netback of $41 per Boe.

Yeah.

At our responsible energy producer, we are committed to reducing the intensity of greenhouse gas emissions from our operations. Our corporate objective was to reduce our <unk> emissions intensity measured as kilograms of C. O two equivalent per Boe by 65% by 2025 relative to our 2018 baseline.

<unk> set our Canadian assets.

And I'm pleased to report that in 2023, we reduced our G. H G emission intensity by 9% and achieved our 65% target two years early.

We're in the process of road mapping 2030, ghd reduction targets.

As I wrap up my prepared remarks, I would like to reiterate our commitment to a disciplined returns based capital allocation philosophy to drive increased per share returns. The three key pillars of our business strategy, our disciplined capital allocation strong free cash flow generation and maintaining financial strength.

Eric Greager: As I wrap up my prepared remarks, I would like to reiterate our commitment to a disciplined, returns-based capital allocation philosophy to drive increased per-share returns. The three key pillars of our business strategy are disciplined capital allocation, strong free cash flow generation, and maintaining financial strength. Our 2024 guidance remains unchanged, with exploration and development expenditures of $1.2 to $1.3 billion and production of 150 to 156,000 BOE per day.

Our 2024 guidance remains unchanged with exploration and development expenditures of 1.2 to $1 3 billion and production up 150 to 156000 Boe per day.

Eric Greager: I would note that we expect our first quarter production to be approximately 2,000 BOE per day lower than our budget due to extreme weather conditions across North America in January, which led to production disruption. In 2024, we intend to continue progressing our Pembina DuVernay, further delineate our Clearwater and Manville heavy oil fairways, and deliver strong drilling and completion performance in Eagleford and Vica. Based on the forward strip, we expect to generate approximately $575 million of free cash flow in 2024.

I would note that we expect our first quarter production to be approximately 2000 Boe per day lower than our budget due to extreme weather conditions across North America in January which led to production disruptions.

And 2024, we intend to continue progressing our Pembina Duvernay further delineate our Clearwater and Manville heavy oil fairways and deliver strong drilling and completion performance in Eagle Ford and Viking.

Based on the forward strip, we expect to generate approximately $575 million of free cash flow. In 2024. This was up 8% from our budget announcement in December doing who due to an improved outlook for crude oil prices.

Eric Greager: This is up 8% from our budget announcement in December due to an improved outlook for crude oil prices. Our capital program is weighted to the first and third quarters, and as a result, we expect to generate a significant amount of our 2024 free cash flow during the second and fourth quarters. I'm very pleased with the operating results across our portfolio, which has set the stage for a strong 2024. Our board has declared a Q1 cash dividend of two and a quarter cents per share to be paid on April 1st, 2024.

Our capital program is weighted to the first and third quarters and as a result, we expect to generate a significant amount of our 2024 of free cash flow during the second and fourth quarters.

I'm very pleased with the operating results across our portfolio, which has set the stage for a strong 2024. Our board has declared a Q1 cash dividend up two and a quarter cents per share to be paid on April one 2024.

We are well capitalized and remain committed to creating long term value and increasing shareholder returns.

And now operator, we're ready to open the call for questions.

Operator: We are well-capitalized and remain committed to creating long-term value and increasing shareholder returns. And now, operator, we're ready to open the call for questions. Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press star, then one on your telephone keypad.

Thank you we will now begin the analyst question and answer session.

To join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request and submit your question in writing. Please use the farm in the lower section of the webcast screen.

If youre using a speakerphone please pick up your handset before pressing any cool.

To withdraw your question. Please press Star then two.

Our first question is from Greg Pardy with RBC capital markets. Please go ahead.

Operator: You'll hear a tone acknowledging your request to submit your question in writing. Please use the form in the lower section of the webcast frame. If you're using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star then two. Our first question is from Greg Pardy with RBC Capital Markets. Please go ahead. Hi, good morning.

Hi, Good morning, it's Rob a man on for Gregg Party and and Thanks for your commentary. My first question just on the Clearwater production remained strong coming in above 16000 barrels a day in the quarter.

Do you still believe the 12 to 15000 production range is the right range to this asset and how are you guys thinking about this moving forward.

Hey, Rob Thanks for the question.

You'll hear us continue to stay 12% to 15000, but honestly I think it's gonna hug. The high end of that so probably you know over over time, maybe just referring to around 15000 as a.

Greg M. Pardy: It's Rob, a man on for Greg Pardy, and thanks for your commentary. My first question is just about Clearwater. Production remains strong, coming in at above 16,000 barrels a day in the quarter. Do you still believe 12,000 to 15,000 barrels a day? What is the right range for this asset and how are you guys thinking about this moving forward? Hey, Rob, thanks for the question. You know, you'll hear us continue to say twelve to fifteen thousand. But honestly, I think it's going to hit the high end of that.

A plateau rate I think that makes a lot of sense.

But there's you know, we'll we'll continue to to have this conversation as the wells.

Come on in and help us understand performance.

We will inform that conversation accordingly, but so far it has outperformed our expectations. So I would say hug the high end of that and more to come.

Okay, great. Thanks, that's helpful and maybe just shifting gears, a little bit and your total debt came down about 10% in the quarter.

Eric Greager: So probably, you know, over time, maybe just referring to around fifteen thousand as a plateau rate, I think that makes a lot of sense. But there's, we'll continue to have this conversation as the wells come on and help us understand performance. You know, we'll we'll inform that conversation accordingly, but so far, it has outperformed our expectations. So I would say, you know, embrace the high end of that and more to come. Yeah, great. Thanks.

Well debt repayment remain a priority for 2024, and where do you see your debt a year end 2024, given the current strip.

Yeah. It certainly will we really like our capital allocation framework, so 50% of our free cash flow are committed to reducing our debt and the other 15% committed to capital returned to shareholders.

I anticipate that we'll finish 2024 with probably about a turn of leverage so total debt in the range of our EBITDA, probably I would say 2.2 billion is probably a pretty decent number.

Yeah, 2.1 to $2 2 billion is what I'm told.

Yeah, great. Thank you that's really helpful I'll turn it back thank.

Thank you Rob.

The next question is from Phil Skolnick with eight capital. Please go ahead.

Eric Greager: That's helpful. And maybe just shifting gears a little bit. Your total debt came down about 10% in the quarter. Will debt repayment remain a priority for 2024? And where do you see your debt at year-end 2024 given the current strip? Yeah, it certainly will.

Yeah. Thanks, good morning.

Yeah.

My first question is just with respect to your first quarter production.

How should we be thinking about oil production overall.

Our natural gas natural gas for.

For Q4 did come in a bit above our expectations.

Yeah, Youre right, Phil and thanks for the question. So so Q1 I would anticipate.

Eric Greager: We really like our capital allocation framework. So 50% of our free cash flow is committed to reducing our debt, and the other 15% is committed to capital returns to shareholders. I anticipate that we'll finish 2024 with probably about a turn of leverage. So total debt in the range of our EBITDA, I would say 2.2 billion is probably a pretty decent number. Yeah, 2.1 to 2.2 billion is what I'm told. Yeah, great. Thank you. That's really helpful. I'll turn it back.

Probably in the bottom of our $1 50 to $1 56 range. So think kind of $1 50, which is where we've been.

Discussing it.

In the in the budget conversation and then.

If it's kind of a $1 50 to $1 51 in that range as we as we turned out our budget then make a small adjustment you know I mentioned 2000 BOE a day, a full year's going to be right in line with the midpoint of our of our range.

But we could be a little bit below what we talked about in the budget conversation so think.

Operator: Thank you, Rob. The next question is from Phil Skolnick with 8 Capital. Please go ahead. Dad, thanks. Good morning.

It could be $1 49, $1 49, five something like that as we work to overcome the production disruptions in our as a result of the polar vortex.

Phil Skolnick: My first question is just with respect to your first quarter production, you know, how should we be thinking about oil production overall and, first, natural gas, because natural gas for T4 did come in a bit above expectations. Yeah, you're right, Phil, and thanks for the question. So Q1, I would anticipate, you know, probably in the bottom of our $150,000 to $156,000 range. So think kind of $150,000, which is where we've been discussing it, you know, in the budget conversation. And then, you know, if it's kind of $150,000 to $151,000 in that range, as we have determined our budget, then make a small adjustment. You know, I mentioned $2,000 BOE a day.

You're right, we actually have seen before.

Because we've seen such strong well performance out of our Eagle Ford.

You know that that well performance includes all phases Friday and includes natural gas oil and Ngls and the well performance has been as I mentioned in my prepared remarks top quartile.

That has also brought on and on you know a fair amount of gas in Nat gas has been.

Hum.

Resulted in probably a 1% or so a change to our total liquids gas mix in Q4, but I would anticipate moving into Q1.

We're going to shift back into a more balance with regard to our historical trends, so think kind of 84.

Possibly or right around there in terms of the liquids mix to gas so things will trend back toward I think a more balanced trend line.

Got it thanks, and then my.

Eric Greager: A full year is going to be right in line with the midpoint of our range. But, you know, we could be a little bit below what we talked about in the budget conversation. So think it could be $149,000, $149,500, something like that, as we work to overcome the production disruptions as a result of the polar vortex. You're right.

Other questions are there any updates on.

More and bill and will stack.

Yes.

Yeah, Yeah. So we have continued developing in our in the Cold Lake area that was sika and I've continued to learn and generate results. We can we can continue to build forward.

We haven't released those results yet, but we're encouraged by what we're learning.

Certainly that sat with CCAR in the Manville stack in the Cold Lake area on that new land extension and continue discoveries in that area.

Eric Greager: We actually have seen, because we've seen such strong well-performance out of our Eagleford, you know, that well performance includes all phases, right? It includes natural gas, oil, and NGLs. And the well performance has been, as I mentioned in my prepared remarks, top quartile. That has also brought on a fair amount of gas, and that gas has resulted in probably a one percent or so change to our total liquids gas mix in Q4. But I would anticipate moving into Q1 that we're going to shift back into more balance with regard to our historical trends. So think kind of 84 possibly or right around there in terms of the liquids mixed to gas.

And then around the more and bill the racks and more and Bill Likewise, we've continued to delineate those structures and.

And understand kind of the extent of the structures of the quality of the reservoir.

Nothing really to report at this juncture in the conversation, but we're continuing to.

Better understand the reservoir quality and better understand the extension structure.

And then I think it's important to point out we actually made another land extension to the north and West of our Peace River area an area. We call Grizzly Ah that is also exploratory that we feel very very.

Very encouraged by our in our understanding of its prospectively, so more to come on that but continued learnings and progress.

Around that with seek at Cold Lake the racks at more in Bill and the Blue Sky in in Grizzly.

Eric Greager: So things will trend back toward, I think, a more balanced trend line. Got it, thanks. Then my other question is, are there any updates on Morneville and Waseca? Yeah, yeah, so we have continued developing in the Cold Lake area and the Waseca area and have continued to learn and generate results we can continue to build forward. We haven't released those results yet, but we're encouraged by what we're learning. Certainly, that's the Waseca in the Manville stack in the Cold Lake area on that new land extension and continued discoveries in that area.

Perfect. Thank you.

Thank you Phil.

Yeah.

This concludes the question and answer session from the phone line I'd like to turn the conference back over to Brian Ector for any questions received online.

Alright, Thanks, Kaley and there are a lot of questions coming through on the webcast. So we do appreciate.

The level of engagement with our shareholders I'm going to try and get to a number of the questions. If we don't get to your question then I will follow up with you.

Line, Eric you alluded to it in one of the analyst questions, but a number of investors are asking about our capital allocation framework. Some questions around should we be allocating more to debt repayment others are asking should we be increasing the buyback program. So do you want to just run through maybe a little bit of your thought.

Eric Greager: Then around Morenville, the wrecks in Morenville, likewise, we've continued to delineate those structures and understand kind of the extent of the structures and the quality of the reservoir. Nothing really to report at this juncture in the conversation, but we're continuing to, you know, better understand the reservoir quality and better understand its extents and structures. And then I think it's important here to point out we actually made another land extension to the north and west of our Peace River area, an area we call Grizzly, that is also exploratory and we feel very encouraged by our understanding of its prospectivity. So more to come on that, but continued learnings and progress around the Waseek at Cold Lake, the Wrecks at Moranville, and the Blue Sky in Grizzly. Perfect, thank you.

This is around the capital allocation process and what we're doing and what we're thinking going forward yeah. It's a great question Brian.

And I appreciate the question through the web portal.

These are this is not a perfect science and we continue to engage with our shareholder community and our board and these are the.

Really interesting and intellectually stimulating conversations, but because again its tradeoffs and it's subjective, but we really do like the 50 50 framework. So.

50% of the free cash flow generated goes to our debt and if you think about the debt as a return on those on that marginal free cash flow dollar that's committed to that if you think about the return on that on an after tax basis, that's for round numbers, let's call. It 6% so an after tax <unk>.

Brian G. Ector: Thank you, Phil. This concludes the question and answer session from the phone lines. I'd like to turn the conference back over to Brian Ector for any questions received online. All right. Thanks, Gayle.

Brian G. Ector: And there are a lot of questions coming in on the webcast, so we do appreciate the level of engagement with our shareholders. I'm going to try to get to a number of them. If we don't get to your question, then I will follow up with you offline. Eric, you alluded to it in one of the analyst questions, but a number of investors are asking about our capital allocation framework, some questions around, should we be allocating more to debt repayment? Others are asking, should we be increasing the buyback program? So do you want to just run through maybe a little bit of your thought process around the capital allocation process and what we're doing, and what we're thinking going forward? Yeah, it's a great question, Brian.

Churn of 6% when you commit a marginal free cash flow dollar to the to the debt Paydown and you compare that to if I'm doing back of the envelope math today about a 16% free cash flow yield and if you use that as a proxy measure for the return on a marginal free cash flow dollar applied to paying down equity or buying back shares.

Just two pools of capital and they have different underlying cost of capital associated with them.

If you're.

Buying a car or a building a home or financing your business and you had one pool of capital that cost you, 16% in one pool of capital that cost 6%.

Then you would generally want to lean toward paying down to 16% of the higher cost pool first and that generally guide to this vision, but because there are also underlying dynamics between enterprise value market cap and the debt component of enterprise value and how it shifts from.

Eric Greager: And I appreciate the question through the web portal. This is not a perfect science, and we continue to engage with our shareholder community and our board. And these are really interesting and intellectually stimulating conversations because, again, it's tradeoffs and it's subjective.

EV as you pay down debt over the market cap, there's some underlying incentives to keep that allocation.

Eric Greager: But we really do like the 50-50 framework. So 50 percent of the free cash flow generated goes to pay off our debt. And if you think about the debt as a return on that marginal free cash flow dollar that's committed to debt, if you think about the return on that, on an after-tax basis, that's, for round numbers, let's call it 6 percent. So an after-tax return of 6 percent when you commit a marginal free cash flow dollar to debt pay down.

More balanced than a 16 to six.

What it would imply and so based on all of this while we've said is look you can't make a perfect formulaic answer we like 50 50, because it recognizes the value of both sides of that.

And.

The bonds actually trade really well last I looked the bonds were trading at 104, so it's a really strong signal that.

Eric Greager: And you compare that to, if I'm doing back-of-the-envelope math today, about a 16 percent free cash flow yield. And if you use that as a proxy measure for the return on a marginal free cash flow dollar applied to paying down equity or buying back shares, they're just two pools of capital, and they have different underlying costs of capital associated with them. If you were buying a car or building a home or financing your business and you had one pool of capital that cost you 16% and one pool of capital that cost you 6%, then you would generally want to lean toward paying down the 16% of the higher-cost pool first.

The credit profile and credit worthiness and the debt is as strong as.

And that also tends to tell us that continuing to push capital free cash flow.

Into our equity buyback is probably a really good place to focus and so let me just pause with that Brian and happy.

Happy to happy to dig in a little bit more if there are other questions that need more.

But that's all part of that okay. Thanks, Eric.

Another common theme coming through on the question it does relate to the non cash impairment.

Decent so a number of investors asking for me would be just a little bit more of an explanation be.

Eric Greager: And that generally guides this vision, but because there are also underlying dynamics between enterprise value, market cap, and the debt component of enterprise value and how it shifts from EV, as you pay down debt, over to market cap, there are some underlying incentives to keep that allocation more balanced than a 16 to 6 would imply. And so, based on all of this, what we've said is, look, you can't make a perfect formulaic answer. We like 50-50 because it recognizes the value of both sides of that, and the bonds actually trade really well.

Behind the impairment on the non operated Eagle Ford and the routine Viking assets. Yeah can you elaborate a little bit for people you get a little bit of comfort with what we're doing please yeah. Thanks Bryan so.

It's important to understand that in particular in E&P every industry and different businesses kind of run on different foundational.

Structures within E&P, what's most important in these businesses is the cash making capacity of our business.

And a noncash impairment is an accounting adjustment, it's not a cash measure the cash making capacity of our business remains stronger than it's ever been Q4 was a solid quarter.

Our solid finish to a transformational year, a strong company significant base of quality assets with lots of opportunities. Our operational performance is better than it's ever been and we're more diversified and resilient than we've ever been.

Eric Greager: Last I looked, the bonds were trading at 104, so it's a really strong signal that the credit profile and credit worthiness and the debt are strong, and that also tends to, you know, tell us that continuing to push capital, free cash flow, into our equity buyback is probably a really good place to focus. And so, let me just pause with that, Brian, and I'll be happy to dig in a little bit more if there are other questions that need more, but that's where I'll park that. Okay, thanks, Eric.

But what lies underneath those noncash impairments those accounting adjustments.

It really is an underlying conversation around revere.

The revisions to the reserves so.

The technical revisions were relatively small 4% of our opening reserves balance a majority of those technical revisions occurred on our non operated Eagle Ford asset and those.

We're basically founded where we recognize steeper declines on wells drilled after 2017 as a result of tighter spacing.

Brian G. Ector: Another common theme coming through in the questions does relate to the non-cash impairment that, so a number of investors are asking for maybe just a little bit more of an explanation behind the impairment on the non-operated Eagle Ford and the retained Viking Assets. Eric, can you elaborate a little bit for people, give them a little bit of comfort with what we're doing, please? Yeah. Thanks, Brian.

This is something that the industry at large has recognized across the unconventional space and it's a little bit lumpy as to when when people recognize these in their reserves and they take them.

But it's not altogether without precedent. So we wanted to have a little bit of a conversation just on where the majority of these technical revisions ly again steeper declines on wells drilled after 2017 as a result of tighter spacing in our non op Eagle Ford and there were a few spacing adjustments related to infill development as well we feel very good about.

Brian G. Ector: So, it's important to understand that, in particular, in E&P, every industry and different businesses kind of run on different foundational structures. But in E&P, what's most important in these businesses is the cash-making capacity of a business. And a non-cash impairment is an accounting adjustment; it's not cash.

Eric Greager: The cash-making capacity of our business remains stronger than it's ever been. Q4 was a solid quarter, a solid finish to a transformational year, a strong company, and a significant base of quality assets with lots of opportunity. Our operational performance is better than it's ever been, and we're more diversified and resilient than we've ever been. But what lies underneath those non-cash impairments, those accounting adjustments... It really is an underlying conversation around So, the technical revisions were relatively small, 4% of our opening reserves balance. A majority of those technical revisions occurred on our non-operated Eagleford asset.

Where the book lies today.

And I think going forward in terms of cash making capacity of this business, what's really important to these businesses and that's better than it's ever been before so a little bit disappointed in the reaction. This morning I understand.

But I think it's a little bit of an overreaction to what is a noncash accounting adjustment.

Okay. Thanks, Eric.

Let's shift a little bit.

To the to some operational questions that are coming in as well here.

Here's one related to the Eagle Ford.

<unk>.

Yeah, I was talking about the non operated wells, having similar results to our operated program, but the capital on the Ranger Wells is higher its about 50% higher yet what are the reasons Eric.

Eric Greager: And those were basically founded where we recognized steeper declines on wells drilled after 2017 as a result of tighter spacing. This is something that the industry at large has recognized across the unconventional space. And it's a little bit lumpy as to when people recognize these in their reserves and they take them, but it's not altogether without precedent.

For the higher well costs and the.

At the same time I think maybe you can speak to some of the efficiencies. We're still we're seeing from a drilling standpoint, and our target to improve the efficiencies in 2024, yeah. Great question. So.

So.

Just to be clear the karnes trough this as karnes county southwestern to wet.

Eric Greager: So we wanted to have a little bit of a conversation just on where the majority of these technical revisions lie. Again, steeper declines on wells drilled after 2017 as a result of tighter spacing in our non-op Eagleford. And there were a few spacing adjustments related to infill development as well. We feel very good about where the book lies today.

In that general area is.

I think objectively some of the very highest quality unconventional resource in North America, just very very good resource.

<unk> discovered.

In the mid two thousands late two thousands and has been kind of held in locked up and developed over time very very high quality resource.

Eric Greager: And I think, you know, going forward, in terms of the cashmaking capacity of this business, what's really important to these businesses, and that's better than it's ever been before. So I was a little bit disappointed in the reaction this morning. But, you know, I think it's a little bit of an overreaction to what is a non-cash accounting adjustment. Let's shift a little bit to some operational questions that are now coming in as well. And here's one related to eagle fur.

Along in its development.

We have recognized with our.

Non operated karnes trough assets very good quality, but having been.

Kind of developed over a lengthy period of time as.

As you move up to the to the north and east into the block of our Ranger lands.

The concentrated contiguous block of our Ranger lands.

The reservoir quality is good.

Eric Greager: It's talking about the non-operated wells having similar results to our operational program, but the capital on the Ranger wells is higher; it's about 50% higher. Yeah. What are the reasons, Eric, for the higher well costs? At the same time, I think maybe you can speak to some of the efficiencies we're seeing from a drilling standpoint and our target to improve those efficiencies in 2024. Yeah, great question. Just to be clear, the Carnes Trough is Carnes County, south-western DeWitt, and that general area is, I think, objectively, some of the very highest quality unconventional resources in North America. Just a very, very good resource. Discovered in the mid-2000s and late-2000s, and has been kind of held and locked up and developed over time.

But not as good as the Karnes trough and so you know there's exceptional resource quality the best in North America, that's the Karnes and then Theres, one step down I would call it.

Tier two plus or <unk>, plus very high quality resource, but in order to get their results to punch at the same level, you've got to work harder.

You've got to spend more energy intensity hydraulic intensity kinetic energy to shatter the resource in the reservoir and generate the fracture surface area necessary to liberate and slightly lower quality resource and it's this fracture surface area that generates the well performance that we're seeing.

But it takes more effort and it takes more capital and as a consequence of that we're seeing very strong well performance, but we've got to work harder and we've got to spend a bit more capital. These are also longer laterals as I mentioned in my prepared remarks, and so we're building efficiency and by drilling longer laterals and getting strong performer.

Eric Greager: Very, very high quality resource, long in its development, as we have recognized with our non-operated Carnes Trough assets. Very good quality, but having been kind of developed over a lengthy period of time, as you move up to the north and east into the block of our ranger land, the concentrated contiguous block of our ranger lands. The reservoir quality is good, but not as good as the Carnes Trough.

Out of those longer laterals.

And I think one other point that I'll just try to tuck in here is we continue to target.

8% to 10% performance improvements in 2024 over 2023, and there were embedded improvements in 2023 as well these are operational improvements, but they they they really orbit around things like <unk>.

Eric Greager: And so, you know, there's exceptional resource quality, the best in North America, that's the Carnes, and then there's one step down, I would call it, you know, Tier 2 plus or Tier B plus, very high quality resources. But in order to get the results to punch at the same level, you've got to work harder. You know, you've got to spend more energy intensity, hydraulic intensity, and kinetic energy to shatter the resource in the reservoir and generate the fracture surface area necessary to liberate a slightly lower quality resource.

Hey designs of the bottom hole assembly and drilling the design of that BHA. The efficiency the bit selection. These are multi blade polycrystalline diamond bits and the.

The way the cutters are designed the way the bits are designed the way. The BHA is designed affects that penetration rate hole cleaning.

The way we stay in zone is.

A very energy and.

Intellectually intensive effort to stay in the best rock, but it results in kind of active geo steering to stay in the best rock, but results in better ultimate performance and so you want to get faster, but you also want to stay in the highest quality of resource and it's always a balance between getting faster pushing down call.

Eric Greager: And it's this fracture surface area that generates the well performance that we're seeing, but it takes more effort and it takes more capital. And as a consequence of that, we're seeing very strong well performance, but we've got to work harder, and we've got to spend a bit more capital. These are also longer laterals, as I mentioned in my prepared remarks.

Costs, while also staying in the highest quality resource and getting the biggest bang for the effort.

Eric Greager: And so, we're building efficiency by drilling longer laterals and getting strong performance out of those longer laterals. And I think one other point that I'll just try to tuck in here is that we continue to target 8 to 10 percent performance improvements in 2024 over 2023. And there were embedded improvements in 2023 as well. These are operational improvements, but they really orbit around things like BHA design, so the bottom hole assembly and drilling, the design of that BHA, the efficiency, and the bit selection. These are multi-blade polycrystal and diamond bits.

And so that's the balance, but we will continue to put a lot of.

Downward pressure on those capital numbers.

But only to the extent that we continue to drive maximum performance out of the reservoir because you kind of get one shot at unconventional stimulation and you want to make sure. It's right. The first time.

Hey, Eric just continuing on the Eagle Ford, maybe a bit of a two part question here.

We have an investor asking about.

Leasing programs are expanding acreage sort of tuck in bolt on opportunities, where do we see in the Eagle Ford and maybe you could expand that even to Canada and.

And second part around the Eagle Ford would be would we even consider selling the non operated.

Eagle Ford position.

Yeah.

Eric Greager: And the way the cutters are designed, the way the bits are designed, the way the BHA is designed affects the penetration rate, hole cleaning, and the way we stay in the zone is, you know, it's a very energy and intellectually intensive effort to stay in the best rock, but it results in a kind of active geosteering to stay in the best rock, which results in better ultimate performance. And so, you want to get faster, but you also want to stay with the highest quality resources. And it's always a balance between getting faster, pushing down costs, while also staying with the highest quality resources and getting the biggest bang for the effort. And so that's the balance.

So let me just take the last one first we really like our Eagle Ford position all of it the non op Eagle Ford the operated Eagle Ford the team in place today is getting the best out of both and putting them together in ways that elevate the combination and so we're going to continue to realize.

Both operational efficiencies and improvements and performance efficiencies and improvements over time, we're just six months in and we've put two back to back top quartile quarters in place I couldnt be more proud of the team.

And there's a lot more to come in terms of the competitive and leasing landscape around our our lands in the Eagle Ford there are a lot of small opportunities. We're focused on small opportunities tuck ins working interest acquisitions, because they're very efficient you're already investing the effort in developing <unk>.

Eric Greager: But we will continue to put a lot of downward pressure on those capital numbers, but only to the extent that we continue to drive maximum performance out of the reservoir, because you kind of get one-shotted on conventional stimulation, and you wanna make sure it's right. Okay, Eric, just continuing on the Eagle for maybe a bit of a two-part question here. We have an investor asking about leasing programs or expanding acreage, sort of tucking in bolt-on opportunities. What do we see in the Eagleford, you know, and maybe you could expand that even to Canada. And the second part of the Eagleford would be, would we even consider selling the non-operated? Beagleford position. Yeah, we... So, let me just take the last one first.

If you can buy working interest in.

Your own operated program that's real efficient.

So tuck ins are working interest extensions that will allow us to drill longer laterals be more efficient.

Take advantage of the capacity of our gathering and processing apparatus. So all of that's very efficient.

And you won't see any of it because no single transaction ever rises to the level of materiality, but we continue to work on efficiency in it and it hits the cost structure.

<unk> improves the margins in Canada are.

We talk openly about.

How strong our teams are and in particular around heavy oil we've got three land extensions two discoveries and continue to make good on the economic performance of those land extensions and discoveries there will continue to be more to talk about there.

Eric Greager: We really like our Eagleford position, all of it. The non-op Eagleford, the operated Eagleford, the team in place today is getting the best out of both and putting them together in ways that elevate the combination. And so, we're going to continue to realize both operational efficiencies and improvements and performance efficiencies and improvements over time. We're just six months in, and we've put two back-to-back top quartile quarters in place. I couldn't be more proud of the team, and there's a lot more to come.

You know I like to say three discoveries in three years.

And three land extensions on on those discoveries one was P. VI. It was spectacular Atlanta extension recently of course Cold Lake and they will seek in the Manville, we just talked about the racks at more unveil, which is Clearwater equivalent just north of Edmonton and then of course the.

Eric Greager: In terms of the competitive and leasing landscape around our lands in Eagleford, there are a lot of small opportunities. We're focused on small opportunities, tuck-ins, working interest acquisitions because they're very efficient. You're already investing the effort in developing, and if you can buy working interest in your own operated program, that's really efficient.

Grizzly near Peace River, the Blue Sky and these are these are all highly perspective, and we've got the right team at the right time to take advantage of those opportunities and then finally I would say within our Pam on the Duvernay.

We continue to unlock the secrets of that reservoir and there are opportunities in and around our current position, where we will continue to look and possibly.

Eric Greager: So tuck-ins, working interest extensions, those allow us to drill longer laterals, be more efficient, and take advantage of the capacity of our gathering and processing apparatus. So all of that's very efficient. And you won't see any of it because no single transaction ever rises to the level of materiality, but we continue to work on efficiency, and it hits the cost structure, and improves the margins. In Canada, we talk openly about how strong our teams are, and in particular around heavy oil.

Take advantage of again, they may not be large enough to ever hit materiality. So you may not know, but these things.

Definitely improve the performance of the overall apparatus.

Last question on the Eagle Ford.

<unk> relates.

It relates to re frac opportunities and if we have any plan for 2024, we actually do so we continue to high grade. Our candidate list candidate selection is probably the most important part of our re Frac program.

You got to find you got to find candidates that have the right.

Wellbore architecture that have the right degree of primary cementing and zonal isolation.

Eric Greager: We've got three land extensions, two discoveries, and continue to make good on the economic performance of those land extensions and discoveries. There will continue to be more to talk about there. I like to say three discoveries in three years and three land extensions on those discoveries. One was Peavine. It was spectacular.

Tubular is that are large enough to be able to get in and out of.

Without getting into ultra slim hole technologies that become a bit fragile for this kind of work.

And we have a long list of candidates are the other thing. That's important is the candidates have to date back to a vintage or a time when they were let's call it understand related.

Eric Greager: We made a land extension recently. Of course, Cold Lake and the Waseca and the Manville. We just talked about the wrecks at Morinville, which is a clear water equivalent just north of Edmonton. And then, of course, the grizzly bears near Peace River, the Blue Sky.

These are the days back in the day, when borate and zircon eight cross linker is where the thing and the very low volumes and low tonnage and leaving a lot of resource in the ground to put it in just kind of scale context.

Eric Greager: And these are all highly prospective, and we've got the right team at the right time to take advantage of those opportunities. And then, I would say, within our Pamela DuVernay, we continue to unlock the secrets of that reservoir. And there are opportunities in and around our current position where we will continue to look for and possibly take advantage of. Again, they may not be large enough to ever hit materiality, so you may not know, but these things definitely improve the performance of the overall apparatus.

You know our position began developing in the.

The early stages of the Eagle Ford development and many of those opportunities can now be re-entered and reevaluated and re stimulated.

If for the sake of just illustration, let's say there are 40 million barrels of oil equivalent in a section and Eagle just a representative number to put it in in terms of scale a full development program today in an unconventional like like the Eagle Ford May recover.

10% to 15% of the total resource in place so 4 million to 6 million Boe of a 40 million Boe.

Eric Greager: Eric, the last question on the Eagle Bird relates to REFRAC opportunities and if we have any plan for 2024. We actually do. So we continue to high-grade our candidate list. Candidate selection is probably the most important part of a REFRAC program. You have to find candidates that have the right wellbore architecture, that have the right degree of primary cementing and zonal isolation, tubulars that are large enough to be able to get in and out of without getting into, you know, ultra-slim hole technologies that become a bit fragile for this kind of work. And we have a long list of candidates. The other thing that's important is, you know, the candidates have to date back to a vintage or a time when they were, let's call it, under-stimulated.

Original resource in place number.

That leaves 85% of the original resource still in place and this is this is a time and a place in an opportunity at the right pricing and economics for refractory stimulations.

To extract some of that value that's left in the resource.

And in some ways other technologies that feel that look and feel like the unconventional.

Version of EUR, and so lots of opportunities to continue unlocking. This we're doing the science, the math and physics today to better understand it but we do have re fracs in the ground.

And along candidate list that we're that we're currently evaluating and we will be excited to talk about at the right time two things there.

I do have one more question coming from the Eagle Ford.

And it relates to any constraints on completion activity.

Eric Greager: You know, these are the days back in the day when, you know, borate and zirconate crosslinkers were the thing, and very low volumes and low tonnage and leaving a lot of resources in the ground. To put it in just kind of scale context. You know, our position began developing, you know, in the early stages of the Eagle for Development, and many of those opportunities can now be re-entered, re-evaluated, and re-stimulated. If, for the sake of just illustration, let's say there are 40 million barrels of oil equivalent in a section of EGLE, just a representative number to put it in terms of scale. A full development program today in an unconventional like the EGLEford may recover.

As always I think were carrying ducks within the program at various points in time, but.

Any constraints on the completion side of our business Eric Yeah. We generally don't Bill just as a matter of practice, we don't we don't build a DUC inventory per se. So it's not an intentional effort to sort of build a DUC inventory we.

We have a working DUC inventory. So when for example, three rigs are running.

There'll be generating cased and cemented wellbore is faster than the crew will be clearing them at the tailgate until you build a working DUC inventory, but it will be cleared within a few quarters.

And that's really just a capital efficiency piece.

Perfect, Eric I want to shift to a couple of other maybe more macro themes that have come through on the webcast as well here.

Eric Greager: 10 to 15% of the total resource in place. So 4 million to 6 million BOE of a 40 million BOE original resource in place. That leaves 85% of the original resource still in place. And this is a time and a place and an opportunity, at the right price and economics, for refracturing, and re-stimulation, to extract some of that value that's left in the resource. And in some ways, other technologies that look and feel like the unconventional version of EOR.

Can you discuss M&A and views on being a buyer or seller at this part of the cycle.

Yeah.

What I can say is we really like our five year plan.

We took a lot of time.

And a lot of effort to put together, our <unk>, which runs through the entire full depletion cycle of our business, but we published our five year plan, we're very pleased with it.

We grow from 2024 to 2028.

At Notionally about 2% per year.

Eric Greager: And so lots of opportunities to continue unlocking this. We're doing the science, the math, and the physics today to better understand it. But we do have refracts in the ground and a long candidate list that we are currently evaluating and will be excited to talk about at the right time. Thanks, Eric.

And by 2028 were 170000 BOE a day business, we've paid down our debt to about $1 billion Notionally at that point in 2028, and a turn by turn even at even at reasonably.

Eric Greager: I do have one more question coming from the Eagleford. It relates to any constraints on completion activity. There's always, I think we're carrying ducks within the program at various points in time. But any constraints on the completion side of our business, Eric? Yeah, we generally don't build just as a matter of practice.

Reasonably priced prices reasonable by today's standards.

Close to support levels were generating billions of dollars of free cash flow and billions of dollars of that free cash flow will be returned.

To shareholders as well so at the top line over that five year program, where we're generating 2% per year topline growth, we're taking let's call it 7% to 10% per year of our shares out through our N CIB.

Eric Greager: We don't We don't build a duck inventory per se. So it's not an intentional effort to sort of build a duck inventory. We have a working duck inventory. So when, you know, for example, three rigs are running, they'll be generating cased and cemented wellbores faster than the crew will be clearing them at the tailgate. And so you build a working duck inventory, but it will be cleared within a few quarters. And that's really just a capital efficient. Perfect. Eric, I want to shift to a couple of other, maybe more macro, themes that have come through on the webcast as well.

And we.

We are generating a dividend as well and so the total shareholder return associated with that very straightforward and reliable program over five years is meaningful.

Probably 10% per year on a <unk> basis and it results in a strong.

Well capitalized low leverage business over time.

That's what we're focused on today and I think I'll just I'll just park that one there.

Eric Greager: Can you discuss M&A and views on being a buyer or seller at this part of the cycle? Yeah, I can say we really like our five-year plan. We took a lot of time and a lot of effort to put together our LRP, which runs through the entire full depletion cycle of our business, but we published our five-year plan, and we're very pleased with it.

A bit of a financial related question Eric.

Do we have any interest rate swaps on our floating rate debt and as so locked in rate we don't.

The capital structure capital structure is very simple it's a great question. It's very simple, it's very straightforward we've got two issues out a 2027.

Eric Greager: We grow from 2024 to 2028 at notionally about 2% per year, and by 2028, we're a $170,000 BOE a day business. We've paid down our debt to about $1 billion, notionally, at that point in 2028, and turn by turn, even at prices reasonable by today's standards, kind of close to support levels, we're generating billions of dollars of free cash flow, and billions of that free cash flow will be returned to shareholders as well. So on the top line, over that five-year program, we're generating 2% per year top-line growth.

This is a.

High yield senior unsecured.

That we've got the 2020 Sevens at 410 million U S.

Got to 20, <unk> at 800 million U S.

And those have a coupon the 20 <unk> have a coupon of $8 five and 2020 sevens have a coupon of eight in three quarter.

And those of course are fixed firm term.

Net.

Staged out nicely. So we can manage them the balance is the floating debt that the individual investor was asking about.

Eric Greager: We're taking, let's call it, 7% to 10% per year of our shares out through our NCIB, and we are generating a dividend as well. And so the total shareholder return associated with that very straightforward and reliable program over five years is meaningful, probably 10% per year on a TSR basis, and it results in a strong, well-capitalized, low-leverage business over time. That's what we're focused on today, and and I think I'll just I'll just park that one there. A bit of a finance-related question Eric: Do we have any interest rate swaps on our floating rate debt and, so, what locked-in rate? We don't.

That's on our.

Credit facility and we don't have.

Any part of that subject to interest rate swaps or other construct it's really just a it floats at a sofa plus 225 I think Chad.

And so that basically moves up and down with it.

Slight.

Premium to sulfur and as benchmark rates go up or down it moves with it but it is our first use of.

Debt Paydown is against our credit facility.

Another sort of financial related question around the entire business and free cash flow generation.

Eric Greager: Yeah, capital structure is very simple. It's a great question. It's very easy. It's very straightforward.

What would be our <unk>.

Current breakeven price, Eric I'm thinking <unk> here, yeah in <unk> terms the way I think about this is at the asset level, because we use individual asset level breakeven.

Eric Greager: We've got two issues out. 2027. This is, You know, high-yield senior unsecured debt; we've got the 2027s at $410 million U.S. We've got the 2030s at $800 million U.S. And those have a coupon, the 2030s have a coupon of $8.5, and the 2027s have a coupon of $8.75. And those, of course, are fixed firm terms, and Bob McDowd, staged out The balance is the floating debt that the individual investor was asking about. That's on our credit facility, and we don't have any part of that subject to interest rate swaps or other constructs. It's really just it floats at SOFR plus 225, I think, Chad. And so that basically moves up and down with a slight, you know, premium to SOFR, and as benchmark rates go up or down, it moves with it. But it is our first use of debt pay down against our credit.

For capital allocation purposes. So the first call is on your lowest and your lowest breakeven highest performing package of assets and so we use break evens to help us.

And capital allocation efficiency. So the numbers that are in my mind range from the most defensive assets, which have break evens in the thirties W. Ti.

And our lease defensive or.

The assets that have the most torque or operating leverage also have the highest break evens.

And those have breakeven just under $60 <unk> at the asset level and so I would say, let's just say notionally between kind of high 30, SWT I and high 50, SWT I and in the Middle there you've got let's just say kind of mid Forty's is.

Eric Greager: Another sort of financial-related question around the entire business and free cash flow generation, but, What would be our current break-even price, Eric? I'm thinking in WTI terms here? Yeah, in WTI terms. The way I think about this is at the asset level because we use individual asset-level break-evens for capital allocation purposes. So, you know, the first call is on your lowest and, you know, your lowest breakeven, highest performing package of assets. And so we use breakevens to help us with capital allocation efficiency.

Just kind of where the mid point of the assets and the beauty of this is because we have each of these assets tiered out in tier one tier two and tier three we don't have to turn off capital till the whole asset we can actually turn off capital to the selective tearing portions of the asset.

Defined by our kind of reservoir quality and asset quality tearing and this allows us to be very very flexible when prices move higher to take advantage of the torque in the upside and when prices move lower to take advantage of the defensive nature of the assets and to turn off capital to those which have achieved.

Eric Greager: So the numbers that are in my mind range from the most defensive assets, which have breakevens in the 30s WTI, and our least defensive or have, you know, the assets that have the most torque or operating leverage also have the highest breakevens, and those have breakevens just under $60 WTI at the asset level. And so I would say, let's just say notionally between kind of the high 30s WTI and the high 50s WTI

A threshold level of let's call it 15% be tax IRR, we can switch those off and we can do so on a playbook that is already well established and so this is the way we think about three.

Thriving in a volatile price environment and it's also the construct youll see how this really does support the 60 by 100 call our structure.

Eric Greager: And in the middle there, you've got, let's just say kind of the mid 40s is kind of where the midpoint of the assets is. And the beauty of this is that because we have each of these assets tiered out in tier one, tier two, and tier three, we don't have to turn off capital to the whole asset. We can actually turn off capital to the selective tiering portions of the asset as defined by our kind of reservoir quality and asset quality tiering. This allows us to be very, very flexible when prices move higher to take advantage of the torque and the upside. And when prices move lower to take advantage of the defensive nature of the assets and turn off capital to those which have achieved a threshold level of, let's call it, 15% B-tax IRR, we can switch those off, and we can do so on a playbook that is already well established. And so this is the way we think about thriving in a volatile price environment. And it's also the construct. You'll see how this really does support the 60 by 100 collar structure.

Eric can you comment on and we've got time for I think I'll give you maybe a couple of questions here.

We reached our limit.

Comment on the juniper position.

Yes, yes, I can't believe we're that says yes. So.

Juniper had three escrow hold periods, each one consisting of about 90 days and those hold periods started with the close on June 20th of 2023.

So the first 90 days as soon as that first escrow hold period expired.

Juniper.

<unk> free to trade on one third of the total.

Number of shares they had at the time and that was lets just call. It for the sake of illustration 51 million shares that occurred I think on September 18th. It was 51 million shares. It was an overnight bought deal in the U S.

And that was the first third of what they held they now hold about 12%. So it was 18 sell a third its about 12 remaining today.

That means they're deemed an insider, which is which is why we as a company can't knowingly buy directly from an insider and that's not the question the investor asked but it's one of the reasons why we haven't been able to participate directly in those transactions.

Eric Greager: Eric, can you comment on, and we've got time for I think I'll give you maybe a couple questions here as we reach our limit. Can you comment on the Juniper position? Yes, yes, I can pull up where that sits.

Eric Greager: Yeah, so Juniper had three escrow hold periods, each one consisting of about 90 days, and those hold periods started with the close on June 20th, 2023. So for the first 90 days, as soon as that first escrow hold period expired, Juniper was free to trade on one third of the total number of shares they had at the time. And that was, let's just call it for the sake of illustration, 51 million shares. That occurred, I think, on September 18th.

But what I would say is the second escrow hold period expired 90 days after the after the first one expired which was.

Before Christmas of 2023.

Juniper still hold that position.

It's our best understanding based on filings they haven't sold any theres been some maybe some changes to the way it's.

Considered within their holding package, but I think they still hold all of those shares.

They are available and juniper can choose when juniper decides to decides to to sell those.

Eric Greager: It was 51 million shares. It was an overnight bought deal in the U.S. And that was the first third of what they held. They now hold about 12 percent. So it was 18 sell a third. It's about 12 remaining today.

Now the third escrow hold period will expire in March and so that will add to the available shares for sale.

And what.

What I would say is you know juniper owns the shares just like everyone else that has a common shareholder and they'll decide according to their own needs and desires win when they sell.

Eric Greager: That means they're deemed an insider, which is why we as a company can't knowingly buy directly from an insider. And that's not the question the investor asked, but it's one of the reasons why we haven't been able to participate directly in those transactions. But what I would say is the second escrow hold period expired 90 days after the first one expired, which was before Christmas of 2023. Juniper still holds that position. It's our best understanding based on filings, but they haven't sold any yet. There may have been some changes to the way it's considered within their holding package, but I think they still hold all of those shares. They are available, and Juniper can choose, when it decides to, to sell them.

Okay.

Thanks, Eric you've been very generous with your time here today I do want to close it had a number of comments and questions around the share price performance.

Today.

We'll grow a bit of a longer period of time and so maybe you can just reiterate your thoughts.

The reaction today.

Maybe over a longer period of time you is.

As a shareholder of in person insurers as well.

Your comments as we as we have yeah. So I.

And not at all happy with the share price performance, but transformational deals.

Like the Ranger.

Merger.

Eric Greager: Now, the third escrow hold period will expire in March, and so that will add to the available shares for sale. And what I would say is Juniper owns the shares just like everyone else that is a common shareholder, and they'll decide according to their own needs and desires when they sell. Thanks, Eric. You've been very generous with your time here today. I do want to close.

Acquisition by merger it creates certain overhangs in those overhangs take time to work off the Juniper ownership is in fact, one of those and probably a pretty significant contributor to the overhang. There will be in March 102 million shares available and Juniper may hold those shares forever I just don't.

No, but they also might decide to sell them and that creates a little bit of uncertainty around.

Eric Greager: I had a number of comments and questions around the share price performance, both today and over a bit of a longer period of time. And so maybe you're just reiterating your thoughts on the reaction today and maybe over a longer period of time. I mean, you as a shareholder have been purchasing shares as well. What are your comments as we wrap up? Yeah, so I am not at all happy with the share price performance, but transformational deals like the Ranger, merger acquisition by merger, create certain overhangs, and those overhangs take time to work off.

The shareholder community now in the first half of 2023.

W. T I languished a bit kind of at an average <unk> price of 75.

And.

Given the transformational nature of this transaction and its size relative to the legacy pay tax.

Those prices weren't enough to create a great deal of excitement, but when prices rallied in the third quarter.

We saw strong price performance and that felt really good it told us that there's a there's a fundamental kind of understanding and some pent up demand for the shares when prices do rally.

Eric Greager: The Juniper ownership is in fact one of those and probably a pretty significant contributor to the overhang. There will be 102 million shares available in March, and Juniper may hold those shares forever, I just don't know, but they also might decide to sell them, and that creates a little bit of uncertainty around the shareholder community. Now, in the first half of 2023, WTI languished a bit, kind of had an average WTI price of 75. And again, given the transformational nature of this transaction and its size relative to the legacy Baytex, those prices weren't enough to create a great deal of excitement. But when prices rallied in the third quarter, we saw strong price performance, and that felt really good. It told us that there's a fundamental kind of understanding and some pent-up demand for the shares when prices do rally.

I personally believe in the stock I believe in the company I believe in the teams and I think we're demonstrating where it really counts at the cash level at the cash cost level at the cash.

Making our generative capacity of the business level that this is a great business and I continue to believe in the business, believing the team's believing the assets and the strategy and I think the overhang will lift the CRA matter didn't help it just added a little bit of additional uncertainty.

It didn't help.

But.

We will continue delivering on our five year plan delivering quarter over quarter and.

I believe we are still a great value and this is a great entry point and a very high quality company. So.

Well said.

I do think we're at our time limit for this call today.

Eric Greager: I personally believe in the stock, I believe in the company, I believe in the teams, and I think we're demonstrating where it really counts at the cash level, at the cash cost level, at the cash making or generative capacity, at the business level, that this is a great business. I continue to believe in the business, believe in the teams, believe in the assets and the strategy, and I think the overhang will lift. You know, the CRA matter didn't help. It just added a little bit of additional uncertainty. It didn't didn't help.

So thank you gay lean and thank you to everyone for participating in our year end conference call have a great day.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Yeah.

Yeah.

Yes.

Eric Greager: But we will continue delivering on our five-year plan, delivering quarter over quarter, and I believe we are still a great value. And this is a great entry point into a very high-quality company. Okay, thanks, Eric. Well said, and I do think we are at our time limit for this call today. So thank you, Gaylene, and thank you to everyone for participating in our year-end conference call. Have a great day! This concludes today's conference call. You may disconnect your lines.

Okay.

Okay.

Okay.

Hum.

Yeah.

Operator: Thank you for participating and have a pleasant day. Overview Fill the cylinder Fill the four other 2 pieces Fill the rest 2 together Fill the cylinder Cylinder with oil Fill the piece with paint Fill in the cylinder Fill in the other cylinder Fill in the cylinder, Laique Arif, Chad Lundberg, Menno Hulshof, Eric Nuttall, Laique Arif, Chad Lundberg, Menno Hulsho ..

Yeah.

Okay.

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Okay.