Q2 2024 PrairieSky Royalty Ltd Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. Welcome to PrairieSky Royalty's second quarter 2024 financial results.

Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to PrairieSky Royalty's second quarter 2024 financial results.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You would then hear an automated message advising that your hand is raised.

Speaker Change: At this time, all participants are in the listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question during the session, you would need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Andrew Phillips, President and Chief Executive Officer. Please go ahead.

Speaker Change: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Andrew Phillips, President and Chief Executive Officer. Please go ahead.

Andrew M. Phillips: Thank you, Michelle, and good morning, everyone. And thank you for dialing into the PrairieSky Q2 2024 earnings call. On the call from PrairieSky are Pam Kazeil, CFO, Dan Bertram, CCO, and Michael Murphy, VP Capital Markets, as well as myself. Before we begin, there's certain forward-looking information in my commentary today, so I'd ask investors to review the forward-looking statements qualifier in our press release and MD&A.

Andrew M. Phillips: Oil royalty volumes of 13,312 barrels per day are the result of strong operator drilling efficiencies across our vast land base. Continued improvements in fluid systems, drilling orientations, and geosteering have resulted in better 90-day IPs and anticipated oil recoveries. Given we are still in the very early innings of development, further efficiencies will be recognized.

Andrew M. Phillips: Thank you, Michelle, and good morning, everyone, and thank you for dialing into the PrairieSky Q2 2024 earnings call.

Andrew M. Phillips: On the call from PrairieSky are Pam Kazeil, CFO , Dan Bertram, CCO, and Michael Murphy, VP Capital Markets, as well as myself. Before we begin, there's certain forward-looking information in my commentary today, so I'd ask investors to review the forward-looking statements qualifier in our press release in MD&A.

Andrew M. Phillips: Oil Royalty volumes of 13,312 barrels per day are the result of strong operator drilling efficiencies across our vast land base.

Andrew M. Phillips: Continued improvements in fluid systems, drilling orientations, and geosteering have resulted in better 90-day IPs and anticipated oil recoveries. Given we're still in the very early innings of development, further efficiencies will be recognized.

Andrew M. Phillips: PrairieSky has decades of economic inventory for heavy oil. Approximately one third of the wells drilled on our land this year will be unstimulated. These wells have lower decline rates than stimulated wellbores. Water and polymer flood implementation across our lands will have the benefit of both lowering our annual decline rate and significantly enhancing the ultimate recovery of oil volume. In some cases, operators will recover more than double the oil that can be achieved with primary drilling.

Andrew M. Phillips: PrairieSky has decades of economic inventory for heavy oil. Approximately one-third of the wells drilled on our land this year will be unstimulated. These wells have lower decline rates than stimulated wellbores.

Andrew M. Phillips: Water and polymer flood implementation across our lands will have the benefit of both lowering our annual decline rate and significantly enhancing the ultimate recovery of oil volumes. In some cases, operators will recover more than double the oil that can be achieved with primary drilling.

Andrew M. Phillips: Selecting the right partners who share a long-term vision is important. Leasing remains at record levels, with 55 new leasing arrangements with 46 distinct oil companies. We have a lean staff at PrairieSky who are able to efficiently handle these large volumes of contracts and continue to execute. All of our employees are shareholders and get the benefit of their great execution. Our data room continues to be busy, and our technical group has developed some new game concepts that we believe have great economic value. I will now turn the call over to Mike.

Andrew M. Phillips: Selecting the right partners who share a long-term vision is important.

Speaker Change: Leasing remains at record levels with 55 new leasing arrangements with 46 distinct oil companies. We have a lean staff of PrairieSky who are able to efficiently handle these large volumes of contracts and continue to execute. All of our employees are shareholders and get the benefit of their great execution.

Andrew M. Phillips: Our data room continues to be busy and our technical group has developed some new play concepts that we believe have great economics.

Mike: Thanks, Andrew. In terms of activity, well spots were down quarter over quarter due to the seasonality of spring breakup, with a total of 115 well sites on PrairieSky Acreage in Q2 2024. Although spots were down relative to the same period in 2023, this was offset by a higher average royalty rate of 6.6% due to improved well productivity driven by an increasing contribution from multilateral drilling. In the quarter, multilateral wells accounted for approximately 43% of drilling activity on PrairieSky lands, which is up from 30% in the second quarter of 2023 and 17% in the second quarter of 2022.

Andrew M. Phillips: I will now turn the call over to Mike.

Mike: Thanks, Andrew. In terms of activity, well spots were down quarter over quarter due to the seasonality of spring breakup, with a total of 115 well spot on PrairieSky Acreage in Q2 2024.

Mike: Although spots were down relative to the same period in 2023, this was offset by a higher average royalty rate of 6.6% and improved well productivity driven by an increasing contribution from multilateral drilling.

Mike: In the quarter, multilateral wells accounted for approximately 43% of drilling activity on PrairieSky lands, which is up from 30% in the second quarter of 2023 and 17% in the second quarter of 2022.

Mike: We saw a significant increase in clear water spuds quarter over quarter, and we anticipate robust activity to continue through the remainder of the year in this plate, as well as the Manville stack, driving strong Royalty production volumes. I'll now pass it over to Pam to discuss the financials.

Speaker Change: We saw a significant increase in clearwater spuds quarter over quarter, and we anticipate robust activity to continue through the remainder of the year in this plate, as well as the man-built stack, driving strong oil royalty production volumes.

Pam: Thank you, Mike. Good morning, everyone.

Speaker Change: and I'll now pass it over to Pam to discuss the financials. Thank you Mike. Good morning everyone. PrairieSky's total production volumes averaged 25,320 BOE per day in the quarter.

Pam: PrairieSky's total production volumes average 25,320 BOE per day. Oil royalty volumes reached a record 13,312 barrels per day, up 6% over Q2 2023. Year-to-date, oil royalty volumes are up 7%, with growth generated primarily in the Clearwater and Mandelstadt Plains. This quarter, oil generated 89% of our royalty revenue due to the combination of increased production and strong pricing. Our realized oil price of $91.75 per barrel increased by approximately $14 over Q1 2024, with stronger WTI pricing and a tighter WCS heavy oil differential as a result of the Trans Mountain Pipeline coming online.

Pam: Oil royalty volumes reached a record 13,312 barrels per day, up 6% over Q2 2023. Year-to-date, oil royalty volumes are up 7%, with growth generated primarily in the Clearwater and Mandelstadt Plains.

Pam: This quarter, oil generated 89% of our royalty revenue due to the combination of increased production and strong pricing.

Pam: Our realized oil price of $91.75 per barrel increased approximately $14 over Q1 2024, with stronger WTI pricing and a tighter WCS heavy oil differential as a result of the Trans Mountain Pipeline coming online.

Pam: As noted in our year-end conference call, a U.S. $1 change in the heavy oil differential adds approximately $2.5 million to annualized cash flow after tax, so the improved differential post-trans mountain has a meaningful impact on PrairieSky's oil revenue. This quarter, the differential tightened by just under $6 per barrel from Q1, increasing our oil revenues by approximately $3.5 million. Royalty production revenue totaled $125.5 million in Q2, and other revenues generated an incremental $10.1 million, including $6.7 million of bonus consideration. Year to date, our leasing is on pace with 2022 and 2023, our most active leasing year. We issued leases across our land base, with DuVernay and Manville being our most active sites.

Pam: As noted in our year-end conference call, a U.S. $1 change in the heavy oil differential adds approximately $2.5 million to annualized cash flow after tax, so the improved differential post-transmountain has a meaningful impact to PrairieSky's oil revenues.

Pam: This quarter, the differential tightened by just under $6 per barrel from Q1, increasing our oil revenues by approximately $3.5 million.

Pam: Year to date, our leasing is on pace with 2022 and 2023, our most active leasing years.

Pam: Cash administrative expenses in the quarter totaled $6.8 million or $2.95 per BOE and included $700,000 of deferred share unit payments related to a direct to retirement. We continue to forecast 2024 cash administrative expenses to be in the range of $35 to $40 million. Current income tax expense, a total of $19 million in Q2. Throughout the year, PrairieSky has $1.4 billion in tax pools to offset future taxable income, mostly deductible at 10% per year.

Pam: We issued leases across our land base with the DuVernay and Manville being our most active place.

Pam: Cash administrative expenses in the quarter totaled $6.8 million or $2.95 per BOE and included $700,000 of deferred share unit payments related to a direct to retirement.

Pam: We continue to forecast 2024 cash administrative expense to be in the range of $35 to $40 million.

Pam: Current income tax expense totaled $19 million in Q2. Entering the year, PrairieSky has $1.4 billion of tax pools to offset future taxable income, mostly deductible at 10% per year.

Pam: For 2024, that means the first $140 million of pre-tax cash flow is tax-free, with incremental cash flow taxed at 23.6%. Funds from operations totaled $106.1 million, or $0.44 per share, in the quarter. This was 16% or approximately $15 million ahead of Q2 2023. PrairieSky declared a dividend of $59.7 million, or $0.25 per share, in the quarter, with a resulting payout ratio of 98.5%. PrairieSky's net debt at June 30th totaled $174.6 million, a decrease of 21% from year-end. We will now turn it over to the moderator to proceed with the Q&A.

Pam: For 2024, that means the first $140 million of pre-tax cash flow is tax-free, with incremental cash flow taxed at 23.6%.

Pam: Funds from operations totaled $106.1 million or $0.44 per share in the quarter. This was 16% or approximately $15 million ahead of Q2 2023. PrairieSky declared a dividend of $59.7 million or $0.25 per share in the quarter with the resulting payout ratio of 56%.

Speaker Change: PrairieSky's net debt at June 30th totaled $174.6 million, a decrease of 21% from year-end.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question. The first question comes from Adam Schwartz with Black Bear Partners. Your line is now open.

Speaker Change: We will now turn it over to the moderator to proceed with the Q&A.

Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again.

Speaker Change: The first question comes from Adam Schwartz with Black Bear Partners. Your line is now open.

Adam Schwartz: Hi, good morning. Thank you for taking my question. Good morning, Adam.

Adam Schwartz: Two questions that are kind of interrelated. Could you comment on maybe short, medium, and long-term views of what the impact of the Trans Mountain pipeline is going to have on your operators and on the overall market? Like how you think, I know it's not looking for a firm prediction, but just generally speaking, how you think it's going to impact your operators and, then by extension, your business? And then secondly, you know, there's some talk about the government being at times friendly and at times hostile to the industry, and I guess how do you think when you look out five or ten years, how do you think that that will affect the industry in your More opinion than, obviously, prediction.

Adam Schwartz: Hi, good morning. Thank you for taking my question.

Speaker Change: Morning, Adam.

Adam Schwartz: Two questions, kind of interrelated. Could you comment on maybe short, medium, long term?

Adam Schwartz: views of what the impact of the Trans Mountain

Adam Schwartz: Pamela Kazeil, CEO Alphabet and Google

Speaker Change: And then secondly, you know, there's some talk about, you know, the government.

Speaker Change: You know being at times friendly and at times hostile to the industry And I guess how do you think when you look out five or ten years? How do you think that that's going to translate? the industry into your business

Andrew M. Phillips: No problem, yeah, so on the first question Adam, short, medium and long term, the Trans Mountain Pipeline adds 590,000 barrels of capacity to the West Coast and what we believe will be the result in both the short, medium and long term is just compressed differentials and Canada is unique, we have the largest heavy oil resource in the world, which is well known, it's well delineated and with some of the new technologies like multilateral drilling it's really unlocked a huge amount of resource, there's billions of barrels that are recoverable and now all of a sudden you can get them to market and receive only in some cases $12 to $13 differential off WTI, so it really I think structurally changes the economics for the producer of heavy oil, which therefore changes the economics for us and we see a lot more activity and far superior economics on that heavy oil resource, so I think it's important and when you look at some of the first shipments that have come from Trans Mountain, some of them have gone to Asia, but a lot of them have actually gone to the West Coast refineries, which we didn't have access to before, so you're just kind of forcing the refining complexes in the southern United States to bid for our crude, so definitely it's a huge positive and that was a very important pipeline and then line 3 replacement actually, which is now a couple years old, I think line fills in 2021, that added another just under 400,000 barrels of capacity, so again it's been the first time in about a decade where we've had excess pipeline capacity out of the basin and that in general is a huge positive for the conventional oil resources in general. And then your second question on the government, yeah, I mean, PrairieSky is a unique business. This business goes back to 1886. CP Rail owned it for 100 years, so it goes decades and decades.

Speaker Change: More opinion than obviously prediction. Thank you.

Speaker Change: No problem, yeah. So on the first question, Adam, short, medium and long term, the Trans Mountain Pipeline adds 590,000 barrels of capacity to the West Coast and

Speaker Change: What we believe will be the result in both the short, medium and long term is just compressed differentials.

Speaker Change: Canada is unique. We have the largest heavy oil resource in the world.

Speaker Change: which is well known, it's well delineated and with some of the new technologies like multilateral drilling it's really unlocked a huge amount of resource, there's billions of barrels that are recoverable and now all of a sudden you can get them to market and receive only in some cases $12 to $13

Speaker Change: differential off WTI so it really I think structurally changes the economics for the producer of heavy oil which therefore changes the economics for us and we see a lot more activity and far superior economics on those on that heavy oil resource so

Speaker Change: I think it's important and you know when you look at some of the first shipments that have come from Trans Mountain some of them have gone to Asia, but a lot of them have actually gone to the West Coast refineries which we didn't have access to before so you're just kind of forcing the refining complexes in the southern United States to bid for our crudes.

Speaker Change: Definitely, yeah, it's a huge positive and that was a very important pipeline.

Speaker Change: And then line 3 replacement actually, which is now a couple years old, I think line fills in 2021. That added another just under 400,000 barrels of capacity. So again, it's been the first time in about a decade where we've had excess pipeline capacity out of the base.

Speaker Change: That, in general, is a huge positive for the conventional oil resources in general.

Speaker Change: and then your second question on the government

Speaker Change: PrairieSky is a unique business. This business goes back to 1886. CP Rail owned it for 100 years. It goes decades and decades. We're going to have to work with all sorts of governments. We work with whatever government is in place at the time. Don't get too fussed. There's good policy and bad policy.

Andrew M. Phillips: So we're going to have to work with all sorts of governments. So we work with whatever government is in place at the time. And don't get too fussed.

Andrew M. Phillips: There's good policy and bad policy. And again, I think we've probably had some weaker policies over the last eight, nine years federally. But there's definitely some pushback on that, and that seems to be starting to change. So maybe there are some positive tailwinds there.

Speaker Change: Again, I think we've probably had some...

Speaker Change: Weaker policy over the last

Andrew M. Phillips: But again, we work with whoever's in place. I know the local governments, both in Saskatchewan and Alberta, have been very, very supportive of energy. So you have provincially supportive governments, and then federally less supportive. So hopefully that answers your question, because I don't know if I didn't get it all there.

Speaker Change: eight, nine years federally, but there's definitely some pushback on that and that seems to be starting to change, so maybe there's some...

Speaker Change: positive tailwinds there but Again, we work with whoever's in place. I know the local governments both in Saskatchewan, Alberta have been very very supportive of energy. So You have provincially a supportive Government and then federally less supportive government

Adam Schwartz: So you got them, I mean, do you find that the government, especially at the more national level, is it more, I don't want to use the term window dressing, but it's more speeches and public statements to appease those who want to make sure they're tuned in? Do they appreciate, I mean, it seems like they appreciate the economics of the pipeline, so it's important for the country's financial well-being. So do they understand and appreciate that, or is it, you know... I think you know what I'm getting at. I'm not; I'm not coming up with a question.

Speaker Change: So hopefully that answers your questions. I don't know if I didn't get them all there.

Speaker Change: So you got them, I mean, do you find that the government, like especially at the more national level, is it more, I don't want to use the term window dressing, but is it more more more more

Speaker Change: speeches and public statements.

Speaker Change: to appease those who want to make sure they're tuned in.

Speaker Change: It seems like they appreciate the economics of the pipeline, so it's important for the country's financial well-being. Do they understand and appreciate that?

Andrew M. Phillips: Yeah, and I think, and look, I think that it's very clear to the federal government that the oil and gas industry and the materials business are a massive part of the economy here. We're only a $2.3 trillion economy.

Speaker Change: I think you know where I'm getting at. I'm not coming up with the right question.

Speaker Change: Yeah, and I think, and look, I think that it's very clear to the federal government that the oil and gas industry and the materials business is a massive part of the economy here. We're only a 2.3

Andrew M. Phillips: Canada Canada Canada. They clearly understand the importance of it from a tax revenue standpoint. I think that the Trans Mountain Pipeline being built by the federal government, they understand the importance of it. I think everyone understands the importance of this business in Canada, and I think it's easier in other jurisdictions like in Britain to be hard on it because oil production there has gone from bad to worse, from 1.1 million barrels a day to 0.7. It's not even that significant a business anymore, as a function of their GDP. So in Canada, it is very important. I think they recognize that. Okay.

Speaker Change: [inaudible]

Speaker Change: Canada and it's a very very significant portion so I think there is the they clearly understand the importance of it from a tax revenue standpoint I think that

Speaker Change: is clear when you see the Trans Mountain Pipeline being built by the federal government, they understand the importance of it. So I think everyone understands the importance of this business in Canada, and I think it's easier in other jurisdictions like in Britain to be hard on it because oil production there has gone from 2.2%.

Speaker Change: [inaudible]

Adam Schwartz: Okay, can I sneak one last one in? No problem.

Speaker Change: I think they recognize that.

Adam Schwartz: You know, you've continued to pay down debt with your free cash flow, and you know, you've heard me harp on it before. You know, is the plan? Does the plan remain to get that debt down to zero or close to zero? And if rates, and I'm not a predictor of interest rates, but if interest rates were to decline, and you found them more favorable rates to borrow at, would you consider keeping some debt outstanding and buying in the stock, given that it just seems very cheap relative to the margin, and the growth and kind of what I would call conservative assumptions?

Speaker Change: Okay, can I sneak one last one in? No problem.

Speaker Change: You know you've continued to pay down debt with your free cash flow and you know you've heard me harp on it before but

Speaker Change: You know, is the plan, does the plan remain to...

Speaker Change: Get that debt down to zero, or close to zero, and if rates...

Speaker Change: I'm not a predictor of interest rates, but if interest rates were to decline and you found it more favorable, you know, rates to borrow at, would you consider keeping some debt outstanding and buying in the stock given, you know,

Speaker Change: It just seems very cheap relative to the margins.

Speaker Change: and the growth and kind of what I would call conservative assumptions.

Adam Schwartz: To arrive at those numbers,

Andrew M. Phillips: Yeah, and for sure, that's the biggest thing that we work with is how to allocate capital properly over the different cycles. And I know we were fortunate in the last two big downturns to go in with a billion of liquidity in both times. The first time, we were able to buy CNRL; the second time, we were able to buy back a bunch of stock in COVID and then proceed to buy Ontario Teachers' Pension Plans, a big asset, as well as a number of other assets kind of discounting $50 to $60 crude.

Speaker Change: to arrive at those numbers.

Speaker Change: Yeah, and for sure, that's the biggest thing that we work with is how to allocate capital properly over the different cycles. And I know we were fortunate in the last two big downturns to go in with a billion of liquidity in both times. The first time we were able to buy CNRL, the second time we were able to buy back a bunch of stock in COVID, and then...

Andrew M. Phillips: I think, you know, going forward, we'll be debt-free sometime in the middle of next year to the third quarter of next year. And that'll give us a lot of flexibility. And I do think, you know, when you really step back and say, okay, over the next 10 years, how much cash is this business going to generate? It's somewhere in the range of $4.5 billion after tax, after G&A. Right now, with the dividend at $1 per share per year, that's $240 million annually.

Speaker Change: Proceed2Buy, Ontario Teachers Pension Plans, Big Asset, as well as a number of other assets kind of discounting $50 to $60 per year.

Speaker Change: I think, you know, going forward, we'll be debt free sometime in the middle of next year to third quarter of next year.

Speaker Change: And that'll give us a lot of flexibility. And I do think, you know, when you really step back and say, OK, over the next 10 years, how much cash is this business going to generate? It's somewhere in the range of $4.5 billion after tax, after G&A. Right now with the dividend at $1 per share per year, that's $240 million annually. So there's a lot of excess free cash. And I think.

Andrew M. Phillips: So there's a lot of excess free cash. And I think any acquisition we do, it has to have a better IRR than the existing business and have the same optionality. So that's getting more and more difficult to do. So buybacks will certainly be a significant part of the returns over the next 3, 5 and 10 year periods. Just don't know the exact timing of it as yet.

Speaker Change: Any acquisition we do, it has to have a better IRR than the existing business and have the same optionality. So, that's getting more and more difficult to do. So, buybacks will certainly be a significant part of the returns over the next 3, 5 and 10-year period. Just don't know the exact timing of it as of yet.

Adam Schwartz: But even if you are building some cash, it's not a lazy part of your capital structure right now. You can earn a pretty good income on your cash in the bank and during the next downturn.

Speaker Change: But even building some cash is not a lazy part of your capital structure right now. You can earn pretty good income on your cash in the bank for the next downturn.

Adam Schwartz: Yeah, you don't need to Programmatic buybacks are not something I'd ever encourage, so you guys are thinking about the right way and running the business great. So I appreciate you taking my questions. Thank you.

Speaker Change: yeah you don't need to programmatic buybacks are not something I'd ever encourage so you guys are thinking about it the right way and running the business great so I appreciate taking my questions thank you

Andrew M. Phillips: Thanks for the questions. Have a good day.

Operator: One moment for the next question, and our next question comes from Jamie Kubik with CIBC. Your line is open.

Speaker Change: Thanks for the questions. Have a good day.

Speaker Change: One moment for the next question. And our next question comes from Jamie Kubik with CIBC. Your line is open.

James Kubik: Good morning guys, and thanks for taking my question. I have a couple here, I guess. I'm just curious if you can talk about some of the dynamics in the Vikings this quarter that saw activity moderate in that particular play.

James Kubik: Good morning guys and thanks for taking my question. I have a couple here I guess. I'm just curious if you can talk about some of the dynamics in the Viking this quarter that saw activity moderate in that particular play.

Andrew M. Phillips: Yeah, so we definitely saw lower spuds in Q2 in the Viking. We do expect, as per usual, the seasonality of the Viking where you've got kind of late Q3, early Q4 drilling where they don't have to run a boiler, and the single rigs aren't up in the oil sands. So I think we do expect a busy quarter for the Vikings coming up. But again, the spuds were down for sure. They're more than replaced, clearly, if you look at the production volumes. And that's also with an outage at Nipissi. They were replaced by very, very efficient drilling in the Manvel stack in Clearwater.

James Kubik: and Q2.

James Kubik: Bye.

Speaker Change: Yeah, so we definitely saw lower spots in Q2 in the Viking. We do expect, as per usual, the seasonality of the Viking where you've got kind of late Q3, early Q4.

Speaker Change: drilling where they don't have to run a boiler and the single rigs aren't up in the oil sands. So I think we do expect a busy quarter for the Viking coming up.

Speaker Change: But again, as far as we're down, for sure, they're more than replaced, clearly, if you look at the production volumes. And that's also with an outage at Nipissi.

Andrew M. Phillips: So we're definitely insulated by that. But again, the nice thing for us is that on any given individual play of the 30 plays we have in our portfolio, we never get too fussed about spuds quarter over quarter. We know, as per the playbook, that we have over 8,000 drilling locations in the Viking that are development locations. The Economics Department is a very good organization. Probably the best operator from an IP and EUR standpoint.

Speaker Change: They were replaced by very, very efficient drilling in the Mandville stack in the Clearwater. So we're definitely insulated by that. But again, the nice thing for us is.

Speaker Change: On any given individual play of the 30 plays we have in our portfolio, we never get too fussed by spuds quarter over quarter. We know, as per the playbook, that we have over 8,000 drilling locations in the Viking that are development locations.

Speaker Change: at which they get filled, we can never control, but the economics are very, very good, and probably the best operator from...

Andrew M. Phillips: They bought a significant asset in Saskatchewan, and we expect Whitecap to get active on that asset given some of their really good results in their last program. So again, I think they do have inflows for sure, but the economics are quite good now. That's light oil, and it's getting $112 a barrel, so they're getting pretty quick payouts on those wells.

Speaker Change: IP and EUR standpoint bought a significant asset in Saskatchewan and we expect Whitecap to get active on that asset given some of their really good results in their last program.

Speaker Change: So, again, I think they do have inflow for sure, but the economics are quite good now. That's light oil and receiving $112 a barrel, so they're getting pretty quick payouts on those wells.

James Kubik: Great, thank you. And then I'm also just curious about a point that you made in your remarks, Andrew. You mentioned that your team is busy leasing land and that they have some new play concepts. Can you just talk a little bit about maybe new plays that you might have? You might be able to share some details on.

Speaker Change: Great, thank you. And then I'm also just curious on a point that you made in your remarks, Andrew. You did mention that your team is busy leasing land and...

Speaker Change: Did have some new play concepts. Can you just talk a little bit about maybe new plays that you might have?

Andrew M. Phillips: Yeah, for sure. So I think, you know, the one interesting thing, um, when you just look at the base and, in general, these multilateral plays are still in the early innings, even around Cold Lake where there are, uh, over 10 rigs running right now. People are continuously tweaking the fluid systems and the drilling orientation in each of the individual zones and finding different successes with each zone. And then if you further expand that, when you own 18.3 million acres across the entire Western Canadian Basin, there are a lot of different zones across the basin that look like they have similar reservoir characteristics, maybe slightly tighter rock, but lighter oil, where we think these multilateral plays could be implemented.

Speaker Change: You might be able to share some details on

Andrew M. Phillips: Yeah, for sure. So I think, you know, the one interesting thing, when you just look at the base, and in general, these multilateral plays are still in the early innings, even around Cold Lake, where there's over 10 rigs running right now, people are continuously tweaking the fluid systems and the drilling orientations and

Andrew M. Phillips: in each of the individual zones and finding different successes with each zone. And then if you further expand that, when you own 18.3 million acres across the entire Western Canadian Basin, there's a lot of different zones across the basin that look like they have similar reservoir characteristics.

Andrew M. Phillips: maybe slightly tighter rock, but lighter oil where we think these multilateral plays could be implemented. And then further to that,

Andrew M. Phillips: And then further to that, you know, where Tourmaline bought out Bonavista in the deep basin, the overpressure Glock play that exists around kind of Olds, Garrington, we're seeing some extensions to that that we think that we've mapped out that we think are very economical and have very strong IPs. And so we've worked up some of those multi-stage frag plays as well. So we're always kind of working on plays on our acreage and have a huge amount of seismic to augment the technical work.

Andrew M. Phillips: you know where tourmaline bought out bonobos in the deep base and the overpressure glock play

Andrew M. Phillips: that exists around kind of Olds Garrington, we're seeing some extensions to that that we think

Andrew M. Phillips: that we've mapped up that we think are very economic and have very strong IPs.

Andrew M. Phillips: And so we've worked up some of those multi-stage rock plays as well. So we're always kind of working up plays on our acreage and have a huge amount of seismic to augment the technical work.

Andrew M. Phillips: So yeah, I think we should have some success leasing those. And that's one of the nice things about an environment where there's new capital formation and quite a bit of cash flow and good balance sheets amongst the producers. There are a lot of people looking for trailing inventories. So we've had some success recently leasing out plays, and I think, hopefully, we can continue that.

Speaker Change: Yeah, I think we should have some success leasing those. And that's one of the nice things about an environment where there's new capital formation and quite a bit of cash flow and good balance sheets amongst the producers. There's a lot of people looking for trilling inventories. So we've had some success recently leasing out plays, and I think hopefully we can continue that.

James Kubik: Okay, great. That's it for me. Thank you.

Andrew M. Phillips: Thanks for the questions, Jamie.

Operator: As a reminder, to ask a question, please press star 11 on your telephone keypad. I have no further questions at this time. I would now like to turn the call back to Andrew for closing remarks.

Speaker Change: Okay, great. That's it for me. Thank you. Thanks for the questions, Jamie.

Speaker Change: As a reminder, to ask a question, please press star 11 on your telephone keypad.

Speaker Change: I show no further questions at this time. I would now like to turn the call back to Andrew for closing remarks.

Andrew M. Phillips: Thank you, Michelle, and thank you everyone for joining our call today, and if you have any further questions, please feel free to reach out to one of the four of us. Have a great day.

Andrew M. Phillips: Thank You Michelle and thank you everyone for joining our call today and if you have any further questions please feel free to reach out to one of the four of us. Have a great day.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.