Pine Cliff Energy Ltd.

Thank you, Chris. Good morning, everybody.

Thanks for your time today. We appreciate it.

We’ll dispense with reading the press release or kind of rereading my President’s Letter, both of which you should have access to. But I would like, we’ll just start with some general comments and then get right into the questions that are already in the queue here.

The one thing that we talked about at the Board level yesterday was we’ve never had a stronger inventory here at Pine Cliff from a drilling perspective in the history of our -- we’re now going on 14 years. And so that -- it raises a lot of really relevant questions, given all the uncertainty in the market right now, as to how we allocate capital in 2025.

We chose not to go with exact guidance for this year for what we’re going to do on the CapEx side. There’s a lot of uncertainty, as everybody on this call knows, with the tariffs, with the startup of LNG on the horizon.

There’s -- with the kind of storage situation, it’s kind of much improved over the last few months with the colder weather in both the United States and Canada, but still a lot of moving parts. And so for our -- from our perspective, it’s really all about capital allocation and that discipline that I think that we’ve displayed over the last 13 years.

How do we go forward? How do we -- what is the proper way for us to allocate capital?

And now with an extra variable in there, with this deep drilling inventory that we’ve got, because there’s some very good economic opportunities that we definitely would like to start to exploit in the back half of this year. So that’s kind of the overall, overreaching kind of discussion that has been kind of consuming our management team and the Board level going forward.

And so there’s -- when we look at capital allocation, there’s obviously debt repayment, there’s the CapEx, there’s the dividend, there’s other operational decisions that have to be made on capital and the timing of that. All of that goes into the mix as to kind of where we want to go going forward.

Wanting to keep our balance sheet strength for opportunities and transactions. As many of you who have been shareholders for many years, you’re well aware that our model has always been to opportunistically take advantage on a, when we can see accretive acquisitions, we’ve been able to successfully get those into the portfolio.

We’ve grown from 100 barrels a day to now to 23,000 in the last 13 years. We think there’s going to be more opportunities in the back half of this year and into 2026.

So that’s also in our back of our mind, is making sure that we are in a position to take advantage of those opportunities should they present themselves and so there is a -- it’s just a lot of uncertainty right now and that’s -- this is not particular to Pine Cliff. This is going with every business owner across Canada right now.

It’s got a lot of uncertainty as to what the horizon is going to be, what does the back half of this year look like, what is the impact of tariffs? I mean, one of the questions we had here was to what extent do we think the tariffs are going to impact our business and with regard to the pricing?

It is very unique on the energy side and that’s why I think the President Trump has already kind of lowered the tariff that he imposed upon the Canadian energy is currently at 10% versus the 25% across some of the other sectors. A big part of that is because the energy -- our energy that we export to the U.S., which is about 8 Bcf a day of gas and about over 4 million barrels a day of oil, are pretty integral to the U.S.

system and it’s not as easy to just to find alternative sources on either the natural gas or the oil. So there’s a complicating factor with regard to the tariffs because this question is going to be who’s going to bear the cost of that.

In many cases, I think, it’s going to be the consumers within the United States, which is going to create an extra pressure on the President going forward because inflation is not what he’s trying to do with the tariffs. So there’s that kind of backdrop across a lot of our decision making.

The guiding force for us is about cash flow per share growth, always has been. And that -- when we look at acquisitions, that’s the key factor, the key metric that we’re looking at and then also how we allocate our capital going forward.

So it’s going to be something we’re going to continue to watch very closely. We did highlight in the President’s letter and press release the fact that we’re moving forward with data center development.

We’ve got multiple sites that we think would be very good locations for data centers. We announced the one.

We continue to work on potential other sites. I think that’s going to be a good long-term diversification of opportunity for us and for our natural gas production.

And I think the one extra piece I would add to this is that, the capital allocation, when we talk about ways that we can increase the cash flow per share, there’s always a kind of a give and take with that transaction. We’ve always got, we only have so much capital.

It seems to be -- we’ve had some good last week in ACO pricing. We’re starting to see the forward strip start to move up, not just the spot price, but also the forward strip for the rest of the year and into next year.

And so we’re starting to see winter pricing get around that $3 level, which is a very -- that’s a good level for us. And we’ve always talked about that being a price level where we generated a lot of free cash flow.

So the question is, how do we again optimize our position going into the back half of 2025 and into 2026? So, with that, I think we’ll, we’ll get to some of these questions.

With the one of the questions is about providing some detail around the strategic drilling opportunities that we’re evaluating in the second half. Maybe I’ll turn that over to Terry McNeil to talk a little bit about that.

Thanks, Phil. The -- as Phil had indicated right off the top, our inventory has really never been better.

You’ll see it in our reserves report with our reserves bookings. We have 18 booked glock locations in Sundry now.

Those locations are the same ones that one of the top plays of Tourmaline and Whitecap are quite involved in. And our team was able to, through the lands we acquired in the service acquisition, do some strategic land swaps to be able to increase our working interest and consolidate our interests around our own owned and operated infrastructure.

So a lot of that work was done in 2024 and our team did a fantastic job consolidating the land base and setting up the locations to drill. So we’ve got an excellent inventory of top quality wells.

The wells based on the current forward strip payout in about a year, give or take, depending on commodity prices. But so they’re very, very low payout and excellent wells.

So we’re excited about the over-pressured glock in the Sundry-Caroline area. Also, there’s the emerging Basil Courts play that’s just north of Drumheller.

There’s several private equity companies that are out there actively developing the play and we’ve got an excellent land base and light bookings on our reserve and we have a lot of infrastructure that we control in that area. So those are the two biggest emerging plays that we have and we’re very, very excited about both of them.

Our previous inventory, Pekisco [ph], is still booked inventory that we still have and we’re still very, very much excited about it. But it’s at this point in time, both the Basil Courts and the glock wells pay out in 12 months, give or take.

So they’re very, very quick payout, lucrative wells, high rate of return, even at today’s commodity prices. So those are the opportunities that we have in front of us.

Thanks, Terry. The -- just to add to that, the one thing that was highlighted in our in our reserve reports that some of you have already commented on, and some of the analysts have commented on, is that even though we didn’t drill a well in 2024, we actually had an increase in our in our approved plus probable reserves, even after taking into account the production for last year, which is pretty impressive.

And as Terry said, we’ve got now added locations. There’s booked locations in both the glock well and also in the Basil Courts area.

So these are areas that we’re pretty excited to get to. One of the questions we’ve got is, how do you free up cash flow to take advantage of those opportunities?

And like I said, it’s -- there’s -- we’ve got a cash flow coming in, and luckily, it seems to be it’s -- the last couple weeks, it’s been rising. But we got to measure that against, okay, how do we look at debt repayment for the year?

How do we look at kind of drilling? We’ve got the dividend commitment that we continue to watch very closely and monitor and assess.

So it is -- there’s a few levers that we can pull and the -- for us, again, the test is, how do we -- what do we think is the best path to increase cash flow per share for our shareholders? And it’s not just about this quarter or next quarter.

It’s about how do we do that for them for the years to come? So we’ve got the, another question we had here is about the Canadian dollar and the U.S.

dollar affecting business. Maybe I’ll pass that over to Kris.

Yeah. Thanks, Phil.

So the Canadian dollar is obviously there’s a lot of uncertainty in the market right now with respect to commodity prices. And ACO prices are higher than they were at this point in time last year and continue to move, creep up a little bit higher here.

But WTI prices are lower. Fortunately, when the U.S.

dollar or when WTI moves down, generally, we get some offsetting impact by the -- by a weaker Canadian dollar. So we’re seeing that a bit in the numbers.

It’s not a perfect offset, oil prices are still weaker than where they were at this point in time last year, but it certainly helps.

Thanks, Kris. Another question we had here is about the storage situation in Canada, and whether or not there’s regular announcements on storage levels in Canada, like there’s in the U.S.?

There isn’t any -- we don’t -- the U.S., for those who aren’t, don’t follow it every Thursday, typically, is when they announce what their storage levels are. And so it’s a very clear and it’s the -- everybody waits for that announcement.

The Canada is of ongoing monitoring, but it’s a very transparent, if you’re, if you’re on the TC Energy website, you can see where storage are and you can actually see on an hourly basis, what is the storage draws or injections that are going on at that time. So the -- I highlighted it in my email that went out, and I think, everybody probably on this call is probably a subscriber to our quarterly email.

But the storage has dropped a lot in the last little bit and a lot meaning it’s now, we start -- went into this winter with the highest storage level we’ve ever had. I mean, we were actually testing the maximum limits of what our storage was, which is not good for pricing, which is why ACO was as weak as it was.

We’ve had a cold winter. So this is after two abnormally warm winters.

This winter is much more in the normal to cold side. Because of that, we’ve seen a really quick reduction in natural gas storage to the point that is now below the five-year high and heading in Canada and heading below right now on a trajectory that would take below the five-year average, which is pretty amazing given where we started at.

And so -- and that’s all in the backdrop of having LNG Canada starting up this summer, which will be a big draw, it could be, depending on how fast it ramps up, early indications are that could be as high as a Bcf a day in the summer months, ramping up to close to 2 Bcf a day by the end of the year. So the United States is already ahead of us from there in that context, because their storage is already under their five-year average, which is why NYMEX has had as much strength as it has over the last month here.

So it is a -- there is no specific, like I said, no specific announcement on the storage, but it’s a very readily accessible data that you can get. We’ve got a question that just about our liquidity level?

The -- this is something that we watch very closely and maybe I’ll hand it over to Kris. I mean, when we talk about the payout ratio, that’s a -- that’s something that we watch very closely.

And the payout ratio is essentially all the money that you bring in and then all the money that you send out. And obviously, we’ve had a -- our dividends since 2022, we treat that like a variable dividend, like, we obviously in a perfect world continue to hold it or increase it, but we’ve reduced it before where we didn’t feel it was in the best interest of the business.

We’ve also increased it a couple times. So the -- that’s an important toggle or lever that we have if we’re looking at how do we access cash flow, if we need it, if we see better opportunities to use that cash flow in the longer term.

Again, I think shareholders, the most of our shareholders do take a longer term around why they own Pine Cliff. There’s -- you’ve got the longer term prospects around where we think natural gas is going in Western Canada and having that exposure to it.

I know, Kris, if you want to add anything.

Yeah. No.

I think I would just reiterate, Phil, thank you that we continue to be very sensitive to the fact that we need to run a balanced budget over the course of the year in 2024. We managed to keep our payout ratio below 100%.

By pulling different levers and managing through things like strategic dispositions and hedging, and we’ll continue to look at all of those options to be able to protect the liquidity on the balance sheet.

Thanks, Kris. Yeah.

I mean, the -- from our perspective it’s -- again, all the decisions we’re making on capital allocation are long-term. And so it is not -- we’re -- we’ve been around now for this is their 14th year, we think we’re going to be around a long time to come in what we believe is going to be a much better natural gas environment here in Western Canada.

And the fact that we’ve stabilized our cash flow and our balance sheet with adding oil and liquids production, that has turned out to be very prudent. I think one of the things that we’re quite happy with was the transaction that we did in December of 2023.

That production that we added, which was over 5000 barrels a day, about 50% of it, which was liquids has been very consistent all through 2024 and still remains over 5000 barrels a day. So that’s, again, we continue to look for resilient assets within drilling inventory that we can add with like, as I started this call off, our drilling inventory has never been stronger in the history of Pine Cliff and that’s -- we’re very fortunate that we now have got some very economic drilling locations that Terry touched upon in his question.

The -- one of the questions is about AIMCo. The question was, if the AIMCo Board change will impact the holding of the company stock.

We have, AIMCo has been a fantastic shareholder for us for many years now. They’ve now been so they are, for those of you aren’t aware, the Alberta -- AIMCo is the Alberta investment management company, which manages about $160 billion.

They’re one of the biggest pension funds in Canada. They have been with us now for over eight years as a shareholder and own over 10% of our stock.

They -- we have ongoing discussions with them at the -- every indication is that they’re very happy to be a shareholder. They continue to be very supportive.

We do not think that any of the changes that have happened at the Board level with AIMCo or will have any negative impact on their shareholdings in Alberta. In fact, on a -- one from a taking one step back, the Alberta Government is, one of the reasons they made some of the changes or at least they seem to have indicated is they’d like to see a bit more focus on Canadian investment by AIMCo.

And not -- and so that’s why they closed some of their international offices, which I think would be positive for us. Because if we see opportunities in the future, that we could if equity is part of that solution, then we hopefully have got a partner who’s going to be supportive in those transactions.

Another question is what is our hedging position today? I’ll pass it over to Kris.

Yeah. Thanks, Phil.

So our hedging position, we continue to build out and add positions opportunistically at the end of the year or at the time of the of the other report that we published last night, on gas, where if you use 2024, the fourth quarter 2024 volumes of the as a benchmark, we’re about 35% hedged on natural gas at an average price of around $2.91 in Mcf, that’s Canadian. So that’s certainly helpful to our gas exposure.

And then on the oil side, we’re around 31% of our Q4 2024 volumes hedged at just about US$69 a barrel. So again, certainly helping at the margin with our cash flow.

Thanks, Kris. I think that covers all of the questions that we’ve currently got in the queue.

The -- I think most of the shareholders are well aware that if there’s any other follow up questions or comments, that they’re welcome to send emails to the management team and we’ll get back to you as soon as we can. We appreciate the ongoing support from the shareholders.

It is a tumultuous time. This is a -- one of the it’s always been volatile.

It’s always we’ve always had different stresses and tailwinds and headwinds that are competing with each other. This one’s a bit unique.

We haven’t had the tariff. This is a new circumstance that we’re dealing with.

But it’s still too early, I get asked about the tariffs quite frequently and it’s just too early to say what the impact is going to be on Pine Cliff, specifically, or even on broader base, the natural gas energy sector in Canada. Time will tell.

Are these tariffs going to be here for a long period of time? How are they going to be?

Are the prices, or sorry, are the tariffs going to be impact really picked up by the end consumer or will that be borne in any way by the producers? We’re all kind of guessing.

And I guess, we’ll keep a close eye on all of that. And again, it comes back to us, it’s all about the cash flow per share.

And so what are the impacts on that? If there’s capital allocation decisions that we have to make, in response to kind of that, that uncertainty, then those are the decisions we have to make.

And so it were -- as I’ve often highlighted to those who follow our story, management owns a lot of stock. So we are totally aligned with the shareholders, where every decision we make is trying to increase cash flow and the value of our shares and so the -- we’re very close to it, we watch it and we discuss it on an ongoing basis and this is no different than at any time during the past 13 years, it’s just a little different circumstances and we will continue to make decisions that we think are prudent for the shareholders.

Thank you to everybody for their time today. Very much appreciate it.

Look forward to talking to you again in the future.