TSE:SCR Strathcona Resources Q3 2023 Earnings Report C$26.13 +1.04 (+4.15%) As of 04/17/2025 04:00 PM Eastern Earnings HistoryForecast Strathcona Resources EPS ResultsActual EPS-C$0.02Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AStrathcona Resources Revenue ResultsActual Revenue$1.10 billionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AStrathcona Resources Announcement DetailsQuarterQ3 2023Date11/13/2023TimeN/AConference Call DateTuesday, November 14, 2023Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptInterim ReportEarnings HistoryCompany ProfilePowered by Strathcona Resources Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 14, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good morning. Speaker 100:00:01My name is Mark, and I will be your conference operator today. I would like to welcome everyone to the Q3 2023 Conference Call of Strathcona Resources Limited. All lines have been placed on mute to prevent any background noise. 2. After the speakers' remarks, there will be a question and on your telephone keypad. Speaker 100:00:36I would now like to introduce Rob Morgan, President and CEO of Strathcona to begin the conference. Operator00:00:44Thank you, and good morning, everyone. Welcome to the Q3 2023 conference call of Strathcona Resources Limited. As mentioned by the operator, I am Rob Morgan, President and CEO of Strathcona. With me today is Conor Watrous, Senior Vice President and CFO and Angie Lau, our Treasurer. Before we begin, please take note of the advisories regarding forward looking information and non GAAP measures Strathcona is very excited to host our first conference call as a publicly traded company. Operator00:01:20We closed the acquisition of Pipestone Energy Corp. On October 3, 2023, as Strathcona shares began trading on the TSX on October 5, 2023 under the symbol SCR. Watchers Energy Fund, Strathcona's controlling shareholder, retained an ownership position of approximately 91%. As the Pipestone transaction closed after quarter end, please note Strathcona's 3rd quarter results do not include the contribution of Pipestone's assets. Pipestone's 3rd quarter results have been filed separately and are available on SEDAR. Operator00:01:53Production for the Q3 of 2023 averaged approximately 147,000 BOE per day, up 3% from the 2nd quarter. Production at our Cold Lake Thermal, Lloydminster Heavy Oil and Montney segments averaged 58, to 51,000 and 38,000 BOE per day respectively. 3rd quarter production was higher in the Cold Lake Thermal segment due to new wells coming online and improved base production performance at the Lindbergh property. Omni production increased due to additions from new wells and production returning to normal after an outage at a third party operated processing facility late in Q2. Westminster heavy oil production was down slightly from the 2nd Tadcona tied in and began circulating steam at the Cold Lake Tucker asset on the HPAD consisting of 8 new well pairs, the first new well pairs to be drilled in approximately 5 years. Operator00:02:54The HPAD is expected to benefit from improved reservoir characterization versus legacy well pairs drilled previously, driving higher production and a lower steam oil ratio for Tucker into 2024. In the Montney Strat, Kona also completed the expansion of its Ground Birch gas plant to 60,000,000 cubic feet per day from 30,000,000, which we expect to fill with 3 new wells that were also completed in the quarter. Connor will now provide a financial overview. Speaker 200:03:22Thank you, Rob. In the Q3, Strathcona generated approximately $290,000,000 of total operating earnings and approximately $155,000,000 of free cash flow. Q3 free cash flow was roughly flat versus the 2nd quarter realized hedging losses and higher CapEx. Strathcona ended the 3rd quarter with total debt of approximately $2,800,000,000 which we expect to be roughly flat between now and the end of 2023 with the 4th quarter's free cash flow largely being by the end of February 2024. Strathcona's oil production for the Q4 of 20 23 is approximately 80% hedged on a net after a royalty basis at an average WTI price of US78 dollars per barrel. Speaker 200:04:32A summary of the company's risk management contracts is available in Strathcona's MD and A. Back to you, Rob. Operator00:04:40Thank you, Conor. As part of our Q3 earnings release, we have updated guidance for the Q4 of 2023 and provided preliminary guidance for 2024. Strathcona expects its Q4 2023 production annual production of approximately 155,000 BOE per day and full year capital expenditures of approximately CAD1 1,000,000,000 Looking at 2024, I am pleased to report that Strathcona's Board of Directors has approved a capital budget of approximately CAD1.3 billion. Capital is expected to be allocated roughly evenly across Strathcona's 3 core operating areas. Of the total CAD1.3 billion, Approximately CAD800 1,000,000 is sustaining capital. Operator00:05:27Approximately CAD250 1,000,000 is directed towards filling existing facility capacity and will contribute to near term production growth. Approximately CAD250 1,000,000 is capital dedicated to long lead debottlenecking and brownfield facilities capacity expansion, which will contribute to growth in the longer term. On a combined basis, These expansion projects are expected to increase production capacity by up to 25,000 barrels per day above current capacities by the end of 2026 at a combined capital efficiency of approximately $25,000 per barrel per day. Strathcona expects 2024 production to be between 190,000 190 5,000 BOE per day weighted 77 percent to liquids. The midpoint of this guidance reflects approximately 9% year over year production growth on Strathcona's 2023 legacy asset base and approximately flat production on legacy Pipestone's full year 2023 production of 33,000 BOE per day. Operator00:06:29The guidance for the legacy Pipestone assets reflects a disciplined capital program of approximately $120,000,000 focused on optimization of base production, which is expected to result in a reduced base decline rate and enhanced future well economics. Back to you Conor. Speaker 200:06:53To generate approximately $1,000,000,000 of free cash flow at US80 dollars per barrel WTI, Assuming a $15 per barrel WCS WTI differential, dollars 0.73 USD CAD and $3 per per Mcf gas price and is expected to be fully funded down to as low as approximately US40 dollars per barrel of WCS. These figures do not take into account the retirement of approximately $150,000,000 of previously disclosed call premiums and foreign exchange callers inherited from a previous transaction, neither of which are sensitive to oil and gas prices. Transcona's Board of Directors has approved a debt target of $2,500,000,000 The company intends to allocate 100% of free cash flow towards debt pay down until this debt target is reached, after which the company is expected to provide further details of its shareholder return program. Back to you, Rob. Operator00:08:00Thanks, Conor. Lastly, with this being our Q1 as a public company, we wanted to comment on some of the bigger picture priorities for our company in both the short and longer term. In the short term, we recognize that the market has been volatile since the close of the Pipestone transaction and we expect it to continue to be volatile for some time as legacy Pipestone shareholders cycle out and new long term investors begin to cycle in. We also recognize that many in the public markets are still not familiar with the unique characteristics of our company and we are committed to increasing investors' knowledge of our business. Strathcona was built with focus on long term value creation and we are confident that we remain focused on our core investment principles Speaker 100:09:202. And our first question comes from the line of Greg Pardy at RBC Capital Markets. Please go ahead. Your line is open. Speaker 300:09:28Morning. It's Justin Ho on for Greg Pardy. Thank you very much for taking my question and congratulations on going public. So We do recognize that more detail will be provided on the mode of shareholder returns after you reach that $2,500,000,000 debt target as you touched on there, Connor. But broadly speaking, how should we be thinking about shareholder returns, especially when we think of the limited public float? Speaker 200:09:54Sure. Thanks for the question, Justin. So first, going back to our debt target, we sized that 2,500,000,000 based on approximately one times debt to EBITDA at a mid cycle price of $70 WTI. Our plan is to use 100% of the free cash flow that we generate to get down to that level as Quick as we can, post switch, our plan will be to flip the switch, so to speak, to send as much of the free cash flow that a business generates out to the shareholders of the business post that. While the Board of Directors has not yet approved a formal dividend or either form of shareholder return plan. Speaker 200:10:46We think it will be the vast majority of free cash flow going back to shareholders. Speaker 300:10:54Perfect. Thanks, Conor. And just to dig a little bit deeper into that if I can. If you were to go the dividend route, Would you view a suitable dividend policy as perhaps a base dividend supplemented by variables as your free cash flow covering, of course? Speaker 200:11:12That's right, Justin. Going back to Rob's comments about trying to manage the business with a margin of safety, The focus for the team and the Board when we size that base dividend will be to make sure that it is still a fully funded post maintenance capital down to a very low trough point in the oil and gas price cycle. And then post setting that base dividend, the balance of the capital sent back to shareholders We'll likely be in the form of variable dividends, although based on where our share price is at the time, Speaker 100:12:07Thank you. The next question comes from the line of Menno Hulshof of TD Securities. Please go ahead. Your line is open. Speaker 400:12:24Thanks and good morning everyone. I'll just start with a question, I believe for Rob on the eight well Aripad at Tucker. What can you tell us about the well design and how it does it differ from what Husky was doing back in the day? And Maybe as a follow-up to that, what should we expect in terms of the overall profile for Tucker into 20 2420 25 from a production and SLR perspective. Operator00:12:52Thanks for the question, Manu. So what we've actually done is to help support conformance along the wellbore. We've also where we've characterized the drilling of these wells. I think back in the day, Given some early time struggles back in the day that Husky drilled the wells, they probably used a bit more of a margin of safety drilling the next levels of wells. And so we're really trying to optimize the amount of good quality reservoir above these individual wells. Operator00:13:33We expect these wells to come on at a much stronger steam oil ratio than the overall average of the field. And I think when you look at The current time with the amount of steam we're injecting not really getting new production, the steam oil ratio moving up into that 6 range. We expect that over time bringing that filling that capacity we have at Tucker that we can start to move that steam oil ratio down into the 4% to 5% range. Speaker 400:14:04Terrific. Thanks for that, Rob. And then maybe moving on to the Pipestone assets. You have a few months under your belt now, a bit longer. What have you seen in terms of positive Or negative surprises, if any, and how is the integration going so far? Operator00:14:21So I think the integration is going very well. We have a number of new team members here at Strathcona consistent with how we have incorporated corporate acquisitions we've done in the past. I think on the asset side, we have intentionally decided and we've communicated that we intend to hold production there flat, basically really optimize focus on base production. I think the Pipestone team did an excellent job of growing the asset base very quickly. And our focus will be, as we've done with almost every one of our acquisition, take our time, really evaluate the opportunities in the asset And then move forward with perhaps additional capital as we move through 2024 into 2025. Speaker 400:15:12Terrific. Thanks again. I'll turn it back. Operator00:15:16Thank you. Speaker 100:15:18Thank you. And our next question comes from the line of Dennis Fong at CIBC. Please go ahead. Your line is open. Speaker 500:15:27Hi, good morning and thanks for taking my questions. The first one here is just around cash cost. As you further deploy CapEx to backfill existing facility capacity as well as implement a waste heat recovery unit at Orion. Can you characterize approximately what the targets happen to be for cash Speaker 200:15:59Sure, Dennis. Thanks for the question. So first speaking on the waste heat recovery project that we're currently in the middle of on our Orion project. We forecast finishing the tie in of that waste heat unit, which will add 16 megawatts of power or Less than 90% of the power needs of the project, call it in the first half of the calendar twenty twenty five year. And on that project by about $2 per barrel going forward. Speaker 200:16:43I think a bit more broadly speaking, one of the reasons we're very excited about the various drill to fill and larger major expansion projects that we have in our 2024 capital program is that when we look at almost all of the transport and our processing costs And the vast majority of our non energy field operating costs, the vast majority of those Our costs are fixed. And so as we drive towards a 6% to 8 2% year on year growth in volumes when a meaningful portion of our cost structure is fixed Plus, the line of sight we see to decreasing our cohort power costs. With that, a waste heat unit that really sets us up for A better breakeven price and ongoing margin on that business going forward. Speaker 500:17:58Great. Thanks. Appreciate that color. Shifting gears, I'd like to focus in on CAqua here. You've shown a fairly good ROI from the Montney broadly. Operator00:18:08Can you talk about some Speaker 500:18:09of the initiatives that you're pursuing to bolster inventory in the region, specifically in Capua, especially as you're keeping Pipestone relatively flat For the time being while you evaluate that asset further. Operator00:18:26Thank you, Dennis. So part of what we are actually working on is one of the minor transactions we did is We've done actually a bit of a land swap within the quarter where we looked at swapping out some Mandeville rights that we had 4 additional Montney rights in and around our core area, again bolstering the number of locations we would have on a go forward basis. And within the Montney acreage itself, as we continue to expand out, not only exploring our acreage across the asset base, but also looking at the 3 benches that we are testing and how to optimize The spacing, if you will, and the drilling of those benches to optimize overall recoveries from the assets. So We continue to look at on our subsequent pads how we space the sequencing of the individual wells within the 3 benches And also always looking to optimize our completion techniques when it comes to our frac spacing and even sand concentration. So it's an ongoing process as you know, but we've been pretty happy with our progress that we've made In terms of evaluating the benches as well as any revisions to our completion techniques. Speaker 200:19:49Yes. I think what I would I'll put forth further on that, Rob, is when we think about our CACWA asset for most of the first 4 or 5 years that we spent drilling it. It was really focused on the top two layers in our Middle Montney. Over the last couple of years, we've moved to de risk the 3rd layer on that middle of Montney and has seen a much stronger condensate gas ratio. And then going forward into the 2024 year, Part of our 2024 budget is to start approving up the Lower Montney in Caquod, which will mean that there will be 4 separate layers with a production at a Kakwa. Speaker 200:20:44And since we can drill all 4 of these layers all off the same pad, We think that there will be some very large savings on a per well basis going forward. And we've Speaker 100:21:12Thank you. And we have a third question from Menno Holzeroff of TD Securities. Please go ahead. Your line is Speaker 400:21:20Hello again. Thanks for letting me back into the queue. I just thought I'd ask a question on the float since it's a question I'm getting fairly often. Can we just get a refresh on your thought process for increasing the float and overall liquidity over time? And of course, the big potential driver of Future liquidity is Watrous Energy Fund. Speaker 400:21:40Is there a scenario where we could see the fund trim its position a bit sooner then later to address that. Speaker 200:21:51Thanks for the question, Manav. So the Way we've thought about the float is maybe in call it 2 to 3 different stages. In the short term, Obviously, as folks know, the legacy Pipestone business was about 70% of it was held by the 3 big shareholders in that business. And we think just naturally, there is going to be some turnover Within that big three legacy Pipestone shareholder base over time. And so just on a natural basis, the pro form a float of the business should grow. Speaker 200:22:38In the longer term, How Watchers Energy Fund has thought about monetizing the stake That it currently holds in the business has largely not been through pure secondary sales of its shares, but will likely come in the form of a step by step liquidation of that various partnerships that it's managed. And that's likely going to take place or call it the over the next 2 to 3 year timeframe, Post which the business will have a very broadly held stock. Prior to that, we certainly think that there's some chance that we can use The public currency that we now have to as a form of purchase price consideration 2 for a given transaction that we find, but the piece that we'll be laser focused on there is making sure that it's a value per share accretive transaction, which we recognize We'll be at which will be quite a high bar to clear for the business in the short term. And then finally, just to be precise in terms of How that fund might trim its stake in the business in the short term, we don't think that there's any plan or thought for the funds to start doing any pure secondary sales at the current stock price. Speaker 100:24:47Thank you. And as there are currently no further questions in the queue, I'll hand the floor back to Rob for the closing comments. Operator00:24:55Thank you. Once again, we are very excited with our debut as a publicly traded company And I want to thank you all for your interest this morning and wish you all the best for the day. Thank you again for joining.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallStrathcona Resources Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsInterim report Strathcona Resources Earnings HeadlinesStrathcona Resources Ltd.: Strathcona Reports Voting Results from the 2025 Annual Meeting of ShareholdersApril 18 at 4:43 PM | finanznachrichten.deCIBC Cuts Strathcona Resources (TSE:SCR) Price Target to C$33.00April 13, 2025 | americanbankingnews.comDOGE Social Security bombshell?Elon Musk just dropped another bombshell... He revealed his DOGE organization has been taking aim at Social Security, finding what he says is widespread fraud across the agency.April 20, 2025 | Altimetry (Ad)Strathcona Resources, Ever Heard Of Them?March 27, 2025 | seekingalpha.comOff-market insider buying at Strathcona Resources (SCR)March 22, 2025 | theglobeandmail.comPublic market insider buying at Strathcona Resources (SCR)March 7, 2025 | theglobeandmail.comSee More Strathcona Resources Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Strathcona Resources? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Strathcona Resources and other key companies, straight to your email. Email Address About Strathcona ResourcesStrathcona Resources (TSE:SCR) acquires, explores, develops, and produces petroleum and natural gas reserves in Canada. It operates through three segments: Cold Lake Thermal, Lloydminster Heavy Oil, and Montney. The Cold Lake Thermal segment includes three producing assets in the Cold Lake region of Northern Alberta; and Lindbergh, Orion, and Tucker. The Lloydminster Heavy Oil segment has multiple oil-in-place reservoirs accessed through enhanced oil recovery techniques and thermal steam-assisted gravity drainage located in Southwest Saskatchewan. The Montney segment includes assets in the Northwest Alberta Kakwa region; Grande Prairie regions; and the Northeast British Columbia Groundbirch region. Strathcona Resources Ltd. was incorporated in 2009 and is headquartered in Calgary, Canada.View Strathcona Resources ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? Why Analysts Boosted United Airlines Stock Ahead of EarningsLamb Weston Stock Rises, Earnings Provide Calm Amidst ChaosIntuitive Machines Gains After Earnings Beat, NASA Missions Ahead Upcoming Earnings Tesla (4/22/2025)Intuitive Surgical (4/22/2025)Verizon Communications (4/22/2025)Canadian National Railway (4/22/2025)Novartis (4/22/2025)RTX (4/22/2025)3M (4/22/2025)Capital One Financial (4/22/2025)General Electric (4/22/2025)Danaher (4/22/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 6 speakers on the call. Operator00:00:00Good morning. Speaker 100:00:01My name is Mark, and I will be your conference operator today. I would like to welcome everyone to the Q3 2023 Conference Call of Strathcona Resources Limited. All lines have been placed on mute to prevent any background noise. 2. After the speakers' remarks, there will be a question and on your telephone keypad. Speaker 100:00:36I would now like to introduce Rob Morgan, President and CEO of Strathcona to begin the conference. Operator00:00:44Thank you, and good morning, everyone. Welcome to the Q3 2023 conference call of Strathcona Resources Limited. As mentioned by the operator, I am Rob Morgan, President and CEO of Strathcona. With me today is Conor Watrous, Senior Vice President and CFO and Angie Lau, our Treasurer. Before we begin, please take note of the advisories regarding forward looking information and non GAAP measures Strathcona is very excited to host our first conference call as a publicly traded company. Operator00:01:20We closed the acquisition of Pipestone Energy Corp. On October 3, 2023, as Strathcona shares began trading on the TSX on October 5, 2023 under the symbol SCR. Watchers Energy Fund, Strathcona's controlling shareholder, retained an ownership position of approximately 91%. As the Pipestone transaction closed after quarter end, please note Strathcona's 3rd quarter results do not include the contribution of Pipestone's assets. Pipestone's 3rd quarter results have been filed separately and are available on SEDAR. Operator00:01:53Production for the Q3 of 2023 averaged approximately 147,000 BOE per day, up 3% from the 2nd quarter. Production at our Cold Lake Thermal, Lloydminster Heavy Oil and Montney segments averaged 58, to 51,000 and 38,000 BOE per day respectively. 3rd quarter production was higher in the Cold Lake Thermal segment due to new wells coming online and improved base production performance at the Lindbergh property. Omni production increased due to additions from new wells and production returning to normal after an outage at a third party operated processing facility late in Q2. Westminster heavy oil production was down slightly from the 2nd Tadcona tied in and began circulating steam at the Cold Lake Tucker asset on the HPAD consisting of 8 new well pairs, the first new well pairs to be drilled in approximately 5 years. Operator00:02:54The HPAD is expected to benefit from improved reservoir characterization versus legacy well pairs drilled previously, driving higher production and a lower steam oil ratio for Tucker into 2024. In the Montney Strat, Kona also completed the expansion of its Ground Birch gas plant to 60,000,000 cubic feet per day from 30,000,000, which we expect to fill with 3 new wells that were also completed in the quarter. Connor will now provide a financial overview. Speaker 200:03:22Thank you, Rob. In the Q3, Strathcona generated approximately $290,000,000 of total operating earnings and approximately $155,000,000 of free cash flow. Q3 free cash flow was roughly flat versus the 2nd quarter realized hedging losses and higher CapEx. Strathcona ended the 3rd quarter with total debt of approximately $2,800,000,000 which we expect to be roughly flat between now and the end of 2023 with the 4th quarter's free cash flow largely being by the end of February 2024. Strathcona's oil production for the Q4 of 20 23 is approximately 80% hedged on a net after a royalty basis at an average WTI price of US78 dollars per barrel. Speaker 200:04:32A summary of the company's risk management contracts is available in Strathcona's MD and A. Back to you, Rob. Operator00:04:40Thank you, Conor. As part of our Q3 earnings release, we have updated guidance for the Q4 of 2023 and provided preliminary guidance for 2024. Strathcona expects its Q4 2023 production annual production of approximately 155,000 BOE per day and full year capital expenditures of approximately CAD1 1,000,000,000 Looking at 2024, I am pleased to report that Strathcona's Board of Directors has approved a capital budget of approximately CAD1.3 billion. Capital is expected to be allocated roughly evenly across Strathcona's 3 core operating areas. Of the total CAD1.3 billion, Approximately CAD800 1,000,000 is sustaining capital. Operator00:05:27Approximately CAD250 1,000,000 is directed towards filling existing facility capacity and will contribute to near term production growth. Approximately CAD250 1,000,000 is capital dedicated to long lead debottlenecking and brownfield facilities capacity expansion, which will contribute to growth in the longer term. On a combined basis, These expansion projects are expected to increase production capacity by up to 25,000 barrels per day above current capacities by the end of 2026 at a combined capital efficiency of approximately $25,000 per barrel per day. Strathcona expects 2024 production to be between 190,000 190 5,000 BOE per day weighted 77 percent to liquids. The midpoint of this guidance reflects approximately 9% year over year production growth on Strathcona's 2023 legacy asset base and approximately flat production on legacy Pipestone's full year 2023 production of 33,000 BOE per day. Operator00:06:29The guidance for the legacy Pipestone assets reflects a disciplined capital program of approximately $120,000,000 focused on optimization of base production, which is expected to result in a reduced base decline rate and enhanced future well economics. Back to you Conor. Speaker 200:06:53To generate approximately $1,000,000,000 of free cash flow at US80 dollars per barrel WTI, Assuming a $15 per barrel WCS WTI differential, dollars 0.73 USD CAD and $3 per per Mcf gas price and is expected to be fully funded down to as low as approximately US40 dollars per barrel of WCS. These figures do not take into account the retirement of approximately $150,000,000 of previously disclosed call premiums and foreign exchange callers inherited from a previous transaction, neither of which are sensitive to oil and gas prices. Transcona's Board of Directors has approved a debt target of $2,500,000,000 The company intends to allocate 100% of free cash flow towards debt pay down until this debt target is reached, after which the company is expected to provide further details of its shareholder return program. Back to you, Rob. Operator00:08:00Thanks, Conor. Lastly, with this being our Q1 as a public company, we wanted to comment on some of the bigger picture priorities for our company in both the short and longer term. In the short term, we recognize that the market has been volatile since the close of the Pipestone transaction and we expect it to continue to be volatile for some time as legacy Pipestone shareholders cycle out and new long term investors begin to cycle in. We also recognize that many in the public markets are still not familiar with the unique characteristics of our company and we are committed to increasing investors' knowledge of our business. Strathcona was built with focus on long term value creation and we are confident that we remain focused on our core investment principles Speaker 100:09:202. And our first question comes from the line of Greg Pardy at RBC Capital Markets. Please go ahead. Your line is open. Speaker 300:09:28Morning. It's Justin Ho on for Greg Pardy. Thank you very much for taking my question and congratulations on going public. So We do recognize that more detail will be provided on the mode of shareholder returns after you reach that $2,500,000,000 debt target as you touched on there, Connor. But broadly speaking, how should we be thinking about shareholder returns, especially when we think of the limited public float? Speaker 200:09:54Sure. Thanks for the question, Justin. So first, going back to our debt target, we sized that 2,500,000,000 based on approximately one times debt to EBITDA at a mid cycle price of $70 WTI. Our plan is to use 100% of the free cash flow that we generate to get down to that level as Quick as we can, post switch, our plan will be to flip the switch, so to speak, to send as much of the free cash flow that a business generates out to the shareholders of the business post that. While the Board of Directors has not yet approved a formal dividend or either form of shareholder return plan. Speaker 200:10:46We think it will be the vast majority of free cash flow going back to shareholders. Speaker 300:10:54Perfect. Thanks, Conor. And just to dig a little bit deeper into that if I can. If you were to go the dividend route, Would you view a suitable dividend policy as perhaps a base dividend supplemented by variables as your free cash flow covering, of course? Speaker 200:11:12That's right, Justin. Going back to Rob's comments about trying to manage the business with a margin of safety, The focus for the team and the Board when we size that base dividend will be to make sure that it is still a fully funded post maintenance capital down to a very low trough point in the oil and gas price cycle. And then post setting that base dividend, the balance of the capital sent back to shareholders We'll likely be in the form of variable dividends, although based on where our share price is at the time, Speaker 100:12:07Thank you. The next question comes from the line of Menno Hulshof of TD Securities. Please go ahead. Your line is open. Speaker 400:12:24Thanks and good morning everyone. I'll just start with a question, I believe for Rob on the eight well Aripad at Tucker. What can you tell us about the well design and how it does it differ from what Husky was doing back in the day? And Maybe as a follow-up to that, what should we expect in terms of the overall profile for Tucker into 20 2420 25 from a production and SLR perspective. Operator00:12:52Thanks for the question, Manu. So what we've actually done is to help support conformance along the wellbore. We've also where we've characterized the drilling of these wells. I think back in the day, Given some early time struggles back in the day that Husky drilled the wells, they probably used a bit more of a margin of safety drilling the next levels of wells. And so we're really trying to optimize the amount of good quality reservoir above these individual wells. Operator00:13:33We expect these wells to come on at a much stronger steam oil ratio than the overall average of the field. And I think when you look at The current time with the amount of steam we're injecting not really getting new production, the steam oil ratio moving up into that 6 range. We expect that over time bringing that filling that capacity we have at Tucker that we can start to move that steam oil ratio down into the 4% to 5% range. Speaker 400:14:04Terrific. Thanks for that, Rob. And then maybe moving on to the Pipestone assets. You have a few months under your belt now, a bit longer. What have you seen in terms of positive Or negative surprises, if any, and how is the integration going so far? Operator00:14:21So I think the integration is going very well. We have a number of new team members here at Strathcona consistent with how we have incorporated corporate acquisitions we've done in the past. I think on the asset side, we have intentionally decided and we've communicated that we intend to hold production there flat, basically really optimize focus on base production. I think the Pipestone team did an excellent job of growing the asset base very quickly. And our focus will be, as we've done with almost every one of our acquisition, take our time, really evaluate the opportunities in the asset And then move forward with perhaps additional capital as we move through 2024 into 2025. Speaker 400:15:12Terrific. Thanks again. I'll turn it back. Operator00:15:16Thank you. Speaker 100:15:18Thank you. And our next question comes from the line of Dennis Fong at CIBC. Please go ahead. Your line is open. Speaker 500:15:27Hi, good morning and thanks for taking my questions. The first one here is just around cash cost. As you further deploy CapEx to backfill existing facility capacity as well as implement a waste heat recovery unit at Orion. Can you characterize approximately what the targets happen to be for cash Speaker 200:15:59Sure, Dennis. Thanks for the question. So first speaking on the waste heat recovery project that we're currently in the middle of on our Orion project. We forecast finishing the tie in of that waste heat unit, which will add 16 megawatts of power or Less than 90% of the power needs of the project, call it in the first half of the calendar twenty twenty five year. And on that project by about $2 per barrel going forward. Speaker 200:16:43I think a bit more broadly speaking, one of the reasons we're very excited about the various drill to fill and larger major expansion projects that we have in our 2024 capital program is that when we look at almost all of the transport and our processing costs And the vast majority of our non energy field operating costs, the vast majority of those Our costs are fixed. And so as we drive towards a 6% to 8 2% year on year growth in volumes when a meaningful portion of our cost structure is fixed Plus, the line of sight we see to decreasing our cohort power costs. With that, a waste heat unit that really sets us up for A better breakeven price and ongoing margin on that business going forward. Speaker 500:17:58Great. Thanks. Appreciate that color. Shifting gears, I'd like to focus in on CAqua here. You've shown a fairly good ROI from the Montney broadly. Operator00:18:08Can you talk about some Speaker 500:18:09of the initiatives that you're pursuing to bolster inventory in the region, specifically in Capua, especially as you're keeping Pipestone relatively flat For the time being while you evaluate that asset further. Operator00:18:26Thank you, Dennis. So part of what we are actually working on is one of the minor transactions we did is We've done actually a bit of a land swap within the quarter where we looked at swapping out some Mandeville rights that we had 4 additional Montney rights in and around our core area, again bolstering the number of locations we would have on a go forward basis. And within the Montney acreage itself, as we continue to expand out, not only exploring our acreage across the asset base, but also looking at the 3 benches that we are testing and how to optimize The spacing, if you will, and the drilling of those benches to optimize overall recoveries from the assets. So We continue to look at on our subsequent pads how we space the sequencing of the individual wells within the 3 benches And also always looking to optimize our completion techniques when it comes to our frac spacing and even sand concentration. So it's an ongoing process as you know, but we've been pretty happy with our progress that we've made In terms of evaluating the benches as well as any revisions to our completion techniques. Speaker 200:19:49Yes. I think what I would I'll put forth further on that, Rob, is when we think about our CACWA asset for most of the first 4 or 5 years that we spent drilling it. It was really focused on the top two layers in our Middle Montney. Over the last couple of years, we've moved to de risk the 3rd layer on that middle of Montney and has seen a much stronger condensate gas ratio. And then going forward into the 2024 year, Part of our 2024 budget is to start approving up the Lower Montney in Caquod, which will mean that there will be 4 separate layers with a production at a Kakwa. Speaker 200:20:44And since we can drill all 4 of these layers all off the same pad, We think that there will be some very large savings on a per well basis going forward. And we've Speaker 100:21:12Thank you. And we have a third question from Menno Holzeroff of TD Securities. Please go ahead. Your line is Speaker 400:21:20Hello again. Thanks for letting me back into the queue. I just thought I'd ask a question on the float since it's a question I'm getting fairly often. Can we just get a refresh on your thought process for increasing the float and overall liquidity over time? And of course, the big potential driver of Future liquidity is Watrous Energy Fund. Speaker 400:21:40Is there a scenario where we could see the fund trim its position a bit sooner then later to address that. Speaker 200:21:51Thanks for the question, Manav. So the Way we've thought about the float is maybe in call it 2 to 3 different stages. In the short term, Obviously, as folks know, the legacy Pipestone business was about 70% of it was held by the 3 big shareholders in that business. And we think just naturally, there is going to be some turnover Within that big three legacy Pipestone shareholder base over time. And so just on a natural basis, the pro form a float of the business should grow. Speaker 200:22:38In the longer term, How Watchers Energy Fund has thought about monetizing the stake That it currently holds in the business has largely not been through pure secondary sales of its shares, but will likely come in the form of a step by step liquidation of that various partnerships that it's managed. And that's likely going to take place or call it the over the next 2 to 3 year timeframe, Post which the business will have a very broadly held stock. Prior to that, we certainly think that there's some chance that we can use The public currency that we now have to as a form of purchase price consideration 2 for a given transaction that we find, but the piece that we'll be laser focused on there is making sure that it's a value per share accretive transaction, which we recognize We'll be at which will be quite a high bar to clear for the business in the short term. And then finally, just to be precise in terms of How that fund might trim its stake in the business in the short term, we don't think that there's any plan or thought for the funds to start doing any pure secondary sales at the current stock price. Speaker 100:24:47Thank you. And as there are currently no further questions in the queue, I'll hand the floor back to Rob for the closing comments. Operator00:24:55Thank you. Once again, we are very excited with our debut as a publicly traded company And I want to thank you all for your interest this morning and wish you all the best for the day. Thank you again for joining.Read morePowered by