Good morning. My name is Annis, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Topaz Energy Corp Fourth Quarter 2021 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question at this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. Mr. Scott Kirker, you may begin your conference. Thank you, operator, and welcome everyone to our discussion of Topaz Energy Corp.'s results as at and for the years ended December 31, 2021 and 2020. My name is Scott Kirker, and I'm the General Counsel for Topaz. Before we get started, I refer you to the advisories on forward-looking statements contained in the news release as well as the advisories contained in the Topaz Annual Information Form at our MD&A available on SEDAR and on our website. I also draw your attention to the material factors and assumptions in those advisories. I'm here with Marty Staples, Topaz's President and Chief Executive Officer, and Cheree Stephenson, Vice President, Finance, and Chief Financial Officer. We will start by speaking to some of the highlights of the last quarter and our year so far. After their remarks, we will be open for questions. Marty, Cheree, please go ahead. Thank you, Scott. Good morning, and thank you for attending the Q4 conference call for Topaz Energy. First off, I'd like to thank all of our management, staff, directors, shareholders, partners, analysts, advisors, and all the others who have supported Topaz. Cheree and I are closing in on our second year at Topaz, which, as you know, was at the beginning of a world pandemic. We're encouraged that this chapter is looking like it is well behind all of us. With the beginning of another major macro event, we hope that the conflict can be settled peacefully and quickly. Now jumping into Q4, it was another busy and exciting quarter for Topaz, and we're pleased to look back on the growth we've accomplished through 2021, which we believe was at the right stage in the commodity price cycle. In the fourth quarter, we generated record cash flow of CAD 68 million. For the full year, we generated cash flow per share of CAD 1.54, which was 57% higher than 2020 at CAD 0.99 per share. We're also pleased to announce our third dividend increase to date to CAD 0.04 per share, which represents a 30% cumulative increase since our initial dividend was set at CAD 0.80 per share. The dividend is consistent with our messaging that we aim to provide modest and sustainable dividend increases alongside growth. During the past few months, we've opportunistically layered on some hedging with a focus on summer gas price protection. We have hedged approximately 30% of our summer 2022 gas production at an average price of CAD 3.94 per Mcf. When you combine our stable infrastructure income and moderate hedging, our 2022 dividend is fully covered even at ultra-low commodity pricing. Our royalty acquisition strategy has been focused on low decline, highly economic oil plays to complement our best-in-class natural gas exposure. In the fourth quarter, we realized better than anticipated production results and 48% liquids-weighted royalty production growth. When we released our November 2021 guidance update, we estimated fourth quarter royalty production of 16,700 BOE per day, and Q4 actuals came in at 17,200 BOE per day. We saw higher production from a number of our partners, including Headwater, Tourmaline, and reserve royalty counterparties, while our other operators continue to meet or exceed initial forecasts. We estimate a minimum of CAD 1.5 billion in capital deployment on our royalty acreage in 2022. Through Q1, we expect there will be between 21 and 24 rigs active on our royalty lands. For the quarter, there were 143 gross wells spud on our acreage, and 142 gross wells were brought on production. A number of wells that were brought on stream in Q4 were Q3 drills, and there are significant Q4 drills which are scheduled to be brought on production in Q1. We have maintained our 2022 production guidance range at 16.1-16.3 thousand BOE per day. Assuming commodity prices of CAD 4 AECO and $75 WTI, we estimate 2022 EBITDA of CAD 270 million, which represents a 39% increase to 2021 EBITDA of CAD 194 million. After payment of our increased dividend, we estimate we'll have CAD 115 million of excess free cash flow, which we plan to direct towards M&A growth as we continue to identify new opportunities. Consistent with our IPO messaging, we believe we can continue to repeat transactions with existing counterparties as well as add new high-quality partners. During Q4 2021, average daily utilization of Topaz's net natural gas processing capacity was 97%, consistent with the prior quarter. During Q4 2021, Topaz generated CAD 16 million of total infrastructure income, compared to CAD 16.6 million generated in the prior quarter. In 2021, we invested a total of CAD 945 million in royalty and infrastructure acquisitions, which increased our royalty acreage 77% and natural gas processing capacity by 23%. In addition, we diversified our infrastructure portfolio through the acquisition of a water conservation facility under a fixed take-or-pay contract and doubled our corporate tax pools to CAD 1.8 billion. On current strip pricing, the cumulative 2021 acquisitions are estimated to generate a return on capital of 16% in 2022 based on an estimated free cash flow of CAD 149 million. In 2021, our reserves increased significantly. 92% growth in our proved plus probable net present value discounted at 10% from CAD 592 million in 2020 to CAD 1.1 billion in 2021. This includes a 29% increase in the economic value attributed to our infrastructure cash flow. Our proved plus probable reserves volumes increased 82% from last year. We added 18 million BOE of proved plus probable reserves through our acquisitions, and the operators on our royalty acreage generated 6 million BOE of volume additions. At no capital cost to Topaz, 118% of our 2021 production of 5.1 million BOE was replaced with development drilling by our operators. In the fourth quarter, we expanded our credit facility from CAD 400 million to CAD 700 million and extended the term to December 2025. At year-end, we had net debt of CAD 234 million or 0.8x net debt to Q4 2021 annualized cash flow. We've set a number of corporate ESG commitments and targets, which we look forward to reporting in our 2021 sustainability report targeted for early fall, 2022 release. At this time, if there's any questions, please feel free. Thank you. Ladies and gentlemen, we now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You'll hear a three-tone prompt acknowledging your request, and your question will be pulled in the order they're received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Aaron Bilkoski with TD Securities. Please go ahead. Thanks. Good morning. My question is around production cadence through the year. Given the Clearwater flood adjustment at the start of this year, could you talk about how you would expect production to trend on a quarterly basis through 2022? Yeah. I'd say we'd speak more to an annual rate. We see about 162 as our midpoint of our range for 2022. We definitely see cadence of growth through the year. You know, we do see you know, very positive results from a number of our operators. We have sort of maintained the forecast we've set previously. You know, ultimately, we don't control the CapEx. We do as best as we can, but we don't have full disclosure of drilling plans. Also, we don't have a GOR on all acreage for all of our counterparties, so there is some factors built into our modeling to account for some of that other lands that they may direct capital to. Also, we've accounted for water flood capital spending, which, you know, trades off near-term production growth with long-term enhanced economic value. We're very confident in the 16.2 we've presented, and hope to have some upside to that, but wanna see how Q1 comes through, and then we'll revise the guidance accordingly. One comment there too, Aaron, is we are gonna see some updated five-year plans from a couple of operators this week, being Tamarack Valley and Tourmaline, so we will adjust accordingly. We don't get that information beforehand, obviously. We do kind of, like Cheree mentioned, the capital costs, and some of our capital commitments are actually fully spent, as well that we've put in place, so they've accelerated those programs. The Tamarack Charlie Lake capital commitment has been finalized, and the Headwater capital commitment has been finalized. Well ahead on both of those capital commitments. Perfect. Thanks, guys. Thank you. Your next question comes from Patrick O'Rourke with ATB Capital. Please go ahead. Hey, guys. Good morning. Thanks for taking my question. You know, results from the quarter tend to be pretty consistent, very solid and in line with our expectations. The one thing that's obviously opaque and different, difficult to predict is the M&A or the acquisition environment for Topaz out there. I noticed, you know, you talked about 15% historical ROIC, which is well above what we gauge to be our average cost of capital around 9.5%. You're guiding to 10%-13% for that sort of CAD 150 million you have to deploy in 2022. Just wondering how the nature of the acquisition landscape is changing, and you know, where the sort of most attractive deals are right now. Good question. We kinda thought with this higher commodity cycle, we wouldn't see as much opportunity in the M&A environment, and it's been quite the opposite. It's been very active. We're in a number of data rooms right now. I think the big key to it is to maintain our discipline, though, and we don't wanna go out and acquire at all costs. You know, that was one of the comments. In your question you asked is there a cost component that goes along with this, where we've got to maintain discipline. Lots of good opportunity, but that doesn't mean we have to go pay an egregious amount. It is at the high end of the cycle right now, we think. Anything else, Cheree, you'd like to add? I'd say it's a time we can focus more on infrastructure. We don't see those multiples changing as much. Some of the deals take a bit longer to do because we're, you know, a bit pickier to make sure that they fit within our strategy. I'd also comment that the enhanced environment and better commodity prices expanded our opportunity set, where the more intermediate or small-cap producers maybe are more in our line of sight as opposed to two years ago and we probably wouldn't have ventured into that space with the debt levels and the position some of those operators were in. Does the sort of increasing interest rate cycle that we're heading into here, given, you know, the nature of infrastructure assets and the timing of cash flows there, make those deals sort of more attractive relative to GOR deals at this point in time? It just depends on the asset. Yeah, we'd like to continue to have a balanced portfolio of both. As long as it meets our strategy where there's good contractual strength and newer quality, high utilization, we're definitely willing to look at those. Yeah, the interest rates are gonna play into that a little bit, obviously. I mean, we're gonna see, I think lending rates are probably gonna be impacted by that. We do think that, you know, that might actually benefit our business, because we're competing against some of these higher interest rate net debt type scenarios. Yeah. That's sort of what I had in mind there, especially with the longer duration nature of those assets and the sensitivity. Just one more question. I think pro forma, we're estimating dividend payout ratio in around 54% right now. Can you just remind us sort of what the guideposts for the target dividend range will be going forward and sort of what are the levers or sensitivities that kind of gravitate you towards the upper and lower end? Yeah. 60%-90% is what we've always guided towards. Like you mentioned, we are below that right now, even after the dividend increase. Why we didn't go out and increase it more aggressively, obviously, we've had a big run in commodity price that, you know, is this long term or is it short term? I think we gotta watch the macro environment and see if that is something that, you know, we don't wanna react to it too quickly. In addition to that, as I mentioned, like, we are seeing a lot of opportunity right now, and we have this excess free cash flow that we think, you know, growth is still a function of this company. If we can grow in this environment, we wanna use excess free cash flow to do some of that. Okay. Thank you very much. Thanks, Patrick. Thank you. Your next question comes from Josef Schachter with the Schachter Energy Research. Please go ahead. Good morning, guys and Cheree, so Scott and Marty and Cheree, congratulations on the great year and the increase in the dividend. Two questions from me. One, do you guys have any kind of guideposts that you're looking at for the mix of businesses? As you mentioned, you're 82% natural gas now and targeting, you know, 78% for next year. Do you have a minimum that you wanna stay at and continue to be a natural gas focused, you know, royalty payout firm? Yeah. We definitely wanna be focused on natural gas. We think you look across the environment right now, it's setting up very nicely for natural gas. Across North America, I think we're the only royalty company that is focused on natural gas and probably one of the larger royalty companies that's exposed to it with one of the best operators in North America. We've always targeted about 75% natural gas, 25% oil liquids. That's ultimately where we wanna be. A significant component of this company will always be tied to natural gas. Okay, super. My next question is, have you contemplated going across the border and looking at deals in the U.S. as well as having your big exposure here, the large exposure in Canada? Yeah. Absolutely. We've looked at some things in the U.S. I mean, it's a space that we haven't participated in as a management team, as an executive team, and so a little cautious looking into that space. Right now, there's just a bunch of opportunity in Canada that we'd like to focus on. You know, from a royalty standpoint, there's 3-4 other royalty companies out there. So it's limited competition. You look in the U.S., there's tens to 20s to hundreds of royalty companies if you go to the small ones. And from an infrastructure standpoint, I think we're doing a little bit of a different business here, and so we do think we've got a competitive advantage in Canada. Like I said, lots to do in Canada still. Okay, super. Thanks very much. That's it for me, and congratulations on another great year. Yeah. Thanks, Josef. Good talking to you again. Thank you. Your next question comes from Matthew Weekes with iA Capital Markets. Please go ahead. Good morning. Thanks for taking my question. Just looking at the guidance and thinking about commodity prices and where they are, at least in the short term. I'm just wondering what some of the gives and takes are on the guidance. If you see upside going forward here based on your hedging program. I know you talked about the hedging as far as natural gas goes into the summer, but maybe if you could also provide a comment on your hedging program for crude oil. Yeah. We layered on a small amount of hedging in Q4 from a WTI perspective. Total liquids, we are about 15% in 2022 at a WTI of just under $74. That was focused on Q4 acquisitions that at the time were done near the top or higher end of the strip. Just wanted to protect those economics. Going forward, given the resiliency of the business, the infrastructure, the payout ratio, we are comfortable to remain unhedged on the balance of the production. We definitely wanna provide that commodity exposure, but we wanna do it in a really reliable safe way. We've done about 30% of our estimated 2022 summer gas production at an average price of CAD 3.94/Mcf, but do feel that's sufficient. As Marty mentioned in the discussion earlier, our dividend, even with the increase, is protected down to, you know, I think about CAD 1 AECO and $40 WTI. We feel very, very protected. We never wanna touch that dividend, but wanna provide the commodity exposure as well. Okay. Thank you. My second question was just clarifying something made earlier. You said there were a couple sort of key operators on your lines that were expected to release updates by your clients this week. Could you just remind me who those were? Yeah. Tourmaline and Tamarack Valley. Okay. Thanks. Appreciate it. I'll turn the call back. Thanks, Matthew. Okay. Thanks, Matthew. Thank you. Your next question comes from Jeremy McCrea with Raymond James. Please go ahead. Yeah. Hi, guys. I just wanna follow up on Patrick's question just on M&A. Just if you can put a little bit more numbers to what you're talking about in terms of your M&A strategy. I was just curious if there's an actual change in strategy and how you think you can get M&A done this year versus last year, maybe number of data rooms that you're in today versus last year, if you're looking at different size of packages, you know, if it's, you know, 1,000 BOE or, you know, if it's lower, if it's higher. Just a few more numbers to kind of go back to what you were talking with Patrick about. Yeah. Data room-wise right now, probably around 8 different packages. Or not even just packages, some of them are kind of manufactured ideas that we've come up with. You know, the flow is still there. Last year, I think it was similar, 8 to 12 kind of, and you know, there's some pretty quick answers on some of these packages, but we still look. You know, what's gonna be very material to us is if there's a spread between bid-ask price. Like any time there's a high commodity cycle, there's lots for sale, it seems like, but not as many buyers. You know, I'm gonna reiterate again, this is a time to show discipline. Historically, if you look at, you know, how Tourmaline performed when I used to work at Tourmaline, high commodity cycles are tougher to buy things at and, you know, sometimes you gotta wait. What I will reiterate as well is there's lots of good packages out there that are coming to market. I think the valuations of some of these E&P companies, although they're healthier, there's still a unique form of funding that they're gonna have to use. I don't think they wanna use all equity. I don't think they wanna use all debt. It's probably a balance between the two and maybe a royalty or infrastructure component can go along nicely with that. Okay. Do you guys still have a kind of a rough goal to get to about 6% of your, you know, revenue being from infrastructure, or has that changed a bit this year as well too? Yeah, that's the goal. We'll see if this next cycle provides some infrastructure opportunity, which we think it will. That's some of the items we've been working pretty hard on. 50/50 is the ultimate goal. But like I've said in the past to you, Jeremy, it's always written in pencil. We wanna be opportunistic on assets and ideas that are in front of us. You know, over the last year it was royalty-based and maybe this year it changes a little bit. But you know, we're pretty open to either side of the business. I think over time, you'll see us get more balanced to 50/50. One of the questions I didn't answer, you asked about size. I mean, yeah, we're looking at anything from 1,000 BOE to a lot larger than that and looking to fund, you know, high quality names with high quality assets. Okay. That's great to hear. Well, thanks, guys, and talk soon. Good talking to you again, Jeremy. Thank you. There are no further questions at this time. You may proceed. Thanks everyone for checking in, and we'll come back to you at the end of next quarter. Thanks, everyone. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.