Athabasca Oil Corporation ($ATH)

Hello, and welcome to the Annual General Meeting of Shareholders of Athabasca Oil Corporation. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to the Chairman of the Board, Ron Eckhardt.

Good morning. Welcome to Athabasca's Annual General Meeting of Shareholders. I'm Ron Eckhardt, Chair of the company's Board of Directors. Pursuant to the company's bylaws, I will be the Chair of this meeting. This year, again, the meeting will be held in a virtual-only format conducted via live website (sic) [ webcast ]. On the agenda today is the formal business described in the notice of meeting and the notice and access notification. After we take care of the formal business, I will ask Rob Broen, Athabasca's CEO, to give an update on the company's recent activities and strategic objectives. During the meeting, registered shareholders and duly-appointed proxy holders may at any time submit questions or communicate with the Chair and the Secretary by clicking on the Q&A tab, typing in and submitting their question or comment. If you are attending as a guest, you may submit questions to be addressed by Mr. Broen following the formal meeting. No questions submitted by guests will be read or answered during the formal meeting. Given the virtual format of the meeting and in order for us to expediently address as many questions as we can, we would encourage shareholders who have a specific question on an item of business to submit their question now. If you have further questions not specifically relating to the items of business, feel free to submit those questions at any time, and they will be addressed at the conclusion of the meeting. I will now call the meeting to order. In addition to myself, the other Board nominees attending virtually are Angela Avery, Bryan Begley, Rob Broen, John Festival, Marty Proctor, Marnie Smith and Theresa Roessel. So let's get started with the formal part of the meeting. Cam Danyluk will act as Secretary of the meeting; and Marina St. Denis from Computershare will act as scrutineer. I've been advised that the notice calling this meeting, along with the management information circular and the form of proxy were mailed on March 31, 2026, to registered shareholders of record as of the close of business on March 9, 2026. Our circular and other meeting materials were made available to beneficial shareholders through the notice and access system. And so with the consent of the meeting, I will dispense with reading the notice calling this meeting. I've been provided the scrutineers' report. At this meeting there are 69 persons holding or representing by proxy circa 247 million shares or 50% -- 57% of the common shares entitled to vote at this meeting. This represents a quorum of shareholders. Therefore, I declare this meeting regularly called and properly constituted for the transaction of business. To facilitate the formal business of the meeting, Matthew Taylor will propose and Karla Ingoldsby will second the formal motions. If you have voted your shares prior to the start of the meeting, your vote has been received by the scrutineer, and there is no need for you to vote those shares during the meeting, unless you wish to revoke or change your vote. As such, if you have already voted and do not wish to revoke or change your vote, please do not vote during this meeting. In order to streamline the voting process, we will now open the polls. And at any time during the meeting, registered shareholders and duly-appointed proxy holders that they are logged on and wish to vote the shares may do so by clicking on the vote tab on your screen. The polls will remain open until just before conclusion of formal business of the meeting. If you are attending this meeting as a guest, you will not be able to vote during the meeting. We have been advised by Computershare that based on proxies already deposited with them, enough votes have been cast to carry each of the motions. The first item of business is the presentation of the company's financial statements for the period ended December 31, 2025, and the related auditor's report. Copies are available online and on the company's website. Extra copies are also available to shareholders upon request. The next item of business is fixing the number of directors to be elected at the meeting at 8. Mr. Taylor, may I have a motion?

Thanks, Ron. I move that the number of directors of the company be elected at the meeting be fixed at 8.

I second the motion.

Mr. Danyluk, have we received any questions relating to this item of business?

No, Mr. Chairman, there are no questions relating to this item of business.

Thank you. You can cast your vote on this item of business until I announce that the polls are closed. I will announce the voting results of this item of business and all items of business after the polls are closed. The next item of business is the election of the company's directors. Mr. Taylor, may I have a motion for the election of the company's directors.

I nominate each of the following individuals as directors of the company to hold office until the next annual meeting or until his or her successor is duly elected or appointed unless his or her office is earlier vacated: Angela Avery, Bryan Begley, Rob Broen, Ron Eckhardt, John Festival, Marty Proctor, Marnie Smith, Theresa Roessel.

I second the motion.

Thank you. No other nominations have been made in the time frame specified in the company's advance notice bylaw. Accordingly, I declare that the nominations are now closed. Mr. Danyluk, have we received any questions relating to this item of business?

No, Mr. Chairman, there are no questions relating to this item of business.

Thank you. You can cast your vote on this item of business until I announce the polls are closed. The next item of business is to appoint Athabasca's auditors. Mr. Taylor, may I have a motion for this?

I move that Ernst & Young LLP, chartered accountants, be appointed auditors of the company until the next annual meeting and that their remuneration as such be fixed by the Board of Directors.

I second the motion.

Mr. Danyluk, have we received any questions relating to this item of business?

No, Mr. Chairman, there are no questions relating to this item of business.

Thank you. You can cast your vote on this item of business until I announce that the polls are closed. You may not for any accounting -- you may not vote for any accounting firm other than Ernst & Young LLP. We will now wait a moment to allow registered shareholders and duly appointed proxy holders to submit their votes, and we will then close the polls. [Voting]

The polls are now closed with respect to voting on all of the motions. Mr. Danyluk, could you provide -- please provide the preliminary voting results?

Mr. Chairman, based on the preliminary report of the scrutineer, all items voted upon at the meeting have received more than the number of votes required, and therefore, all items are passed. The final voting results will be posted online at SEDAR+ under Athabasca's profile.

Thank you, Mr. Danyluk. In light of the results of voting, I now declare the number of directors of Athabasca is fixed at 8. The 8 director nominees named in the management information circular have been duly elected as directors to hold office until the next annual meeting or until his or her successor is duly elected or appointed. unless his or her office is earlier vacated. And Ernst & Young LLP is appointed as auditor of Athabasca until the next annual meeting, and the Board of Directors is authorized to fix its remuneration. The final report to be furnished by the scrutineer subsequent to the meeting will be incorporated into the minutes of the meeting. That concludes the formal business as set out in the notice of meeting. I will now give our registered shareholders and duly appointed proxy holders the opportunity to ask other questions. Mr. Danyluk, have we received any other questions?

No, Mr. Chairman, there are no questions.

Thank you. I will now call for a motion to terminate the meeting.

I move that the meeting be terminated.

I second the motion.

Thank you all for attending. I now declare this meeting closed. Now I would like to invite Rob Broen to provide an update on the business. Rob?

Thank you, Ron, and good morning, everyone. My name is Rob Broen, and I'm the CEO of Athabasca, and thank you for joining our virtual AGM. 2025 was another outstanding year for Athabasca. We continued strong operational execution, building a resilient business that is growing its production base and generating sustainable free cash flow. Over the past several years, we've remained disciplined and responsible -- responsive in how we allocate capital, always acting in the best interest of our shareholders. We started by paying down our debt, allowing us to have full control of our strategy. When it made sense to do so, we shifted our capital allocation strategy towards share buybacks based on the massive intrinsic value in our assets. We have now shifted towards growth, balancing that with thoughtful evaluation on the continued use of free cash flow for share buybacks. We are in a unique space where our vast asset base allows us to efficiently grow our business while reducing share count at the same time. That approach has proven to be an effective way to enhance per share value. On this slide, you will see our 5-year total shareholder return. Over that period, Athabasca has outperformed all of our peers, delivering a total shareholder return of approximately 1,700%, including over 70% this year alone. That performance reflects the strength of our asset base, the discipline of our capital allocation framework and the commitment of our team to creating sustainable shareholder value. We will continue to apply that discipline going forward. And ultimately, our objective is simple: to create long-term value for our shareholders. Our strategy is underpinned by three key pillars: first, low-decline, high-quality thermal assets that have an 85-year reserve life; second, self-funded growth through the high-returning Kaybob Duvernay oil play that has over 400 future locations and third, a pristine balance sheet with a net cash position supporting financial resilience and flexibility. You can see in this graph on the bottom left-hand side that we expect a compound annual growth on production of greater than 20% per share through 2030. The middle graph shows our expected cash flow growth. With consistent execution of share buybacks, we expect to also realize greater than 20% per share compound annual growth rate on funds flow through 2030. We've already returned approximately $1.1 billion to shareholders through first deleveraging and then share buybacks over the last 5 years. And now looking ahead, we expect to exceed that level of free cash flow between 2026 and 2030. The growth outlined assumes long-term commodity prices of $70 WTI and $12.50 heavy oil differential. And I'm going to speak in a moment to the pricing sensitivities and our exceptional ability to withstand periods of volatility and continue to deliver strong returns. This slide is a corporate snapshot. Our thermal oil assets underpin our strategy and the heavy oil production also positions us very well for today's pricing environment. And on the Duvernay Energy side, our assets are positioned in the liquid-rich fairway of the prolific Kaybob Duvernay with over 400 future locations. I'm going to talk more about our assets in a moment. But you can see our financial position is clean and resilient. At the end of the quarter, our balance sheet was in a $60 million net cash position with over $400 million of liquidity, including almost $300 million of cash. We also have approximately $2.1 billion of valuable tax pools, allowing for a tax-free horizon for years into the future. Our 2026 guidance is summarized at the bottom of this page. Our production guidance includes the impact of turnarounds that are happening across our assets this year and then highlights the significant exit growth rate to approximately 45,000 boe per day later this year, and this growth will continue in 2027 and beyond. Yesterday, after market close, we released our Q1 results. There are a number of significant highlights. Production of 40,242 boe per day with 98% liquids. We started the year strong and expect that we'll be at the upper end of our annual corporate production guidance, including turnarounds as we execute our exciting capital programs on both sides of our business. Our consolidated adjusted funds flow was $128 million in the quarter, which is a 14% growth on a per share basis year-over-year with free cash flow of $20 million from our thermal oil assets. You can see that our asset netbacks are very strong, an indicator of the quality and the profitability of our assets. These assets or these netbacks rank very well compared to peers across North America. And in fact, in March of this year, we recorded netbacks of approximately $67 a barrel in our thermal assets and $66 a barrel in our Duvernay asset, demonstrating the fantastic upside to commodity prices. We continue to allocate 100% of thermal free cash flow to our shareholders, and we've repurchased approximately $40 million worth of shares year-to-date. Our balance sheet remains pristine, as I've already mentioned, with $60 million net cash position. Our business strategy is to deliver capital allocation that maximizes shareholder returns. As I touched on earlier, you can see in the graph on the top right-hand side that we expect a compound annual growth rate on production of greater than 20% per share through 2030. We expect our thermal business to reach over 60,000 barrels a day by 2030. And including our Duvernay business, we will be almost 80,000 boe per day. Our breakevens are very competitive with our capital growth program fully funded over the next 5 years at about $55 WTI pricing. And we've now repurchased 149 million shares or about 24% of our fully diluted share count over the last 3 years, and that's at approximately a 60% discount to our current value. Athabasca continues to see intrinsic value in its shares. For 2026, we renewed our normal course issuer bid with the capacity to repurchase up to 47 million shares until mid-March 2027. The bottom graph on this page shows our substantial cash flow growth. You can see the power of compounding through the growth in cash flow while reducing share count through a buyback program. As previously mentioned, we're forecasting greater than 20% cash flow per share growth through 2030 annually. We believe this is a winning formula enhancing per share value in a way that few companies can match. Now the macro backdrop for Canadian heavy oil has rarely been more compelling. Global markets are pricing in a very real supply risk with the disruption in the Strait of Hormuz impacting a significant share of global oil flows at a time when inventory buffers remain limited worldwide. At the same time, the Canadian heavy oil outlook continues to strengthen. TMX and the Mainline optimizations are expected to unlock roughly 700,000 barrels per day of incremental egress with additional pipeline projects also being advanced. Athabasca is uniquely positioned to benefit from this environment. We have material liquids growth through 2030, and we are fully unhedged on commodity prices in 2027 and beyond. Approximately 65% of our volumes are committed long term to secure PADD II and PADD III markets in the U.S. At $70 WTI, we expect to generate $1.5 billion of cumulative free cash flow over the next 5 years. And for every $1 move in WTI, that number increases by almost $20 million. So we have strong exposure to the macro backdrop, growing liquids volumes, direct access to premium markets and the balance sheet strength to execute our business strategy. I'd like to now switch to our assets and talk about our exciting development programs. This slide shows Leismer, a top-quality oil sands project and our largest producing property that is currently producing around 27,000 barrels per day. We are focused on progressive growth to 40,000 barrels a day over the next 2 years at a total project cost of $300 million. We will implement this growth with a highly economic $25,000 per flowing barrel capital efficiency. Central processing facility is being expanded. We're adding more steam, water treatment and oil processing capacity. We recently drilled 12 new well pairs that will begin steaming in a stage sequence in the second half of this year following our planned 3-week turnaround in May that's underway right now. We are anticipating an exit rate of approximately 31,000 barrels a day in 2026. Additional drilling will continue next winter, and we expect to reach our planned capacity of 40,000 barrels a day by the end of 2027. The project remains on budget and on schedule with about 90% of the capital spending complete by the end of this year. Once full capacity is achieved, we estimate that our sustaining capital breakeven to hold production flat is at about $45 WTI, allowing us to generate substantial free cash flow from this asset. This growth will complement our long-term strategy with a 50-year 2P reserve life remaining at this asset. Hangingstone is our original SAGD asset that was commissioned in 2015. It also has a 50-year reserve life index. This asset has seen tremendous improvement in cost structure. The implementation of co-gas injection for pressure maintenance has displaced steam, resulting in a reduced steam oil ratio currently around 3.4x. This reduced our operating costs, it lowered our emissions and created excess steam capacity. In March of 2025, we brought on two new 1,400-meter well pairs. Current well performance remains very strong with average production of 800 to 1,100 barrels per day per well. These sustaining well pairs will support our base production in 2026 and beyond. The asset has generated about $300 million in operating income in the last 3 years with very minimal capital. It continues to deliver meaningful cash flow contributions with competitive netbacks. We have a planned 10-day turnaround that will be completed this year in June. The asset has been important to corporate cash flow, and we are now evaluating growth potential to take advantage of unused facility capacity starting in 2027. Our next exciting growth project is called Corner, an asset just offsetting our Leismer project. This asset is completely derisked in the McMurray sand reservoir with over 300 vertical well penetrations. The asset has approximately 350 million barrels of 2P reserves and another 520 million barrels of contingent resource. We believe it is a very high-quality reservoir relative to most other industry projects. The asset also has a 40,000 barrels a day regulatory approval for development in place and its close proximity to Leismer will allow for the realization of many operational synergies. Our plan is to develop this asset through modular design in 15,000 barrel a day phases. This type of development will also allow a progressive build at the asset while self-funding the project from existing cash flow. We have received Class 3 cost estimates on the first phase of the project, and we're now evaluating lump sum bid proposals to enhance certainty over both project schedule and cost. We also have secured key critical path elements, including long-term gas supply and power contracts and are evaluating our options for diluent supply and build egress. In the first quarter of this year, we began preparing the site and access road during the winter construction season. And looking ahead, we expect we will sanction Phase 1 in the second half of this year. Once sanctioned, we expect first steam in about 30 months and first oil in 34 months, allowing the project to reach its 15,000 barrels a day by the end of 2029. The majority of capital will be deployed in 2027 and 2028, and that's following the completion of our current Leismer expansion. Our current estimate for Phase 1 is approximately $35,000 a flowing barrel capital efficiency. Additional phases of this project would follow in subsequent years, resulting in Athabasca's thermal oil business growing to almost 100,000 barrels a day, completely self-funded while also returning free cash flow to shareholders. We are very excited about this project and look forward to fully sanctioning it later this year. Now I'll switch to our Duvernay assets. Duvernay Energy Corporation, which created 2 years ago is a private subsidiary company operated by Athabasca. It has exposure to approximately 200,000 gross acres in the liquids-rich window in the prolific Kaybob Duvernay resource play. The company has an estimated 430 gross future locations with extensive operated infrastructure in the region. The area is very active with industry peers, allowing for a unique low-risk development outlook. Business plan is to allocate 100% of adjusted funds flow from this business to drive self-funded growth. Our capital program for 2026 is estimated at $79 million. We recently brought on stream a 4-well 30% working-interest pad with average lateral lengths of 4,500 meters. These wells have an outstanding initial rate of approximately 1,635 boe per day, 91% liquids. The performance of these wells, including the free condensate yields is contributing to outstanding netbacks and new wells in this area are consistently performing at or above our type curves. We announced yesterday that we're adding a new pad this year with three wells planned at 4,500 meters each, taking advantage of our increased cash flow due to strong commodity prices. This pad will be on stream in Q4, contributing to an exit rate of about 6,000 boe per day this year. Land tenure is very good in this area, allowing for flexible development. Our objective with this asset is continue the growth to achieve a material scale in drilling inventory. Value crystallization for shareholders will be done once these goals are achieved. So that, ladies and gentlemen, concludes my presentation this morning. I want to thank our shareholders for your continued support as we deliver on our strategy. And I want to say a special thank you to the staff at Athabasca for their dedication and very hard work. I'm very proud to work with such talented individuals. So at Athabasca, we believe that responsible energy we produce here in Alberta makes people's lives better. The world needs more Canadian energy. We'd be happy to take questions at this time.

Rob, there's no questions in the queue.

All right. We'll turn it over to you, operator.

This concludes the meeting. You may now disconnect.