Cavvy Energy Ltd. ($CVVY)

Good day, ladies and gentlemen, and welcome to the Cavvy Energy Annual General Meeting and Q1 2026 Financial Results Conference Call. Please be advised that today's proceedings are being recorded. [Operator Instructions] I would now like to turn the meeting over to Mr. Dallas McConnell, Vice President, Corporate Finance. Please go ahead, Mr. McConnell.

Thank you, Didi. Hello, and welcome to the Annual General Meeting of Shareholders of Cavvy Energy Limited. My name is Dallas McConnell. I am Cavvy's VP of Corporate Finance, and I will be the moderator for today's meeting. I would now like to take this opportunity to review the logistics for today's meeting. In addition to the in-person portion of this meeting at Norton Rose Fulbright, this meeting is being streamed by live audio webcast and telephone. Participants attending via the webcast or telephone may listen to the meeting and ask questions, but will not be able to vote on items of business. Only registered shareholders of record as of March 24, 2026 and duly appointed proxy holders present in person at this meeting are entitled to vote on items of business. Procedure for voting and asking questions will be addressed at the outset of the meeting. Please note that today's meeting is being recorded. If you participate in the meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of your personal information. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant that you first obtained all required consents for the disclosure, recording, transfer and use of their personal information. It is now my pleasure to turn today's meeting over to Patricia McLeod, Chair of the Board of Directors. [indiscernible]?

Thank you, Mr. McConnell. Good afternoon, and once again, welcome to the 2026 Annual General Meeting of Cavvy shareholders. My name is Patricia McLeod, and I am the Chair of Cavvy's Board of Directors. In accordance with Cavvy's bylaws, as Chair of the Board, I will act as Chair of today's meeting. Before we proceed with the formal business of the meeting, I would like to take a moment to introduce the other members of the Board who are here today. Darcy Reding, who is our President and Chief Executive Officer; Michael Backus, Harvey Doerr, Doug Dreisinger, Andrew Judson, and Kiren Singh. We also have with us the following members of senior management; John Emery, our Chief Operating Officer; Adam Gray, our Chief Financial Officer; and Paul Kunkel, our Chief Commercial Officer. Darcy Reding and Adam Gray will provide a corporate presentation and report on Cavvy's 2026 Q1 financial results following the formal portion of today's meeting, and I invite you to stay for their presentation. The meeting will now come to order. I appoint the representatives from Norton Rose Fulbright present here to serve as recording secretary for the meeting, and thank you for doing that. I also appoint Paul Bedard of Odyssey Trust Company to serve as scrutineer for the meeting and thank you to Paul. In accordance with the notice and access provisions under applicable securities laws, the notice calling this meeting and the accompanying management information circular were made available on March 24, 2026, to all shareholders of record as of that date. Being the record date for the meeting. A notice and access notification and form of proxy or voting instruction form as applicable, were also mailed to registered shareholders or delivered to intermediary in each case as required by applicable securities laws. An affidavit as to the mailing to registered shareholders is available for inspection by any shareholder I direct that the secretary append the affidavit as a schedule to the minutes of the meeting. In according with the Alberta Business Corporations Act, the notice calling this meeting was also sent to Cavvy's directors and to our auditors, Ernst & Young LLP. Turning to Cavvy's bylaws, business may only be transacted at this meeting if 2 people [ link ] or representing by proxy at least 5% of the shares entitled to vote are present in person or represented by proxy at this meeting. Mr. Bedard, do we have a quorum?

Yes, [indiscernible] we have a forum.

Thank you. I direct that the Secretary open the scrutineer's report as is schedule to the minutes of the meeting. Notice having been served in accordance with Cavvy's bylaws and a quorum being present, I now declare that this meeting has been duly called and is properly constituted for the transaction of business. The purpose of the meeting is as follows: To receive Cavvy's audited consolidated financial statements for the year ended December 31, 2025, along with the associated auditor's report; to fix the number of directors of Cavvy to be elected at 7; to elect the directors of Cavvy for the ensuing year; to appoint Ernst & Young LLP as Cavvy's auditors for the ensuing year and authorize the work to fix their remuneration; to accept caving approach to executive compensation; and to transact any other business which we may be properly brought before the meeting. All items of business are also outlined in Cavvy's management information circular dated March 24, 2026, which was made available to all shareholders along with the notice calling this meeting. I will now briefly review the voting procedures for today's meeting. Each item of business to be covered today will be voted on by shareholders other than the beat of the financial statements and associated auditor's report. Every shareholder as of the record date is entitled to vote on such items and has 1 vote for each common share they hold. Each item of business requires that the resolution be passed by a [ liberty ] of the votes cast. As previously mentioned, only registered shareholders and duly appointed proxy holders present in person at this meeting are entitled to vote. Pursuant to Cavvy's bylaws and the [indiscernible] Business Corporations Act, all items of business must be decided by a show of hands unless a ballot is required or demanded by a shareholder or property holder.

Madam Chair, my name is Adam Gray, and I'm a proxy holder. In the interest of ensuring this meeting is timely and efficient. I demand that voting on all items of business be taken by ballot instead of by a show of hands.

Thank you, Mr. Gray. All items of business will be voted on by ballot then. If you are a registered shareholder or proxy holder attending in person, please raise your hand and the scrutineer will provide you with ballots. Okay. If you voted in advance of the meeting, you do not need to take further action today unless you would like to change your vote. If you choose to cast a ballot in person at today's meeting, your previously submitted vote will be disregarded. I will now review the procedure for asking questions at this meeting. We encourage all shareholders to ask questions. However, we ask that questions unrelated to the matters being voted upon, be held until after the formal portion of this meeting. While participants who wish to ask a question are asked to state their name, the entity they represent, if applicable, and whether they are a registered shareholder or a duly [ updated ] proxy holder. Registered shareholders and duly appointed proxy holders attending this meeting in person may ask a question by raising your hand. Participants on the phone can initiate a question by dialing STAR 1-1. Participants on the webcast can submit questions clicking the ask a question button on the top right corner of the webcast. Questions received via phone or the webcast will be rather summarized by the moderator along with the name of the person asking the question and the entity which they represent, if applicable. In each case, the Chair of the meeting will respond to the question or direct the question to the appropriate person. We will now proceed with the formal business of today's meeting. To facilitate this process, I've asked Adam Gray, Paul Kunkel and John Emery, who are all proxy holders to move and second all motions. I will call on them at the appropriate time during the meeting. First, to receive the audited consolidated financial statements. First item of business is the receipt of audited consolidated financial statements for the year ended December 31, 2025, and the associated auditor's report. Copies of the financial statements and auditors' report have been made available to all shareholders. As is customary, we will not conduct a vote on the financial statements and associated auditor's report. As previously indicated, there will be a brief corporate presentation following the formal portion of the meeting, and shareholders are invited to ask questions on the financial statements at that time. I declare that the audited financial statements of Cavvy for the year ended December 31, 2025, and the associated auditor's reports have been received. The next item of business is to fix the number of directors to be elected to the Board. May I please have a mover and secondary for this item.

Madam Chair, I move that the number of directors to be elected to the Board be fixed at 7.

Madam Chair, I second the motion.

Thank you. Is there any discussion?

There are no relevant questions.

Thank you. As there are no further questions or discussion, I call for the vote on the motion before the meeting to fix the number of directors of Cavvy at 7. I ask all shareholders and proxy holders that have not yet voted to please complete a ballot. Raise your hand if you're -- once your ballot is complete and the scrutineer will collect it. Okay. Scrutineer has tabulated the voting results. I am informed that the majority of the votes submitted were in favor of the motion, and therefore, I declare the motion carried. The next item of business is the election of the 7 individuals nominated by management to serve as directors of Cavvy. The names of the 7 Director nominees are myself, Patricia McLeod, Michael Backus, Harvey Doerr, Doug Dreisinger, Andrew Judson, Kiren Singh, and Darcy Reding. Information about each of the director nominees was included in Cavvy Circular. Cavvy did not receive any additional nominations for directors under the advanced notice provisions of our bylaw #3, which establishes the procedures for a shareholder to nominate director for election to the Board. Accordingly, no additional nominees will be considered for election at this meeting, and I declare the nominations to be closed. May I please have a mover and seconder regarding the election of the director nominees.

Madam Chair, I move that each of Patricia McLeod, Michael Backus, Harvey Doerr, Doug Dreisinger, Andrew Judson, Kiren Singh, and Darcy Reding be elected as Director of Cavvy to hold office until the next Annual Meeting of Shareholders or until their successor is duly elected or appointed.

Madam Chair, I second the motion.

Thank you. Is there any discussion?

There is not.

All right. I now call for a vote on the motion before the meeting to elect the nominated individuals as directors of Cavvy to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. Each director nominee is voted on individually. I ask all shareholders and proxy holders that have not yet voted to please complete a ballot by marking X next to for or withhold for each director nominee listed on the ballot. Raise your hand when your ballot is completed and scrutineer will collect it from you. Scrutineer has tabulated the voting results. I am informed that each of the director nominees has received a majority of the votes submitted in favor of their election. Therefore, I declare that myself, Patricia McLeod; Michael Backus, Harvey Doerr, Doug Dreisinger, Andrew Judson, Kiren Singh, and Darcy Reding are each duly elected as a Director of Cavvy to hold off until the next annual meeting of shareholders or until their successors are duly elected or appointed. I'd like to congratulate the members of the Board, and I thank them for their service. It's truly an honor and a pleasure to serve with you. The next item of business is the appointment of Cavvy's auditors. May I please have a mover and a seconder for this item.

Madam Chair, I move that Ernst & Young LLP be appointed as auditors of Cavvy to hold office until the next Annual Meeting of Shareholders at such remuneration as may be read by the Board.

Adam Chair, I second the motion.

Thank you. Is there any discussion?

No, Madam Chair, there is not.

Okay. As there's no further discussion, we will now take vote on this motion. I ask again that all shareholders and proxy holders that have not yet voted to please complete a ballot. Scrutineer has tabulated the voting results. I'm informed that a majority of the votes submitted were in favor of the motion. Therefore, I declare that Ernst & Young LLP is appointed as Cavvy's auditors to hold office until the next Annual Meeting of Shareholders at such remuneration as may be approved by the Board. The next item of business is the nonbinding advisory vote on executive compensation, also known as say on pay. May I have a mover and a seconder for this item.

Madam Chair, I move that on an advisory basis and not to diminish the role and responsibilities of the Board of Directors that the shareholders accept the approach to executive compensation as disclosed in Cavvy's management information circular.

Madam Chair, I second the motion.

Thank you. Is there any discussion?

No, there is not.

Okay. As there is no further discussion, I now call over the vote on the motion before the meeting. I ask all shareholders and proxy holders that have not yet voted, please submit the ballot. Scrutineer is tabulated as the voting results. I'm informed that a majority of the votes submitted were in favor of the motion. I declare that Cavvy's approach to executive compensation as disclosed in the circular has been accepted by the shareholders. After this meeting, the voting results will be filed on Cavvy's SEDAR profile and publicly announced by way of news release. And this concludes the formal business of the meeting. I now declare the formal portion of this meeting be terminated at, I mean time 1:45 p.m. Thank you. I will now ask Darcy Reding to provide the corporate presentation. Adam Gray will then present our recently released 2026 Q1 results.

Thank you, Patricia, and thank you, everyone, for your interest this afternoon in Cavvy Energy's Annual General Meeting. At this time, and as Patty mentioned, Adam Gray and I will review the company's First Quarter 2026 Operating and Financial Results and certain other company business. Before doing so, I would like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties please see the reports filed by Cavvy with Canadian securities regulators on sedarplus.ca. We are extremely pleased with our most recent quarterly results, which continue to deliver shareholder value through this successful execution of our corporate strategy. We believe Cavvy offers an attractive investment opportunity for our shareholders given our mix of prolific upstream reduction and its associated development upside, our material midstream business and our unique identity as a significant producer and seller of sulfur which is recovered through processing of our solar gas production. Our industry-leading upstream base decline of approximately 6% per annum contributes to a healthy reserve life [indiscernible] that exceeds 25 years. This, in turn, complements our ability to grow our business through development of our extensive identified drilling inventory with the potential to grow the upstream business to 50,000 BOEs per day. Our first quarter results to be discussed in more details in a few minutes, show how our ownership and operatorship in our 3 large deep cut gas processing facilities, support a significant midstream business that is projected to deliver in excess of $40 million of revenue in 2026. This midstream revenue has grown significantly in the past several years, and provides a revenue stream largely dependent of natural gas pricing, providing the company with another layer of cash flow certainty during times of weak AECO natural gas pricing. Cavvy sulfur production in excess of 1,000 metric tons per day is benefiting from exposure to much higher pricing as of January 2026, now reflected in our expectations sulfur sales will generate approximately 1/3 of the company's gross revenue in calendar year 2026. In essence, Cavvy provides our shareholders with the opportunity to invest in attractive upstream hydrocarbon assets that are long life and prolific with deep development drilling inventory. However, our midstream assets and growing revenue stream corresponding to these assets, provide supplemental revenue well protected from natural gas price volatility. And in addition, our substantial sulfur production traditionally considered a byproduct of natural gas provides an extremely robust revenue stream uncoated to the price of natural gas. We believe this diversity yields an attractive opportunity for investors given it is unique for energy companies Cavvy's size. This diversity has helped support corporate performance, and we are excited to speak specifically to our latest quarterly results over the next few minutes. Taking a moment to further expand on our revenue diversity. Focusing on the far right of the bar chart on this slide, we show our Q1 2026 revenue broken down by category and commodity type. Readily apparent is the substantial growth in sulfur revenue in the quarter, accounting for approximately 1/3 of our total revenue, and frankly, dwarfing the contribution made previously by sulfur sales. Revenue from our Midstream business was stable in the quarter on an absolute dollar basis, but its contribution on a percentage basis was reduced to 12% as the larger portion of the revenue pie, so to speak was contributed by our sulfur sales. Similarly, strong natural gas liquids pricing and relatively stable natural gas sales revenue supported by our attractive existing gas hedges, saw their contributions to the total corporate revenue stream diminish on a percentage basis this quarter due to the growth of sulfur revenue. Distilled debt, our key message is simply this. The importance of sulfur to our business was materially amplified in the first quarter of 2026. Sulfur will continue to be key to our business and we are strategically and uniquely positioned to take advantage of the many opportunities sulfur provides. Our upstream assets provide the feedstock and our midstream assets are designed to extract sulfur from the raw gas production. In essence, a perfect combination, particularly given the record high sulfur pricing significantly aided by the current Middle East conflict. Cavvy represents a rare and unique vehicle for investors to participate in sulfur pricing upside. Given the current sulfur market, I will lastly note that we may consider committing a portion of our forecasted 2027 calendar year sulfur production to a fixed price contract, particularly as our existing natural gas hedges wind down by the end of May 2027. Prudent management of cash flow and cash flow certainty remains a key focus for the company to ensure our critical turnarounds and other preventative maintenance activity can be appropriately funded. Adam will be speaking to our corporate commodity prices and hedge programs in a few moments. So I'll defer further details on that at this time. Shifting now to our first quarter results highlights. We are pleased that our previously detailed sulfur revenue growth supported a very substantial USD 27 million debt reduction which was a new company record for single quarter deleveraging. Our major gas processing facilities located at Waterton, jumping pound and Caroline, all achieved 100% run time in the quarter. helping to support both our commodity sales and third-party processing revenue in the quarter. Additionally, our strong run time performance contributed to a new record volume of third-party raw gas processing that averaged nearly 157 million cubic feet per day in the quarter. I want to briefly note that we continue to forecast a June outage at Waterton with an expected duration of approximately 3 weeks, a result of the scheduled maintenance outage by the owner of the sales gas pipeline infrastructure. We also maintain our forecast for the approximate 6-week outage at Caroline to accommodate our maintenance turnaround at the Caroline gas plant. Both the Waterton and Caroline outages were expected and scheduled and their impacts are included in our corporate guidance. Nevertheless, the outages will have a disproportionate impact on revenue and cash flow utilization in those quarters as compared to the first quarter and their impacts should be appropriately considered. Reviewing our specific quarterly operating results, production of over 24,600 BOE per day and nearly 1,100 metric tons per day of sulfur generated nearly $42 million in net operating income, a net back of $18.87 per BOE. Operating costs in the quarter of $47.8 million were slightly higher than originally anticipated, in part due to robust production volumes including higher production at nonoperated facilities where the fee burden on cave gas is higher than the marginal cost of processing at our owned facilities. Of note and consistent with our usual communications, our facilities are strategic components of revenue generation from our midstreaming business and from sulfur sales. Accordingly, we draw your attention to our adjusted operating expense, which is shown as the brown line in the operating expense chart in the lower right corner of this supporting slide. Our $21.55 per BOE operating cost in the quarter if third-party revenues of $12.4 million are taken into account as an offset can be quantified as approximately $16 per BOE in the quarter. As has been customary, our communications, if our sulfur revenue derived primarily from our ownership in our sour gas processing facilities, is also utilized to offset operating expense. Our adjusted operating cost in the quarter is only $0.09 per BOE. Although we realize this calculation and the $0.09 operating cost is not an industry standard, we do believe it is a parameter to consider with appropriate context given our uniqueness as an upstream producer with the material midstream business. I'd like to now hand things off to Adam Gray, who will provide details on our quarterly financial results, hedging positions and forward-looking business for the remainder of the year.

Thanks, Darcy. Good afternoon, and thanks again for joining. I'm Adam Gray, Chief Financial Officer. The financial results headline for Q1 is pretty straightforward aligned to Darcy's previous comments. The sulfur contract expiry delivered exactly as promised. Our revenue diversification initiatives are bearing fruit, and our quarterly results demonstrate what this business is capable of even in an exceptionally weak AECO natural gas pricing environment. Net operating income was just under $42 million or $0.14 per share, up 29% from the first quarter of 2025 and funds flow from operations came in at $32.2 million or $0.11 per share, up 48% year-over-year. Our operating netback of $18.87 per BOE is nearly double where we were just 1 year ago. We recognized $35 million in sulfur revenue this quarter compared to $1.6 million in the first quarter of 2025. Vancouver FOB sulfur price averaged over USD 500 per ton during the quarter and while the structured pricing agreement means 2/3 of our volumes are fixed or colored, the unhedged remaining third participated fully in that market, which continues to be exceptionally strong. We recognized a net loss on revenue hedging activities during the quarter of $14.8 million, which accounts for hedging on gas, liquids and sulfur combined versus $21 million gain in Q1 2025, primarily on gas. Those figures demonstrate the intended shift in our revenue profile. We are less reliant on hedging to support our operations and debt repayment precisely because sulfur and midstream revenues have stepped up in gas debt. We also saw an expected increase in royalty burden, primarily as a result of higher sulfur prices, but also due to higher liquids prices. In case there are lingering concerns, I believe it's important to point out that we pay sulfur royalties based on our realized or hedged price, not based on Vancouver FOB price, so there is no disconnect between sulfur revenues and sulfur royalties. I also want to acknowledge how Darcy did that operating expense was slightly above our expectations at $47.8 million. While flat on a per BOE basis, we did experience higher-than-expected processing fees which resulted in higher expected volumes on nonoperated Central Alberta volumes, which were reactivated by the operator, plus the minor cost escalations in maintenance and chemical categories. We are working very hard to bring annual 2026 operating expense back in line with our expectations. On an adjusted OpEx basis, as Darcy mentioned, our core facilities collectively operate at or near 0 adjusted operating expense. We may look to modify this measure going forward, but I think the moral of the story or at least one way to look at it is that third-party processing and sulfur revenues are fully funding our operating costs with actual hydrocarbon production revenues delivering free cash flow. On capital, we spent $6.3 million in the quarter, consistent with guidance. Some of those expenditures were associated with procurement of parts associated with the upcoming Caroline in Q3. We also accelerated $6.8 million of planned reclamation and abandonment spend into the first quarter. This was intentional, proactive planning our ARO obligations primarily getting into winter access-only facilities in Northeast BC. Finally, on this slide, a brief note that we saw 100% of our outstanding warrants exercised during the quarter, resulting in 18.2 million new shares issued and $3.5 million of cash proceeds. These warrants were exercised at a weighted average exercise price of $0.50 and while this did cause some dilution in the quarter, it cleans up our capital structure, provided a bit of cash and removed some mark-to-market complexity, which we've seen in our P&L, and we want [indiscernible] more. All right. Turning to the balance sheet. As previously mentioned, we repaid USD 27 million of senior debt in Q1, the single largest quarter repayment in the company's history reducing our total principal outstanding to USD 88.9 million. In Canadian dollars, total debt ended the quarter at $123.9 million and net debt at just over $156 million. Since the first quarter of 2022, we've repaid total debt by $121 million. Cash interest expense is down 29% year-over-year. which reflects the compounding effect of disciplined debt repayment. Liquidity also improved significantly. We ended the quarter with $9.5 million in cash and a fully undrawn USD 22 million revolver giving us total available liquidity of just over $40 million, up from $11 million at year-end. That liquidity capacity is an important buffer heading into Q2 and Q3, which include the turnarounds and outages that Darcy mentioned. Our senior term notes and revolver mature in March of 2027 and our subordinated notes mature in September of 2027. You will see on our balance sheet, the term notes totaling CAD 74 million classified as a current liability now. I have been clear that refinancing in 2026 is a priority to provide certainty to our shareholders to add flexibility to our balance sheet to support future growth initiatives and to reduce our cost of capital. Those activities are ongoing, and I'll continue to provide updates to the market as and when I have them. For context, absolute debt reduction is both strategically aligned and increases our competitive position in a refinancing initiatives. In Q1, our actual debt repayment represented 30% of the remaining debt, which matures in March of next year. It wouldn't take very many similarly strong quarters to repay that balance income. Finally, on this slide, I will make a quick comment on working capital deficit. The primary driver of the increase in our working capital deficit is the addition of a deferred venue liability on our balance sheet. That liability comes from the sulfur prepayment we received in January. The amount of salt prepaid, but not yet delivered, is classified as a current liability and has worked down over the months as sulfur deliveries occur. The same will happen at Q2 as I expect to see the second half of the 2/3 prepayment in late June. This liability skews our noncash working capital deficit number, but of course, is overall very positive to our cash management. Okay. Turning to hedging. We have approximately 53% of remaining 2026 hydrocarbon production hedged based on midpoint guidance production range with natural gas swaps at a weighted average price of $3.38 per GJ and condensate protected through collars and swaps out to 2029. And we continue to monitor the forward market for opportunities to add GAAP hedging coverage above $3 per GJ when pricing allows, which unfortunately, it does not at the moment. March was quite a busy month on the hedging front though not particularly impactful to 2026. We added 10 megawatts of power hedge in 2027 and 5 megawatts in 2028 as we view the current Alberta power market to be conducive to long-term hedging. We also added a number of WTI hedges ranging from Q4 of 2026 into Q4 of 2029 at prices that increase our weighted average head prices across the board. As Darcy mentioned earlier, we have and will consider hedging a component of our 2027 sulfur production, especially considering that our remaining gas hedges roll off May of 2027. The sulfur market is distinctly different than other markets we risk manage into due to the lack of forward price transparency. We plan risk management activities in the context of cash flow volatility reduction across our business as opposed to simply targeting a specific percentage of production. More detail on these efforts will be made available as and if we have them. Okay. Finally, I'll discuss guidance a bit, starting by saying that we are not making any adjustments to our guidance today. Certainly, Q1 has front-loaded cash generation, and we are feeling confident about our NOI and debt reduction targets. I also recognize that as compared to the current sulfur spot price, our guided pricing assumption of [ USD 23,750 ] for the second half of the year appears very conservative. However, as we've previously discussed, gas prices remain sharply below our 2026 guidance range. We have a chart in our MD&A this quarter, which sensitizes 2026 NOI to various inputs. From that chart, a 10% move in sulfur price is worth nearly 3x cash flow impact to our business of a 10% move in AECO on a hedged basis. Overall, I believe our revenue diversification is functioning as designed. Q2 will absorb the impact of the Waterton out of June, which was previously discussed with some opportunistic capital spending planned during that time, both to meet regulatory requirements and hopefully, to defer a planned major turnaround at that facility from 2028 to 2029. Q3 will be impacted by the 6-week planned Caroline turnaround. The Q2 sulfur prepayment, which is expected to repaid at the end of June, will provide ongoing debt repayment and working capital, and these outages are expected to be funded from operating cash flows. Overall, we are very pleased with the quarter and with the evolving cash flow profile of our business, and very optimistic about delivering strong results throughout the remainder of the year. That concludes my prepared remarks, and I'll turn things back over to Dallas to manage our Q&A.

Thanks, Adam. Thanks, Darcy. What we're going to do for the questions is I'll turn it back over to the operator to deal with any questions over the telephone. And then he'll turn it back to me and we'll deal with any questions on the webcast or in the room. So go ahead, Didi.

[Operator Instructions] And our first question is from Adam Gill of Ventum Financial.

So 2 questions for me. First off, on the Caroline plant, there's been increasing third-party volumes from the guys developing the Glauconite play in the area. Do you have an idea based on your conversations with them and activity levels you're seeing. When do you expect that to top out? And do you think -- how will the plant end up being when that play region peak?

Paul Kunkel, Chief Commercial Officer. We believe in talking to the customers in the area that there's at least 5 years of development and drilling in the area. Because of the egress issues in the area, they're not drilling and developing as fast as they would like. So we believe there's quite a bit of room there remaining. And ultimately, by the end of 2027 without any additional debottlenecking in the facility we would consider Caroline full.

Sounds good. Second question, just on sulfur revenues and marketing. Obviously, some stability in the longer price realizations, I think, would be helpful for the soft. Can you give us any color on potential marketing arrangements that are out there? Is there an ability to hedge out 2027 this early in the year?

Yes. We are in conversations with regards to 2027 hedging. We believe there is an opportunity to do that, and it will depend on price, obviously, and we'll make a decision on that we hedge based on price. But we believe there's appetite for at least 2027. Anything else further than that seems to be a little bit difficult in this sign, but certainly '27 as possible.

And our next question comes from [ Maximo ] of [indiscernible].

I wanted to get back to sulfur again. In the past, all of the sulfur was sold to Shell, I'd like to know who's buying it now. And I'd also like to know from your chart where you indicate capacity of 1,500 tonnes a day in that faded blue line on the table. What we're doing to try and get to that maximum 1,500 tonnes a day because clearly, sulfur is the most profitable cash flow-wise product that we're selling right now. So why aren't we trying to maximize that?

It's Darcy here. I can answer that question. Thanks for the question. First of all, maybe I'll answer the second question first. The 1,500 metric tonne per day number is obviously associated with all of our production capability being online. We currently have around 260 to 300 metric tons per day of sulfur production associated with the voluntary shut in production. The shut-in production will remain that way until we can come to an agreement with the third-party facility owner and operator that makes that production stream economic, sufficiently economic for us. Despite the fact that sulfur is obviously at a very high price right now, gas prices are still extremely low. The cost structure associated with that third-party facility is extremely high. And as a result, the economics of producing that stream is not that attractive, particularly for a depleting resource that every molecule you take out of the ground, you can't get it back to produce at a higher price at a later time. And could you just repeat your first question again? I'm sorry.

Marketing.

Marketing. Who the buyer is, I think, was your key question. We've been asked by the buyer, not to disclose who is. We don't believe that's a material fact or a piece of information. We have fully disclosed the terms of the year, and that's what we're comfortable with disclosing.

Can you confirm that it's not Shell? I can't confirm anything. I've provided the information that we're readily able to provide.

Thank you. There are no further telephone questions at this time. I'd like to turn it back over to Mr. McConnell to manage the webcast question-and-answer portion of the call.

Thanks, Didi. We've had a couple of questions come in. A couple have been answered already, so we won't waste folks time. First question, great quarter, everyone. Can you please shed some light on your approach to M&A, particularly would you favor acquisitions that skew sour to increase your sulfur throughput and especially considering your spare sulfur processing capacity and your unique capacity as a sulfur producer.

Yes, I think I can take that question. It's Darcy again. We would absolutely be very keen on making acquisitions of sour gas, particularly if it's sour gas that's in very close geographic proximity to our existing production and even more particularly if we could bring that into our gas plant if it wasn't already at our gas plant. We're somewhat agnostic in terms of what we would look at beyond that. Of course, the key driver for us would be any acquisition must be accretive to our current business. That's a key consideration for us, not only accretive on existing operating and financial metrics, but we would be looking at acquiring upside that can be developed and brought online to enhance our business.

Thank you, Darcy. Can you provide the recent price at Vancouver FOB that sulfur is receiving?

Sure. Sure, I can take that. Paul Kunkel here. Currently, FOB Vancouver is receiving a price between USD 950 and USD 1,000 per metric ton, which averages out to $975 per metric ton.

So I'd just add to that, that's 1/3 of our 2026 production is capturing that Vancouver FOB price, less deductions to our plant gate of around USD 80 per U.S. a ton.

[indiscernible] capital. With regards to the voluntarily shut in [indiscernible]. Third-party producers [indiscernible] comes back, does Cavvy has intention to start [indiscernible]. Can you back to add any more color in terms of that production in...

Yes, I can answer that. It's Darcy again for those online. We would very much like to restart that production, but it has to be at terms that are mutually beneficial. And so far, we have not reached that. We continue to work on that. At this point in time, that gas is contracted to that third-party facility through to the end of calendar 2027. If we can get something on stream prior to that, that would be great. We're working on it. We don't have anything of substance to speak to on that at this point in time.

As a quick follow-up on that. So in 2027, when that contract expires, if there's no follow-up. Is there an option to reactivate that pipeline...

Our intent is all of that gas production that is shut in right now by the end of 2027 with the split and put back on production to both our own operated and owned facilities and also to another third-party facility in the area, which the production is jointly owned on a working interest basis between us and that facility operator.

Another question from the webcast. There was talk of adding power plants in the past. Is that still going to be an option in the future.

Paul Kunkel, again. Yes, we continue to work on opportunities for both powerful and data centers. We are putting quite a bit of resource to identifying and screening opportunities. We have nothing to report on that right now, but certainly will when we are ready to do so.

Great. That concludes the questions. Appreciate everyone for your time. and for your participation today, and we appreciate your interest in Cavvy. If you have further questions, please call us at 403-261-5900 or e-mail company at [email protected]. Thanks again, and we look forward to speaking to you soon.

Thank you. The conference call has now ended. Please disconnect your lines at this time, and we thank you for your participation.