Obsidian Energy Ltd. (OBE) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the Obsidian Energy's 2024 Guidance Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Stephen Loukas, President and CEO. Please go ahead.

Thank you. Good morning, all. Thank you for joining Obsidian Energy's 2024 guidance presentation. I will turn your attention to Page 2 and our advisories. Before we start, I'd like to first point out that we will refer to forward-looking information in connection with Obsidian Energy in the subject matter of today's call. By its nature, this information contains forecasts, assumptions and expectations about future outcomes, so we remind you it is subject to the risks and uncertainties affecting every business, including ours. Please refer to the disclosure at the end of the presentation, along with our public disclosure filings available on both SEDAR+ and EDGAR systems for a full discussion of significant factors and risks that could affect Obsidian Energy or that could affect future outcomes for the company. Turning to Page 3, just in the way of a corporate overview. Obsidian Energy is currently forecasting a production profile to average approximately 36,000 BOEs a day in 2024 that equates to approximately 12% year-on-year production growth. We signaled that we intend to be active with our NCIB. So one should assume that on a per share basis, it will be greater than 12%. Our production mix currently on a 2024 estimated basis, approximately 67% oil and liquids. Year-end 2022 reserves are approximately 181 million BOEs, and that equates to an ROI of approximately 13 years. Our PDP decline is optimally 24% as of year-end 2022, and we have approximately $2.4 billion of tax pools, many of which are immediately deductible. Total shares outstanding as of 12/31/2023 are 77.6 million shares equating to a market capitalization of a bit below $700 million. Total net debt at quarter end Q3 2023 is approximately $294.3 million, equating to a net debt to FFO -- Q3 annualized FFO of approximately 0.7x of a turn with a total enterprise value of approximately $1 billion. Turning to Page 4, just to speak a bit about our focus, what our focus will be during 2024. We've outlined the plan is expected to deliver approximately 12% production growth while generating approximately $27 million of free cash flow with assumptions that we've outlined in our disclosures that we would deem to be conservative and indicative of the current market environment. We have a strong repeatable development program that we expect to generate strong returns, and we are focused on executing with the 5 -- current 5 rig program growing to 6 rigs by the end of the year. Total capital -- development capital expenditures is forecasted to be between $345 million and $355 million, and that is inclusive of approximately $25 million of exploration and appraisal capital to further delineate our Peace River position. The development plan is weighted towards our Peace River asset. As we've been consistent over the course of the last couple of months, we're focused on derisking our asset in totality, but in the short term, focused on derisking our Walrus Bluesky play and our Dawson play within the Clearwater, both will see continued activity here in the first half of the year. And we're going to go -- we plan on continuing to drill a number of OSE wells to test acreage across both of our formations. Just to highlight 2023. During the year, we purchased and canceled approximately 6% of our total shares outstanding, which was 5.1 million shares for a total expenditure amount of $47.4 million, and we expect to be active during 2024. With that, I will turn it over to our CFO, Peter Scott, who will walk us through our 2024 guidance.

Thanks, Steve. On to Slide 5. Again, I'll take a couple of slides here to show you some details of our 2024 guidance. Just to orientate you on this slide, on the left-hand table, is our corporate numbers; on the right-hand -- upper right table is light oil assets, and then we do have a production -- high level production graph down on the bottom. So as Steve mentioned, we're looking at 36,000 BOEs a day production average for 2024. Again, that's up 12% over 2023. You can see the range there. If I just pull your attention to the table on the right, looking at the oil and light oil, heavy oil is forecasted to be 8,500 BOEs a day, light oil, 27,500 BOEs a day. Again, those would match what we had in our 3-year forecast for 2024 that we released in September. Just looking at the graph at the bottom, and as we mentioned in our press release, you can see how production grows fairly steadily in the first half of the year through Q2, it takes a little bit of a dip in Q3 as there's less activity during spring breakup in Q2, so that production doesn't come on. And then build again into Q4 of 2024. And as we also provided just the forecast for 2025, looking at approximately 40,000 BOEs a day for Q1 2025. So obviously, that production continues to build. As Steve mentioned, capital expenditures midpoint about $350 million. That is down about $30 million from what we had in our 3-year forecast for 2024. And again, if you look at the heavy oil, light oil split; on the heavy oil side, $180 million capital expenditures, light oil is $165 million. That's really where that $30 million decrease comes from. And really, that's because we accelerated our Viking program from what we originally had in our 2024 forecast into the second half of 2023. And so that's really the major part of that delta. Just finishing off on the table, you can see within that operating income that we're projecting for each of the heavy oil and light oil assets based on the forecast assumptions that I'll get into in a moment. You can see we're a net investor in the heavy oil side with cash used of $80 million, but that's more than made up for with the $185 million of cash that's generated in the light oil side. Assets, obviously, so we use that for the Peace River assets as well as other corporate activities. Decommissioning expenditures are estimated between $23 million to $24 million, which is down from our '23 guidance. Looking at operating costs, again, we're looking for some improvement over our '23 guidance, about $0.50 per BOE. So a nice result there with the new production coming on with generally lower operating costs. On the G&A front, we're looking to be flat on a per BOE basis to what we have in our '23 guidance. Just looking at some of our pricing assumptions, again, this is for the February to December period. We're looking at $75 WTI, $3 light oil differential, $15 heavy oil differential an AECO price, we're using $2.25/GJ difference from what we had in our 3-year forecast that we presented in September is our AECO prices down from $3, which is driving the drop in cash flow that we had from that -- or funds flow from operations that we had in the forecast. So FFO on these assumptions is $400 million. Again, that's down about $40 million. The large driver of that is the AECO price contributed by some lower NGL pricing a little bit higher interest with some higher debt. FFO per share would be $5.16 at that $400 million using the shares outstanding at year-end. So before any other NCIB free cash flow is estimated to be $27 million or $0.34 a share, net debt winds up to be about $315 million. So very stable with 0.8x net debt to FFO. And again, those are all pre-NCIB. And we do have some sensitivities in the table below. You can see obviously most sensitive to WTI, $1 change is almost $10 million of FFO, about $6.5 million, $6.7 million for light oil differential, $3 million for heavy oil differential. So if you want to choose a different price, you can have some fun there. Next slide, Slide 6. Just to provide some details of where we're drilling and then Jay will get into some more specifics around this. As you can see, the majority of our wells are in Peace River and the majority of those wells are targeting the Bluesky with a strong second half focus. Peace River, there's 46 in total, 11 of which will be in the first half. You can see on the bottom of the chart, our exploration appraisal wells. Those are primarily focused in the first half with 7 out of the 10 wells being drilled there. Again, that's all Peace River related. Just as a note, we will use results of our first half drilling, including those wells in order to refine our second half program. So the second half program that sits there, you can see is a total of 48 wells. In the light oil side of the business, we're drilling 22 operated wells with 12 of those in the first half, and obviously, we do have some non-off wells that we're participating in as well. So overall, we have 78 operated wells in the program. And I'll turn it over to Jay to give you some more detail on that.

Thank you, Peter. As both Peter and Steve have alluded to, front and center in our 2024 budget is an increase in the scope and scale of our investment in the Peace River heavy oil asset. The discovery of our Walrus Bluesky field, combined with the emergence of the Clearwater play into the area, is a catalyst of our 3-year growth plan. If you follow closely Obsidian's journey in the asset over the past 2 years, our increasing land position and infrastructure footprint have been apparent. We have increased our development options and ensured our capacity to grow. Behind the scenes, we have staffed up with an incredibly strong technical team who led a renewed exploration and appraisal program on the asset throughout last year. At the start of this year, we released preliminary well results from these efforts. In the Dawson Clearwater, our southernmost well on the 7 of 13 pad produced an IP30 of 312 BOE per day at 100% oil. The follow-up pad in central Dawson, which I'll highlight directly offset a 2022 OSE well, had not yet reached 30 days but had IP13 rates of 228 and 147 BOE a day, respectively. We have now drilled 4 producing wells and 1 OSE well in Dawson and the field is ready to move forward. In Walrus, our 4 new wells on [indiscernible] pad all encountered good reservoir and impressive early production rates in the Bluesky. We are most excited by the [indiscernible] well, which was our first attempt to vertically stack producing wells within the Bluesky. It produced an IP30 of 333 BOE per day. This stacked well design has been tested in the Bluesky just north of Walrus, and we see a strong opportunity to apply it in our new field along the same trend. With this development design comes significant drilling inventory and improved capital efficiencies from the shared surface facilities. As our knowledge of this asset continues to grow through the year ahead, so too does our production and our reserves close behind. In terms of what we plan to do in the first half specifically, the first half program in Peace River is comprised of 2 separate but equally important parts. First is the obvious development drilling, where we are foremost following up with our recent results in Dawson and Walrus. In both fields, we will have multiple offset wells drilled in the first half of the year. In Dawson, the initial production rates I alluded to on 7 of 13 were so strong that we had to reorient our program to ensure we could get back there in the first half of the year and drill the offsets. In Walrus, we are now offsetting our initial pad and plan to have 6 new wells rig released in the first half of the year. Additionally, we have 1 well planned in Harmon Valley South continuing to expand the boundaries of that field. The second part of our exploration -- of our program is our exploration and appraisal program. This starts with 5 vertical OSE wells denoted by the orange dots on the map. These gain reservoir information in perspective new areas. And as you saw in Dawson last year, we were able to quickly follow up on those results. The second part is what we call with stock drilling, where we drill and core an initial vertical leg prior to kicking off into a multi-leg horizontal well. This has the benefit of still gathering the reservoir data we look after, but also optimizing the horizontal placement and providing a good productivity test for the zone. We are currently on the first of these wells up in North Nampa before moving south for a second well. In total, we have 3 active rigs in the area and are planning to increase that to 5 by the end of 2024. On to our light oil assets. If Peace River is our new growth catalyst, our light oil assets are the engine of this company. Our Cardium position is the best in the basin with core acreage through both Pembina and Willesden Green, though the Cardium has been around for decades, the year-end 2022 book locations and the upcoming 2023 update prove that development of these assets still has significant runway. In our growth plan, Cardium remains the foundation of our growth with strong repeatable results. I will highlight though there is no plan currently in 2024 for the Viking, we keep it ready as needed. The 8 wells we drilled at the end of 2023 are currently undergoing final optimization before full start-up this week. Those wells offset the 11 wells drilled in early 2023, which were identified as some of the top Viking producers in the entire basin in reports last year. If commodity prices suddenly present an opportunity, we can layer in Viking activity at a moment's notice. Specifically to half 1 in Willesden Green and Pembina, we will start in Willesden Green, we plan to utilize the incremental capacity provided by our 2023 debottlenecking project to continue our development program in Crimson. The area has been our bread and butter of development since 2017, and we continue to get strong results that lead to even more incremental drilling opportunities. We will also drill an Open Creek to the East, offsetting our [indiscernible] Open Creek well that was identified as a top producing Cardium well for October in the entire basin. In Pembina, we have just completed our longest horizontal well in the Cardium to date as part of a 4-well pad in North Pembina. That pad will be on production later next month. From there, we'll move the rig southward on to a 3-well pad in PCU 9, before finishing the season in Willesden Green. Worth mentioning in Pembina is our non-operated activity as well. We plan to participate at least 12 wells at a 44% working interest in Northwest Pembina as part of an integrated waterflood drilling program with our partners. And that is above and beyond our operated well count. For the second half of the year in Cardium, we'll move down to a single rig as a lower decline in waterflood-supported portions of these assets allow us to maintain relatively flat production at this pace. With that, I'll pass it back over to Steve to finish off the presentation.

Thanks, Jay. So why invest in Obsidian Energy? It's really a combination of factors. We have a strong organic growth strategy focused on growing our Peace River asset, which we believe will lead to robust per share metrics. We have substantial reserves which include a very strong underpinning VR Cardium position with growing exposure to a Bluesky and Clearwater formations. We have a differentiated value proposition in that we have an organic growth strategy overlaid with an NCIB to buy back our shares. We have a significant tax book position, which will result and allow for Obsidian Energy to be a noncash taxpayer for approximately 10 years at USD 75 WTI. And we're committed to a strong ESG practices and dedicated to making a positive difference to the environment, stakeholders and our communities where we live and work. And with that, that concludes the prepared remarks, and we will open it up for Q&A.

[Operator Instructions] Great. Thank you very much, Steve, and management team. We've got several questions, and just reminding anybody if you have a question to submit, please do so on the webcast. The first question is what location do you use for WCS differential as shown in your guidance?

Yes. So the WCS differential is based off of [ Hardisty ], we are using the forward market as a guide as we're looking at our forecast for what we see the WCS differential to be.

Great. And what is the approximate net debt presently if you can provide that?

Just to give you maybe a little bit of guidance about that. If you look at our 2024 guidance, you can see we have net debt ending at $315 million, free cash flow of $27 million, that would add up to about $340 million at the start of the year. We're probably going to be a little bit better than that. I suspect there's always some working capital movements that go through net debt that makes it a little bit more of an approximate number. So hopefully, that helps your question.

And Peter, you did answer this. I think fully when you were speaking. But a question about breaking down the $40 million FFO difference between old and new numbers?

Yes. Again, the majority of that is on gas side, some NGL pricing. There's some other small puts and takes like interest with debt being up a little bit higher, but that is the bulk of what the change is.

Great. Thank you. A few questions about the buyback. One is, are we currently below the $60 million liquidity threshold that allows for share buybacks? And secondly, do you expect to complete the full 10% buyback before it expires? And will it be renewed?

Yes, I'll take that question. I mean, we don't comment on our liquidity position other than simply to say that -- we've been active in January. So we'll let you kind of infer from that. And I think given that we've been very transparent that we continue to anticipate that we'll be very active with the NCIB over the course of 2024. I think you can say a reasonable assumption to assume that it will be renewed.

And at the current buyback rate, does management have any idea what the float will be in 2026 once the development of Peace River is complete and reached 50,000 barrels a day?

We don't. I mean someone wants to tell us what WTI will average and with this full average, and I think we can give you -- and where our shares will trade we can give you an answer to that, but it's highly speculative. So we can't and we won't.

Thank you. If Obsidian was private, how would your current strategy change?

I don't know that it would. Our strategy has been very transparent. I mean over the next couple of years, we're focused on sharing that our light oil volumes stay more or less flat to support the growth in our Peace River assets. I'm not sure that our strategy would change much. I think the only thing that would change would, we wouldn't be fielding questions about when we intend to pay a dividend. But with that, we'll go on to the next question.

Well, speaking of dividends, we have had several questions about dividends in terms of when we will put out a timeline or timetable for a return as in terms of when we would begin to pay a dividend.

Yes. I think we've been very transparent in that. We're focused on maximizing total returns on an after-tax basis. We think the strategy that is -- that we have put forth -- that the Board has put forth kind of aligns with that. Over the course of 2024 and 2025, given that we've anchored our growth plan on a $75 WTI assumption. There's free cash that we know from where we sit today, we would intend to prioritize a share buyback program over a dividend. As it relates to what we may or may not do in 2026. I think we would evaluate it when we get there.

Thank you. Turning to some of the operations and development, a question about why there are no Viking wells in our 2024 plan, and I think to address that, as well as a clarification in terms of what are the difference between the exploration appraisal wells as we identify them as Bluesky, Clearwater and OSE.

So in regards to Viking, I think we've been transparent that we pulled forward the intended 2024 program into late 2023. It's a flex asset at prices north of $75, we certainly reserve the option to basically put it back into our 2024 program, if we felt that, that's what made sense. But we would evaluate that against our other potential options in the scenario in which prices were materially greater than $75. In regards to the second question, I'll have Jay answer that.

Sure. And happy to clarify that. So the Bluesky and Clearwater, the formations we're targeting, and particularly with OSE wells, and OSE well is simply a vertical well where we gained reservoir data primarily through chlorine. Those frequently can core both the Bluesky and Clearwater, but they are only vertical well and they're nonproductive. So we gather that information and then we leave the well. The rest of our appraisal plan includes what we had talked about in the presentation is the WIP stock wells, where we do grab core, but it does allow us the opportunity to step back and turn that into a producing horizontal multi-leg well at the same time. So those 2 inclusive are what we call our appraisal program. And then the rest of the wells that we feel we can go directly into multi-leg drilling are what we consider development.

Thank you. Going to the drilling as well. What are the decline rates on the new Peace River wells? And is the production as compared to the type curves presented in the 3-year plan in association to it.

Yes. In terms of what we've put out since, actually, some of the production results are probably too early to make that analysis. We put out the IPs that show we're pretty happy with what we've seen from initial rates, and we're still optimizing some of those wells. Some of our wells have precluded the 3-year plan, including the [indiscernible] are overperforming. And then what we have to do very much internally is normalize that to our net pay thickness and our reservoir parameters. So because Walrus is a much thicker, better-looking homogeneous reservoirs than some of the wells we've done recently, we consider that potentially internally a different type curve and we're happy with the results that we've seen.

Great. Inclusive of the 2026 growth presentation, how much inventory does Obsidian have to keep production flat at 50,000 barrels post 2026?

Yes. I mean I think as we've outlined kind of in our plan when we announced in September, we're only using a small percentage of our inventory within Peace River. Moreover, we still have a very deep inventory position within the Cardium that we're choosing at this time to not focus on growing. And the rationale for that is simply the Cardium is fairly well delineated and well understood, whereas our Peace River asset is not. Additionally, we haven't even begun to speak to other EUR opportunities, including waterflood, polymer floods, et cetera. So I think it's fair to say that our ability to keep the production profile flat at 50,000 BOEs a day, we can do that for a very long period of time.

The next question is why do you prefer production growth over debt reduction or share buybacks? And related to that is why do we continue to use capital to make these purchases in uncertain environment instead of paying down debt?

Yes. I don't know that, I would say that we're focused on or we prioritize production growth. I mean what we've prioritized is putting forth the value proposition that we feel will maximize shareholder value. We have an undelineated asset in the way of Peace River. And so the production growth coming out of that asset is really a byproduct of drilling in the area. Clearly, we've been explicit and say -- telling the market that we believe our shares are materially undervalued. And we've put our money where our mouth is and aggressively bought our shares back. So in regards to debt pay down, one of the byproducts of the growth strategy as you do delever. You delever because your cash flow base increases materially. So I think we're achieving all of those objectives. But simplistically, our weighted average cost of debt is probably out the side of 10%, all well ahead, economics are materially greater than that. So I think that's what you should think through our business plan through that one.

A couple of questions around hedging. Has management's view on natural gas changed and will we continue to hedge heavily as well as do we have a particular hedging target in mind?

Yes, I'm not so sure that our view on natural gas has changed in the near term. And when we felt that storage levels will be elevated this year, I mean, they very much are. And I think you've seen that result in AECO and Henry Hub trading down. We're aggressively hedged through summer 2024 and kind of reasonably well hedged through next winter. And I would say to you that it's a bit of a TBD as to kind of what winter 2025 looks like or what next winter looks like because there's just a lot of variables that can change that. But as it pertains to calendar year 2024, we're very comfortable in our position and that we've hedged the majority of our production.

Great. Going back to share buybacks on the NCIB. Is there a reason for less CapEx and less production as announced previously? Is it to complete the NCIB? And do we have any capital still available for share repurchases in 2024 to be opportunistic?

I think it's fair to say that our 2024 formal budget, which we've put forth today as opposed to our 2024 forecast which we laid out in September, the only thing that's materially changed is -- it's really 2 things. I mean, we've been able to optimize the improved capital efficiencies to allow us to continue to deliver our 36,000 BOE a day target for 2024 with less capital. As it relates to kind of what we intend to do with that capital, notwithstanding that. We're also in a vacuum, we're holding all other variables constant, projecting less free cash because of lower AECO, it's a TBD. I mean, we'll do what we believe is in the best interest at the time. If commodity prices continue to be constructive and ultimately I think that our WCS differential assumption is going to prove to be conservative as Trans Mountain on streams, and we'll evaluate that. But -- and we're comfortable with the plan that we've put forth, I think it offers downside protection in the event that prices surprise the upside, we'll do what we believe is in the best interest of shareholders.

Does management still think they can get the net debt down to $25 million by 2026?

I think it's fair to say that management believes in the forecast that it laid out in September and the corresponding free cash flow generation that the plan would result in. We've modeled in a way where we simply assume that you sweep the cash and pay down debt as it relates to what we would ultimately do. And that's a bit of a TBD.

Great. Thank you very much. You're speaking about the TransCanada pipeline. We have a couple of questions regarding that in terms of will Obsidian benefit. Where does our crude go? How is it transported? And again, overall, what does the TransCanada mean to us?

Yes. I think Peter outlined kind of where our crude goes, but I think it's fair to say that we think we will benefit, and I think we'll begin to see those benefits in 2Q. But really kind of 3Q and beyond as some of the higher inventory levels in Canada start to clear.

How did the recent Bluesky Walrus results influenced the CapEx budget? Any spending reallocation bias that we could see for '25 or '26?

Yes. I mean I think it's fair to say that we have followed up with another pad in the Walrus area. And we also intend to follow up with in Dawson. I think the way to think about the growth plan is that it doesn't really kick off in the Bluesky or in Peace River, I should say, until the second half of this year. And given the lead time to license acquired new wells, it will be early 2025 before you truly see the impact of some of the positive results that we've seen to date reflected in our plan. So a long-winded way of saying that when we get to our formal 2025 budget, I think it'd be reasonable to assume that there will be some substantive changes relative to how we forecasted 2025 this past September, but we're not speaking 2025 just yet.

A clarification about the debt and why it's at $315 million and just some clarification of how it's changed from last year.

Sorry, [indiscernible], I'm not sure I really understand the question. As you can see, our net debt has -- is expected to go up here in Q4 versus Q3. obviously, pricing has come down from what we had in our revised 2023 guidance for Q4. Sorry, I'm not sure where the...

I think it's fair to say that our Q4 debt in 2023 is up on the back of pulling forward the Viking into 2023 as well as our share buyback activity. We have given you our free cash flow forecast for 2024 based on the assumptions that we've outlined, and you have a projected 2024 kind of net debt number on that basis.

Great. Speaking to the cold weather, do we see costs coming down for field activity after winter as there is excess service industry capacity?

Sure. I'm happy to give that an answer. I think the answer is probably threefold. Obviously, we've seen capital cost come down on the commoditized portion of what we're doing. So your steel, your diesel all that is cheaper than what we had seen in terms of the inflationary pressures previously. On a rig perspective, we are seeing service rates come down modestly, probably in the middle to high teens in terms of what we're looking at for service rate costs, and we're happy to see the benefit of those. But the other one, and the third factor that I would not underestimate is that because of the pressure in terms of total drilling activity has come down modestly. The efficiency of the crews that we're receiving has also gone up. So our overall drilling efficiency is also improving in parallel with this. So we're seeing faster rig times in parallel with some of those capital costs coming down. So in total, the impact is probably quite tangible.

Great. Thank you. We have a follow-up, Jay, on requesting more color on the stack well success and how this can be applied elsewhere.

Sure. To answer the value we've seen stack well success, you kind of have to start the reservoir. I don't want to go too deep into this, but if you start with cold flow heavy oil, the recovery factors we get from an individual well are in the low single digits. We really don't get much oil out of the reservoir. So when you see a reservoir that has a thickness of, say, hypothetically 20 meters, there's potential to try to put more wellbores in there to increase that overall recovery factor because you're really scratching the surface of an area very close to the existing wellbore. When we go stack, what we do is essentially for all intents and purposes, stagger the wellbores. So we kind of create spacing using for lack of a better term, Pythagorean theorem to create as much space between the vertical wells as possible, but also create as much reservoir exposure as possible. And in doing so, those wells are drilled off the same surface. One is essentially higher. One is essentially lower. The overall design of the well is very similar, but the placement in the reservoir and to some degree, the overall fluid quality interact with is modestly different. But the overall results that we're seeing is that we're not seeing tangible interference between those 2 outcomes. And as a result, we think that particularly from day 1, an opportunity to put more wells in the same reservoir is presenting itself.

Thank you. A question regarding tax flows. If tax flows are over $2 billion, why is the deferred tax asset only $223 million?

Yes, thanks. So the $2 billion number is really the gross tax number. What we have to do when we put it on our books as an asset, is take the net tax impact from that and then discount it back from the time that it's anticipated to be used, and that's what comes up with the $223 million.

Next question. What do you see on the M&A side? And do you see this as part of growth in 2024?

We've outlined in our organic growth strategy. We don't feel that we need M&A to achieve our objectives. I mean, as fiduciaries, we're constantly evaluating opportunities as they present themselves. I won't speak to kind of what we may or may not do other than simply to say, we're very happy with our organic growth plan as we've presented it.

Okay. Speaking on the Viking, the new Viking step-out area, do we plan to do any more step outs when we do our next Viking program to help delineate the size of the Viking pool size?

Certainly not something that we would deem exploration. We're going to keep moving that play westward, but we think that the results are in parallel and just really just offsetting the original results that we've seen.

Great. Thank you. Under what conditions would management consider hedging oil? I understand hedging oil is challenging, but would like to get some perspective.

Yes. Look, I think it's fair to say we've outlined the plan at $75. And our anticipation is that prices will be constructive. I mean, we've laid out the sensitivities as to what, the convexity to higher and lower WTI and WCS differential assumptions are. Those sensitivities are not lost on this either. I mean, it's fair to say that there are prices that we would deem to be attractive that we would look to aggressively hedge and lock in that FFO and by extension of free cash flow generation. It's hard to give you now a right number because I think we'll just have to overlay it against market context, but none of that is lost on us.

Is there any thought about thermal recovery?

As I alluded to when I answered one of the other questions, I mean, there are a lot of EUR opportunities that are available both within Peace River and the Cardium. You certainly could do a mini thermal project. Some of our reservoir would be very conducive to that. It's not something that fits within our strategy between now and 2026, we've outlined our growth -- our strategy as we see it today, but certainly, the potential is there.

One overall strategy question. What is the end goal? What will you focus on once 50,000 barrels a day is reached?

Yes. The end goal is always to maximize kind of shareholder value. So I don't know that, it's a difficult question to answer because it somewhat depends on kind of where we are trading in 2026. But I think it's as simple as that.

Thank you. At this time -- one more question. What's the level of management ownership of company shares?

You can find that information in their circular, but I think it's fair to say there's a strong alignment between management ownership, board ownership and the shareholders.

Great. At this time, there are no more questions. So I'll turn it back over to you, Steve.

I want to thank everyone for their participation. Thank you for your continued support and look forward to speaking to you post our Q4 news release. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.