PrairieSky Royalty Ltd. (PSK) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us for our third Investor Day. At PrairieSky Royalty, we're very proud of the quality of our shareholders, their engagement and their understanding of our business. This is our third Investor Day, our third asset handbook release and a full 7 years since our IPO. This is why it's important to always look out 5 to 10 years when allocating capital and making acquisitions. Time can go by quickly. Time is the enemy of a bad business and a friend of a great business. We hope to show you today a pathway to generating strong industry-leading returns in an irreplicable compounding business. This is today's agenda. The benefit of having a very simple, old-fashioned business is we won't need to take up your whole day, and you can still have an excellent understanding of what you own as a shareholder. Presenting today from PrairieSky are Cam Proctor, Pam Kazeil and myself. Just a little housekeeping before we get started. All of the materials for Investor Day can be accessed in the handout section of your screen. You will find a PDF of the presentation there and a link to our website for the 2021 Royalty Playbook PDF as well as a link to the Royalty Playbook web book and a PDF of our 2020 responsibility report. All of these documents will be available on our website after the presentation. If you would like a hard copy of the playbook mailed to you, please send it -- send an e-mail to Investor Relations, [email protected]. and provide a mailing address, and we'll have it sent to you and share it with your friends and family, particularly wealthy ones, who would like to buy the stock. PrairieSky Royalty is the largest royalty owner in Canada with over 16 million acres of land. We run our business with cash to negligible debt and offer unparalleled exposure to optionality in the Canadian energy sector. PrairieSky offers shareholders a decreasing share count and an increasing dividend in a high-margin capital-light business. Over 7 years, owners have received $1.1 billion in dividends and $224 million in buybacks. Very few businesses have the long-term ability to pay dividends like PrairieSky does. Much of this has to do with the high margins. But the most important thing is the undeveloped land portfolio. This map shows all of PrairieSky's land spanning from Southwest Manitoba all the way up to Northeastern British Columbia, which would take 2 days to drive the entire land base. And it's roughly half the size of Britain, if you added it all up. Because half of PrairieSky's lands are productive and generate cash flow, our owners not only get a strong cash flow stream today and a good near-term return profile, but also the future cash flows without the need for acquisition capital. But there are opportunities for acquisitions and opportunities to expand on -- accretively on a per share basis. We'll talk a little more on this acquisition later. But as you can see here, all of the orange lands in the Deep Basin are the lands we acquired in the 660,000 acres at the start of the year. And this -- we're very excited about this acquisition, and we do think that it has tremendous growth opportunities ahead. So is there more to own in Western Canada? Well, we already own -- PrairieSky owns 65% of all of Canada's fee mineral title. So there are some other large blocks to talk about. The one that's probably the most important over the short term is all of the kind of farmer fee title lands individual companies still own 6 to 10 sections. We've been cleaning those up over the last 7 years and will continue to over the next decade. And a lot of those lands would be the yellow lands in between kind of Manitoba to Eastern Alberta. The other major land packages would be -- this is ExxonMobil, and they own about 1.2 million acres. And then this green here and this green here, those lands are owned by Ontario Teachers' Pension Plan. The way we've structured our company and built out our technology we could acquire any of those assets without adding a single staff member. So it's a very scalable business. So this is the Deep Basin acquisition. And before I go through our latest acquisition, which we are very excited about. I want to talk about acquisitions in general. Any time you make an acquisition, you're effectively selling down your existing business. This acquisition that we made, with no future capital, will be producing more royalty barrels in 20 years than it does today and all the while paying out numerous times. Sometimes you pay management teams for what they don't do. More on this later. Almost all acquisitions, when they're announced sound good, but they're not all good. So this is our track record and our scorecard for making acquisitions since our IPO on May 29, 2014. The 92 million shares we issued since our IPO generate currently 65% of production. And as a reminder, we issued 130 million shares on the IPO. Those additional shares, the 92 million shares generate 65% of production revenue. The original IPO lands generate 35%. So the acquisitions have been successful definitely in the short term and medium term. Per million shares you purchase on the IPO, you now own 80% more royalty acreage, and this is going to be a very important theme over the next 10 years because, not only have you increased your acreage per share you own, but it's quality acreage and acreage at better parts of the cost curve. And we'll get into that more later as well. But now that we're finally starting to see capital returning to the Canadian basin, we will get the benefit of this additional acreage per share for our shareholders. Per share metrics are what matter in the business, and production per share has declined from 110 barrels per million shares prior to the IPO. It actually peaked at about 130 barrels per million shares. And today, it sits at 95 barrels per million shares. The one other change on this production mix is that we are now 50% liquids, and when we IPO-ed, we were 40% liquids. So that's a positive change in terms of the cash-flow-generating ability of those producing barrels. But the other part, of course, on the right-hand side is the acreage per million shares, as we talked about on the last slide, but that's up a full 80%. And probably the last reminder, this is while returning the majority of the free cash flow to shareholders over that entire period of time, including $1.1 billion in dividends. Reserves replacement. Now this is a really important slide, and I think it's just our proved reserves wedge. And because PrairieSky does not book any future locations, our reserves are comprised of just existing wellbores, just existing producing wellbores. So each year, the business produces around 7 million royalty barrels, which allows us to return, as you can see on the right side, approximately $200 million to shareholders every single year. But the most important thing is what happens with the proved reserves. So you're producing somewhere between 6 million and 9 million total royalty barrels. And at the end of each year, you actually have net higher or flat royalty barrels in your portfolio. So this is kind of the recycling nature of the land base. People are spending enough capital and in particular, over the last year, they spent capital on some of the natural gas assets, but in addition, a lot of waterfloods and those add longevity to the asset base. But to be able to replace them year upon year upon year with 0 capital is very important. Low cost in our business wins and to have no F&D costs is a major advantage. So here's the production history that dates back almost 6 decades on the X axis. As shareholders, we've been waiting patiently to see the inflection point as 2020 was a 35-year low in CapEx. We are hopeful that we're getting close to this point today. Not many businesses like this generate billions of cash flow every 10 years and still have the same great business at the end of it. And we'll talk a little bit near the end about what we expect the next 10 years to look like from a production standpoint. So many of you hopefully are looking at the new royalty playbook online. We also have hard copies here. As I said, we can mail these to you if you're interested, just e-mail us at Investor Relations. But what I want to talk about here is how we built this and what went into it and what's in there and what's not in there. So the next couple of slides here, I'm just going to kind of walk through how we did the math on it and how we calculated the values. So the bottom wedge, the kind of teal blue wedge, that's our booked reserves. So you saw that a couple of slides ago. That's the 48 million barrels of NI 51-101 booked reserves. So that's obviously in the playbook. And then the only other wedge that exists in the playbook is the orange wedge in the middle. So that orange wedge is -- effectively includes development wells on proven producing trends, using 5-year trailing type curves and no new discoveries. So it's kind of a conservative look at what the development wells look like over time. And of course, we just put it in an undiscounted basis. The top wedge, which is the navy blue edge is really the reason it's not in this playbook, and that's the real reason you want to own royalties over time. Any new pool discovery, any expansion of a trend improvement in type curves, improvement in recovery factors from EOR, all of that sits within that top wedge, which will not show up in this book or in the value. But you do get that with your shares in PrairieSky. So finishing off on methodology, just to look at a map view as to how we do that. So the orange lands here, this is a Cardium trend, and there's been recent activity in this Cardium trend, and proven producing wells that are economic in today's pricing environment. So all of those in orange will show up in the playbook as value. Now all those blue lands surrounding it are within the play trends within the strike area. And a lot of them will have value over time, but they don't show up in the playbook because they're not close enough to a producing well or there hasn't been a recent drill there. So that's how we come up with these numbers, and that's how we come up with our locations. And then here is a summary of all the undiscounted value of all those development lands we talked about. So this, of course, again, has the proven wedge, which I talked about, the lower one, which is the reserve report we get every single year. And then this adds in that orange wedge, so the development wells. The total is $15.6 billion undiscounted at $55 WTI. If you recall on the last playbook, we used $60 WTI. So we ran with $55. I thought it was a good 10-year number. We're usually wrong when you're trying to predict pricing over a decade. There'll be ups and downs, but it's a pretty reasonable price, I think, to use. And this really highlights why the share buyback is such an important return mechanism for shareholders. Not only do you get a high single-digit free cash flow yield that's unlevered, but you also get undeveloped land portfolio worth multiples where we currently trade. So here's the summary of some of the changes from the 2019 playbook. I'll highlight a few here. So the first one is we've actually added 500 locations in the Saskatchewan Viking oil play. Technologies unlocked those expansions. And then in Forgan, Saskatchewan, which I'll touch on a little later in the play-specific part of the presentation, there's been some very high deliverability trends discovered down there in Township 24, range 14, west 3. And what's unique about those is those are almost looking like conventional producers. So they're going to be very conducive to waterfloods in the future. The second one I'll talk about is the 277,000 acres of land we added in the Clearwater. This is a very important part of the future for our business. We are very conservative with how we booked the Clearwater this year. We did add a number of locations and quite a bit of value, but I will talk about where that play is going, and we do ultimately expect the Clearwater to be our largest producing asset as a company. We added 100 future locations in Central Alberta. That was primarily due to our asset acquisition that I talked about, the 660,000 acres in the Deep Basin. So I think that number goes up over time, too, because we're still digesting that, making sure we do a really good job on both compliance and leasing and understanding all those contracts. And the team is working very hard to integrate that. But it did add numerous opportunities in West Central Alberta, including an overpressured block play that's paying out in under a year. And lastly, just to talk about price optionality. We are a big basket of call options and natural gas price for the first time in 5 years is very good. And we added $575 million of undiscounted potential just from gas plays just because it's a better pricing environment. So the one great thing about owning PrairieSky is you do get these call options and they don't expire. So whenever gas price is good, whenever propane prices are good, you're going to capture that optionality. In addition, because we have no capital, no capital programs and no significant leverage, we don't hedge, and there's going to be massive hedging losses this year. Not for us, for the industry. Sorry, I should be clear on that. So the methodology and summary of changes. We have added 925 wells to our drilling inventory through the cycle, through the last 2 years, through the playbook. The Clearwater is very underbooked as a result of the methodology used and described earlier, and I'll show that on a map view as well. Just simply said, if we use the same price, the $60 WTI that we used in the 2019 playbook, you'd add another $1.2 billion of value, which you can see on the bottom right. It's 1.176 and that's just price sensitivity. So of course, I don't know what the next 10 years holds for pricing, but you can see how sensitive it is to changes in pricing. And it almost is double levered because with better pricing, obviously, better activity as well. So you pull that present value forward. So we're now going to move on to feature plays, and I'm going to talk about 4 plays today. One is the Clearwater oil. The second one is the Duvernay play, the Montney oil and gas and lastly, one of our favorites, which is the Viking. In the next asset handbook, if you could look out 2 years, I think there'll be a huge focus on enhanced oil recovery in the Mannville and polymer floods and waterfloods. We've seen a tremendous amount of capital start to be deployed on some of these assets. And it's interesting because you don't see the production kick in year 1, sometimes not even in year 2. But when it does happen, you can see an inclining or a very, very shallow declining asset base. And I think it's going to be a very important part of the next 10 years for our business and a lot of capital is going into those types of assets. So I would suspect 2 years from now, if we're standing here, we'll have a very big section on the Mannville waterfloods. But let's start with the Clearwater. So this was a little known play when we were buying our first oil sands permits in the region. We had a little bit of data, but very encouraging data that showed that you could take this better viscosity oil out of the ground, and it was light enough that you could produce it on primary, so you didn't require steam-assisted gravity drainage to get the barrels out. And as a result, with the multilateral technology and the ability to do them in a very short period of time and no fracs required, the total capital cost per well are in the $1 million range, plus or minus. So when you look -- I'm going to show some of the well results, but you can clearly see that this is full-cycle finding and development costs under $10 a barrel. So it is the lowest-cost oil basin in the whole North America. So these low-cost barrels, over time, are going to displace higher-cost barrels, and we'll continue to see growth on this play. So even though a large amount of our land is derisked, we continue to book this play conservatively. We have $407 million of value booked to it, which is almost double from the previous playbook, but this will go substantially higher. And as a reminder to investors, we invested $70 million in this play, and it was the lease issuance bonus we received from the Duvernay leasing program in 2017. The last thing I'll talk about is the lesser-known South Clearwater play. So that's kind of Ukalta. Down here, Jarvie, would be another pool down there. It's -- there's a lot of more distinct pools. They're very high quality. And actually, we're starting to see some exceptional results from some of the latest drills. But what makes this area very unique is because they're compartmentalized pools, they're very conducive to secondary recovery. And Caltex resources in the Bellas field is actually undergoing the first polymer flood in that South Clearwater area. So we're encouraged to see -- we do think that's a successful technique that will work on that pool and a number of other ones that are offsetting it. So this area actually doesn't get as much profile, but I think it will over time, you'll see it's a very economic area in the Clearwater. So just to zero-in on Nipisi, this is pretty much where all our value is right now. And it's -- and again, it's 10% of our land. So I think you will see, over time, other areas being booked. And it's just the methodology in which we do it. So if you have 1 proved and producing well, you're only going to get a couple of development wells off of that. So you do need a pretty significant development before you start to book these aggressively. But when you look at this play, it exited at 300 barrels per day, the Clearwater play in total, from 0, 2 years ago. We expect triple-digit growth from this play again this year. So next year, at the same time, we should be producing over 600 net royalty oil barrels at no cost to us, of course. In spite of -- and also in spite of successful secondary recovery pilots, particularly by a spur and Nipisi, we are not booking any of this into our optionality as of yet. So what can you expect from the Clearwater over the next 2 years before we stand in front of you again at this Investor Day? Significant increase in future development locations, that's no question. There's a number of areas where you could already put them with a really high degree of confidence, but just the way in which we book these, they don't show up. Ultimate recovery increases, greater drilling densities and polymer and waterfloods. And based on recent transactions, when you look at some of the capital that's been spent in the Clearwater, kind of on the south fringe of the Clearwater play, our lands have been valued significantly higher than even the $400 million value that we have put on it right now. So now we'll move to the Duvernay play. So this is -- this one has a special place in our heart because we got all the capital we needed to make the investment in the 15-year oil sands permits in the Clearwater with the capital commitment. We got that capital from leasing land on this play. And there are some near-term expiries now coming as a result. That leasing program was in 2017. The Duvernay currently makes up 315 barrels per day of production. Two new wells came on in Q1 and took that all the way to 400 barrels. And I'm going to talk a little more about that later. But because these are such high-rated wells, they are exceptionally high IP wells. And if you get that IP in good price environments like we're in today, you can actually pay them out in a year. So we do expect in these higher price environments to see activity pick up in a play like this. Numerous sweet spots have been identified in all 3 embayments. So just for -- I'm sure a lot of you know this, but these are the reefs. These are the original reefs discovered by Imperial Oil in the 50s. This is the Homeglen Rimbey reef. So this basin is called the Ghost Pine Embayment. This is the Westerdale Embayment. And then this is the eastern most portion of the West Shale Basin. I just call it West of the Homeglen Rimbey Reef. But in all 3 basins, sweet spots have been identified. And in all 3 regions, there's economic resource that's being developed today. So again, talking about 2 new wells coming on and adding over 30% share production, it can happen very quick. So one single pad could double our production off these assets. So we're hopeful that we can get some leasing done on this land in the near term. And that brings us to the leasing slide. So we've always kind of talked about the recycling nature of the fee land base. And since our IPO, we've leased 1.4 million acres to industry. And we've had 1 million acres come back. So you lease it for a primary term. If you drill -- that you get the zones that you're currently producing from as long as you're paying us on time monthly, and then all the shallower rights and all the deeper rights revert back to us. So we always have expiries within this massive portfolio of land from Manitoba all the way to Northeastern BC. So we're always recycling that land and re-leasing it. So one of the big re-leasing programs that should be happening over the next few years, are the orange lands that you can see West of the Homeglen Rimbey Reef. There's been some very, very high-rate wells drilled over the last 2 years in this area. Baytex recently put on 1,000 barrel a day wells, IPs, and they're only 1.5 miles long wells, pretty spectacular drills. And so there's some pretty encouraging data coming out of this west part. And we do think there's going to be some significant leasing as these lands expire in the next year. So again, just a reminder, a single well pad, a single 4- to 6-well pad could double our production off of this play. So what does our inventory look like? Because of our massive land position and of course, of the 1 million acres, they'll -- in the end, there might be 300,000 to 500,000 acres that are developed over time. But we'll see continuous activity on this play over the next 3 decades. This is one of the few scalable light oil plays in Western Canada with year-round access and available infrastructure capacity for the light oil and the solution gas. And of course, this is an oil play and -- but it does have quite a bit of liquids-rich solution gas that comes along with it, which was almost a nuisance in the previous 3 years, but now it's got enough value that it's actually augmenting the economics. And that's true in the Viking as well, which I'll get into at the end of the Viking section. So the Viking remains as one of the shortest cycle time, quickest-payout plays in Canada. We've had 500 wells drilled on this play in the last 2 years. So with the current development locations remaining in our inventory, that's a 20-year drilling inventory at that pace. Now of course, in a more normalized environment, we would expect that pace to pick up. So it's probably more like a 15-year inventory of drilling. In 2020, we averaged 2,800 royalty barrels from this play. And it has dropped into Q1 as most of the 2020 capital was dedicated to waterfloods. This is a good thing is that will add duration and lower the declines of this asset. So that takes us into the waterflood. So there's numerous active waterfloods or ones that have been expanded across land base over the last year. This will add to the recovery factors and increase the life of our assets. We've also had a very active leasing program in the Viking over the last 2 months, which leads us to believe that the second half drilling activity should come higher, especially if pricing can remain as strong as it is today. Now the one I'm going to point to here on the very bottom, right below where it says Plato, Saskatchewan, that's actually an area called Forgan, Saskatchewan. And it is emerging as one of the best Viking trends in Saskatchewan. It's got some wells that are coming on at well over 100 barrels a day. They're not declining like a typical harmonic decline you'd see on kind of a short face well. So what's interesting about that is with that better porosity, better permeability, you're likely to see a lot more waterfloods emerge in the Forgan area. So the inventory snapshot. It's a very impressive inventory of land. The Canadian Natural Resources acquisition was very important for this. We got the checkerboard fee, the smart-on fee in Western Saskatchewan. That gave us the ability to have access to this play. Alberta and Saskatchewan both have sizable drilling inventories for oil. And PrairieSky owners also have a very large Viking gas asset, but we don't talk a lot about gas in this presentation. But the -- there is a large Viking gas asset. And at these plays, there's some of those that are coming back into good economic territory as well. And the better pricing for the solution gas associated with the Viking oil will also augment the economics in 2021 and 2022 for the producer. Now moving to the Duvernay -- or sorry, the Montney oil play. The Montney is the largest conventional resource play in Canada. Our diverse royalty portfolio gives us optionality on this play from a variety of different operators. The current -- the play currently represents 10% -- just over 10% of our royalty production. And we have assets, as you can see. The blue lands are PrairieSky lands with Triassic rates. And we have everything from the oil window to the volatile oil window to assets in the volatile gas window right through to the dry gas window. So the -- we do have diverse exposure. We have everything from kind of junior kind of poorly capitalized companies right up to our larger payers, which would be companies like Ovintiv. So the last one I'm going to talk about is just other plays and other plays are kind of one of my favorites. As a geologist, when you look at other plays, there's a very long list of them. And every year, some smart geologists or an engineer, find a way to make one of these plays economic or find a new shore face or find a new area where this could be prospectively taken out or economically taken out. So right now, in other plays, we have $171 million of booked reserves. So there's real value there. But we took -- in the playbook, we put 0 future development locations. And part of the reason is until they become bigger plays and there's a sizable number of wells drilled every year, we leave them in this kind of other category. But interestingly enough, the chart on the right there shows a Charlie Lake well that was drilled on our lands in 2020. It generated $370,000 in revenue for us. You can see it came on at 500 barrels per day. So this is something that you wouldn't have thought you owned, and it came on last year. And so there's a lot of those out there in your portfolio as a PrairieSky owner, just owning such a diverse piece of land. The Banff oil play, where PrairieSky has seen significant -- had significant exposure, has seen some payouts inside of 1 year recently. And this just further highlights the optionality inherent in our business. There are many things in this company, many things that you get that you don't have to pay for in the stock market today. So I thought it was a good time to take a quick break. I'm going to finish with this slide, and then we'll move into the ESG portion of the presentation. But before we go there, I just want to talk about why Canada. Why is Canada advantaged? And Canada has seen some of the least investment over the last 10 years in a long, long time. The U.S. has seen some of its highest investment. So now why Canada? So number one, lower declines. I think declines are a big part of the sustainability of your business. If you have a 40% decline, you have to drill twice as much as someone who has a 20% decline, just to stay flat. So while those really high IPs, they're fun to drill and there -- but they do come off fast, and you have a less sustainable business. So when you hit a tough oil trough like we saw last year, you really see how unsustainable some of the higher decline businesses are. So Canada, in general, has lower base decline rates. The second part is the profit to investment ratios. So we stole this from the Scotia playbook. But the profit to investment ratio in Canada, which is in red, 9 of the top 10 plays are in Canada. And 64% of the top plays are in Canada. So advantaged Canada from a profit to investment ratio. The Far East advantage is another one that's important. And I think over the next 20 years, this is going to be a very important piece. It's a 20-day round trip shipping time to the Far East. So almost less than half of any of the other shipping times from the U.S. Gulf Coast. And why this matters is because we're shipping our products to the centers of increasing demand in the cheapest and most ESG-friendly -- and from the most ESG-friendly place on Earth. And then that ties to the last slide, the highest ESG ranking amongst liquids producers. So Canada is #1 for ESG. and PrairieSky happens to be #1 in Canada. So that's a big part of the next section, and we look forward to walking you through that. So why don't we take about a 7-minute break, grab a glass of water and come back. [Break]

Welcome back, everyone, and thanks for joining us today. I'm going to walk through the next section of this, which will be ESG and our differentiated approach in our business. Andrew is going to come back and join us for a portion of it, and then I'll come back and talk about some opportunities. This is going to be broken down into a few different segments. First, we'll talk about our overall ESG approach. Then we'll talk about some of our results, then we'll talk about our new responsibility report, which is our fourth. And then we release it every year, and that's available both on the dashboard as well as on our website. Then Andrew will come back and talk about CCUS with a focus on the EOR opportunities in the business. I'll come back and talk about some transition energy opportunities on the land. And then probably the most important slide will be how do shareholders benefit from this over time. So probably the most important thing in our business to recognize on our ESG approach is this top blue bar here. Profit is very important to our business. We're partners with the Canadian energy industry. And we're a very profitable business. We're one of the highest margin free cash flow businesses in energy today, and we do everything with a view towards profit and sustainability of that business model. Next on our list would be strong governance and leadership. We have a very engaged Board led by Jim Estey, who's very involved in the ESG journey that we've been on for the last 7 years. All of our Board are very engaged, very knowledgeable about this area of our business as well as heavily invested. On the bottom, you can see low environmental impact. This is very important to us. And over the last 2 years, we've been net 0 on our Scope 1 and 2 emissions. We do buy some carbon credits, a very small amount to offset our carbon footprint. But this year, we're down 16%. Probably what's -- we've been getting a lot of questions about over the last year or so is engagement with stakeholders. And that's really 2 parts of our business. One is our supply chain and our procurement. Now as shareholders would know, we're a very simple business. We run out of a single-office location when we're in the office, which we're not today. And we have a very limited number of suppliers. However, over the last year, we have put in place a supplier business code of conduct and engaged with all of our suppliers to make sure that they are aligned with our standards as well as our vision for the future of our business. And then another point on the bottom orange bar engagement with stakeholders, we are engaging more with our upstream clients to make sure we understand how we can help them on their own ESG journeys and how we can collaborate with them. We firmly believe that their ESG success will be our ESG success given the intricate link between our clients and the upstream as well as the royalty business. And then one of the things I wanted to highlight as well is the health and safety of our people and our assets. We are custodians of this land for the long term, but it's really a group of dedicated professionals within our office that help us run this business and create value for shareholders. Substantially all of them have been working from home over the last year longer with really no impact on the business whatsoever. We've bought back roughly 5% of the stock. We've done some very accretive acquisitions. We've integrated those. And we've also put out this third playbook, which is a substantial amount of work. So I'd like to thank all of them for their hard work over the last number of years. Here's a little bit about our results. So starting on the top bar, the net 0 Scope 1 and 2 emissions. We touched on that previously. That's something that we don't just talk about. That's something that we get verified every year. Pricewaterhouse comes in, does a very exhaustive verification process. And we do buy a small amount of carbon credits. It's very modest. But as I noted, this year, we're down 16% on our overall GHG. So the carbon footprint profile of the business is actually improving. That leads to some fairly phenomenal results from leading rating agencies. So for Sustainalytics, we're ranked #1 out of all oil and gas producers, and then we're ranked within the top 6% to 7% globally across all industries. We're also ranked #1 by ISS. And on the climate change for CDP, which is the Carbon Disclosure Project, we're ranked in the global leadership category. So we do spend quite a bit of time on it, and I think investors appreciate that, that information is publicly available to them. Governance is also very important to us. We rank in the top quartile of Canadian companies every year in the Canadian rankings in the Global Mail. And that's alongside and par with good companies like Nutrien, Enbridge, BCE and our royalty peer in the mining space, Franco-Nevada. One thing I wanted to highlight kind of at the bottom in the middle is our staff. We have one of the highest percentages of female employees in the energy business, the highest that we're aware of. 73% of our organization is women. 80% of our managers are women, and 50% of our named executive officers are women. Our Board has recently implemented a new policy to get to at least 30% women on our Board by 2025, although we expect that will be achieved earlier than that target. This isn't a goal that we're achieving, we're striving to. We're just trying to hire the best people, and it turns out that that's the way it kind of unfolds. So we've been recognized in the Report on Business: Women Lead Here survey, which is Canada's leading survey of corporate culture in Canada and female representation across the organization. And just another reminder to people at the bottom there that we have no field operations, no working interest ownership and no environmental or abandonment liabilities in the business, which is unique. Our 2020 Responsibility Report is available on our website, and I'd like to thank the group of people in our organization, in particular, Pam, who work very hard putting this together on an annual basis. As I've noted, there is an independent verification of net 0 in there from last year and from this year. We've added some additional verification of KPIs this year, including more environmental disclosure and more health and safety disclosure. And one new thing this year, which I would encourage shareholders to take a look at is our climate scenario analysis. This is really part of our -- the first steps on our journey to being fully compliant with TCFD-type disclosures. We do have a TCFD report on our website, which we're going to be updating. But what we've done is we've taken 2 IEA goal posts, the sustainable development scenario and then also the current policy scenario, and they're described in the Responsibility Report. And we've built basically a matrix which shows what the potential outcomes could be based on those 2 goalposts. And that includes transition risk. It also includes physical risk, but it also includes opportunities for our business. So this will be a core part of our enterprise risk management process going forward as well as our improved TCFD disclosure into the future. One thing we've done this year, which we think will be helpful to shareholders is we've included a reference index at the back of our responsibility report. Now this will highlight where shareholders can find TCFD, SASB, GRI, World Economic Forum and UN reporting framework data in all of our disclosure. So there's kind of a one-stop shop opportunity for shareholders to get their data. We know that shareholders are being asked more questions about ESG from their own stakeholders, and this should provide a very useful resource to provide that to your own stakeholders. Finally, on this slide, I just wanted to highlight that we've recently been included in the S&P TSX Composite Index, which was effective at the beginning of May. Why do we like Canada and why do we like Canadian oil and gas? Well, one of the reasons is it's the most safe and reliable energy in the world. Environmental regulations and stewardship and best-in-class in Canada. I know Andrew talked about this. We're very proud to be part of that culture in Canada. Probably one of the most important bullets on this slide is this one here. Energy firms are really leading the technological innovation and ESG journey in this country. And while there's a lot of data out there about public companies and what they're doing, there's very little data about private companies. And as we've told shareholders in the past, roughly 40% of the revenue in PrairieSky Royalty comes from private businesses. We're highly engaged with those businesses. We're very proud of what they're doing. And I'd just like to highlight 2 of them in particular that have really achieved great results over the last year. Artis Energy has reduced their freshwater intake by 50% by partnering with a local community to use effluent wastewater in order to offset freshwater in fracking. Now that's positive for a number of reasons. You're not using freshwater, but you're also partnering with the local communities and providing jobs and opportunities there. And then Caltex Energy has basically gone through a complete electrification of their systems and their field operations as well as putting vapor capture on a lot of their assets, and that's reduced their GHG emissions by 30%. But if you take into account their growth, it's more like 50% on a BOE basis. So we're very proud of those opportunities that we're exploring with producers on our land. And then another reason we like Canadian energy, and we'll get into this a little bit more, is the organic energy transition opportunities in our existing asset portfolio. We always talk about this being a high-margin, 0 capital business, and that really is our mantra at PrairieSky. We continue to see opportunities on the land base from coal-to-gas switching, carbon capture, EOR, blue hydrogen, blue methanol, which are a little bit further out. And then we'll talk about some of those opportunities on future slides. We think natural gas is going to play a large role in that. And for reference, I think Andrew mentioned this previously, but from the 2019 playbook to the 2021 playbook, we've actually added, on an undiscounted basis, close to $600 million of value. And that's with just price increase and not very much activity. So we think there's room for that to grow. Today, if you annualize Q1, and Pam will talk a little bit more about this. The natural gas revenue effectively pays for the dividend with the oil revenue and the liquids revenue, paying for acquisitions, paying for the buyback and putting cash in the bank. So we think natural gas will play a bigger role in the future. We're already seeing that today with coal-to-gas switching. There's a lot of talk about carbon capture, and we're going to get into that today. And then a little bit longer term, we'll get into blue hydrogen. So I'll introduce carbon capture briefly, and then I will invite Andrew back up to the stage to talk about what our team has been doing internally. But on a global scale, this has actually accelerated quite a bit in recent years, and that's a function of a number of things. So first is improved technology. We've done a lot of work in our business, looking at old reservoirs, looking at data. And we often get asked by shareholders, "What do you do with all the data you collect?" And this is part of what we do. We collect data from about 40,000 different wells in Western Canada. We have one of the largest seismic databases. So we put that to work with our in-house technical team of experts to generate new opportunities on the land. So that includes looking at structural trapping and looking at soluble technologies, looking at absorption technologies and looking at residual trapping as well. So there's a lot of different technological advancements that are happening in CCUS. But ultimately, we think a lot of those will be applied to our lands in Western Canada. There's also a financial and government incentive framework that's developing. Now it's much more advanced in the U.S. with 45Q, which is a tax credit, which varies between $35 to $50 a ton by 2026 or depending on whether you're talking about dedicated storage, EOR or utilization. And then the U.S. Department of Energy has co-funding loans. So while they're a little bit further ahead, the Canadian government recently announced in their budget that they are looking at incentives. It's in a consultation period right now. But we expect that, that will be rolled out sometime before the end of the year, which will provide a little bit more of a pricing framework for these projects to advance. And then probably most importantly is the high impact that CCUS can have on reducing global emissions goals. The IEA has basically stated that any emissions reduction goal will require CCUS. And we think that Alberta, in particular, is very well positioned for that going forward. So far, the CCUS opportunity has been very focused on EOR, and there are some of those projects that are happening on PrairieSky lands today. But we think there's an opportunity to reduce emissions intensity across the energy spectrum, including manufacturing industries, electricity, heat generation, cement as well as new entrants like hydrogen and methanol. And before I turn it back over to Andrew, I'll just highlight some of the projects that are happening in Western Canada today. Obviously, the White Waiver and Midale flood white cap and then Cardinal as well. A lot of that CO2 comes from the boundary CCS project, which is both EOR and then a small dedicated CCS aquifer, which is run by the PTRC, which is the Petroleum Technology Research Center based out of Regina. And then, of course, the Alberta carbon trunk line, which Andrew will talk a little about with respect to EOR and in the enhanced pool and then the Quest project with Canadian Natural and Shell, which is a world-renowned carbon sequestration project. So with that, I'll invite Andrew back up to talk about CCUS and EUR.

Thank you, Cam. So I'm going to get into a little more of the technical part of the CCUS and they'll be a very high level and just talk about where the opportunities sit with PrairieSky and why our lands are ideally suited just given where they are geographically. So there are limitations, of course, to this opportunity, the largest of which is economics, which I'll get into in a few slides. The technical limitations can include, but not there are more, but reservoir and trapping, the purification of the CO2, the transportation of the CO2, the injection of the CO2 and the cost of all of these different parts of the value chain. So there's definitely some costs involved. So one of the most unique ways to profit from it is you can buy the CO2, inject it into the reservoir and recover incremental oil volumes. So what do we do with all of our data that we own? We own, obviously, one of the biggest seismic databases in Canada. We have, as Cam mentioned, 40,000 wells in the database. So we've taken all that over the last 2 years and done a huge study on all the applicable pools we thought that had potential for either carbon storage and/or enhanced oil recovery using carbon dioxide. So we ended up going through over 800 distinct pools and narrowing that down to 100 based on the technical criteria. And then of those 100, you actually only have 12 that we think are very good opportunities for their miscible and they're very good opportunities for enhanced oil recovery. So jumping ahead to this slide. So when we were doing our kind of first look at this, how do you filter it out, like what are the good opportunities? So first, you start with the province. And then you layer on all our land. So you've got this big land base between Calgary and Edmonton. So hopefully, that's the right spot to have it. And then there's the pools that we think are the most conducive to carbon sequestration. There's the carbon trunk line. You cannot underestimate the importance of having this already built, already in-service carbon trunk line because that's where the supply is going to come from. And so as you can see, our pools and our lands are ideally situated in terms of capturing value from this. The last part, again, and this is just another benefit of having all this data. And so these are the intangibles. You don't know what you have is value. I know I've said to reshoot all of the seismic we currently have, it would cost in the range of $0.5 billion. You could never sell it for that today, but it does have a lot of other values. And this is the other value. There's all the 2D seismic and the 3D seismic. And when you look across those lens, it's very, very important to really understand where the reservoirs are trapped, especially if you're trying to keep CO2 in there forever. So how does it work? From a high level, you first capture and separate the CO2 at source from an emitter. And then number two, you transport the CO2 to an applicable reservoir, which has already happened with Alberta carbon trunk line. Number three, you inject it. There's the injected CO2 there on the left hand of the diagram into the reservoir. And typically, you inject it in a configuration to achieve effective sweep in the reservoir. And then you sweep and drive the water in the CO2 and you have the oil bank that shows up at the producer well. And in that producer well, you produce oil and, of course, water and, of course, carbon dioxide. You then take that carbon dioxide and reinject it into the pool. So you're recovering oil, recovering and recycling the CO2. And then when all the incremental oil has been recovered, you cut and cap everything and you leave the CO2 permanently downhole. So it's a very unique made-in-Canada solution, and there's a lot of different examples from some great operators across Western Canada that are doing this. And we have a large opportunity set in Central Alberta, and I'll talk about Fenn Big Valley probably being the most advanced and the biggest pool, but there are a number of others as well. So a working example on PrairieSky lands is Enhance Energy, one of the leaders in this front in Central Alberta. They commenced CO2 injection in 2020 into the Clive D3A unit. CO2 will be permanently left downhole, and the light oil produced will be the lowest Scope 1, 2 and 3 emission oil producer in the world. We think that'll matter more over time. The carbon trunk line in blue on the map in Central Alberta has been built, is in service and happens to be where PrairieSky's -- majority of our fee lands from our May 29, 2014 IPO. This further highlights the optionality in our company. What is old is new again. So how are they managing this first project? So right now, Phase 1, they're injecting into the green part of the pool. They've drilled their horizontals, producers and injectors. And how is it producing for oil? Well, it just started to show good oil response. So they started last year injecting the carbon dioxide. And as carbon dioxide is injected, the oil is swept, and the pool is repressurized, resulting in increased production. So you can see the production response even from just a small part of the pool. So you can see the benefits of this. Not only are you taking 300,000 cars off the road, but you're also getting oil recovery as well. So Fenn Big Valley is another deal. This is a deal we've done with Enhance as well. So this pool, just to give you a little background, it was discovered in 1950. It's 0.5 billion barrels of oil in place, original oil in place and has recovered 300 million barrels. So normally, you'd think the pool's done. It's recovered the majority of its oil. It's time to be abandoned. But this will be one of our largest producing assets over the next 10 years. The operators stated that when they get to peak production on this pool, someday -- this may be 10 years out. This will be our largest single producing asset that'll be producing over 2,000 net royalty oil barrels a day at that point. So not only will this be one of our largest cash flowing assets, which will allow us to pay dividends, cancel shares. It will also take cars off the road, which is unique. And back to Cam for the last couple of slides.

Great. Thank you, Andrew. Okay. We're going to talk a little bit about energy transition transactions. And I just want to highlight for people, these are deals that we've done in the portfolio over the last year. We're going to focus on 3 primary areas in situ resource gasification, so nonhydrogen in situ gasification, hydrogen and then also stand-alone CCUS projects. We'll close out by talking a little bit about helium lithium and some of the other mineral optionality in the portfolio as well. And I just want to highlight that all of these transactions that we're talking about are supported by fee leasing on the title lands. And while we've received permission from counterparties to talk about certain terms of the transactions. We're not going to be naming parties, and we've excluded certain commercial terms for confidentiality and strategic reasons. First one I'll talk about is in-situ resource gasification. And this is a new concept that's come to us over the last year. Part of what I really like about this is that the lands that cover this leasing transaction actually came back through compliance initiatives. So it was inventory that was returned to us and that we were able to re-lease out to industry for a new idea. The idea here is to basically gasify, in situ, resources and leave carbon and other compounds in the earth while extracting valuable synthesis gas to produce hydrogen, methanol, ultimately ferment that and then turn it into single cell proteins. So along this spectrum, and I'll just point here, there's multiple steps here, including injection of oxygen into the reservoir, gasification of resources to produce hydrogen, carbon monoxide, CO2 and methanol and then bring that to surface and then reinject or sequester the CO2. Now this is going to be important when we talk about the terms of the deal as we go forward. There's both residual sequestration in this transaction, but there's also structural sequestration as well by reinjection. At this point in time, the syngas goes along a treater dropping out blue green hydrogen with no freshwater usage whatsoever. They're -- in the next stage, the intermedium methanol gets put into a fermenter and create single-cell protein with the purge gas used for cogeneration, which then is used to dry the single cell protein. So this is an interesting transaction for us for a number of reasons. The first is there's a whole suite of different opportunities to capture and sequester greenhouse gases. But at the end of the day, we're also producing valuable commodities like hydrogen, methanol and ultimately single-cell proteins, which can displace and offset more carbon-intensive food sources for aquaculture and livestock. This is the strike area where we've leased. So today, shareholders have received lease issuance bonus and rentals. There's also optionality to take royalties down the value chain. So as I talked about before, as we move down to hydrogen and methanol and feedstock, PrairieSky has the option to take their royalty further down the value chain. One of the things we've done in this transaction as well is we've taken a GORR on any area -- on any crown rights that are purchased within the AMI area. So that's utilizing our seismic tools to an advantage. One of the reasons we wanted to highlight this is it's actually the first opportunity PrairieSky has taken to create a royalty on future carbon credits that are generated in a project. So just for context, in Alberta, we have one of the oldest carbon registries in the world, North America. It's very well known, and there's multiple different opportunities to create carbon credits in the province by offsetting CO2 emissions and greenhouse gases. Those can be emissions performance credits where a producer creates an efficiency in their business and creates below or generates a product below whatever the baseline GHG emissions are that the government sets. And that creates an efficiency credit. We're not talking about that here. What we're talking about is displacement and offsetting carbon through sequestration and displacing more carbon-intensive processes. So we like this project because there's a team that's running it, that's well capitalized. They've got 40 years of experience. This is a proven technology that's been used around the world, and it's been tested in the Canadian biofermentation lab in Montreal as well as the U of A. And it's an improved process in the EU as well. And the end product is actually fed for aquaculture and livestock there. So one other thing that we like about this project is they're a large Alberta-based infrastructure firm, with experience in methanol and hydrogen that's a partner in this project and part of the consortium. So it's an early-stage project. It's backed by leasing and shareholders have received bonus and rentals for that already. It is in the early stage. So construction of the first calibration plant and drilling of the first assessment test wells is scheduled for this summer. So we expect, as the project advances, we'll be able to update shareholders on what happens. Potentially one of the most important things at the bottom is it keeps with our thesis of no capital requirement going forward for PrairieSky. Next, we're going to talk a little bit about hydrogen. And while we think that this is likely a little ways off given the infrastructure constraints and the amount of investment that's going to have to happen, most energy models suggest that hydrogen will be part of the mix to get to net 0 going forward. Alberta is currently the largest producer of hydrogen in Canada with the low-cost natural feedstock -- natural gas feedstock being a very strategic advantage for that. Also the CCUS expertise and successes at the ACTL, QuEST and others provide ability for us to scale this up. So I've focused on the diagram on 2 different clean hydrogen technologies: blue hydrogen, so with a focus on steam methane reforming, and then green hydrogen at the bottom where you take electricity and use electrolysis to basically separate the hydrogen out through a more energy-intensive process. I just want to highlight, this doesn't include any sort of clear hydrogen opportunities, which you may have heard talked about. There is a company in Calgary, you call Proton technologies that's licensed this technology to a few different parties, including Whitecap. The idea being that oxygen, concentrated oxygen is injected down into a reservoir, creating a chemical reaction with heat, and hydrogen is separated leaving all the CO2 and other GHGs downhole. We think that has some potential application on our lands, but we haven't explored it in detail, and we haven't done any transactions on that. But in looking at the reservoirs that Andrew talked about in the last number of slides, we think that technology potentially has some application in the future. So a little bit more on SMR and why we like SMR, and we think that it has a place in our portfolio. Number one is the cost over on the far side. So natural gas, combined with CCS using SMR is one of the most cost-effective ways of producing blue hydrogen. It's quite a bit less capital-intensive than electrolysis. It uses less water, and it uses significantly less energy. So now we'll flip to talk about some blue hydrogen deals on the land. I've highlighted here 3 different strike areas. These are different leasing deals we've done, just east of Calgary. And you can see the land positions in the map blowout. So these are on our consolidated surface to basement, 100% ownership fee lands. We've leased zonal natural gas to the producer. And in conjunction with that, we've provided what we think are suitable opportunities for sequestration reservoirs as well as potential longer-term EOR stimulation on known oil accumulations. We think this has some potential near-term application because of the centralized SMR production, where you have the SMR unit, the natural gas and the sequestration opportunity basically stacked on top of one another. The other thing that we like about it is it's got geographic proximity to Calgary and to end markets. So there's no need for infrastructure type of blue hydrogen project. So again, shareholders, for this, will receive bonus rentals and ultimately, longer-term royalties with the ability to take that royalty further down the value chain as hydrogen. Here's just a little slide on this, and I'll advance the target area. That's the fee lands. That's our seismic database there. And here's the different target areas. Now similar to the last slide I talked about and the last transaction I talked about, one thing that we have built into this as well is another carbon credit royalty. So on production, PrairieSky will receive a percentage of the carbon credits from this project, and those are measured and verified annually and then transferred from the carbon registry to PrairieSky. Okay. We'll finish up here with talking about CCUS partnerships. And as Andrew noted, we've identified a number of immiscible reservoirs and depleted reservoirs on the lands, which we think are suitable for CCUS. So just to back up a little bit, the government has a regulatory framework where partners or proponents have to apply for evaluation permits and then do testing work, including measuring, monitoring and verification of the trapping of carbon as it's injected into the subsurface. And then after that, CCUS leases are granted. Where we've come into this is we've identified 2 strike areas, and we've partnered with different companies where PSK is going to contribute zonal leases, tenured buffer zones around those identified reservoirs and seismic to the partnership. In exchange for that, the partners will contribute management, technical expertise, upfront capital and make all the applications through the permitting approval stage in order to get to construction. So we expect those evaluation permits to be submitted under the Mines and Minerals Act by the end of -- likely by the end of June, but potentially trickling into the summer. And one thing I will note is that last week, the Alberta government came out and said, given the high volume of CCUS applications or expressions of interest that they receive, they're going to be examining how they go about granting CCUS leases to partnerships. And they're going to do that in a hub configuration. And we think we've designed a partnership structure that works well for that, which is on the next slide. So here, you can see the strike area. This is the fee lands and the seismic and the 2 different areas we've identified with known carbon emissions that are available as source. So the way this will work is that we'll have an equal partnership at the beginning. But ultimately, at the time that there's an investment decision, PrairieSky will have the opportunity to either contribute capital and continue to participate in the partnership or the partnership can bring in new investors, and PrairieSky will be diluted down. Now the dilution down will be to effectively a special partnership unit that mirrors a double-digit royalty. So we'll have distributions, income and loss, the partnership will be available for incentives, whatever those are that were rolled out. And we'll have the ability to stream income back up to PrairieSky with actually no capital commitment. We think this is a structure that can likely be replicated across Alberta and then particularly on this land base. One thing I would highlight is that this doesn't include carbon credits. We -- our partners and us think that the -- ultimately, the emitters need the carbon credits, and that's very desirable for them. So we've developed a fee structure similar to infrastructure, with a little bit of escalation and inflation as carbon prices go from $40 to $50 and ultimately potentially higher over time. So while we don't get carbon credits out of a venture like this, we do have fee escalation that's tied to carbon pricing. Next, I'll just talk a little bit about helium. And many of you have been hearing about helium quite a bit over the last number of years, in particular this last year. There's multi-industry demand for helium that's really driving pricing as well as the U.S. protecting a strategic reserve. So helium is used for MRIs. It's used in semiconductor production, and there's really an increasing demand for it. In Saskatchewan, including on some of our fee lands, there's been some exploration for helium over the last number of years. Saskatchewan has a more advanced royalty framework with the Alberta Crown putting in a royalty framework last year, which is effectively 4.25% for all helium. So this is an example of a recent helium transaction we've done, where we've done a seismic AMI review. So the proponent has the ability to review our seismic for a period of time and draw down leases in this area -- in their target areas where they're focused in on. We'll be able to generate gas royalties as well as helium royalties from this, and we've created a GORR over any non-PrairieSky lands within this AMI. So today, shareholders have received some bonus from this, but over the long term, hopefully, we generate royalties on a new product as well as natural gas being developed. And I'll finish off -- just will finish off talking about the mines and minerals title. Now we do have latent capacity in the mineral title. We own surface debasement, all mines and minerals, which includes a stack of opportunities, which, to be frank, we don't understand what the value of them is today. But we own them forever, and we're doing lots of technical work to figure out what that could look like in the future. Lithium is one that's seen some pretty significant interest over the last number of years. There's a brining technology, a brine evaporation technology that's being tested and commercialized in Alberta. And we believe we have a role to play in that. Typically, those brine waters come from old depleted oil reservoirs that are producing a lot of associated water. But the petroleum and natural gas leases to the producer don't include the ability to produce, take and sell lithium. So ultimately, PrairieSky, as a mineral title owner, will have a role in negotiating some of those commercial arrangements and hopefully generating some lithium royalties going forward. So probably the most important slide, and Andrew will touch on this a little bit more later as well as how did PrairieSky shareholders benefit from this? The first thing I want to highlight is we continue to be a capital-light business, a capital-free business. So all of the benefits that we expect shareholders to get from this are generated from the existing land position. That includes bonus and rentals from leasing, royalties on production, seismic licensing fees and also GORR creation and seismic AMIs. The future can include rejuvenation and optimization of known reservoirs using EOR, improving recovery factors, incremental leasing and pool expansions options for royalties further down the chain, like hydrogen, methanol, feedstocks, reinforcing our organic net negative emissions profile by capturing royalty revenue on carbon credits in an escalating and inflating carbon environment and partnerships with CCUS proponents and infrastructure teams to give us exposure to new revenue streams based on the fee lands and as always, technological advancements with no capital spend. So with that, I'll turn it back over to Andrew. Thank you.

Good morning, everyone. So good to be here with you this morning. I'm going to be walking through a financial update and our high margins and the income statement. We'll be focusing on cash items today. They generate our funds from operations and ultimately, our shareholder returns. Given our extensive land base, we have access to plays across Western Canada, including where we see significant capital being allocated today. We don't give guidance, but as you work through the playbook, you'll have the opportunity to see production by play over the past 3 years as well as where we've seen capital and wells drilled. So royalty revenue is principally made up of oil. Oil makes up 38% of our production, but over 60% of our revenue. During 2020, we saw shut-in production and reduced capital spending by third-party operators. Due to the shut-ins and lower capital budgets across Western Canada, we did see a decline in our oil production, which you can see on the slide here. Looking out over the next 12 to 24 months, the outlook for WTI and Canadian light and heavy oil differentials is strong, with WTI well over $55 a barrel and differentials for light oil around $5 per barrel and for heavy oil differentials at under $15 per barrel. Pricing supports oil activity and strong cash flows for producers and PrairieSky. This slide breaks down our production by play. Looking at specific plays, the Viking is one of the most economic plays in North America with its quick payouts. Annually, the Viking has represented approximately half of the activity on our lands. Due to the slowdown in 2020, we have seen a decline in production. In past years, a $50-plus WTI environment has led to a very active third quarter of drilling in the Viking, and we anticipate this third quarter will be active as well. We have a significant inventory in the Viking including over 6,800 fee locations in Alberta and Saskatchewan and over 3,200 GORR locations, which, at an average drilling pace of 400 wells per year, would be over 25 years of drilling inventory. The Viking is light oil and receives a strong price netback of over 80% of Edmonton par, and it represents a significant part of our cash flow generation. The Mannville is an important play. It spans across our land base, and we have producers developing both light and heavy plays. In our royalty playbook, we combined the Lindbergh and Onion Lake projects in the Mannville, but you can see on the slide here that I've broken the production out. Mannville oil production in both Alberta and Saskatchewan decreased in 2020 with shut-in volumes and reduced activity. There were only 18 wells drilled in the Mannville in 2020 and already, in the first quarter of 2021, we've had 9 wells drilled, including 9 -- sorry, including 5 by a private producer on our fee lands in Southern Alberta. The Mannville represents a significant opportunity for PrairieSky as ownership is expansive across Alberta. And we have, as well ,significant heavy oil projects in Saskatchewan in 3 distinct locations. Lindbergh and Onion Lake are our 2 thermal oil projects. These projects also reduced their production in Q2 2020, but by year-end, production was restored. And in Q1, Lindbergh was producing 16,500 barrels a day, and Onion Lake was producing 10,500 barrels a day, including their heavy oil volumes. At our royalty rates of 4% at Lindbergh and 3.6% at Onion Lake, we generated just over 1,000 barrels a day of production in Q1. Both of these operators remain active with 8 infill wells drilled in Lindbergh last year and 6 new wells drilled at Onion Lake. The Lindbergh wells are on production, and the Onion Lake wells should be on production by year-end 2021. I would note that there is scheduled downtime during Q2 at Onion Lake, and that will impact our royalty volumes. Over the long term, there remains significant opportunity to continue to grow these projects. Units excluding the Viking and the Mannville contributed approximately 500 barrels a day of oil production last year. Overall, we've seen a lot of activity on the unit, and we expect that these volumes will remain relatively flat with new production offsetting declines. The Clearwater and the Duvernay are where we expect to see the most significant increase in volumes over the next 3, 5 and 10 years. At our last Investor Day, we were looking back at 2018 production for the Duvernay. And the volumes were averaged just over 130 barrels a day. We saw 39 wells drilled in the Duvernay through 2019 and '20. And although production averaged only 240 barrels a day in 2020, we exited the year at 360 barrels a day and hit 420 barrels a day in Q1. Total production on the play, which included natural gas and NGLs, reached 560 BOE per day in the first quarter. The Duvernay produces light oil and earns a high netback of over 95% of Edmonton par, which -- and this equates to about double our corporate price netback. So from a cash flow perspective, 1 barrel of oil Duvernay replaces 2 BOE a day of PrairieSky production. We are seeing rapid growth in the Clearwater as operators continue to be active with 72 wells drilled in 2019 and '20. Production averaged 36 barrels a day at our last Investor Day, and it grew to average 211 barrels a day through 2020, and it's currently at 360 barrels a day. Given the economics of the play, as Andrew described, and our large land position of over 1 million acres, we expect to see continued growth in this play. Finally, the remaining other plays are extensive and represent over 20% of our production. These plays include the Cardium, Montney, Bakken and Mississippian. The first quarter of 2021 was active with 16 wells spud in these other plays, and we expect that this level of activity will continue under the current pricing environment. Overall, with strong WTI and continued narrow differentials, we expect operators to be busy on our oil plays. We expect reserves to be replaced like they have in prior years and with an active third quarter in the Viking, oil royalty production volumes to grow in late '21, early 2022. Natural gas makes up about half of our production and over 20% of revenue. In our asset book, we've assumed $2.25 natural gas pricing forever. As a result, we have not included 14,000 shallow gas locations in the playbook. Even though we have not seen operators actively drilling these locations, they do continue to work in the field to keep production relatively flat year-over-year. Shallow gas makes up about 16 million a day of our production and generated over $11 million of revenue in 2020. The most active natural gas plays in our portfolio are the liquids-rich natural gas plays in the Mannville, Spirit River and Montney. In 2020, these 3 plays, which are in Central Alberta, Northwest Alberta and Northeast BC, produced almost 21 million a day of natural gas and over 1,500 barrels a day of NGL royalty production, and they generated over $23 million in revenue. We do not hedge, and we are benefiting from very strong natural gas prices. As Cam mentioned, we don't talk a lot about our natural gas portfolio, but it is extensive, and it is interesting to see the impact of a $3 gas price on free cash flow. So if you annualize, as Cam mentioned, the Q1 natural gas revenue, you would cover almost the entire 2021 dividend. As Cam and Andrew discussed earlier, there are positive medium-term projects for Canadian natural gas including coal to natural gas conversion for electricity, LNG offtake and petrochemical plants. In addition, in the long term, there may be opportunities for projects such as blue hydrogen. Because we own a fee title land in perpetuity, we have a call option on natural gas that never expires and at no cost to PrairieSky. This slide focuses on our other revenues. Fee lands generate royalty income as well as another -- a number of other revenues. Lease rental income is a per hectare amount paid annually, which you can think of like apartment rent. This ranges from $6 million to $8 million a year and it fluctuate -- and those fluctuations come when leasing is quite active. And this is because lease rentals are due for the primary term upfront and then annually after that. Bonus consideration is the upfront payment that is negotiated upon entering a lease. Leases can range in term, but they're generally 1 to 5 years with a 3-year lease being the most common. The amount of bonus consideration will vary depending on the play, the duration of the lease, and the cost will increase in more competitive areas. Our peak year for bonus consideration, as Andrew mentioned, was in 2017 when we earned $67 million in bonus consideration, and that was primarily for leasing lands in the Duvernay. These funds were used to make our initial investment in the Clearwater, which we were able to do from cash on hand due to the significant incremental cash flow stream. Other revenues also include sulfur revenue, water disposal well fees, a pipeline tariff and noncompliance fees that are due when capital commitments are not met. Overall, other revenues is generally somewhere between $2 million and $4 million per year. Finally, we include compliance revenues on this slide. But when compliance revenues are received, they are included in royalty revenues. These revenues represent the forensic accounting work of our compliance team. These collections are made by comparing what royalty payer has paid us to what we expect the royalty to be. Collections annually have ranged from about $6 million a year to $12 million a year. And since IPO, we've collected $60 million. The royalty compliance team works closely with our land compliance team to ensure that, not only our royalties pay correctly, but that the terms of our lease are being followed and bringing land back into inventory when these terms have not been met. Any lands that are returned to PrairieSky can be leased to another party where we can earn bonus consideration, lease rentals and future royalty revenue. Operating compliance with the terms of the lease also means following good operating procedures. which includes following all environmental regulations. We have the ability to terminate a lease for any operator not following these standards. PrairieSky has a very simple cost structure with only 2 operational expenses, production and mineral tax and administrative expenses. Production and mineral tax is at the top, is made up of Alberta Freehold mineral tax and Saskatchewan acreage tax. Alberta freehold mineral tax is based on production and price, whereas the Saskatchewan tax is based on a per acre amount. This expense totaled $2.5 million in 2020, and we expect it to be somewhere around 2% to 3% of royalty revenue go forward. Administrative cost on the bottom has been decreasing on both an absolute and per BOE basis. We have achieved this by working to improve our efficiencies through technology. At PrairieSky, data management is core to our business and developing and/or implementing software solutions to improve our processes has been key to our strategy. We've always said that our business is scalable. And over the years, we've proven that by tripling our land base and reducing our administrative expenses. As noted on the slide, we will incur some interest expense this year due to the use of bank debt to make our Q1 acquisition. We anticipate having this paid back in the back half of the year. Higher margins and lower risk. This is an important slide for PrairieSky hand one that many of you will be familiar with. PrairieSky's royalty operating margin is 98%, and that's revenues less production and mineral tax. If you remove cash administrative expenses, you have an 88% operating margin, no capital costs, no field operating costs and no back-end environmental liabilities. So because we generate so much cash flow and we don't incur capital, we are a cash taxpayer. At year-end 2020, we had approximately $1.2 billion in tax pools to shelter future income. Because we don't incur capital expenditures, we only create new tax pools when we make an acquisition of incremental royalties. The majority of our tax pools are Canadian oil and gas property expense or COGP. This is deductible at 10% per year. Using that math in 2020, the first $120 million of our cash flow before tax will be tax-free, with the remainder tax at our corporate average tax rate of 23.6%, which is a combination of the federal and provincial tax rates. Our approach to income taxes is always to look for opportunities, but to minimize risk. Thank you. And I will now turn it back to Andrew to talk about returns.

Thank you, Pam. That was great. We'll now do the exciting stuff, returns and capital allocation. So what makes fee lands so valuable? The answer is always optionality. Every 10 years, whether it's the coal bed methane boom, whether it's the Duvernay boom, the shale boom, now the Clearwater, you don't know what that next great play is going to be, but you always have an option on it if you own perpetual mineral title. The market has clearly figured out, our U.S. cousin, the proper value for Texas Pacific Land Trust. I feel when you look at PrairieSky's portfolio that we're not currently having our undeveloped land paid for properly. But now interestingly enough, when you look at this slide, obviously, a big cash flow multiple difference between the 2 businesses, which I view very similarly. Now the market did not figure out Texas Pacific overnight either. It's the second longest listed stock on the New York Stock Exchange. And a smart individual in New York started doing analysis on it, decades before anyone picked it up and began acquiring stock. Today, the position is worth billions. So Texas Pacific adds a premium multiple when compared with our business, which we believe is attributable to the growth that they have observed recently. As the Canadian Basin expands again and as we show consistent growth, we believe our multiple will expand alongside. All of our acquisitions since our IPO focused on better parts of the cost curve in the basin. So over time, we should outpace the basin in terms of activity on our lands. So what are our returns today? And where do we expect them to go over time? So obviously, the return on equity, return on assets, return on capital employed used net income, net income and EBITDA over shareholder equity and then total assets. What we've done is we've just taken out the DD&A because that's obviously not our capital. So it's an adjusted ROE, ROA and return on capital employed, and they all kind of map around 8%, which is quite respectable. But having said that, we believe it's going higher. And that's as a result of -- Texas Pacific has 30% return on equity. They have a fully depreciated asset base, and we will depreciate our assets over time and bring that down and return on equity will continue to rise. And the reason the 3 numbers: return on equity, return on assets and return on capital employed are almost identical is because we have no long-term liabilities. This is another one that we see a lot of analysis on. We show up on a lot of charts when you talk about valuations. And I've heard us called expensive. I would actually put us as one of the cheapest businesses out there. EV/DACF metrics have very different meanings in different businesses. The difference between a producer and a royalty company is that the producer needs a whole -- a huge amount of this wedge for maintenance capital. And then another big part of this wedge for abandonment liabilities at the end of it and a part of that wedge to expand their business over time, so they have continuous inventory. PrairieSky does not have that. It has been argued by some that we have maintenance capital when our production declines. But to be fair, when we see growth, I guess that means our maintenance capital goes negative. In reality, you will experience periods of capital-free growth like our early days, periods of flat production and periods of decline that really vary with the capital cycle, which is something we can't control. But over the medium to long term, the business does not require capital, which is how we've been able to return $1.3 billion to shareholders, almost half of our market cap. So PrairieSky versus the XEG, PrairieSky is the ninth constituent in the XEG at 2.77% of this index. Because we have an advantaged business model, capital structure and higher margins, we will ultimately diverge from the XEG and show outperformance. We just have a better business. All of our management team, staff and Board are shareholders and we all focus every day on creating shareholder value. So hopefully, the next time we're standing up at Investor Day, you'll finally see this divergence I talk about every 2 years. We've also increased our spread versus the 10-year risk-free rate. So the PrairieSky free cash flow yield spread from the 10-year Canadian bond is at an all-time high. We also believe that this will narrow over time. Now this is an interesting one, and PrairieSky is effectively an underground real estate investment trust. We only have half of our floors leased. We don't have to provide any of the maintenance capital. But we run the business with cash to negligible to low leverage. So it's important to remember that all the numbers you saw today, all the numbers we looked at today are unlevered returns. It's a -- and that's -- there's very few businesses that run with no leverage. So it's really hard when you're comparing apples-to-apples on a spreadsheet to compare us with no debt. So PrairieSky trades around the same funds flow multiples, the REITs, as you can see below. If the REITs wanted to 0 out their debt after maintenance capital, it would take them 17 years. In that same time period, PrairieSky would cancel 120% of its shares outstanding. So if there's a REIT investors out there, this may be a good part of your portfolio, if you want to de-risk. This matrix shows Pam's modeling for free cash flow over the next 10 years. Many of you have seen this. This is something that's a mainstay in our corporate presentation. I think it just allows our shareholders to run a simple financial model themselves and really understand how the business will compound over time, and we update it regularly. But for context, if you -- there's a bunch of numbers there in the matrix, of course, But for context, the average analyst has us about $209 million of free cash flow this year. So if you just simply multiply that out by $10, you get to $2.1 billion or 2/3 of our current market capitalization. So what do you do with all this free cash flow when you're debt free? You pay dividends, you cancel shares and when you can improve your business per share, you make accretive acquisitions. For simplicity, we provide 4 examples using 100% of the cash flow to cancel shares using the current share price. Then in year 11, we assume the stock trades at a 5% free cash flow yield. Now we don't know if this is aggressive or conservative. It'll depend on a number of different factors, including interest rates. But we just picked a pretty reasonable number. The returns would also be simulated if you reinvested your dividends and assume we don't find any smart ways to improve our business. So here are the outcomes. I think before I talk about the range of outcomes and what you can expect over time, let's talk about the past. So here we are sitting here today, and as of March 31, 2021, from IPO to today, if you were holding a share from the very beginning to right now. We IPO-ed at $28 per share. It was $104 WTI and $4 NYMEX, not that we're making excuses. And over that 7-year period, you received $5.59 in dividends. So your net price is about $20 per share, including the dividends from a return perspective. But what we did is we started the return profile from today, which is $13.50, I'm not sure what we're trading today, but somewhere in that range. And then we showed the range of outcomes. So this ties to the previous slide with the buyback example and showed a high to a low outcome. Now interestingly enough, if you look at these different outcomes, this one is probably a little too aggressive because what would happen is if you're buying back stock in an environment where you're $75 oil and your business is growing, you're probably buying it back at a higher rate. So this is probably lower. Furthermore, the lowest one, you're probably in an environment where you can buy back stock even cheaper, so the return profile should actually get better. So these are 2 very reasonable bands, the orange and the green. So what do they mean in terms of returns? So what do those map to? So what I did was I carved down right in the middle of those 2, and I took today's production effectively. So 20,000 barrels a day of flat royalty production, no growth, no decline. So I took a flat decade. And if you just take all the cash and buy back stock, you're at $60 share price, assuming a 15% -- a 5% free cash flow yield in year 11. So a $60 share price from today over the next decade would be a 16% compounded annualized return. Now hopefully, there's ways that we can augment that with good business development opportunities. And we don't know what the future holds. I know these lines won't look like that. There'll be bounces and bumps along the way. But when you think about a range of outcomes for a business like ours that doesn't have long-term leverage, so that's not something that can impair your business. You don't have liabilities on the back end. So that's another thing that can impair your business. You can feel pretty comfortable with your range of outcomes. And now I don't know where it lands ultimately, over the next 10 years, that'll depend on pricing, capital cycle, capital availability, debt availability. But they're all pretty good, and I do expect the future to be bright for the business. Lastly, before we jump into Q&A, which is going to take us about 5 minutes, everyone to set up the Q&A. So please start sending in your questions that you have for any of the 3 of us. I'd like to thank our staff, our shareholders, our Board of Directors and particularly my partners, Cam and Pam, who share a passion for the business and are always willing to free up time on weekends and evenings and holidays to work. Never heard a complaint in 7 years, and they probably should have a few times. But anyway, I appreciate everyone who's taken time out of their morning to learn more about PrairieSky. Hopefully, a few of you who are interested in getting the hard copy. It's a great coffee table book for your kids and your neighbors. And we'll now open it up to questions, and it's just going to take us 5 minutes to get set up. Thank you.

Great. Welcome back, everyone. So the way this is going to work is we've got questions. We've got the portal open. So I'll read out the questions, and we'll triage them depending on who wants to answer them. So the first one is it seems like we've created a new business with carbon credits and royalties on downstream products. How do we quantify the size of this business relative to PSK's current estimated undiscounted value? And more importantly, how does this stack up on a discounted basis given many of the projects will be unfolding in coming years?

Yes. So I guess we'll -- and I'll let Cam take part of this question as well. I think what we're trying to do is capture as many opportunities possible on our lands. And I think our lands are ideally suited to capture that value. It is, of course, years out and in some cases, some of the longer lead time ones, decades out before you're seeing the full fruits of this. But I do think there's a lot of value there, and we have time to wait. But I think some of them are advancing faster. And I think the Fenn Big Valley one, I can see 10 years out, that could potentially be our largest producing asset. So that's one example. And a number of these that Cam has recently structured are ready to go. It depends on the success of the technology in a lot of the cases as well.

Yes. And one of the things it also depends on is the incentive framework, and we talked a little bit about that in my part of the presentation where the Canadian government and the provincial governments are still examining what the incentive framework will be in Canada. The incentive framework in the U.S. with 45Q and the Department of Energy loans has really accelerated that. So we're hopeful we see something before the end of the year, which will bring into more focus, some project economics on some of these concepts. But the thesis is and always has been trying to extract maximum value from our inventory and our fee lands. And so while it's hard to quantify what revenues could look like 5 years out or 10 years out, what's important to note is that this is at no cost to shareholders. So what we're doing is we're effectively looking at new technologies. We're partnering with companies that have the expertise to execute on these, and we're going to generate new revenue streams for shareholders over time. The quantum of that is hard to -- it's hard to state right now. But if we get into an inflationary carbon environment and the Federal Government of Canada has said they're taking carbon pricing to $170 a tonne by 2030, this could be a meaningful part of our business.

Yes. And lastly, just to tie off on that. There are some upfront -- we are capturing some upfront revenues. We've done some leasing, which comes with lease bonus, lease rentals. So there's money coming in now on these opportunities. Now the bigger prize will be in the end, obviously, but there is some capital coming in. And our seismic has great value as well because in a lot of cases, it's required for a lot of these projects.

Great. So the next question is about the pools that have been identified for CO2 EOR. And the question specifically, can we talk about the potential original oil in place for these pools and what's been recovered so far?

Yes. So every single pool has a different characteristics. Some have gas caps. Some don't. Some are more depleted. Some are less depleted. So every single one has its own personality. And so again, there is one field that I think has pretty good potential, I believe, Enerplus is the operator of it, [ Dura ], Cam. And the carbon trunk line literally runs right through the middle of the pool. It's an old Viking pool, but it looks like it's visible and it's got some opportunity. But again, every pool's a little different, and they've all had different primary recovery factors and probably ultimately, tertiary recovery factors. So there's no one-size-fits-all and -- but there are a number of what we think are pretty good scalable opportunities to recover a lot of incremental oil but also sequester the carbon dioxide forever downhole.

Okay. So the next question is more on activity levels. And the question is, have you seen early indications that producers, public or private, are planning to spend more now that oil and gas prices have recovered?

The answer is yes. And the timing of which, I guess, will be likely back half of this year is what we're expecting. So I think capital budgets have come up on our privates. Capital budgets have come up on the publics. A little more -- they're little tamer on this cycle. Certainly, they've come up less than you would expect at USD 66 WTI, especially for the short cycle time projects. But they are coming higher in the back half of the year, and that's our expectation. I think we're starting to see lead -- we're starting to see some indications of this. Just yesterday, we were going through the new locations, and we had 4 Cardium development locations licensed on our land, and they're on high-royalty lands and that they can generate hundreds of barrels of initial production. And the other part that I'll tie to this is the heavy oil portfolio. One interesting thing, this is the first time this has happened in 5 years. We've been leasing pretty extensively on our heavy oil portfolio. And there is new licenses. We actually had 4 new spuds by Caltex and Druid. Cona is -- Strathcona resources is drilling in our Cactus Lake Bakken field as well as the Lloydminster pool to the North. So really high level activity is going higher. I just don't know the extent to which that is. And I think just given the timing of when things happened and how quick oil ran up, it's probably back half of 2021.

Great. So the next question is both CCUS as well, and maybe I'll tackle this. Can existing producing wellbores and legacy reservoirs be used? Or is the production from the CO2 flood too acidic? So I think the important thing to note here is that the existing wellbores give us a really good data point. They give us a data point for existing injection to some of those reservoirs that give us an indication as to pressures. But it's also important to keep in mind that that's not really the largest capital consideration on these projects if new wells have to be drilled into the pool. The big capital will be spent more on the infrastructure, purification technology, and the injection side will be focused more on measuring, monitoring and verification long term. So it's a good question, and the existing wellbores provide us with a good data source. Potentially, they could be used. But ultimately, if they can't, that will be a low part of the capital spend on those projects. So the next question is, why is lease rental income trended down since 2017? And Pam, maybe you want to take the lap?

Yes. So when you enter into a lease, you pay your bonus consideration upfront and you pay your lease rentals for the primary terms. So for example, if you enter into a lease for a 3-year term, like we did for many of the Duvernay leases in 2017, you paid your bonus consideration and 3 years of lease rentals. So that means in 2018 and '19, you didn't have lease rentals for those lands, but they'll start paying annually again after the primary term. And so that's why you saw such a large spike in 2017 lease rentals. And then you'll see those lease rentals annually after the primary term is complete.

Yes. And so last year, where leasing was quite quiet, and that was just as a result of very low activity in the basin and not a lot of drilling even. And now that lease is picking back up, you're going to start to see those -- if it's a 3-year term that we lease, we just did a 5-year term, you'll get all those 5 years paid upfront.

Yes. And so we expect it to trend somewhere between $6 million and $8 million a year, depending on the amount of activity.

Great. Okay. So the next question is about CCUS as well, more with a focus on non-EOR. And the question is, as it relates to carbon sequestration opportunities, the potential revenue streams would come exclusively from carbon credit royalties, is that correct? And how [ do ] we monetize that? And I'll clarify that because That's not correct. On the CCUS-only opportunities that we've partnered on so far, the revenues will come from fee structures. And so lands will be contributed by us as well as seismic, including for buffer zones around the known pools, and that will be for structural traps of carbon. The end users, so the carbon emitters who sequester the carbon down hole with us, will pay fees, but they will get the carbon credits for doing that. And so while the fee structure will be linked to price of carbon over time, so you get inflationary escalation on fees, ultimately, the carbon credits will be the property, the producers on those ventures. Now that's not to say that additional partnerships couldn't be structured differently, so we could get carbon credits, similar to what we're doing on the in-situ gasification projects as well as very early-stage SMR hydrogen and how that would work from a carbon credit perspective is on an annual basis, the carbon offsets would be measured and then independently verified and then logged in and registered in Alberta. And at that point in time, our royalty percentage of the carbon credits would be transferred to PrairieSky. Now we can do a number of different things with those. We can offset our existing carbon footprint, which is very, very small, de minimis. We can sell those carbon credits, and there's an active market for those, both over the long term and then also a spot market. Or potentially, we could partner with lessees on our lands and other partners to provide them with carbon credits to offset their own carbon footprint. So there's a number of different opportunities to monetize those, and it's actually a fairly easy market to do so. And the next question is, and I'll give this to Pam. How will we break out royalty revenue as alternative products become a larger part of the stream?

Yes. That's a great question. It really will depend upon the magnitude of what those additional revenue streams are. Currently, we have a place for other revenues. When the magnitude increases, we would expect to see those as separate line items on our income statement. But that's something that will evolve over time.

And maybe, Pam, just touch on what we recently got offered for 2 little wells they were going to convert into Bitcoin mining.

Oh, yes. We did have the opportunity to be paid in Bitcoin on a royalty that we have. It would be a very small amount. So we're currently going to be paid cash, but that is also a future opportunity for us to receive Bitcoin in lieu of cash.

And that doesn't sound like something we're interested in. We don't even know how to use Twitter. So it's probably we'll just collect cash.

And that's an integrated project that gas royalties are generated. But ultimately, the gas is used for power and the power is used to generate Bitcoin. So -- but we have the optionality to do that long term if we want. . And then I'll group for the next couple of questions together for Andrew because they're both about in-situ resources and more focused on oil sands. And the question is, first, what percentage of the oil production do we think that's going to make up from SAGD in-situ projects going forward? And then what are the rough royalty rates at Lindbergh and Onion Lake?

Yes. So Lindbergh royalty across all of the lands, including Muriel Lake, which is a 10,000 barrel future project, which came with the deal is -- it's all 4%. And then it rounds to 3.6%, Pam, at Onion Lake?

Yes, exactly.

And there are parts of Onion Lake, there's one where it's lower, and a lot of it is 3.99%. We just round those ones to 4. But call it, 4% and 4% for rough numbers. Currently, we're 1,000 barrels a day of net royalty oil production with just minor maintenance capital, which is what the plan was last year. These reservoirs will stay relatively flat. But I think Lindbergh, just given where it sits, it's good economics. It's lighter oil, likely could see growth to 30,000 barrels a day, which would effectively double our royalty production. It's just a matter of when they want to spend that capital and go forward with that timing. And then IPC, we've been reading their disclosure because they obviously own the BlackPearl asset now. And they're quite excited about the project. I think they're going to get it up to 12,000 this year, Pam?

Yes, correct.

So that will add 20% of those volumes. But I do think they ultimately have ambitions to grow it to 15,000 to 20,000. So both of those have good growth potential, some of the top-tier economics in the oil sands, and the projects are ready to go. They're fully delineated which makes them a little bit unique as well. So I think those opportunities exist, but I -- we're modeling right now. I think, in our internal modeling, flat, but I think we'll be surprised to the upside on the SAGD.

Yes. And I would just say, on the Onion Lake, that is a 12,000 exit number.

Right.

Okay. Great. Another question for Andrew. Can you remind investors of the appetite to grow the dividend over time? And how do you weigh that allocation option versus buybacks and M&A?

Yes, it's a great question. And I think, obviously, if you look historically, with our business from IPO through 2017, '18, '19, the dividend was a huge part of the return of capital to shareholders. And there was less acquisitions to do during parts of that time, and we just felt it was appropriate to return a large amount of that cash back to shareholders. And we are the ultimate dividend-paying company because we generate a lot of cash and spend none. But it always has to be balanced out with what makes the best total return for shareholders. And I think what happened last year is we just saw this tremendous opportunity to cancel shares way below intrinsic value. So we're making acquisitions with our own money, compounding the business by buying back stock and gave us the ability to make acquisitions like this wonderful acquisition we made in the Deep Basin, with the old Hudson's Bay. It's in [ 26th ], is the 660,000 acres in the Deep Basin, which we're going to -- that will be paying dividends and growing for 20 years. So I think we look at it and the business is always changing. The business is always dynamic. But I do think when you come out of this year, we're going to be in a position to make a significant dividend increase. We made a dividend increase this last year and still have capital available to ourselves to potentially make acquisitions as they come along, good quality acquisitions and/or buy back stock, whichever provides the best long-term value for shareholders.

Great. Okay, so the next question is about incentive structures. And it's, what type of incentive structures might PSK look at to entice operators to look at deploying CO2 capture projects?

Yes, that's a good question. And so we actually have a really good incentive structure. I'm not going to just lay it out here because we did do it with a private operator. But what we do, do is offer lower royalties. We give longer terms on the lease, like normally, our terms are 1, 3 or 5 years. In this situation, we'll give you a 10-year lease if you've got some capital committed, and that's the key. But we'll give you low royalties while you're spending the capital. So it depends on the project. It depends on the size of the project and the amount of capital. But then ultimately, as it starts really making a lot of cash flow, it toggles up to -- in the case of the last one, we did 20% royalty. So again, there's different structures we can put in place. We actually recently did a number of leases in Saskatchewan for SAGD. So there are some new SAGD projects, small SAGD projects planned in Saskatchewan. And we're offering royalty incentives for those as well, where while you're building it out, we can offer a lower royalty. And then at a certain time, we bumped the royalties back up to 17.5%.

Yes. And the only thing I'd add on that is that just going back to the government incentives, we still don't know what government incentives are going to look for -- look like for CO2 capture projects. We'll obviously examine that in detail when that comes out. The government has said at this stage, they're not considering that for EOR projects, although given the potential impact in taking carbon out of the atmosphere or away from emitters and producing some of the lowest scope emissions oil in the world, I expect that they may revisit that. So our incentive structure, as Andrew laid out, is pretty simple, and we're willing to work with producers, but it will also be a function of what the government incentive framework looks like as well. Next question is for -- and maybe Pam and I can tackle this. How are we able to consistently generate strong compliance revenue?

Yes. So I guess I would start that by saying ultimately, we would prefer not to have any compliance revenue. We would prefer to be paid correctly the first time and on time. But royalty structures are complicated and assets are continually changing hands, so that can create compliance opportunities. As well, a number of our royalty structures have very long terms for their audit. So that allows us to go back 7 and sometimes even 10 years. And of course, we have 38,000 operating wells in our lands. So just the magnitude of the royalties that we're looking at is large. And so those things all contribute to us, generating strong compliance revenue. And I guess the one other thing I would add to that is we have a great team, and we have software that allows us always to be looking deeper into the royalties, which can include, not only the upfront royalty, but also deductions. So that also helps us with those collections.

That's great. Yes. And the only thing I'd add is that the forensic accounting and the royalty compliance part of it is only one function in the compliance. There's also land compliance as well, which is tracking offset wells, bringing leases back into inventory getting those leases reissued for bonus and rentals and new activities. So the 2 go hand-in-hand, but you can't underestimate the role that our compliance group, both in land and in the forensic accounting does in our business. It's very important. The next question is, would we consider a variable dividend model?

Yes. I mean you could argue that over the last 2 years, we've had a variable dividend model, and we're certainly not going to pay a dividend out of debt. But we do think when you look at the business today, we believe you get paid a better multiple for a consistent, stable growing dividend, as you've seen with great companies like Canadian Natural Resources. They definitely -- look at how they've outperformed Suncor in the last year, being able to maintain their dividend and continue to grow it. So we do think from the standpoint we sit at today that it should be a dividend growth model for the next 3, 5 and 10 years out. The variable dividend model typically -- and it also goes along like sometimes people pay special dividends, but you just don't seem to capture the value from those over time. So we believe in consistency and predictability.

Another question here is about the CO2 flooding and generally speaking, what's the typical ratio of a CO2 injected versus the carbon content of the product produced? Obviously, that depends on many variables, but just curious about the relative offset. And I think it really varies pool by pool.

Yes. And I'd have to -- it would vary pool by pool. It certainly depends on how depleted original reservoir was and the volume of carbon dioxide that you're sequestering prior to getting those last light oil volumes. So I think I wouldn't be able to answer that. But one will be different.

Yes.

I think that's it.

I think that's it. We have no more questions.

There's no more questions. Well, that's great. Well, on behalf of Pam, Cam and myself, I know I really appreciate how much time people put into going through our disclosure. And hopefully, you all get a chance to read the new Royalty Playbook. It's -- we put a lot of work into it and hopefully it adds some value and lets people understand why we buy our shares back below intrinsic value. And hope everyone has a great day and hope we didn't take up too much of your day or put anyone to sleep. Thank you.

Thank you.