Strathcona Resources Ltd. (SCR) Earnings Call Transcript & Summary

Good morning. Thanks, everybody, for coming this morning. I'm Adam Waterous. And well, maybe just a quick introduction just on myself, and I'll talk about why we're here. So my background is, I got in the oil and gas industry in 1991. We started an oil and gas M&A firm called Watterson Co., which we built up in over the last 15 years into the largest oil and gas M&A firm in the world. We then sold to Scotiabank. I then stayed at Scotiabank and ran their global investment bank for about 10 years. And then a little under 8 years ago, I left to start Waterous Energy Fund, and Waterous Energy Fund owns 91% of Strathcona. That's why we're here. Now what we are hoping to accomplish this morning from the Strathcona's perspective is, we -- and this sort of is the bias that we have coming from private equity, is we're looking for long-term shareholders. In the case of our 91% block, our shareholders have mostly been with us for the last 8 years. So we're not in the business of trying to bring in shareholders that are going to be here for a month or 2, or 12 months, and then sell. Something we can't do -- we can't prevent it from happening. But that's not what we're looking for. We're looking for long-term partners. Now how we think the best way to find long-term partners is to have shareholders that think the same way we do, have the same expectations as we do. And so we're going to try to communicate how to approach that, and how we think about making investments. And we'll try and give you sort of our thought process, is we first take a look at the asset profile of a business. And we're going to spend a lot of time this morning talking about the profile of our business, what is the steady-state position. But the second thing we also do, is we look at how the business got to that point. Because, how they got to that point can be a bit of an indication of what that business might do going forward. The third thing that we look at is, what does the business they want to do? Where do they see themselves over the next 5 or 10 years? And we think that that's -- and so we're going to look back, and we're also going to look forward. What we're also going to do though is we're going to spend time talking about how we measure success, meaning -- why that ends up being quite important is there's an old line about what gets measured, gets done. And I'll give you a sense on how we define success from our perspective. We're also going to spend time talking though about incentives and management incentives. What we also find is how management gets incentive also leads to outcomes. And we're also lastly going to talk about management structure, because how managements get structured also lead to outcomes. So that's what we're hoping to accomplish this morning. And part of that is for the investors to meet the management team of Strathcona. So you're going to meet 8 key folks, who really are going to be driving Strathcona's success, or not, over the next several years. And you'll be able to make your own judgment on the capability of the management team. Now what -- how do we sort of -- we've kind of broken this into three different things, in terms of how to maybe think about this. The first is going back to the assets. And what we've thought is to acquire high-quality assets. And our definition of high quality is high margin and long reserve life index. Now I'm not sure how many presentations that folks in the room have gone to somewhat similar to this. But I am going to go out on a limb, and I think that 100% of all of them have said that they have high-quality assets. 100%. This is not a big going out on a limb here. So we're going to try to do a bit of a deep dive on what is high quality and how do we define it. We also are going to spend quite a bit of time talking about our unique culture at Strathcona, because we think that, that culture does drive the performance and will ultimately allow us to achieve, or not, the objectives that we've set out. So that's really focusing on what we've got. And most of that is kind of rearview mirror stuff. What's always, I think the most important is what's through the front of the windshield. What's coming? And we're trying to spend quite a bit of time talking about our growth opportunity. And specifically, we think there's an opportunity to grow production, which is now around 190,000 barrels a day. Just I think printed right now is about another 105,000 barrels a day on it. Now one of the reasons why we're doing this, and we'll spend quite a bit of time on this, is how we built the business today is using what we think are value investing principles. And while that 105,000 barrels a day is all organic growth, what we are looking to do is use the same value investing approach to be able to make decisions on this organic growth. We're still -- look out for acquisitions from time to time, but our primary focus is organic growth over the next half-dozen years. The last thing I want to talk about is, Strathcona's stock price. Now what's important, how we think about making investments is -- so I think everybody knows, price is what you pay, value is what you get. Now my general view is that the entire Canadian oil and gas sector is undervalued. So we're actually not going to talk about value, because the whole sector is undervalued. What we're going to talk about is price. Price is a relative term, relative to the alternatives. And we'll try and do a reasonable deep dive on that. But we certainly have concluded that when -- today's stock price is around $30. We think that Strathcona's share price represents the type of value investment that we've been making all along over the last 8 years. So with that, I'm going to talk about what have we done, in our first 8 years. So this is the growth profile of the business. We started the lesson, 7.75 years ago with 5,000 barrels a day and have grown to around 190,000. And this is just a profile on a year-to-year basis how that has changed, where we've grown the business. And to be able to see, geez, how did you end up doing this? And what's really driving it? Well, we had a couple of North Stars, couple of drivers in terms of how we thought about building the business. And the first is growing 1P NAV after-tax intrinsic value. And we've grown that at 21% on a compound annual basis over the last year 8 years. We think this is the fundamental best value or best indicator of value -- of intrinsic value. It's not production. It's not reserves. It's not EBITDA. It's 1P NAV after tax. And again, we've grown that at 21%. For comparison, our peers grew the same number at 4% during that time. The second is return on equity. And we've earned 25% return on equity over the last 8 years. Now this is our #2 priority. We think it's the sort of the second-best most important thing to be able to indicate growing value. It's not production. It's not reserves. It's not EBITDA. It's return on equity. Now return on equity is not a popular term in the oil and gas industry. The reason it's not a popular term in the oil and gas industry is, you need a numerator, being profits. And profits are elusive in this industry. It's not debt-adjusted cash flow; it's profit. And that number, to give you just a sense on why I say it's elusive, to give you a sense. So our retained earnings, that's what you get when you add up your profit, you get retained earnings. During this time, we've got $2.1 billion in retained earnings. For perspective on that, that's the largest retained earnings of any company in Canada, started in the last 15 years in any sector. Now this is -- again, I really want to emphasize, profits are an elusive -- elusive term. It's not quite the abominable Snowman you often talked about but never seen, in the oil and gas business, but it's close on it. So we've been extremely focused on profits. Now if you focus on compounding on a per share basis, net asset value, and you focus on return on equity, the byproduct of that, not the goal, the byproduct is actually what does happen with production reserves. And in our case, we've grown approximately at 16% on a compound annual basis on it. Now our peer average in the last 8 years have grown from production 1% on it. Similarly, we've grown 2P reserves on a compound annual basis per share at 19%. So that we have a 39-year 2P reserve life index, which is the third longest in North America. The peers in the last 8 years, reserves have actually on a per share basis fallen about 1% on it. Now in this time, we've grown our head count from 12. And it's kind of a funny number, like I remember I spent a lot of time talking with Steve Fagan, our first CEO, who's currently on our Board, we spent a couple of meetings, maybe 3, do we need 12? Do we need 13? And we now have 783 employees. Now what this chart also shows is, it shows each year what our sustaining CapEx is, what our growth CapEx is, and what our acquisitions have been. And so what we have done to build this business, we invested $11 billion in capital. That was $7 billion in acquisitions and $4 billion in organic growth. And we'll spend quite a bit time of time with the organic growth in a minute. Why I pause on this and show you where we made our acquisitions is that one of the things that I think hopefully kind of maybe jump out is that we were making acquisitions every year. And sometimes, there's a bit of a perception that I hear, that they say, "Geez, you guys are so smart. You put all your money in the depth of COVID, nobody was buying." Actually, that's not the case. We made 1, that's one of our smaller ones. I wish we bought more. We didn't get it done. We were actually -- I mean this has not been a market timing exercise. We've been very methodical. Basically made an acquisition -- roughly made 10 acquisitions, roughly 1 every 9 months. We think it's really tough to market-time, these things. Instead, we focus more on buying the right thing and then operating it effectively. Now I'll come back and talk about quality. And part of the reason when you go to a presentation like this and say, "I got high-quality assets," is that there's a unique set of math in the oil and gas industry. And that is 75% of all oil and gas assets apparently are in top quartile. And I'm not sure how that math works, but that's what I've been seen to -- now why is that? Is that there's a lot of different measures people for quality. I got the highest-quality assets, I have the longest laterals, or I have the highest-quality assets, I have the biggest purse. It means nothing. It's nothing to do with math. It's nothing to do with financial returns. It's kind of interesting, but it has nothing to do with quality. Quality, in our view, is a very simple measure. And the way to measure it is, first of all, by margin. Margin is not percent per BOE, it's percent of revenue. What are your costs as a percentage of your revenue? And this is very common, if you're not -- if you're investing in other sectors outside of the oil and gas industry. But the oil and gas industry tends to get really focused on operating metrics as opposed to simply saying, what's your revenue, what percent of your cost? The higher the margin you've got, the better. Now why do you want -- talk about this for a second. Why do you want high-margin asset? And why is a high-margin asset high quality? The reason a high-margin asset is high quality is it reduces your risk. Because this is a volatile business, prices go up, price go down, always has been, always will be. And the higher the margin you have, the more margin of safety you have. Meaning put another way, it allows you to withstand price shocks. So that's why you want a high-margin business. Now how that really -- so it's not like somebody feel like, "Oh, high quality, I'm a high-quality guy." It reduces your price risk. That's why you want high margin. And what this chart shows is our first half operating margins on a pretax basis, covering all costs, financing DD&A, G&A, share-based compensation and OpEx is 33%. And this is the 31 largest oil and gas companies in Canada, who's on this list. Now we've taken the names off to protect the innocent. But you can see -- you can try and make -- a great part -- a great game is going to be to figure out, match the stock symbol to this. I will tell you that, on the left side of this, there's only one company larger than Strathcona. They're mostly smaller sized companies on. And so this -- the further left you are, the less price risk you're taking. Another way how we think about this is a higher-margin business is fundamentally a business, because it's lower risk, people pay more for. So to give you another example is, left side of the chart, this is kind of like the luxury handbag business. And this is Hermes -- this is the margin Hermes gets. On the right-hand side of the chart, is this is kind of more like the supermarket business, the regional supermarket business, just a couple of pennies on it. To give you some particular driver of what this is, generally speaking, is the oil-weighted companies are more on the left side of the chart, the natural gas companies are more on the right side of the chart, on it. So that's how we think about quality. What is the margin? Now the second metric for quality is reserve life index. And what this shows is that Strathcona has the third longest 2P reserve life index in Canada. I'm sure that will then translate into North America. Now again, why do you want a long reserve life index. What good is it? Well, again, it goes back to risk mitigation. The longer your reserve life index, the less risk you take on commodity prices. Gee, why is that? And the reason being is, is that when prices fall, it's not going to be if they're going to fall, it's when they're going to fall, is a long reserve life index does two things for you. The first thing is, which you may -- obvious is, when prices fall and you're having to continue to produce, you're not running out of reserves in this low price environment. But the second thing you get is, if you have a long reserve life index is, joined at the hip, generally speaking, is a low decline rate. So if you -- and why that is important is, if prices fall and you have to cut capital -- because prices have fallen so much, if you have a low decline rate, you have a 20% decline rate, Strathcona has got, or, say, a 40% decline rate, you're not working yourself into a big hole. So the reason you want a long reserve life index, again, it's not just a badge of honor. It's because you're taking less risk. Meaning those two things in combination, high margin, long reserve life index, the reason those are -- why they are valuable, is you take less risk. The less risk you've got, the more valuable the business is on it. Now next thing I want to talk about is execution. And the execution, first and foremost, gets driven by the management team. And the management team is driven -- and their success is driven by the innate talent of the individuals, but also how those individuals are incentivized, and how the business is structured. You have the greatest guys in the world as a management team, but has a poor structure and you got poor incentives, you're going to have a bad outcome. You need all three things: talent, structure and incentives. And right I finish speaking, Dale's going to come up and he's going to talk about this in greater detail. Now started in the beginning by saying we're going to talk about price. Price is what you pay, value is what you get. And how folks may think about how we're being priced relative to other opportunities in -- investment opportunities in the oil and gas industry. And we think about this a few different ways. The first is, how are we being priced versus our public peers? And we've approached this sort of -- because no one identical in our size that looks just like us. So we've had to approach it a couple of different ways. First is we said, "Geez, if you look at our business," and which has, just to give you a sense, a 2P PV-10 after-tax value of about $19 billion, the component pieces. And that's our Thermal business, our Montney business, our Conventional oil business. It's about, on a net basis, about $19 billion PV-10. Well, it's actually, if you look at these -- one of those three pieces, it's remarkably similar to MEG, NuVista and Headwater. They also have about a $19 billion 2P PV-10. Another way we've kind of thought about it is, it's often sort of maybe referred to as you guys kind of like a mini-CNQ. When you look at the component pieces, you're kind of like a mini-CNQ. And there's a lot of truth to that, because if you just take CNQ and divide by 7, you put another way, they're 7x our size, their proportionate oil sands versus gas versus light, it's actually remarkably similar to our business. Now and when I say remarkably similar, I'll give you just some quick math here, if you -- this is our first half '24 metrics. Strathcona has about 185,000 barrels a day. It has a post-tax net-back of about $32 a barrel. If you look at MEG, NuVista and Headwater together, they're about 200,000 barrels a day, also has a post-tax netback of $3 and change. And if you look at 1/7 of CNQ, they're about 186,000 barrels a day, about the same as us, have $28, a little bit lower, post-tax netback. If you look at reserve life index, we have a 39-year reserve life -- 2P reserve life index, 84% liquids. MEG, NuVista and Headwater has a little shorter reserve life, the next 36 years. Exact same liquids percentage, 84%. If you look at CNQ 1/7, also a 39-year reserve life index; a little bit less on liquids, 78%. And so it's amazing the similarity between these. Of course, Strathcona is bigger on an individual basis than these -- than MEG, NuVista and Headwater and, of course, is a fraction of the size of CNQ. Now how does that get priced in the market? Well, today, on an enterprise value, Strathcona is valued at about $8.2 billion. MEG, NuVista and Headwater on a combined basis is $12.1 billion, and so about 50% more. And CNQ, 1/7, is $16 billion, about double. Now it's kind of -- kind of think about it, well, how does that work? Well, I think that CNQ gets a scale premium because they're so much bigger, source of liquidity, makes sense. It should have some kind of premium because it's bigger than Strathcona. Rationally, very similar business, should trade at a premium. It's 100% premium on an EV basis. What's kind of interesting is about -- MEG, NuVista and Headwater, these are smaller businesses, it's traded at a discount, Strathcona. It's the exact same logic why CNQ will trade. They actually trade at a 50% premium on an EV basis. Now what's also notable about this is that on a relative basis, Strathcona has more leverage than either the 3 businesses combined or 1/7 of CNQ. So there's theoretically more torque on the equity on it. So that's sort of how we've thought about. Now that's all -- all of what I've gone through is very static, this is what we've got, it's kind of how we got there. I said at the beginning, what's more interesting is where is it going? Where is the business going to go ahead? And as I said at the very beginning, over the next 6 years, we actually want to grow the business, about 105,000 barrels a day organically. Now how are we going to be able to do that? How are we evaluating these projects? How are we going to define whether this is being success? Are they going to be able to meet the hurdles that we set internally? And I go back to, so what were those goals? Well, the first goal is we want to maintain at least a 25% return on equity pretax at $70 a barrel. Now if we build this, we're going to talk a lot about it on individual basis for each of our 4 business units, the component pieces, but if we build this up over the next 6 years, what that's going to do is it's going to add an incremental $825 million in annual pretax operating income. Now we're going to have to retain some earnings to do that. I think we're going to have to retain about -- in terms of additional capital, about $1.4 billion, of additional capital to be able to get that $825 million. So instead of getting this 25% return on equity, we think we're actually going to get about a 60% incremental return on equity. Saying, well, that's good, that's a big margin of safety in terms of what we're looking for, in terms of what we're trying to achieve. Now the second thing we're going to do, and why we like this, it's going to lower the risk of our business. And it's going to lower the risk of our business because it's going to drop are sustaining breakeven by about $4. Essentially, we have a lot of fixed costs. And when you have higher production over it, you actually lower your sustainable breakeven. To give you rough numbers, it's going to drop our sustainable breakeven from about $43 WTI to about $39 WTI. So as we grow, we lower our risk. Hopefully, you'll see the recurring theme about how are trying to let's lower the risk, let's lower the risk, let's lower the risk of the business. Now that growth profile of 185,000 BOEs a day, what's importantly is that it's about 83% liquids, 81% oil. Now what you will see very commonly across North America, and when people talk about -- other companies talk about their growth, a good thing to watch is what percent of their growth is natural gas versus liquids. And what you'll see a very high percentage of the time is that they have an increasing natural gas weighting in their business. It is easier to grow natural gas than it is to grow oil across North America. So of that 8% growth, how much is oil? Actually, we're growing our oil business faster than our natural gas in the business. We're going to grow our oil business by 9% on it. And what that really ends up doing is really driving the economics. Going back to that margin page, guys, on the left, Hermes is oil; natural gas, that's the grocery business on it. At the end of that, we're going to be left with reserves. Actually, we're going to a lot of our reserves. We'll still have a greater than 20-year 2P reserve life index. And we assume that we have no organic reserve additions during that time on it. And you say, well, geez, all that business. awfully fast. You're -- that's going to -- what are you going to be left with over for shareholders? Well, at $70 WTI, we're going to be able to grow this business and we're going to be able to generate at the same time a little over $25 a share in free cash flow. Not too far off from the current share price. We're going to grow this business from about 190,000 to about 295,000, a little over 300,000, and we're going to be able to hopefully have as much free cash flow not far off the stock. So that's what we're going to -- so that's what our plan is. Now then you say, geez, the best-laid plans of mice and men, it's really -- it's easy to build these spreadsheets. You guys are deal guys. You might be good at M&A. But geez, this gets complicated when you start having to drill some wells. Do you have any real capability to be able to do that? It's a fair question. Well, it's always best to look at what have we done so far. Over the last 8 years, we spent a little bit under $4 billion in organic capital expenditure in that. Now, how effectively did we spend that? Well, the cost of adding production was about $20,000 of BOE a day, a little under 2x EBITDA, less than 3x sustainable free cash flow, at $70 WTI, on it. To give you just a sense on what that then translates into is that, today, about 60% of Strathcona's production are wells that we have drilled over the last 8 years, that we've organically added. What this shows is there's actually a number of lessons here, is that you could be the smartest M&A guy going, and if you're not buying the right thing and you don't have the right management team to be able to execute the operations, you're going to have a real hard time. Because these assets decline and you have to put more capital into the business to be able to, not only maintain production, but also to grow it -- on it. And to give you just a sense on that, is Strathcona is the third most active driller in Canada year-to-date on it. So it's a -- it's been -- so we have definitely done this before, and that's obviously given us confidence that we should be able to continue to execute the organic growth. Now I say this, well, geez, okay, I see you got this organic growth opportunity, but wouldn't it just be easier to buy something? You guys had seemed to have had some success in buying stuff. Why don't you just keep buying stuff? And let me say, we're always thinking about the buy versus build. And to give you just as a relative comparison, we are often, it's told, maybe what I should do, you should buy MEG. And we think MEG is a good company. We like it a lot. We think it's -- they have a very high-quality asset base on it. And I can see why people would think we should go buy that. But we think, well, geez, you know what, what does buying MEG cost us, and what does organically growing a MEG cost us? Because this what happens, we're going to grow about 105,000 barrels a day, which is about what MEG produces today. And so if we add this organic growth, we're going to add a MEG effectively. Now because -- and what's the profile of that? We're going to be about 83% liquids, 81% oil at that. MEG today is 105,000 BOEs a day, 100% oil. So it's got a higher oil percentage, 81% versus 100%. But what we're always focusing on is you can't eat barrels, you only eat cash. And so what funds from operations does that generate -- is that going to generate? Well, if you look at $79 a barrel WCS, and why I'm using $79 WCS is that's what MEG uses in their forecast. So it's publicly available. Is that they're expecting funds from operation to be $1.350 billion. Ours in 2030, if we'll be successful in building this, will be $1.450 billion, which will be higher. So gee, that's kind of surprising. So we'll have a little -- we'll have less oil than MEG, but we'll have more funds from operations. Why is that? We've actually got better margins. And that's not to denigrate, we think MEG's got a good business. But this profile of this asset will actually have even higher margins on it. Yes. But what we really like about MEG is, that it doesn't cost that much capital to hold production flat. Something we spend a lot of time thinking about. We don't like to spend a lot of money to be able to hold production flat. To hold production flat in MEG today is about $450 million. We think MEG it's exactly the same amount, $450 million. So we think, man, this is a really -- success in building this, be very similar in size and shape to MEG, we'll have a little more cash flow, be very simple. And what's going to cost us? Well, for us to do this organically, it's going to cost $2.75 billion, or we could just buy MEG for $8 billion. So that's why we're doing this than just going out and buying MEG. Now what's the proposition to the investor? Well, I think that sometimes we see that -- we sort of think about what the -- an oil and gas company, E&P company's proposition to investors is a combination of three things. The first is, what is your excess free cash flow yield? What's your current income yield? Now, this is the one that gets most focused on, and where most analysts have got the right comparison, the tables on. And at $3 a share, Strathcona today is -- got a free cash flow yield of about 15%. So that's first thing you get. That's good, that sounds pretty good. But then the second thing you get when you buy an oil and gas company, in addition to current, you get growth. What's the growth? Well, you got to add the growth in. In the case of Strathcona, at $70, we're expecting an 8% growth. So you got a 15% free cash flow yield, you got an 8% growth, so that's 23%. But there's always the bad news. I forgot about this, we're declining. I hate that about the business. It's always declining. So we got to subtract off our reserve depletion. Fortunately, we have a very long reserve life index, so we got to subtract off 3%. So that 15% plus 8%, minus 3%, and our total return today at $70 is 20%. Now, how does that compare to the rest of the Canadian oil and gas industry? Well, the Canadian oil and gas industry, the current yield is about 14%. It's very close -- a little bit lower than Strathcona, but very close. This is when we then start really pulling away. Let's look at the growth. Average growth for the Canadian P sector, 3%. It's 5% less than our 8%. Let's look at the depletion, this really tied to the reserve life index. So 5%, it's about -- you can do the flip, that 20-year reserve life index. So the total return for typical Canadian PE is 12. Ours is 20. This goes back to this pricing issue. Now we think that $7 a share, that if we were -- instead of $3 a share, if we're at $50 a share, that total return would have fall to 14%. So it would be higher than the 12 that typically [ PE ] business has. Now remember, I started off by saying, I think the whole Canadian E&P sector is undervalued. Whole sector is undervalued. Now why do I say that? Well, the Canadian E&P sector has got a total return of about 12%. If you go to the bottom, the S&P TSX is about an 8% total return. That's why we think the entire Canadian sector is undervalued. I tell you what's not undervalued, the U.S. E&P sector. U.S. E&P sector isn't too bad when you look at the free cash flow yields. It's about 12%, that's where the good news stops. It has almost no growth. U.S. E&P is about 1%. And here's the bad news, the reserve depletion is really tough, it's about 10%. So we think the total return for the U.S. E&P sector is about 3%. I think that's tough. We think the U.S. E&P sector is overvalued. Now I don't get invited to any U.S. conferences anymore, okay, to talk about the E&P sector. But that's the math, and it's really tough to argue the math. Now let's go back to that growth, because we said I've heard this narrative that what investors are looking for is return of capital. And that growth is a bad word in the E&P sector. And just give us our money back. It's been kind of a dominant mantra for the last few years. And so how we thought about it, jeez, there's a lot of -- it's a very high bar that you've got to clear to be able to justify E&P growth. And the first one is do the returns justify the risk? So we think on our base case, growing that 105,000 barrels a day, the $2.75 billion we're going to spend. is going to cost us, and just on a metric basis, about $26,000 BOE a day on capital efficiency, a little under 2x EBITDA at $70, a little under 3x sustainable free cash flow at $70. And it's going to earn a 60% incremental return on equity. How we essentially evaluate these, in terms of [ breakeven ] is that they've got to earn a 2x PAR at 10%. And it varies by project. But most achieved that in the $40 to $60 a barrel range. Again, margin of safety. You want to think about how -- so we think that the returns more than compensate for the risk then. Then you say, well, yes, that's good returns, but geez, could the capital be allocated better somewhere else on it? Well, of that, I mentioned upfront we earned $825 million in pretax operating and we're going to have another $1.4 billion of capital employed. Well, how much of that is that $1.4 billion of capital employed? It's actually only 20% of the -- of our operating earnings over those 6 years. So 80% of our operating earnings are free for something else. Only 20% of this is being allocated to growth on it. And that obviously will give us a lot of other opportunities to do things with the capital and return it to shareholders. We'll talk a bit in a second. And then you say, oh, but you have no -- why were antigrowth for investors is because you're overcapitalizing because you're running out of the reserves. Now this is something that I think if you are investing in U.S. E&P, you got to be thinking about every day. Because -- and I also would be very focused on not overcapitalizing that reserve because the reserve life index are already so short. In our case, after all this growth, we still have a 20-year reserve life index, which is about double what that U.S. typical reserve life index is today. And that assumes that we add no reserves through this whole period. Now over the last 7 years, we've actually had a record of 200% 2P reserve replacement. But we assume -- we never do that again, on it. So we're not worried about running out of reserves. The other concern when you're growing the business, you say, yes, but is your balance sheet, can it withstand this? So you should just be just paying down debt, just pay down debt on it. Well, our debt to EBITDA is about 1x at $70 WTI. At $50, it's less than 2x debt to EBITDA. At $40, it's less than 3x debt to EBITDA. And we don't break a bank covenant until we're 4x debt to EBITDA. We've got a lot of liquidity, about $700 million of liquidity within our existing bank group. And then people say, oh, yes. Yes, okay, great. So got high returns, you're not going to stress the balance sheet. You're not going to run out of reserves. But you're going to ruin the market. You're going to flood the market, and Canada has had all these problems with egress and not being able to get the asset to market. Well, 60% of our incremental production is going to be sold outside of Alberta. We're not -- and how we're able to do that, 60% of the incremental oil is sold to the U.S. Gulf Coast versus our Hamlin rail terminal. Then you say, well, what about gas? What about gas? Oh, yes, gas is so horrible here. You increase gas production. Well, 85% of our incremental gas production we're going to consume internally with our -- in our Thermal business here. We don't need any additional midstream capacity, no new pipelines, no new processing facilities to be able to meet this growth objective. And the last question is, well, that's all great. But the market doesn't care. The market doesn't care. You could grow like crazy the market doesn't care. Well, we can't try and second-guess what the market is going to pay for us and what they won't go to pay for us. But we're focusing, going back to the very first thing I started with is compounding per share NAV. And what this is doing is compounding per share NAV. And ultimately, we think that that's what investors should be focused on. Now that is just a quick sort of intro. I'm going to bring up Dale, who's going to talk about our organization.

Thank you, Adam. Good morning, everyone. Just maybe start off a little bit introduction as to my background and experience. So I've been in the industry, I guess, over 35 years now. I started with Imperial in 1987. Had the opportunity to start an operations there. Stayed with them for 11 years, and then I transitioned over to a company called Pengrowth. I remained with them for -- or 22 years, I guess. And then moved over to Cona in 2020, I guess, in that COVID period. So it's been quite a ride, I guess, from my standpoint, not with a lot of companies, but I definitely think as taking on a few different positions with Strathcona, see the value in this growing organization. So it's been quite fantastic and it's been quite a ride. So yes, as Adam alluded earlier, I mean the company has definitely grown significantly over the past 8 years. It's been a series of acquisitions from the time I joined in 2020. And you can see every piece of that, how it mirrors with employee count in the organization, it's grown with that production. So starting off in 2020 when they acquired Pengrowth when I joined, you can see that uptick, in the fall of 2020, of course, the merger with Strath, that took us to that next level. From there, it was the spring of -- spring, early summer when the Osum acquisition occurred for the company. And it kept continuing, with Caltex in the fall of 2021, Tucker Lake in the early year of 2022, and then, of course, Serafina in the fall of 2022. And of course, Pipestone in 2023. So you can see those -- every one of those ticks actually makes a change, not only production, but the employee count equally does as well. What's really interesting to note, I guess, is that 49% of our staff today actually came through the acquisition path, and the remaining 51% actually has been our ability to attract new talent, top talent to the organization. And I'll get into some of the reasons in a little bit in a few pages as to why we actually believe we've been able to attract that amount of people to our organization. I know many people will have known that in the last month, we've elected to make a change to our organizational structure, from a functional design to more of a business unit design. And we -- so we have basically 4 business units that we've set up in our organization. The first one being the Montney, which today produces about 80,000 barrels a day; the Lloyd Conventional group that actually produces right around 26,000, 27,000 barrels a day. Lloyd Thermal. That actually is producing around 27,000 barrels today. And then following up with Cold Lake, that's -- it's right around the 60,000-plus mark for today. And then, of course, we have our corporate staff. So that makes up those pieces. Totaling, exactly what Adam said earlier, 783 people in our organization today. And again, 51% actually came through us attracting those folks to the organization. So with those four business units, we definitely feel it's imperative that we kind of set the stage for culture and values. And there's a few things that we want to really draw out of the staff, and setting that tone. So first off is what do we want? We want the meritocracy of a sports team. And so what does that really mean? We want a high-performance team that they want the reward. And if they can achieve those results, they will receive it. Absolutely. Leanness and focus of a start-up team. When you're a start-up team, you have a direct focus on a specific asset and you bring in top talent to actually do that. And guess what, top talent wants to be around top talent. So it kind of breeds on itself. And so when you have that type of organization, you can achieve some unbelievable results. And so what are we looking to offer and return? It turns out it's actually the exact same thing that the employees want. And they actually want accountability, they want autonomy, and top pay. And that's actually how you can attract high performers, is all with those pieces, those are the elements of creating the culture that we believe is going to take Strathcona to continue to grow to exactly the heights that Adam has mentioned already. So we also believe that we need to be fully aligned with our owners. And so we actually do believe that we have a unique compensation program that I think actually lends itself to that. There's four key compensation principles that we have. And the first one is, is pretty simple, I mean, it's not totally uncommon to industry. I think we're measured on things like PDP and F&D per BOE. Our lifting costs and health, safety results, right? So that's pretty -- that's not totally uncommon. But this is where we actually start to set ourselves apart, is in the next one. For instance, with the no-stock compensation program that we have. We actually don't think it's good for the business, to be perfectly honest, whether it's the business, the shareholders, the staff, in all honesty. The problem with oil and gas equities is that they often follow commodity pricing. It's investor sentiment. And it's not truly the fundamentals of the business. So that's a bit of a problem, right? So if you use stock-based programs and you actually -- and they're submitted to the employees at a low price, there is a dilution -- the potential for dilution depending on the share price when they're exercised, that they actually -- there's a dilution to the shareholders. And the inverse if they're actually granted high, and when they vest, what happens is the employees feel like they've been undercompensated. That's not what we're trying to achieve whatsoever. That is not the goal. So ultimately, the goal is the way we compensate our folks is through 100% cash incentive. On an annual basis, they receive that. So that actually then allows individuals to purchase stocks at their -- at the timing that fits their needs as well and still fulfilling their commitments that are required as a mean member. I'll take a pause right there. And I think not only is it for, I think, the -- more of the executive and other staff, but this also lends itself significantly to how we actually retain and attract people. Remember, the industry actually generally uses these stock-based programs as incentives, or restricted share units, performance share units, where we don't. And so when we want to attract people, typically, they're in the industry and so their programs are exactly that. When they do that, they walk away from that incentive. But when they come to Strathcona, they receive it immediately. There's no loss to them. So it's a huge benefit. On the same token, if they were to -- like if they were to leave Strathcona, why would they leave? When they leave, they're likely going to enter into the industry still and they will be with a company that has a vesting period so that their incentive actually is now most likely 3 years later. So we actually have, I'd say a tool, that actually allows us to not only attract them, but retain top talent. And who are the people that are -- they don't want to move from organization, because they would lose such a significant part of their incentive. And we actually have that mechanism that removes that from those companies. And I'd say that's a competitive advantage that we actually have as an organization, like truly. So what do we want? I mean, ultimately, we want people that want to be here. That's what we want. We don't want people that actually -- they can make a difference. They actually -- people will often stay because there's a vesting period. And we don't want -- if they're just staying for that, they're not committed to the organization. And we want people that are fully committed to the organization. And lastly, it's that strong Board commitment or alignment. And so 2/3 of our Board, they've got a significant part of their net worth invested in this company. And that shows an extremely strong commitment. The graph, the slide -- or on the right-hand side is something that I think lends itself to doing more with less. Right? So that's part of this lean start-up team, is when you have people with high capacity, they actually -- we can do more with less. And the graph there actually says that, because it's actually our all-in G&A for the first half of 2024 compared to our -- as a percent of our net revenue compared to our peers. And we're actually first-in-class. And that says something. That's the top talent that you bring to the table that allows you to do that, right? So it's quite significant. Safety. Of course, safety to Strathcona is paramount. And the organization is rewarded or not as a result of how we perform when it comes to safety. 25% of our compensation, from the individual contributor to the very top of the organization, is tied to our safety performance, and it's 25% of it. The level of importance that it's placed at with the Board, it's the start of every board meeting and there's a considerable amount of time that's spent on it. So there's a strong commitment right at the Board level. And as with the new 4 business units, we will be starting those meetings with each one of the presidents with that same sentiment, right? We'll be talking safety first. Because without it, it just doesn't work. The graphs on this page essentially speak from 2021 to 2023. And what you can see is, as the company has grown, our safety culture has matured and improved as well. So you can see our performance year-over-year essentially continuing to improve. And remember, the staff count is going up significantly. The dollars that we spent on the capital investment side of our business is significant. And so we're taking on a great deal more of work, which means more exposure. And yet we're still actually able to improve our safety performance as an organization. And you can see our total recordable injury frequency compared to industry is far above what they're performing at today. So that's -- I think that's quite noteworthy. So I want to do a little bit of an introduction of our four new presidents and give a little bit of intro as to what these assets have to offer, and they'll come up and explain a little bit more, for everyone. So Kim Chiu, who's actually our President of Cold Lake. Cold Lake is an unbelievable asset. It's an oil sands resource with a lot of optimization opportunity and a significantly large-scale growth opportunity for the organization as well. Over the next 5 years, the intention is really, to really focus in on optimization, reduction of steam oil ratio, because that's essentially cost to get a barrel of oil out of the ground. And then I don't want to ever forget about Lindbergh Phase 2, which has the potential to double in its current capacity today, which is around 20,000 barrels just for that 1 asset alone today, and is ready to go essentially. It's just -- it's timing for when that project will be executed. Ryan Tracy, he's our Lloyd Thermal President. The Lloyd Thermal asset was the Serafina asset. And it is a little bit different than our Cold Lake asset. It's a smaller scale. There are assets that we actually can build modular. So there's a lot of cost certainty in those types of construction projects. So it's quite exciting. Over the past 2 years, we've actually elected to spend more time delineating the field and understanding the reservoir at a higher degree. So it gives us a higher degree of certainty when we actually execute these projects. And so now we're essentially positioned for the next 5 years to grow that part of our business. So we're going to -- we're planning on seeing 3 new modular facilities -- central processing facilities constructed across Meota and Plover Lake. So pretty exciting there because it has the potential to double the current production of what that business unit produces today. Seamus Murphy, he's our Conventional heavy oil President. This is an interesting asset because it is honestly the gift that keeps on giving. It's a free cash flow machine is what this asset is. And overall, the years has continued to find new ways to improve production and keep the results flowing. For the next 5 years, it really is about that: minimal capital investment, generating that free cash flow for the rest of the organization to allow the business to grow. Significant. But I don't want to understate that it also has the opportunity with an emerging play on the Mannville stack with the multilateral designs that we're starting to see more today. So it's more than just that piece of it, but it's like the foundation of the organization. And finally, Al Grabas, he's our Montney President. And like Adam had said, this business, the Montney is a natural hedge to our business, to the oil side of our business. There is some -- there is definitely some significant benefits of this asset. The location is ultimately in the heart of the Montney where we've got condensate-rich gas production, and that is just positioned in a very nice spot. But equally, the LNG export pipelines in Northeast BC, we're right there. I mean a huge opportunity, giving us opportunities to move product where we think it is best. But again, the next 5 years for this asset is essentially about -- or this business unit is really about focusing on the capacity, keeping maximum capacity in the throughput of the asset, and providing that gas condensate for the business needs of the thermal assets that we have. So just great opportunities across the board from my perspective, all four business units. They lend itself to what this company is today. So on that note, I will move it over to Kim Chiu.

Just a reminder for everyone that speaks after me, my microphone position is probably an outlier for the rest of the group here. Before I begin in terms of introducing myself and my portion, Dale's stats in terms of the 51%, I am one of the 51% that came over and was attracted. And certainly, I can speak to a lot of things that he talked about, about culture, autonomy, top pay for top performance. Those are certainly big motivators as to what drove me to come to Strathcona from my previous employer. Adam talked about the Waterous data room. I remember sitting in there as engineering summer student back in the late, late, late '90s. But having said that, obviously, I have more than 25 years of experience in the industry, more than 15, probably close to 20 of that is directly in thermal SAGD, with about 10 or so in conventional heavy oil, conventional gas and lighter oil as well. In terms of the direct thermal SAGD experience, I've held leadership positions in Alberta and Saskatchewan thermal projects. Some very notable ones, at one point, I was the manager of Firebag as well as the manager of Jackfish, where I was part of the Devon Canada asset sale to go to CNQ in 2019, at which point I was there until I decided to come over here to Strathcona in 2021. So as Adam started the discussion, one of the competitive advantages that Strathcona has is long-life reserves. And within Strathcona itself, Cold Lake business unit has a large portion of those 2P and even contingent resource. If I direct your attention to the top left table there, in Cold Lake business unit, we have just under 1.4 billion barrels of booked 2P reserves. What that translates to, as Dale alluded to, at 60, or touching 61, but I'll let you go on there, a reserve life index of just over 60 years. So we have a long attractive runway to continue to produce at the levels and actually at levels well above what we have. And so if you look at the top right-hand chart, we have what we believe is an achievable and executable development plan with a very aggressive growth story of nearly 50% between now and 2030. And what is even more compelling, prior to this organization, I used to keep saying, well, if we were a business all by ourselves and Cold Lake as a division of itself, we could actually self-fund ourselves and get to this growth profile, with just the cash that we generate out of this division and now this business unit. One thing having come from the Athabasca region where I spent a large portion of my SAGD experience, I think it's very well known because I've seen a lot of reports that I think many of you may have even put together in the past, about SORs and comparative SORs between the different assets in the industry. And I think it is quite well known that as a general statement, the Cold Lake assets have a slightly higher SOR than their Athabasca counterparts. So that's nothing new. And if I direct you to the middle of the waterfall chart, that's probably also not surprising to anyone in the room, that translates to typically a higher OpEx. What I think is less well known, and certainly was a learning experience for me prior to coming here, was that on a net revenue basis -- because the kind of oil and our location to market is in a much favorable position and condition than our Athabasca cousins to the North, we actually enjoy a $7 per barrel structural advantage compared to our counterparts in the Athabasca region. And so at the end of the day, although our OpEx, we give some of that back, by having that initial $7 advantage, we end up with a net margin that is the same and actually slightly superior to our competitors that have those larger Athabasca projects. And so then it becomes a game of how do you possibly reduce SOR. And that's nothing new. Every thermal operator, that is their main game. But for us, we start in a position of strength. How do we develop our assets so that we can retain as much of that $7 per barrel advantage as we possibly can. [Break]

A smaller footprint design of these. So basically, we build these modules that are puzzle pieces of these facilities in a shop environment. Allows us to control the cost and the schedule, a lot tighter. As we build these pieces, we [ take them to ] the site on trucks, and we assemble those pieces at site. We bolt them together out there. It's a much simpler process than some of the large mega projects to execute those types of projects. We are on a smaller reserve size at these assets. So we're usually dealing with 50 million to 100 million barrels of oil in place, relative to some of the other assets that in our Cold Lake side, they're talking 300,000, 500,000 barrels of oil in place in those months. Reserve Life Index is still very good at 20-plus years. The one unique advantage also that we have here, which is very unique in the thermal space, is we actually haul a raw heavy oil blend -- or sorry, non-blend, just raw heavy oil, neat barrel, down to the U.S. Gulf Coast. We never ever touch this product with a condensate or diluent blend. So it gives us a bit of a premium on our barrel. The other advantage we do have is we work in Saskatchewan with the Saskatchewan government there and their royalty regime, which is a bit more appetizing than the current Alberta regime right now on the royalties. Currently, I have 5 of these plants producing today, with another three to talk about in the coming slides that we're developing. So what we're doing here isn't anything unique or novel. It's actually been done right next-door in the neighborhood. So Husky was very busy in this area in 2010 until now operated by Cenovus. They've grown those barrels from about 20,000 barrels a day in 2010 up to over 100,000 or around 110,000 barrels a day today. They got the playbook. We got the people, the ingredients to do it ourselves. So if you look at the graph on the bottom right, that's the colorful stack plot there is all those Husky facilities, which are labeled on the map as well, and their growth from 2010 to 2024 on that scale. Overlaid on that graph, we have our old Serafina assets on the dark line that's trending there that was eventually acquired in 2022. The scale on that chart is overlaid to normalized things of 2016 until 2030, where we're planning to grow this asset. And you see, we effectively mirror the same development plan and strategy, of very similar assets. We're in the same pay trends, the same channels, just a little further to the southeast of them mostly. So that growth is certainly achievable. People have done it. And to look at it another way, actually, Serafina did it. We're doing it. So from 2016 up until 2022, we laid right on top of that same growth plan, and effectively the exact same team that was building that Serafina growth plan. And then also in 2014, we poached a lot of the Husky guys that were building these Husky projects, 2010 until 2014, to ensure our success in executing these projects. We've got a similar team or almost identical team assembled to continue that growth here at Strathcona, just we're in a different set of cover-alls but everything else is pretty similar. If you look at the reservoir qualities and properties across these assets, like I said, they're all very similar, and we're effectively growing it to mirror similar to what Cenovus assets did. Hamlin. So this is something that gets talked about a lot. I remember when we first discussed building this, I didn't know what we were doing because I don't know how to run trains. I'm an engineer, but not that kind of engineer. Exciting asset now that I understand it. It's our marketing play here. So we have the opportunity to take our barrels out of our Lloydminster Thermal area here, and transfer them from our central processing facilities that are extremely nearby this rail terminal, that's located right on the CN line, and fill up train cars and send them down to the U.S. Gulf Coast without ever blending a barrel of condensate or any diluent [ material ]. Gives us two big advantages. We actually get a better price, a premium to what you'd see in the WCS market, with this neat barrel that we truck down there with no diluent. Because the refiners down there actually don't want a blended barrel. They're looking for a neat bitumen barrel or oil barrel. Also makes it a safer product to haul. So it's not flammable. This is heavy oil. It's basically asphalt and a train car. So we haul it down to the U.S. Gulf Coast, nonflammable material. We can -- it's categorized as a nonhazardous product, and we don't -- it reduces our placarding and our transfer fees. When it gets to the Gulf Coast, in the U.S. Gulf Coast, we have a purpose-built facility down there -- or there is a purpose-built facility down there, that Strathcona utilizes to take these oil barrels to the refineries down there, which also gives us a bit of an advantage. To put all that in perspective, if you look up top from 2017 to 2024, our differential from WTI is about a $20 differential from what we've shipped these barrels from our Hamlin facility. If you compare that to any other egress option that we have, it's got, at a minimum, a $3 premium on it. So if we're putting these barrels and blending it and put it on pipe, those blending costs and transportation fees, you stack it all up, we actually end up spending more money. We lose $3 a barrel taking that option. So this has a very favorable pricing for us, which really helps our project economics. So a lot of people might be wondering, well, what happened? We got acquired in 2022 and the growth kind of stopped, and we've been just sitting here and not working on things. But the reality is we had a big asset play to understand better. We needed to delineate it, derisk it, and really truly understand what the best optimal growth project would be. So on the charts on the map that you'll see there, we have these red blobs on there. That is what our asset size was in 2022, or what we thought it was in 2022 during the acquisition. And the new outlines that are on there, particularly you'll see in the Meota area where we've drilled 43 Strath wells in the last 2 years to understand and delineate that asset, we've grown those patrons significantly and truly understood the reservoir qualities, exponential learnings on that asset. What that's translated into is, even just in our oil in place number, we've had an 80% growth in oil in place in those 2 years. So it's added a significant value in that aspect. And similarly, down in Plover with our understanding of that asset over the last 2 years in the same time frame, we've grown that oil in place number as well by 87%. So this kind of leads us to our next phase of growth and development in these Lloyd thermal areas. So I'll start with Meota. This is our next kind of out of the gate area that we're working on, looking at adding almost 50,000 barrels a day here over the -- by 2030. The first step in this process is we have this GP, general petroleum trend, GP trend, you'll hear me refer to it as. This is actually tied into an existing operating plant. We're currently in the process. We had a turnaround this year at Meota West 2 and did all the significant tie-ins, got a lot of the equipment to site. We've prepared this Meota West 2 facility to add in this new channel of production, which is phenomenally good pay, it's one of our higher resource dense projects. For those -- that project is currently underway. We've drilled and completed the wells in the channel. They've all come in as expected and on planned. It looks really, really excellent. So we'll be bringing this project into the Meota West 2 existing facility through 2025, we'll be starting to steam it. And towards the end of 2025, we'll start to see that oil come and expecting about 6,000 barrels a day out of that pad. And we'll continue to expand that area in time. Following this, 2025 is going to be a big year for our Meota central area. We're going to be constructing our first brand new facility in this area since Meota West 2. So this is a large project that we're working on. It's a 12,000 barrel a day facility that we'll be spending the capital on next year, building it, drilling it, and getting it ready for a 2026 start-up. It's -- again, projects of this size, they do sound large, but they're very quick turnaround times when we do them in our Saskatchewan play. It's usually about 2 years from the time you start spending money to the time you're making oil out of the assets. So it's very quick turnaround times. Following that, we're going to basically duplicate that facility again, because the resource size is so large in the Meota Central area and reserve life is very long, similar to what Kim is talking about on the -- in PV-10s, you want to bring some of those barrels to the front end of the development. So building another facility there. That will be on stream in 2029. It's a duplicate of our current Meota Central 1 facility that we're going to start constructing here right away. So all of that said, we got $750 million of capital that we're investing over the 2025 to 2029 period. With that's coming about 30,000 barrels a day, less than 3 SOR on those barrels. It's very good capital efficiencies on this scale of project. We're about $25,000 per flowing barrel to bring these barrels on. Big improvements on our net operating income, free cash flows. Everything is very strong coming out of these. And this scale of project, it's pretty unheard of to have 2.5-year payouts, and that's the kind of time lines that we see us getting paid out on these projects, and then enjoying the gravy after that. Kind of already mentioned a bit about the team. These projects, it's effectively the same team we've executed it on already. So a lot of the same folks that have done some of the predecessor Husky assets actually and then came over to us at Serafina, and then we've done this 4 times at Serafina, and we're looking to do it a couple more times here. Also on the map, I didn't really touch on it, but the existing gray boxes, that's our Meota West 1, Meota West 2 and Meota East facilities. Those are all operating facilities that have all been brought on stream during that time of Serafina growth. Plover. This is an excellent asset. This one unfortunately wasn't one of Serafina's assets. So I'm super excited to be a part of it now and it's in our business unit. This is the best quality resource we actually have in our Lloyd thermal group. When it comes down to oil saturations, pay, thicknesses, overall SORs that come out of that, this is the best we have. It has been -- a pilot has been operating here since about 2014. It's been making about 1,000 barrels a day. We are spending some upfront capital to grow that here in an initial phase of the pilot area. We're going to add in some natural gas co-injection. This is a technique we use across -- I mean used across -- all across the Athabasca oil sands region. The Cold Lake team is doing it. We're doing it in all of our other Meota areas in Edam. And this is a technique where you basically inject the gas to be able to take your precious steam and utilize it on new wells and maintain your production and pressure on the mature wells with gas and utilize the heat from the steam to start developing -- accelerating your next barrels. So we start doing that. We're spending capital on that next year, bringing some wells on stream that will be used to eat that newly freed-up steam. And then that production growth will start seeing the initial production out of that capital through 2026. As a part of this growth, we're also going to add some steam generation capacity and some plant debottlenecking there. So that work will be executed as well going through 2026 and come on stream in 2027 where we'll see a more significant growth in our production in the brownfield area up to about 3,000 barrels a day. We're currently at about 1,000 barrels a day. So it's smaller scale but still a significant percentage growth in that asset. Following that, we have our commercial project that we're planning here at Plover right now. Planning on building again another 1 of those cookie-cutter modules [indiscernible] plants that we've done so many times in the past already. Looking at placing this right in the heart of our channel of our main trend little bit to the northwest where the existing pilot project exists. This project is expected to have first production come on in 2028. We'll start really spending the money in late 2026, 2027 on that project to have the oil come on stream of that time line. Again, similar metrics. $26,000 per barrel on capital efficiency. Strong net operating income improvements. Very strong sustaining cash flow improvements at $70 WTI. And this one is actually even faster, less than 2-year payout on that large-scale project. It's just, again, a phenomenal asset, really low SOR, low OpEx. What all this means, so when you add it all up, we're forecasting similar to what Kim's side seeing with their growth and lowering SOR. In 2030, we're expecting to see our SOR come from a 3.9 SOR where we're currently at, down to 3 SOR, which is a more typical number that we would see in these thermal assets. Each of these development wedges comes with an SOR improvement. Again, the pause we've taken to delineate and understand that has basically had some of our wells mature, and in time, the SORs have went up a bit. But now going back to this growth model, we'll see that long sustained lower SOR happen over these step-change periods of development. So the first step change is the GP channel that we're going to be developing that will be on stream here very soon within the next 12 months. The Central follow that, there's a big step change there with the large-scale development we plan in that core area, and then followed by our Plover commercial project. What all that means in the end is it translates to lower OpEx, particularly on the energy side. We drop our energy OpEx by almost $2 a barrel, if we're using $3 gas. Basically makes our lower breakevens that Adam alluded to at the very start of this presentation. It really cuts our breakeven costs on these assets down even further than they already are, which, again, really strong margins on this play. So it's an exciting opportunity. That's everything I got for the Lloyd thermal assets. I'll hand it over to Seamus on our Lloyd conventional side of the business. Thanks.

Okay. So how is it? We're good? Let's stretch this mic a little bit. Good morning, everyone. My name is Seamus Murphy, I am the President of the Lloydminster conventional -- Strathcona Lloydminster conventional division. I started my oil and gas career over 25 years ago, hard to believe, up on the [indiscernible] for AEC, back when gas was king. AEC subsequently became Encana and then Cenovus. I joined Northern Blizzard in 2015, within operations again and in management position. And 2017 came around and all of a sudden things changed significantly overnight. The vision went from a very short-term vision, survival vision, to a long-term vision of growth. And that change was Waterous Energy Fund. From there, yes, it's been a journey. I had the pleasure of integrating in the field, integrating the Pengrowth assets, integrating the Orion assets, then the Tucker assets, and then the Caltex assets. So I've had the pleasure of being the front man out in the field for this amazing transition. Let's get going here. First and foremost, we'll start off with a quick overview of our Lloydminster conventional business. This collection of fields, they're all under -- majority of them are under polymer flood, water flood. And they all consistently generate low-risk, high-margin free cash flow, which in turn assist the remainder of the business to grow. Just in the map, you can see our assets. Southeast of Lloydminster, we've got our Winter and Manitou, high-volume waterflood. Then around the just south of Macklin, Saskatchewan along the border, we have Cosine, Bodo, Cactus assets, those are all polymer flood. And then we have our Court and Druid assets that are waterflood as well. Some interesting key stats. In our current production of roughly 25,000 barrels a day, which is 99% liquids. 2P reserves of 149 million BOE, 2P RLI of 18 years. You're going to hear that repeatedly. Our 2P PV-10 of CAD 2.7 billion. On the right, you can see kind of how we can consistently provide production -- consistently provide production with consistent capital influx. Yes, we are not your average conventional heavy oil business. We have a top-tier business from a margin perspective and a long life perspective that sets us apart from our heavy oil peers. We have, by far, the longest life of any of our conventional heavy oil peers. As you can see from the chart, the netbacks are just shy of $45. And once again, we have a 2 PR RLI of 18 years, which is higher than our peers. Some of our competitors do have high margins, but -- they do have high margins as well, but their assets are newer and unproven. All right. Our conventional assets -- sorry, here. Yes. Our conventional assets just continue to get bigger. Our assets benefit from a massive resource in place and small, little increments -- continuous increments and improvements in technology equate to actually large increases in reserves. As you can see from the graph on the left, we continually increase our reserves year-over-year, 81% increase in EUR over 10 years at a roughly 6% CAGR. Upside from improved technology, 2.2 billion barrels OOIP. We've only recovered 4% of that oil. We've only pulled that 4% out of -- 4% of the oil out of the ground at this point, and we have 6% booked. Ultimately, improved technologies and conformance, multilaterals and polymer continue to enhance value. The key message here is there's a lot of oil remaining in the ground and our fields continue to get bigger. This is a great slide. Strathcona's polymer floods are anticipated to be among the rare 100-year fields, 55 years in and we've only recovered 15% of the oil. The current strategy is to hold these polymer floods flat at 15,000 barrels a day, and we continue to have less than 10% base declines in these fields. And these assets are anticipated to be on production in 2070, which is incredible. I might actually be retired by then. Might. Another great slide, why we love polymer floods. Well, we've had some incredible -- plain and simply put, we love our polymer floods and our polymer wells. The low capital cost and ultra low base declines lead to decades and decades of payouts. The wells cost approximately $700,000 to drill, complete, equip, and tie-in, and have an EUR of 140 million barrels and F&D cost of roughly CAD 5 a barrel. These wells continue paying out approximately every 5 years, at $70 WTI, even after 30 years on production, in contrast to the typical Permian well, which is displayed on the graph. We've had some incredible record-breaking performance at Druid and have recently drilled our first multilateral and first 50-meter infill. Our multilateral well targeting the Mannville stack is outperforming historical wells by roughly 3x for 2x the cost. On our 50-meter infill wells, are performing in line with our 100-meter wells. All-time high production of approximately 7,000 barrels a day is forecasted for the remainder of Q4 2024. These results come with the opportunity to roughly double the 2P inventory and potentially apply the multilateral learnings across our asset base in Lloydminster and in Cold Lake. As you can see from the graph, our multilateral -- our first multilateral is on the top left side of the pool, and then we have our 50-meter infill test in the southeast part of the pool. Presentation is short and sweet, but the details are there. I will hand it over to Al Grabas here from this point forward. Thank you, everyone.

Thanks, Seamus. Hi, everyone. Yes, my name is Al Grabas. I have about over 25 years experience in the business. I started my career, spent a few years in the field in [ Kaybob are ], spent a few years in Calgary. Then I was part of 5 junior startup companies. And one thing I appreciate with these startup companies is just how you have to be lean and you have to be efficient, and every dollar matters. And the startup mentality is something we talk about a lot at Strathcona. So I wanted to mention that. And most recently at Strathcona, I was VP of Capital Operations, kind of looking after that functional unit. Okay. So I'm here to speak to Strathcona's fourth and final high-quality asset. The Montney asset spans across quite a lengthy part of the Montney fairway. We have 2 very liquid-rich assets on the Alberta side, and then a dry asset on the BC side. On the Alberta side, we have Kakwa and we have Grand Prairie. Kakwa is right next to ARC, that everybody is familiar with. And Grand Prairie is next to NuVista, that you're also very familiar with. And as you go into northeast BC, are amongst some of the most prolific cash production in Canada. Current Montney production is about 75,000 barrels a day. 30% of that is condensate. Pretty nice metric in the Montney. Total liquid is about 43%. 2P RLI of about 24 years. And we have about $4.5 billion 2P reserve value. Looking at the production chart on the right. By the way, my fifth startup company was that little, tiny wedge there on the left side of that graph. Here we are 190,000 barrels a day. So we have quite a story of both organic growth and acquisition. We have a clear path on the far right-hand side there to take this asset to that neighborhood of 100,000 barrels a day. This organic growth has been done, we've self-funded that growth. And that speaks to the high capital efficiency of our Montney business and making decisions based on value, not just volumes. So Strathcona is a vertically integrated oil business. our Montney business produces natural gas and our SAGD business consumes natural gas to make steam. Our Montney asset produces condensate, and we use condensate to blend with our heavy oil. I'll just give you one quick example. In 2025, 90% of our condensate production satisfies our blending demand. So without this natural hedge in place, a $10 plus or minus change in condensate price would impact our cash business by $100 million. And with that hedge in place, that there's basically no impact that we have a nice natural hedge. And similar story on the gas side. We are a little longer on the gas side. So in addition to the Montney asset adding value on its own, it provides a natural hedge position to support our business. It reduces our reliance on external supplies and insulates us from fluctuating prices. Our Montney asset has decades and decades of resource potential across multiple horizons. And this is across all 3 areas. We have tremendous reserve life in the Montney, from 18 years in Grand Prairie all the way to 65, whopping 65 years in Groundbirch. I'm looking at the Groundbirch map there on the left. We have 5 horizons. We've tested 3. There's Lower Montney and Middle Montney that we're very -- showing some promise. We're excited and we're paying very close attention. In Grand Prairie, we've tested 4. We're focused on 2 benches. And in Kakwa, we've tested 4 and we're focused on 3. And the reason we aren't drilling every bench is because we're focused on value. We're not focused on maintaining this much white space on the map for undrilled locations. In Kakwa, above our Montney, we have another tremendous opportunity in the Dunvegan oil play. We have 3 wells into that play and they're strong wells. And we're working on a full development strategy for our Dunvegan that will compete with our Montney production. Kakwa is a true organic growth story. It's a great testament to question of do we buy or do we build that you heard. Kakwa has been Strathcona's largest organic growth story. We own most of our infrastructure, which gives us control of our destiny and the high condensate rates and CGRs provide really strong economics. And if you look at the far left side of that graph, we started at 5,000, we're nearly 40,000. And that's primarily through organic growth. When you exclude the initial ramp-up at the beginning in 2017, we still achieved 11% CAGR. Pretty impressive. So we've added 35,000 BOEs a day of production. And we've done that with capital efficiency of 16,000 per flowing barrel, which is top-tier. Some of our peer metrics are -- reflect 30% to 50% of that capital efficiency. Put another way, we have twice the capital efficiency of many of our peers. And how do we do this? We start with a high-quality asset. We own the majority of our infrastructure, which I'll speak to a little bit later. And we've maintained a constant pace of development, with some diversification in there with some other horizons as we take time to learn and expand our asset base. We have a pretty rigorous lookback process. We never stop learning. And it drives our continuous improvement culture. We continue to drill faster and faster and longer and longer in the Montney. Drilling is a significant part of our capital efficiency success, and we do this exceptionally well in addition to the other parts of our business we do well. We're the -- this is in the Kakwa region. We are the industry leader, best in class. And this is amongst some pretty large companies and very well-respected peers. And Kakwa is amongst -- was amongst the deeper end of the Montney and some pretty tough rock. I just want to highlight that we didn't cherry-pick our data set. This is the full data set. We didn't pick our best wells and exclude our worst wells. It's the entire data set. And I'll knock on wood, I'll say, in the Montney, we have -- we've gone years of a significant mishap on the drilling side. In Kakwa, we own most of our infrastructure. If you look at the graph for the map there on the left, our 608 facility, we are pipeline connected with water, with condensate. And we do our own sweetening and stabilize our own condensate. Rich gas goes to the Pembina [ 8-11 ] Resthaven plant, which we have a significant ownership and firm capacity. And so the egress issues are not a concern. We do it, in our longer-term plan, we do -- we will expand the Kakwa asset, and we will achieve that at $18,000 per flowing barrel of capital efficiency. And how do we do that? It's because we execute well, and we have best-in-class results. I plotted the ARC's Hitachi asset. One, we respect the asset. Number two, it's -- everybody is familiar with it and it's a great asset. And you can see we perform right in the range and in fact, a little bit better than the Hitachi asset. And we have very similar capital efficiencies for growth. And Groundbirch, it's dry gas, but it's definitely in the right neighborhood. It's right amongst some of the -- as I mentioned before, some of the most prolific gas plays in Canada. We're surrounded by Shell, by CNQ, ARC, Tourmaline. And once again, we do have plans to grow this asset in the period around 2028 at, once again, very capital-efficient metrics of $15,000 per flowing barrel. And how do we do that? Once again, we execute well. And once again, we have best-in-class wells. We've plotted Shell's well results, and we compare very well to Shell. And that Shell curve is kind of the basis for LNG Canada. And finally, Grand Prairie. Since Strathcona took over the Grand Prairie asset, we've taken a different approach. We've taken a values over volume approach, and we don't want to overcapitalize. We don't want to drill and add volumes at all costs, just to leave as much yellow space on that map. And you can see from the top right curve that the single-layer production results are significantly better than the dual bench. So based on this value approach, we will increase PV by 20% in this asset and spend 50% less capital. So that's another testament to our value approach. So in summary, that's all I have. The Montney business, it stands on its own. It speaks for itself. And it also provides a vertical integration into our oil business. Great assets. And with that said, I'll pass it over to Connie, and she will share Strathcona's carbon story.

Thanks, Al. First off, good morning and thank you to everyone who's able to join us in person. And for those of you online, we really appreciate the support. I'm Connie De Ciancio and I'm the Chief Commercial Officer as well as a Member of the Board of Strathcona. I as well have 25 years of experience. I started my career in '97, '98 as a student at Petro-Canada Oil & Gas. And back then, they hired the students very young. From Petro-Canada, I stayed there until the merger of Suncor, which I chose to leave at that time, because I wanted to experience what it was like to be at a small company. I worked at [ Base Oil & Gas ] for a short period of time until I was picked up by Mosaic Energy. At Mosaic Energy, that's where we put together the Montney asset that you see out at Kakwa. And then I joined Strath. I think I was the third employee of 12. And I've been with the company since then and have enjoyed an extremely interesting commercial opportunity with the Waterous team. And I look forward to what's to come. I'm going to take us through the carbon file, which has been very interesting over the last little bit. As you know, carbon taxes are a big deal, and it is associated to our emissions intensity. Strathcona is one of the biggest carbon payers in the sector. On the left-hand side here, you can see how our carbon taxes have ramped up over time. And in 2024, we're estimated to pay approximately $70 million in cumulative taxes, which is about $1.05 per barrel. And that is continuing to grow over time. In addition, we have our carbon tax liability fully loaded in our 2023 reserves. And as you can see, it's about a $2 billion hit to our reserves there. So needless to say, we're interested in doing something to reduce our emissions intensity. We have taken some steady steps here over the past a little bit to do some projects that we consider to be small-scale projects within our SAGD assets, because the SAGD assets have the largest intensities for us. We are focused on opportunities in this sector that reduce our power needs, decrease our Scope 2 emissions, as well as improve our cost structure. An example of 2 of those, the top one there, the diagram #1, is our Lindbergh Cogeneration expansion, which came on stream in Q1 2023. That project was 60% funded by government grants and it produces about 7 megawatts of electricity, which has reduced our power needs to 0. So we are not on the grid at Lindbergh. It also increased our steam capacity by 5,000 barrels and saw a reduction of OpEx of $1 per barrel. So that was a very, very good project for us, and reduced our emissions by 20,000 tonnes per year. Our second project actually, which is currently being constructed and is expected to come on stream in Q2 2025, so next year, is located at Orion. And it is a waste heat recovery project, Organic Rankine Cycle, or ORC project. That project is 18% funded by the government and is anticipated to produce 16 megawatts of electricity, the grid -- which reduces our grid needs by 80% and provides us with a $2 per barrel reduction in OpEx. And we anticipate that to reduce our emissions by 50,000 tonnes per year of CO2 equivalent. What's interesting about the Orion project is, if successful, we could replicate that at Tucker. So that's a great opportunity for the business. The largest opportunity actually for us to reduce our carbon intensity would be to the carbon capture and sequestration. Strathcona's thermal assets are actually uniquely positioned compared to our peers. The map there, the provincial map there on the left, shows Strathcona's thermal projects in green relative to pathways projects in yellow. And as you can see, we have a very concentrated point source, which is situated directly atop of a suitable pore space, which is different than our peers. We also experience a very supportive regulatory framework in Saskatchewan as well as in Alberta. With the concentrated point source we actually have a low requirement for extended pipelines. Earlier this summer, I'm sure you would have seen that we signed a very transformative transaction with Canada Growth Fund, which sees us having the opportunity to access $2 billion in funding to support carbon capture infrastructure. That partnership is really a true partnership. We are both sharing in the risk of the carbon, like how efficient the project is going to be. Strathcona is retaining the carbon pricing risk. And what's great about this for us is that we are not subject to any fixed payments, minimum volume commitments or mandatory repayments dates. So we're very excited about being able to access this. In addition, we've also secured many government grants over the years in the tune of $43 million. And we have line of sight to a few more grants to come. We are working towards or marching towards our first carbon project. We're progressing a project first of its kind at Meota East. We are hoping to FID that in mid-2025. And in addition, we are also proceeding with 2 FEED studies in Cold Lake because we want to be able to have the ability to pivot and/or do opportunities both provinces, Alberta and Saskatchewan, because that's where our thermal base is located. The reason why we've chosen to move Meota East forward first is because it fits it checks off more FID boxes. We have secured the funding through Canada Growth Fund and we anticipate through the Canada Growth Fund opportunity and grants that it will be 100% paid through the partnership, as well as ITC credits. We're proceeding with 2 EPCM FEEDs on an engineering study out at Meota East. We secured the pore space. So thank you to the Saskatchewan government for that. We have acquired a right of way for the short pipeline that we require. And we've already completed our town hall with our local stakeholders. In addition, we've -- we're securing any other additional regulatory requirements that we need to be able to, hopefully, FID next year, which will be very exciting for the business. With that, I'm going to pass it over to Connor, and he's going to go through our capital allocation strategy.

Okay. So we've heard from Kim, Ryan, Seamus and Al on all the money that we want to spend all the oil and gas that we think we're going to make, and we've heard from Connie on our carbon story and Dale on the culture and values of the business. What my job is to try and tie that all in and talk about what that means for our shareholders from a dollars and a cents perspective. Sorry, and I should say that I've been the CFO of the business last couple of years and a partner at the fund since we got started at the end of 2016. So when we look at what 2025 to 2030 is going to be for the business, on a total production basis, we think we can grow from about 190,000 BOEs a day to 290,000 by 2030. And that's at the same time where the percent of oil goes from about 72% to about 75%. And at the same time, as we've talked about, our 2P life at the end of that is still going to be about 20 years. And while we have about 4 teams and 4 presidents that are all going to be a big part of that, the rate of growth is certainly going to be a bit -- there's quite a big spread. We have Kim grown from about 60,000 BOEs a day to about 93,000 at an 8% rate. Ryan is a racecar, going to go from about 28,000 to 75,000. Seamus sustain flat and making nothing about money, going from 25,000 to 27,000. And then Al from about 72,000 to 95,000. And what's great about our plan is that not only are our BOEs growing at about 8%, but on the oil side, that's about a 9% growth rate. And the good news for our shareholders is that while our oil and gas growth is going to change a lot over the next couple of years, the capital spending is going to be pretty flat. We're spending about $1.3 billion in capital in 2024. That goes up a [ snick ] into 2025, at $1.350 billion. And then it's pretty flat in the $1.5 billion to $1.6 billion range over 2026 to 2029. And then finally, we just get to a whole flat spend profile of $1.250 billion in 2030. And even though we have 4 teams and sets of properties that are all a bit different, they all are going to get a pretty big chunk of the capital spending. And about 1/3 of the capital over the next couple of years is on growth and the balance is on stay flat spending. And I should point out that while we're extremely excited about the carbon capture and storage opportunity we have in front of us, that is not part of the plan that we have in terms of the stats that are shown here over the next 6 years. And that's in part because we want to make a bit more progress in the first sanction until those start to get factored in, and then even post that happening effectively 100% of the cash will be through tax credit or the folks at the fund. So the most important question that we are always thinking about and the hurdle that we always know that we have to clear, is that anytime we ask our shareholders for more money, we need to give them a lot more cash back over time. And there's a bunch of different ways we can think about bringing more cash and capital into Strathcona. Sometimes our shareholders will put a straight cash check into the business. Sometimes we will go to our bank group for money. Sometimes it's just because we keep some of the earnings that we make. And that's really going to be our plan over the next 6 years and that we think the -- effectively, the capital employed of the business is going to go up by about $1.4 billion. The finance and accounting team was -- came for me to give a quick lesson in terms of how we think about that. There's some kind of 2 ways to think about it. One, we're going to spend about $8.8 billion in capital over the next 6 years, and the forecasted DD&A on that is about $7.4 billion. So i.e. the net is the $1.4 million change in the capital employed. The other way to think about it is we think the forecasted operating earnings of the business from about $7 billion, we're going to pay out to our shareholders about $5.6 billion of that. The good news is for that incremental $1.4 billion that we're asking for from our shareholders, we think that's going to increase the go-forward per year operating earnings of the business by about $825 million on a pretax basis, is the best part of the story. The not-so-great part of the story is after trying as we might for the last 8 years, and what we think we continue to do for the next couple of years, we're finally going to be a cash taxpayer, despite our best efforts not to send money out east, and that's going to mean that on a post-tax basis is about a $375 million change. And so our earnings on a trailing 12-month basis have been about $1 billion, and that's going to go to about $1.8 billion, post tax -- sorry, on a pretax basis. The other way to think about that is that's growing up a little more than 10% per year over the next 6 years. The way to think about that is our top line production is growing at about 8% per year. And then the operating earnings margin is growing from about $15 per barrel to about $17. And so at the end of the day, when you think about that all together, the incremental return on the incremental capital that we're asking for from our shareholders is, I'd call it, in the 60% range at $70, still could earn a pretty good cost of capital of 50, but it's not to say that we actually would spend that same quantum at that price. We would certainly have for a sustained $50 or even a $60 price, the quantum of spending would certainly be last, but that's just show that we, in theory, still could, and there's a strong -- the margin of safety in the plan is quite strong. When you think about strength and how the durability of the business is going to change, something that we're super focused on is what is the hold flat -- what is the WTI price we need to stay flat and still generate free cash flow for the business? And then how does that number change post the spending on growth? And then finally, after 7.5 years, we've finally started paying out a base cash payout to our shareholders. And we have to think about what that means in terms of the flat price that we need to still pay that. So right now, the stay flat breakeven for the business is about $43 WTI. Post growth, in '25, it's about $54. And then post the quarter per quarter share base cash payout, it's about $59. The good news is over the next 6 years, we think that the stay flat price or the price we need to stay flat and generate free cash flow will drop from about $43 to $39 as we spread more of our fixed costs over more barrels. And then just assuming that we kept the same, call it, $214 million a year cash pay, then since we're not spending any growth CapEx in 2030, that falls to about $42. And I should say that as we follow through on our plan to do carbon capture and storage and in turn, move from being a carbon taxpayer to someone that is going to be probably long carbon credits, we think that there's a good chance that that's going to lower the net price that we need by a further $2 a barrel. So one of the most important questions that we have as a team and certainly as a Board is thinking about the fact that, under pretty much any price you can think about, we're probably going to be making some money over the next 6 years. And the question for us is, what are we going to do about that? And as folks know, there's really maybe 3 or 4 things that all companies can do with the excess cash that they make. The first is that, as I said, we've finally started paying out a cash payout to our shareholders. It's currently a $0.25 per quarter. How do we think about, how that might change over time is the most important thing for us is, going back to that prior page, is maintaining a breakeven between the sustaining capital and the base payout that is kind of flat, which in turn, that means how that base dividend is going to grow is if we can grow the oil volumes of the business or the breakeven of the business goes down. And so since we're growing oil production by 65% over the next 6 years and the breakeven falls by about USD 4, what that actually means is if we were to maintain the same stay flat capital price, we could actually increase the quarterly payout from about a $0.25 a quarter to about $0.75, or from $1 a year to $3, which on a 6-year CAGR basis would be about a would be about a 20% CAGR. The second thing that a company like us can do with the excess cash that it makes is pay out a series of specials to its shareholders. And that's probably going to be the best use of our -- of the excess cash that we make in the short term as our float is small. And just as a potential thought experiment as to if we chose to do that and that was the only thing that we did with the excess cash we made over the next 6 years, we could pay out about 92% of the current share price of the business. And that's with the business getting a lot bigger over that period of time. The third thing that a company like us can do, and while maybe isn't a great option in a very short term, but over the next couple of years we think it could be a great thing to do with the excess capital, is to start doing a series of buybacks on our stock. As we talked about at the start of the presentation, we think there's a lot of value in the shares right now. And if -- as our public float grows, if that share price stays the same, then it's probably going to make sense to buy. And so just as a potential state of the world that perhaps could happen. Let's say that just over the next 6 years we use 100% of the excess cash flow on top of the current base payout to buy back our stock at oil average $70, and our share price didn't move over the next 6 years. The share count would go down such that production on a per share basis will be growing at about a 34% CAGR. And that base payout, which would still be $214 million a year, but because the share count would be so much smaller, would grow at a close to 25% CAGR. So we -- while that sounds like a pretty great state of the world, I think that's probably not going to happen because, hopefully, the share price goes up at some point over the next 6 years. But that is just how the math shakes out. And then finally, the final thing to do is to buy something. And as you said, we've certainly been big buyers in the past, and we're always looking to buy things, but there's a very high bar to clear. And really what we're looking to do, first and foremost, is buy things that are true bolt-ons to the current properties that we have that, in some way, make that property better. So I think a good example of that is a deal we signed in the third quarter, closed on just over the last month, is to actually buy the Cold Lake gas transmission system, which is the series of pipes that feed the natural gas that is used to burn to create steam in SAGD for Kim. We bought that for about $40 million. And we think that's going to lower the go-forward price that we need to stay flat, and generate free cash flow for Kim by about $0.50 a barrel. Important thing to think about when you're an oil and gas company, or frankly, any company, is where are you selling your product and what risk to each barrel is there in terms of who is your customer? And how is that customer going to change over time? And the good news is that folks in Calgary shouldn't be too mad at us for this big growth plan that we have because only about 40,000 BOEs a day of the 105,000 growth is actually going to be sold in the province. The balance is going to be sold either on the Gulf Coast through our rail terminal, or is potentially going to be new gas that we make that is effectively consumed by the new gas that is going to need to get burned. So the actual kind of percentage of the barrels that are actually going to be sold in town, so to speak, is quite small. And I think that's going to be a big part of trying to shrink the risk of the plan. Finally, this is certainly a presentation that's been focused more on our shareholders, but it certainly does make sense to think about the debt side of our business for just a second. And really our goal on the debt side is the same as it's been since day 1, which is pretty simple, which is to try to get as much access to capital as we possibly can at the best possible cost. And so -- and when we think about how we're doing on that over the last 8 years, when we think about the capacity in the bank market, that Strathcona has been able to build, we've grown our bank line from about 0 to $2.5 billion through, call it, 13 separate bank deals. Something that was not easy to do, I will say. In part, it wasn't easy because while we were growing by $2.5 billion, the entire bank market in Canada grew by about $2 billion. So another way to think about that is we took 100% of the growth, and we took $500 million of our peers' bank line, which is hard to do. And then at the same time, the cost of funds has started to go down over time. And then -- so finally, the real main piece of feedback that we've gotten since we went public over the last year is, hey, the story seems to make sense, and the team seems to be great, and the price seems really low, but I just can't buy it the float is too small. And so we're not tone-deaf to that and we know that over time, as much as we love having this big block, and it's been a great story for the fund, over time, our partners that we've raised capital from are ultimately going to have to start to get some shares back from us. And how that's going to happen is not going to be by us doing a series of secondary sales for cash and handing the cash to our partners, but instead it's going to be through a series of pass-throughs in which we effectively unwind the partnerships that we formed to buy Strathcona to effectively hand the shares to our partners. And so what we're excited to announce as part of the day today is we're effectively going to start that process in the start of Q1. The float is going to grow from about 9% to about 20%. And while we -- as the folks out west see ourselves a very long-term shareholder of the business that we've built, we think that's going to be a big part of starting to make Strathcona, a business that more folks can buy. And so with that, I know we're a little late on time, but we're going to start doing some Q&A. We're going to take a minute or 2 to set up some chairs, and then we're keen to take folks' questions.

While we get set up here, I just want to point out that if you'd like to ask a question, if you're in the room, there's a microphone set up there in the middle for you. All right. Our first question is from the line of Menno Hulshof of TD Bank. Can you give us a sense of the profile of investors of which shares are going to be distributed starting in Q1? Is it going to be prorated across all shareholders or more likely distribute it to smaller, short, medium-term investors?

Sure. Why don't I take that? So we're -- so WAF has a series of partnerships. We're unwinding one of the partnerships. So the shareholders that are receiving the shares are the shareholders of a particular partnership. Are they small or medium, long term? Our guess is that the large majority of the receiving shareholders are medium long-term investors, meaning you never know how these things exactly work, but it would be my guess that a small percentage, minority -- small minority percentage will be looking for immediate liquidity. This is my best guess.

There are no other questions on the line. Any questions in the room?

And if folks want to ask, there's a mic in the middle there. Just come up to the mic, just kind of, if you don't mind, sit kind of in a line, just -- the mic. Sorry. Thank you.

It's Anthony Linton from Jefferies. Just on the pass-through, maybe could you just provide some color on what's changed where the pass-through is happening now? And then maybe how should we think about potential timing of future transactions?

Sure. I can answer that. Why now? Well, let me give you sort of maybe a more macro view, so it's meant to be a riddle in any way. So we're a very conventional private equity fund. We ultimately have to return all of our capital to our investors. And to give you just a macro sense, directional sense, we're going to have to return all of the capital to our investors roughly over the next 3 years. So this is not going forever on it. And as I mentioned, we've got several partnerships. We're doing -- and the partnerships that we are planning on unwinding first are generally smaller partnerships. Rather than have just a big wave of shares come through, we think it's it makes more sense, more prudent to be doing smaller partnerships first. And so this is a smaller partnership on it. And we think that the cadence when we'll be doing these other partnerships over the next 3 years will be roughly at the same time, to give you -- again, this just to give a rough approximation, we'll probably be doing this on kind of a rolling 12-month basis, just as a rough sense. And we thought what we first do is get the business public, sort of, I don't know if stabilizes the right term, but so shareholders are quite familiar with the business, before making a distribution.

I'm Dennis Fong with CIBC. Maybe my first question follows along some of the previous 2. At the opening remarks, Adam, you highlighted that at $30 a share. You view a lot of the value associated -- there to be a lot of intrinsic value there. How do you think about in some of these potential pass-throughs if shares were to come to market, how you balance obviously the variable dividend component of things versus obviously, repurchasing shares in those specific situations?

It's a fair question. Here would be -- I'll give you a hypothetical and then I'll try to give you a sense of -- if we were completely widely held today, we've completely distributed our shares today at $30 a share, we would have a very strong bias for share buybacks, a very strong bias on. So that's just maybe, again, sort of the -- an endpoint. If we distributed over the next 3 years, we've attributed all the shares and the stock's still at $3 a share, and if oil prices are roughly where they are today, we'll have a very strong bias for share buybacks. Because we think the shares are in our view, very undervalued. The challenge we have is that when we have a modest flow, certainly, now when it's 9%, when it has been 9%, we certainly believe that we cannot buy back any shares. I mean the -- as Connor was saying, in his remarks. By far, the #1 reason why folks say they haven't been able to buy the shares is that they're too thinly traded. And now when we go to 20%, it's a fairly significant just a little more than doubling of float. And we'll still think it will be thinly traded like but not -- but it will be materially better. It's another long -- I'm giving you a longer answer than maybe you're interested in, but I think we're going to have a more significant float before we can really start thinking of any significant buybacks.

Great. Maybe switching gears to something a little bit more technical. In terms of your Lloyd thermal production growth in the near to medium term, Meota is obviously a large component of that. Can you talk to, one, the opportunity for outperformance. We've seen a lot of that at least in the near term from some of the historical Husky projects. And secondarily, how do you think about the multi-stack potential, especially in Meota, frankly, Central and West as you kind of think about your near-term developments from both of those facilities.

Yes. Great question. So on the outperformance side, there's always opportunity to outperform on what we're laying forward for plans. What we have out there for plans, we know is achievable. We've got plenty of history to use for our history matching that we use for our analogs when we're developing these assets. So we've put forth what we believe is a good [ P50 ] estimate on our performance and what we expect to see for the future. On the multi stacks of the resource play, I didn't really get into that, I guess, during my presentation, but yes, we have several different formations that are stacked relatively right on top of each other throughout the Meota area in particular. And that just really reduces our capital for getting that resource density back to those main central processing facilities. Right now, we're producing out of the Lloydminster channel, the Colony channel, the Waseca channel, and now we're going into that GP trend that I was showing, those are all within reach of 1 or 2 CPFs, which is a -- that's a huge benefit to us. And that, again, similar to what the Cenovus guys have done or Husky previous to that with their development scenario.

[ Charlie Fischer ] from Seattle, shareholder. First of all, I just want to say, I think you guys did a really nice job in the presentation today. I think that you outlined a really terrific value proposition, and you've outlined historic growth in the company. And it's more of a comment than a question as I think you just -- for me, you just need to keep executing and demonstrating that execution to shareholders, and you'll get your valuation. I think it's a simple -- Adam, you've been around a long time. And is it -- am I missing anything? I mean, isn't it just getting up every day and just driving the car or the store and selling the goods?

First of all, Charlie, thanks for your comment. One of the reasons we were keen to have our session this morning was so that our shareholders could see the team that is going to be executing, driving to the store every day, so to speak, that we're really excited about. We've got a great plan and absolutely, we always like to say, it's really easy to build the charts in terms of what's going to happen in the future. It's harder to be able to make sure that you're executing but we think we've got a great structure and a great team to able to do that. So thanks.

And one last thing. I would -- this has been really helpful. I would hope maybe you'll do this yearly because I think it's good to kind of reset everybody. I know it's a lot of work to put this together, but it's good for the investors to have all this data and the presentation.

Thanks, Charlie. Appreciate it. Any other questions? Don't be shy. Greg, I saw your hand up. Are you -- there'll be -- we prefer the fastballs rather than the underhand, just so you know.

I'll ask you maybe a couple of questions, if you want to repeat [indiscernible], okay?

Great.

How autonomous are they? How do you incentivize?

So what I'm going to -- I'll give you an initial answer. I'm going to pass it over to Dale to answer that question. The initial answer is, I don't want to oversell it because we haven't -- this is so new. So we can't say, oh, yes, we've got -- this is a well-oiled machine. It's new. So we can't provide evidence yet. But maybe Dale can talk about maybe some of the philosophy in terms of how we're thinking about how much autonomy.

Absolutely. Thanks, Adam. And that is definitely a great question going from, again, that functional design to the business unit design. But the autonomy is really -- it truly is autonomous for the 4 presidents to make those business decisions. We still have what we consider to be functional groups at the corporate level that manage things that are more what I would consider to be regulatory driven to make sure that we stay between the goalpost, so to speak. But we think that we want the teams to be focused on doing what they do best. And that's actually understanding the asset, developing the asset and producing the asset. That's really what it's about. I would say it's still not fully business unit structure because we want those corporate functions to help support the business when needed, but that's really what it's about. I believe that it is a much more focused way of doing our business so they can achieve the results. That's what they're good at.

Dale, can I speak with you just for a minute. Can you differentiate stock-based compensation, like I understood the appropriate incentivizing. I mean you guys have quoted CNQ, one of the hallmarks of CNQ right is that you've got direct employees to [ ship ] kind of top to bottom, so I don't think that's what you're suggesting. I think you probably want...

Well, again, I think for CNQ, for instance, and I mean they call it off then it's the golden handcuffs that once you start working for that organization, you don't leave because you have these incentive programs that when they're vesting every year, 1/3, 1/3, 1/3, essentially the people don't want to walk away from that, right? Whereas for someone like ourselves, with our program, we have the ability to take those handcuffs off, those people in those organizations that actually have the ability to join and not lose any incentive compensation by joining our team. like there's a significant benefit. I think people underestimate our compensation program. And I also think that it also, as I've said before, people will lead because they're going back into the industry where they're going to enter into that same type of program where there's divesting that occurs, right? And so again, trying to be trying to be fair to our shareholders as well, when you have stock-based programs, there's a winner and there's a loser. And that's not really what it's about. From our vantage point, people deserve what they get both from a shareholder perspective and an employee perspective. So that's why we think it's such an ideal program.

Yes. And I think the third thing I'd say on that is we -- I think what the folks at CNQ have done is obviously it's always -- it's certainly a great model, and it's worked really well for them and they have an unbelievable track record. Having an owner mentality, a shareholder view is certainly a big part of our culture as well. And we want as many folks as possible of Strathcona to be shareholders, the top 60 folks at the company have to hold at least their full year salary in shares and then it's a much higher bar for the folks that you see up here. So we think that as a percentage of our team and as a percentage of folks' net worth, it's probably going to be the same. What's different is actually how folks become a shareholder at Strathcona as opposed to peer in that we want our employees buying their shares. The best way to feel like a shareholder is to write a check and buy a share. It doesn't have the -- I don't think it really feels the same when you get given the shares. And importantly, the real difference is that when you're buying in the secondary market, the only being -- the only person being heard is the person that you are -- is the person selling you those shares. When it's just been granted to you, it's the whole shareholder base that [ is hit ]. And so for instance, we spent all this time talking about how cheap we think our stock price is. I think folks in the audience would be fair to be angry if we were granting a bunch of stock to ourselves at the current share price. So we still want to own tons of shares and the folks on the stage to, but we want to be buying off folks instead of just a grant.

I'm just going to add one more thing to this, if I could. In a commodity business, you have a lot of unintended consequences with these long-term share programs. One of the unintended outcomes is that we've seen is that the commodity goes down, stock goes down And the employee has been -- a large percentage of their compensation has been tied to their long-term incentive. And now that longer- term incentive is maybe worth nothing. And they say, you know what I got to do. I got to leave and get re-upped to somebody else, not because I'm unhappy at the organization, but because my long-term incentive is now worthless. And the only way I can get more long-term incentive is to leave the company. It's really a crazy thing. Another intended consequences, you have someone at an organization who fundamentally doesn't want to be there. And they say, yes, but you know what, if I leave now, I leave all this money on the table. We don't want those people at Strathcona. If someone does want to be at Strathcona, we want them -- there's no handcuffs. There's no -- yes, we've got you. You can't leave. If you don't want to be here, we don't want you here. There's -- I mean, put another way, there's some very warped behavior happens in a commodity industry as a result, have nothing to do with the operations of the business, with the operation of the employee on it. And that's why we prefer to reward employees on is what they can control. As Dale said, what's our operating cost? What's your finding development costs? What's our health, safety and environment record?

We have another question from the line of Menno Hulshof, where do you see the most risk within your 6-year plan from an executive perspective?

I think from an execution perspective, who wants to answer that?

Sure. I can take that. Well, maybe the simplest way to think about it, most of the growth is coming from Ryan. He's grown at 18% a year. So that's a high bar that we've set for him. But we've got -- we've got a ton of confidence he can do it, and he's leading the same team that he's led for the last close to 10 years that built the first 4 projects and the goal is just build 3 new ones. And I think in general, the way we think about risk is it scales to the quantum of capital that we're spending. We spent -- in 2023, we spent about $1 billion. We're spending $1.3 billion this year. We might -- we'll be in the $1.5 billion to maybe a bit more than $1.5 billion over the next couple of years. So there's certainly more risk as you spend more money, but we don't think this is twice as much risk. It's going to be a bit more, and we certainly think that we have the team to do it.

All right. [ Ashith Lalani ], from Toronto. Just a question. When I talked a lot of institutional shareholders, and I think when the analysts asked the first couple of questions, the focus is really on flows, not about value. Do you think that there are these value shareholders out there that want to be partners? Or is the institutional shareholders just really focus on flows? Or does it matter once you're in the benchmark? Is that going to change sort of how they look at the stock. Just curious what you thought.

The institutional shareholders, sometimes I think get a bad [ wrap ] of being very short term and [ in and out ] of stock quarter-to-quarter. If you look at some of the shareholders at some of our largest peers, we're the fifth largest oil company. If you look at the shareholding base of the top 4, there are some shareholders that have been there for a very long time. And so I think that -- it is -- there is an ability to have a real core base of institutional shareholders that end up believing in the story, look through cycles on it. Now there's clearly some short-termism, of course. But I think that what we are conscious of is that our value investing approach has not been the that dominant investing style of the oil and gas sector over the last -- more than 10 years. It's been growth. And then growth got turned off over the last 4 years or so 3, 4 years, growth became a real negative term on it. And it was a return of capital became a very dominant narrative. We think this will be a good group that -- will focus ultimately on net asset value per share growth is our view.

Yes. And I think maybe just a small point to add on that is, in part why we spent so much time on thinking about how we've made our investments over the last 8 years is the dream for us is to find more partners that kind of I think the same as us, is to find a bunch of value-focused shareholders as well. And to effectively picking folks that I think the same way. And our goal is not to be the perfect business for all types of shareholders and to try and try and please the whole street. We're going after a very small slice of the pie, and I think that should be a plan that works out over time.

[ Michael Spiker ] here, [ HTM ]. I have a question just on the expandability of the CapEx program. So you guys have said that you'll moderate growth to 3% or 5% lower, where is that cut coming from? Or is that kind of across the board when you look at the portfolio?

Yes. So as you said, we think we can get to that. I call it 8% CAGR at 70% and then kind of sub that when we're kind of at a sustained flat 60% or sub or call it 50%, then it's going to be a smaller spend profile and internalize growth. Really, where those cuts start to come is, first and foremost, we're super excited about Lindbergh Phase 2. Unfortunately, that might get cut first. [ Kim ], it's not because we don't think it's a fantastic project. But when we think about the risk of it, it's the one that's going to take the longest to build where we're exposed, frankly, for the longest period of time between the time we invest the capital and start getting cash back. So again, as we think about trying to balance that risk, we would probably start there. And then there'll probably be -- there's going to be a blend of the other projects.

Awesome. I have one question that's a little bit more specific. At Grand Prairie on the Groundbirch asset, how have you guys changed completions year-to-date, like the 16 to 30 pad was a little bit softer. So you go on value over volumes. Is there an approach to lowering DSAT costs there that is maybe not panned out? Or what's the go-forward plan for that asset?

Yes. Good question. So we -- it's a fairly recent acquisition, and we haven't spent a lot of time there ourselves developing. So on the capital efficiency side, we are drilling wells quicker, faster, especially in the last 3 months here. When -- hopefully, when we plot this next year, you'll see the similar graph for Grand Prairie that you saw for Kakwa, and we've taken some learnings from parent-child interactions. We are pacing our wells further and we're drilling a single bench. And we -- if we're going to fail, we want to fail fast, and we're making adjustments.

Awesome. I said Groundbirch, it should have been Pipestone. And then...

Sorry, I was just going to add to that. I would just say stay tuned. When you -- in a year's time, if we do this again, we'll draw a great line between kind of pads planned by pre-Strathcona of the pads plan by Pipestone -- of the plan by us up in that asset, and we think it's going to tell a pretty good story.

Awesome. And then just one more. You speak to the undervalue kind of nature of Canada and then all this free cash flow for M&A. How do you see undervalue between duration and kind of an inventory carry in the shorter cycle place? Are you thinking about M&A capital and taking resource duration in the oil sands or a little bit shorter cycle in the Montney, how do you think about M&A 2027 and onwards?

I think it was Kim who said [ we ] don't have a favorite child. Having said that, we've liked the shorter cycle of the Montney primarily because it's been a great natural hedge for our thermal business, providing natural gas, which we consume and condensate, which we use. The part of what these longer duration, as you described them, Michael, thermal businesses are. They have a profile which in North America now are very rare. Long life, low decline, high free cash flow oil. If you want to keep it really simple in your head, there's none of that in the United States left, none. We're the only place in the free world that has long life, low-decline, high free cash flow oil. And if you have a partially depends on your view on demand. One of the things that was -- that made short-cycle assets, these horizontal [indiscernible] in the Permian popular is you could bring on a lot of production very quickly. And there also became a bit of a narrative on, well, you know there's going to be no demand in 5 years. So you might as well take it all out of the ground now and harvest it because no one is going to be buying it in 5 years. Our view is different on demand. We think that peak oil demand is more than 50 years away, more than 50 years. And so if you have a long-duration asset, we think that, that likely just gets more valuable over time. So we like the Montney. We like its support for our thermal business. But we really like the Canadian thermal asset business, not just our business. I'm talking about that for all the Canadian thermal asset business.

Any other questions? So I want to thank everyone for coming this morning in person and online. We really appreciate it. And we will take [ great parties ] under advisement doing many, many things or maybe it was Charlie's once a year. We'll -- we're really glad we did this. And thanks, everyone, for the time this morning. Appreciate it. Thanks a lot.