Invesco High Yield Equity Dividend Achievers ETF Price & Performance (PEY)

We hit some real highs last year, which are detailed in the year end press release from last night and the recent reserves report release in February. But I think what's most important takeaway is that we delivered on what we said we're going to do with the Repsol assets. After making that significant acquisition in late twenty twenty three. So this time last year, we were already drilling some great wells That continued through 2024 where we drilled a total of 41 gross wells on the old Repsol lands, that represents about 55% of our total 75 and the outcomes from those wells exceeded our expectations by delivering a sustained 40% production improvement over our legacy programs and combined with the near flawless execution in the field, helped with the company helped the company deliver some outstanding PDP FD and A costs in 2024 of $1 in Mcfe. The production offside, the team spent a lot of time redirecting gas molecules to different gas plants in the field last year to improve deliverability and liquid recovery. But they were also able to improve on the cost by simplifying the operations out there. We saved some third party fees on low value ethane liquid recovery and we moved that gas instead to the Edson plant to preserve the rest of the liquids.

We also shut down the sour gas processing side of the Edson plant. And this was a big part of getting our operating cost reduction from $0.55 per Mcfe in Q1 down to $0.5 per Mcfe in Q4. And a result of improved netbacks. Despite the fact that we we lost about 3,500 barrels a day of base production to Atana. Last year, Dundo, our legacy lands last year delivered some great results too.

We drilled a new flare trend right in the heart of Sundance and completed a couple of Takua flare wells near the end of the year, which came in as expected. The team assembled those Kakwa lands over the last few years through a series of crown sales and swaps with other producers. We always had a large Cardium position in Kakwa. And these new Spirit Riverlands along with our gas processing plant really complement that.

We'll monitor the performance of these wells and then we'll go back and we'll drill some more to keep that plant full perhaps later in the year. Over time, if we continue to like the results of those wells, we can expand the plant from 25,000,000 to about 50,000,000 cubic feet a day to match our sales egress in the area.

And we'll increase the drilling activity accordingly. With the improvement of U. S. Gas prices in Q4, the team continued to bring on new production and we set a record of 133,000 BOEs a day in the quarter. And we achieved our target exit production of 36,000 BOEs a day in December after deploying $457,000,000 of capital which is near the low end of our guidance last year. This translated into a trailing twelve month capital of approximately $9,700 for flowing BOE, which is one of the strongest in our history.

On the financial side, we pulled in roughly $200,000,000 in funds from operations or $1 a share in the quarter and thanks to cash costs of $1.36 per Mcfe, which the lowest since Q3 of twenty twenty three, which just before the Repsol acquisition and some good net sales price of $0.28 in MCFE thanks to our hedging and the gas market diversification in our liquids despite the fact that the AECO daily price for the quarter was only $1.4 per GJ. All this culminated into a great year with strong revenue and low overall cash costs delivering a 64% despite it being one of the worst average annual prices at Ecol on record. When you look at our netbacks as compared to our finding costs, we achieved a solid 3.3 times field netback ratio or if you throw in all of our cash costs including our taxes ratio returns to be about 2.6.

By either measure, we think that's a very effective use of shareholders' capital We delivered a record amount of dividends for in 2024 of $258,000,000 to shareholders.

And we still managed to pay down a little bit of debt. On marketing side, obviously our hedges did us well last year. Recall, we would put those on put those on over the last three years.

And that combined with our U. S. Price market exposure helped us especially in the fourth quarter achieve better pricing than ACO. As we look forward, have hedged four eighty million cubic feet a day for the for this year and three sixty six million cubic feet a day so far for next year at prices over $4 in MCF. And to put that into perspective, the hedge book including some liquids some liquid hedges that we have has secured $850,000,000 of revenue for 2025. What's not secured is mostly floating on markets that are priced in U. S. Dollars in Ontario and The U. S. Midwest. And of course the Cascade Power supply deal. We still have a little bit of AECO exposure through our through our exposure or through our infra service. If you look out beyond 2026, at our diversification portfolio, it looks really strong. I would encourage you to check out our marketing slides on the website or in our corporate presentation, and they've all been updated as of last night. One example of the quality of this book is is where we have roughly 70,000,000 cubic feet a day of gas volume that's exposed to Henry Hub through basis deals that are priced at US76 per MMBtu And when you look at Henry Hub 2026 summer futures, currently trading at U. S. $4.17 So $4.17 per annum BTU U. S. This nets us back about $4.6 a gigajoule at AECO when you subtract the basis and convert the units and the currency.

Which is about $5.3 per Mcf with our heat content.

Now that compares to the current price at Acho on the strip at about $2.89 GJ. And we continue to acquire service like this to locations with where most recently made an arrangement to add 30,000,000 cubic feet a day of [indiscernible] starting in November 2025 for a long term deal, which cost us roughly $1.15 per GJ to get there. Right now winter twenty five, twenty six at Don is worth US4.78 dollars per MMBtu. Or about US5.28 dollars per GJ landed in Alberta. After you improved the tolls, subtract the tolls and do unit conversions. So that's $6 an MCF. With our e content. When you combine that new service with our recent 70,000,000 cubic feet a day exposed to that mark. And on top of that, we also have Chicago, Emerson, a little bit of Ventura and Melin as well exposure. So of course, we can hedge these markets and we are or we can let them float. But either way, the marketing diversification portfolio we have assembled looks pretty darn good.

So all these different sales points and our mechanical hedging program that helps derisk our revenues. [indiscernible] couple that with our industry leading cash costs and finding costs, it really helps to reduce the volatility of our profits or our earnings over the long term and should give comfort to our shareholders in our return strategy. In February, our Board of Directors formally approved a capital budget between $450,000,000 to $500,000,000 which should drill us between 70 to 80 net wells and add between 43,000 to 48,000 BOEs a day by the end of the year next year to offset our base decline rate, which we estimated around 27%. That should see us exit December of twenty twenty five at or about 45,000 BOEs a day. Using the midpoint of that guidance. And we think we can do that with a four rig program, which is designed to hold production flat more or less through the first half of twenty twenty five similar to what we've done in past years. If we have production exposed to low prices, any low prices, we expect us to manage that similarly to what we did this past year. [indiscernible] And of course, we're living in some uncertain times right now with the threat of tariffs on and off again.

By the month or by the day But we think we're well insulated on the revenue side since we have already hedged close to two thirds of our gas volumes. And about 27% of our liquid volumes for 2025. Most of our gas contracts physically deliver in Canada, so we should be S. Tariff exempt.

Clearly, the uncertainty doesn't help the market sentiment or the rest of Canadians. So we hope this trade war can be resolved sooner than later.

On the natural gas macro, there's there's plenty to be excited about with LNG ramping up in The U. S. Already and LNG can This the demand right here in Alberta also looks bright with the vast number of connection requests to the power grid, to the AESO network. Totaling 10 gigawatts of demand, which by my math could be 1.4 Bcf a day of local demand if it was all fired by natural gas. We include Phase two of LNG Canada, the Rockies, slism's LNG project that we're part of. And the NGTL expansions that are planned to the end of the decade, you can quickly get up to about seven or eight or even nine BCF a day of of new demand by the end of the decade. It all comes to fruition. And that's pretty exciting for a basin that produces about 19 Bcf a day. So as I like to say, I think we're in the right business. Okay. I imagine there's some questions Olivia. So perhaps we can go to the phones. Take some of those questions.

Certainly. And we have a question coming from the line of Chris Thompson with CIBC Gold Markets. Your line is now open.

Good morning, JP and team. Thanks for taking my question. The first one I wanted to ask you on just with [indiscernible] 09/2024?

Yes. I would say there's room of course to improve. I don't think we budgeted for 9,700 last year either. Having said that though, we did bring a lot of production on at the end of the year. So that year end exit capital efficiency has a little bit of that sort of extra production that we would have saved throughout fourth quarter or through the third quarter, I guess, and moved it to fourth quarter. So I think the 10.5% is a reasonable number still to apply for your your models.

Got it. Okay. And then you mentioned through to the end of the decade. I'm just wondering on Peyto FTR [indiscernible] what is your ability to to deliver there with respect to the growth program that you have planned?

Yes. So we have about 15% to 20% extra FTR that we carry. It's part of our transportation costs. It's embedded in those transportation costs. That you see every quarter.

So that gives us room to grow into that. We also sit in an area in the system, which is downstream of all the congestion. So it is easier for us to get incremental service where we are in Headwind South So that helps as well. So we don't see any problems with being able to expand. And of course, we have the processing capacity at our gas plants that also help us to be able to expand without having to spend a lot of extra money. We have projects that Todd's group will do to help optimize things. But we don't have any sort of greenfield requirements and plants to accommodate that. And think the infrastructure and the build out of NGTL's plans over the next guess, the end of the decade is going to be more than sufficient for us.

Do you guys intend to add more FTR as NGT TL grows and provides that option?

Yes, we'll look at it, certainly. And then as far as further OpEx reductions, as you noted, they were quite good in 2024. What about 2025? How do we see the cost structure moving next this year?

We undertook a couple of big projects. I'll get Todd to elaborate some more here, but we undertook a couple of big couple of bigger projects, one that we we felt were moving the needle and of course increasing utilization is always a big part that. But maybe I'll let Todd elaborate on what thoughts are for this year.

Yes, sure. So obviously, Q1, we typically see higher operating costs than we would throughout the year. And then as the year goes through kind of the back half of the year, we'll see operating costs come down partially through the drilling program that JP mentioned, more gas coming on in the back half of the year. So with that, we'll see operating costs on a per unit basis come down as far as low hanging fruit projects out there to reduce operating costs that We pretty much did most of that this year. We're seeing things like low power prices, which hopefully stay. That's helping us and we're at a time right now where we're seeing the highest methanol cost we've ever seen. And our understanding in the methanol market is we should see that come down. So that's a fairly significant cost. So we will see things drop off in the back half of the year for sure.

Thanks Todd.

Okay, Chris.

Got it.

Yes, that's great. And then maybe I'll just throw in one last one here with respect to Kineticore. On the Greenlight Energy Center. You guys did a great deal with them for Cascade. Have you been in talks with them at all on supplying the new project there? Looking at? I probably can't talk about anything like that, but obviously that's part of the 10 gigawatts I mentioned in the opening remarks. There we have that will make up that it would be included in that number. And I think us or anybody for that matter has opportunities into to if it's not directly, I think in that case for us it's quite a ways away, so we couldn't directly connect to it, obviously, like we did with Cascade. But we'll look at any kind of we'll look at any one of those deals to to increase our diversification and we think in long term power is going to be we want to have that power exposure certainly we like [indiscernible] it's a little bit it can be up and down every month. And so sometimes it's great, sometimes it's not. And but we think as we move forward with all the demand that's coming, it's going to be good to have that power exposure.

Thank you. And our next question coming from the line of Gerald MacKuh Your line is now open. Go ahead, Gerald.

Jeremy. Yes. This question has to do with the hedge book.

Two parts. First part is, thank you for the update to the to March. The last snapshot was December. And when I look at your March update, consistent with your earlier comments about the basis deals you have as you as you the practice has been as you move forward, you fix off of those basis deals and and then it gets included in the marketing update. And in every case or almost every case, it resulted in an upward movement in the level of the fixed hedges. And because Peyto is so hedged, an important consideration as to whether or not things are going to get better or stay the same.

Is the evolution looking forward of the hedge book Having said all that, it appears that the hedge book is has improved is already in great shape, but between December and now for what was taken on, it has moved the forward hedge prices up a fair bit.

And given what you said about the existing basis deals you have and the pricing at the hubs that those basis deals operate from Could you just make a comment on if things prevail the way they are, how that might evolve, how the forward book would evolve? We're moving upward fairly substantially. Second part is probably easier, on the basis deals when might you start setting things up for 2028? 2027 is very robust and the basis are quite tight. I was just curious if it's a timing thing on 2028 for the basis deals or if it is because basis deals aren't available at the price that you tend to take them at, which is the cost of transport. Two parts, second part a little more succinct. Okay. Thanks, Jerry. I think I got it. So to answer your first question, how might the hedge book evolve? I think it would what you were asking at the end of that. And we talked about this before, how we are very mechanical in our in the way we do it. We don't have any plans to change the way we do that and that's so that we have some guardrails in there around targets that we like to be at two fifty to say 75% to 80% when we arrive at a given season and we start putting that on to three years in advance.

Six gas seasons as we call it. So we have the option right now and the AECO price in the future isn't isn't that great. It's not bad though. I mean, we just did some hedges for '27 at $3.5 GJ. $3.45 GJ. Sorry, dollars 3.45 a GJ and that was the winner of $26.27 if I recall. So that hunts for us all day long. But on top of that, we can hedge that NYMEX basis that we have, Henry Hub basis that we have as well and command even better price. So we're doing both. And we'll continue to do that. And so the book doesn't really change as we roll forward. We'll continue to add those to secure those revenues as we always have. And we're out of the money that would be great. Right now, we're in the money and it looks good. But if that changes, that's fine. We're running a long term business, not one that looks just one season ahead. So on the second part, you said about the basis deals. So yes, the basis is is it takes a while for it. Like as you pointed out, we like to get the basis at at or pretty close to transport costs.

As we look forward into 2028, even 2029, that's not there yet. And I think this will improve as LNG Canada comes on, that should narrow. So we expect that AECO will improve and that will narrow the basis. And so there'll be more opportunities to layer in that some more basis deals to wherever they are. But that's also the reason why we're doing some here because we recognize the basis that traditional way of just getting that short term basis deal is not really available right now. We recognize that and we're getting some more fiscal. We just did the $30,000,000 of the park sorry, the Dawn deal and we did fifty million dollars of Dawn Or The Parkway Deal In Toronto. So Toronto area stuff we've just done that. So that's part of the reason why we recaptured that as well. So we can complement our basis deals I suspect that basis will come in, but it's not there right now. It's not there right now. It's not going to transport cost. It's quite it's quite blown out in fact. When you look forward and that's one of the reasons why we're getting much better price than Haco right now, you're looking at price basis that's up $2 out there, only two and three seasons out, right?

So that's quite high, dollars 3 right now. So we expect that will close here though as LNG Canada comes on.

Thank you. And our next question coming from the line of Eric Bissingham with Unconventional Great quarter guys and great year out of the twenty years I've been following you guys. Just it sounds like we're talking a little bit too much about hedging, but your thoughts on accessing JKL pricing vis a vis your traditional hedge books and how that unfolds throughout the LNG build out, shall we say? And or would you consider doing a JT net of processing tools and transport off of the Gulf Coast. And then just secondly, if you had an option to let's say, move into a bit more liquid, heavier rich assets, would you consider it given some of the M and A that's just been recently announced? Possible divestitures Thank you.

Thanks, Eric. Yes, so I think you're referring to JKM deals. To get us exposure to Asia there. I think that's what you were going. You were asking. Yes, of course, we are looking at options for that, whether it be an deal or even a percentage of the JKM pricing. So we just haven't found what we like yet. And so to the extent that balances are continues to add to our diversification portfolio, I mean, lot of those deals are quite long term. So you might be costing a lot of money during a long period of time. So that's something that we're also cognizant of running our business here. So So we certainly are looking at them, but not only just JKM, but really TTF as well, right? So So that's ongoing, but we don't have anything at this point in time. As far as liquid rich M and A, I would say that we want to be careful that we don't do something that if there's opportunity out there and it makes sense to us, it has all the right attributes for any M and A deal we're going to look at whether it be liquids or or gas rich.

So for us, we like to see something that has lots of running room, of course. That has or controls its own infrastructure similar to what we do. And has to be complementary. You don't get the reps all deal we did and that fits obviously like a glove. Maybe those opportunities white that obvious aren't out there, but there's certainly smaller opportunities we're going to continue to [indiscernible] And Derek and his team are active in doing that. But I don't getting liquids rich just for the sake of adding liquids. I mean, our margins are the best Our margins, that's what's important, right? At the end of the day, our costs are really low. Yes, [indiscernible] But it's our margins that we still lead the pack. I'd encourage you to look at our markings or our materials on the website or book presentation where you can see where we've actually shown the margins across with other companies with higher liquid yields And you can see that that's what's important. So just getting liquids rich for the sake adding liquids is not something that we consider. It has to be it has to have all the same And that may I come from liquids and it might not.

No, Kent disagree with you. Thank you.

Thank you. And I see no further questions in the queue at this time. I will now turn the call back over to Mr. J. P. Lachance for any closing remarks.

Okay. Well, thank you. Thank you very much for attending the conference call, and we'll see you next quarter.

This concludes today's conference call. You all for participating.

You may now disconnect.