Pieridae Energy Ltd

TSX:PEA

Earnings Call Transcript

[Operator]

Hello, and welcome to the Annual Meeting of Shareholders of Pieridae Energy Limited. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Odyssey and the corporation that you first obtained all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. [Operator Instructions]. It is now my pleasure to turn today's meeting over to Patricia McLeod, Chair of the Board of Directors. Patricia, the floor is yours.

[Patricia McLeod, executive]

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to this live and audio webcast of our Annual Meeting of the shareholders of Pieridae Energy Limited. My name is Patricia McLeod, and I'm honored to be the Chair of the Board of Directors of the corporation, and I will act as Chair for this meeting. It is wonderful to be hosting an in-person meeting again and to see those of you who are here in person today. This meeting is also being streamed via live audio webcast and those on the webcast have the ability to raise their hand and ask questions. Where, I remind you that voting can only be done in person at the meeting or by proxy, all of which was specified in the management information circular.

Before we proceed with the formal business of the annual meeting, I'd like to take a moment to introduce the other directors and senior officers of Pieridae Corporation, who are participating in this meeting. They include Charles Boulanger, Director and Nominee; Richard Couillard, Director and Nominee; Doug Dreisinger, Director and Nominee; Gail Harding, Director and Nominee; Andrew Judson, Director and Nominee; Kiren Singh, Director and Nominee; Alfred Sorensen, Chief Executive Officer, Director and Nominee; Darcy Reding, President and Chief Operating Officer; Adam Gray, Chief Financial Officer; Tom Dawson, Senior Vice President, Business Development; Yvonne McLeod, Vice President, Health, Safety, Environment and Regulatory Drilling and Completions, winner of longest title. And Dallas McConnell, Vice President, Corporate Finance. I'd like to now invite Alfred Sorensen to present some opening remarks. Sorry.

[Alfred Sorensen, executive]

Good afternoon. Thank you, Madam Chair. Good afternoon, ladies and gentlemen. On behalf of the management and employees of Pieridae Energy Limited I would like to welcome to the 2023 Annual Meeting of Shareholders. Once the formal part of the meeting is over, myself, Darcy Reding and Adam Gray will make a brief presentation that highlights our future operations of Pieridae along with the recently resolved -- released results of our 2023 first quarter. With that, I will turn things back to our Board Chairman.

[Patricia McLeod, executive]

Thank you, Mr. Sorensen. Okay. So at this time, I'd like to introduce Dallas McConnell, Vice President, Corporate Finance who's kindly agreed to act as a moderator for this meeting.

[Dallas McConnell, executive]

Thank you, Madam Chair. I would like to take this opportunity to introduce the participants in the meeting to the basic functionality of the live audio webcast platform, which is hosting the meeting. We encourage shareholders to ask questions but ask that those questions unrelated to the matters to be voted on today be held until after the formal portion of the meeting [Operator Instructions] If you wish to vote or ask a question during the formal business of the meeting, you must be a registered shareholder of record as of March 27, 2023, or a duly appointed proxy holder and be here in person at this meeting.

All those attending via webcast, will be able to listen to the formal business of the meeting and ask questions. However, they will not be able to vote on items of business.

[Patricia McLeod, executive]

Thank you, Mr. McConnell. We will now proceed with the formal part of the meeting. Meeting of the shareholders of the corporation will now come to order and with your approval, I will ask Thomas Valentine, Corporate Secretary to act as Secretary of the meeting. I will also ask Paul Trust company, be appointed to act as scrutineer for the meeting to report on the shareholders participating in person and the number of shares represented in person or via proxy of the meeting and to compute votes on any poll taken at the meeting or any adjournment thereof and to report them on to the chair.

The notice calling this Annual Meeting of Shareholders was sent on April 11, 2023, to all shareholders of record as of March 27, 2023, which is designated as the record date and to intermediaries as required by securities legislation. A declaration as to such distribution is available for inspection by any shareholder. The secretary will append the declaration as scheduled to the minutes of the meeting. The notice calling this meeting was also sent to the directors and to Ernst & Young LLP as auditors of the corporation in accordance with the Canada Business Corporations Act. I've been advised by the scrutineer that we have achieved quorum. I direct that the scrutineer's report be kept with the minutes and as such [Technical Difficulty]

[Operator]

Please standby, we're having technical difficulties. Again, please standby.

[Dallas McConnell, executive]

Hello, can you hear us?

[Operator]

Yes, please proceed.

[Patricia McLeod, executive]

Okay. So I apologize for the technical problem. I'll go to restart where, I believe, cutoff. I've been advised by the scrutineer that we have achieved quorum, and I direct that the scrutineers' report be kept with the minutes of the meeting. As such, I declare this meeting properly constituted for the transaction of business. Notice having been served in accordance with the bylaws of the corporation and a quorum being present, I now declare that the Annual Meeting of the shareholders of the corporation has been duly called and is properly constituted for the transaction of business.

Should a shareholder wish to address the Chair, or if there is any discussion, the monitor will read the statement or question aloud. The form of proxy delivered to registered shareholders in connection with today's meeting provided registered shareholders with the option of appointing Alfred Sorensen or alternatively, Darcy Reding as such shareholders' proxy. As a result, they will be voting on their own behalf and on behalf of all registered shareholders who appointed either of them as their proxy. The purpose of this meeting is to allow shareholders to received the audited consolidated financial statements of the corporation for the year ended December 31, 2022, together with the report of the auditor thereon and the management discussion and the process to fix the number of directors of the corporation to be elected as 8; elect the directors of the corporation for the ensuing year; to appoint Ernst & Young LLP as the auditors for the corporation for the ensuing year; and authorize the Board of Directors of the corporation to fix the remuneration of the auditors; to accept the corporation's approach to executive compensation; and to transact any other business which may properly be brought before the meeting.

All is more particularly outlined in the Management Information Circular of the corporation dated March 27, 2023, which was available via the notice and access regime to all of the shareholders of the corporation with the notice calling this meeting. I'm advised by the scrutineer that the total number of votes represented at the meeting by proxy that are required to be voted against any of the resolutions is less than 3% of the votes attached to the common shares entitled to vote and represented at the meeting.

The last annual and special meeting of the shareholders of the corporation was held on May 26, 2022. The secretary has tabled the minutes from that meeting, and they are available for inspection by any shareholder at the registered office of the corporation. Unless any shareholder wishes the minutes to be read, I do not propose to read them at this meeting. As the first matter of formal business, I place before the shareholders at this meeting, the audited consolidated financial statements of the corporation for the year ended December 31, 2022. Copies of such financial statements, the auditor's report thereon and the management discussion and analysis has been made available to all shareholders.

As is customary, we do not intend to conduct a vote on the financial statements. I declare that the audited financial statements of the corporation for the year ended December 31, 2022, together with the report of the auditors thereon and management's discussion and analysis have been received. As previously indicated, Mr. Sorensen will make a brief presentation on the corporation following the formal portion of the meeting. We will now conduct the votes on the matters before us by a poll. On a poll, every registered shareholder of the corporation, as at the record date, is entitled to vote on the matter and have 1 vote in respect of each common share that is entitled to be voted on the matter and it's held by that shareholder.

It is now an honor to proceed with the election of directors of the corporation. I will entertain a motion to fix the number of directors to be elected at this meeting at 8 and invite any such motion to be seconded.

[Adam Gray, executive]

Madam, my name is Adam Gray, I'm a proxy holder, and I so move.

[Thomas Dawson, executive]

Madam Chair. My name is Tom Dawson. I'm a proxy holder, and I second the motion.

[Patricia McLeod, executive]

Is there any discussion?

[Alfred Sorensen, executive]

No discussion.

[Patricia McLeod, executive]

As there is no further discussion, I will now call for a vote on the motion before the meeting.

[Voting]

[Patricia McLeod, executive]

I am informed that a majority of the votes submitted were in favor of the motion, and I therefore declare the motion carried. I now declare the meeting open for the election of directors. The articles of the corporation allow for a minimum of 3 and a maximum of 11 directors. As well, the corporation has also adopted Bylaw #3, which establishes the nomination procedures. Bylaw #3 requires, among other things, that any notice of nomination is given by or at the direction of the Board must be included in the notice of meeting and if given by any nominating shareholder in the case of an annual meeting, must be delivered to the Corporate Secretary of the corporation no later than the end of the 10th day following April 11, 2023.

I'm informed by the Corporate Secretary that no such notice has been delivered by any nominating shareholder. The corporation has given notice of the nomination for election to the Board of Directors of 8 individuals whose names and biographic information are included in the management information circular. I will now entertain a motion placing the names of those nominees before the meeting for election as directors of the corporation and invite any such motions to be seconded.

[Adam Gray, executive]

Madam Chair, my name is Adam Gray, I am a proxy holder. And I nominate each of Charles Boulanger, Richard Couillard, Doug Dreisinger; Gail Harding, Andrew Judson, Patricia McLeod, Kiren Singh and Alfred Sorensen for election as a Director of Pieridae Energy Limited to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed.

[Yvonne McLeod, executive]

Madam Chair, my name is Yvonne McLeod. I am a proxy holder, and I second the motion.

[Patricia McLeod, executive]

Thank you. As timely notice has not been received as a nomination of any other individual for election as a Director of the corporation and as the number of individuals nominated pursuant to this motion is equal to the number of vacancies on the Board of Directors. I now declare the nomination closed. I will now read the names and call for a vote with respect to each proposed director and ask that all voting shareholders raise your hand with the respect to each director for election as a director of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed, unless their office is vacated earlier pursuant to the article of the corporation for the Canada Business Corporation Act. Charles Boulanger. Richard Couillard, Doug Dreisinger; Gail Harding, Andrew Judson, Patricia McLeod, Kiren Singh. Alfred Sorensen. The moderator has cast the ballot for each individual nominated and the ballots have been counted.

[Voting]

[Patricia McLeod, executive]

I am informed that a majority of the votes submitted were in favor of each motion, and therefore, I declare the motion carried. I declare that Charles Boulanger, Richard Couillard, Doug Dreisinger, Gail Harding, Andrew Judson, Patricia McLeod, Kiren Singh and Alfred Sorensen are duly -- each duly elected as a director of the corporation, will hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. I'd like to congratulate the Board of Directors, and thank them for their service. The next item of business is the appointment of the auditors of the corporation. The corporation proposes the appointment of Ernst & Young LLP as its auditors to hold office until the next Annual Meeting of Shareholders. At such remuneration as may be fixed by the corporation's Board of Directors. May I have a motion please and a seconder of that motion.

[Adam Gray, executive]

Madam Chair, my name is Adam Gray, I'm a proxy holder, and I move that Ernst & Young LLP be appointed as auditors of Pieridae Energy Limited to hold office until the next Annual Meeting of Shareholders as such remuneration as may be fixed by the Board of Directors of Pieridae Energy Limited.

[Thomas Dawson, executive]

My Chairman, my name is Tom Dawson. I'm a proxy holder, and I second that motion.

[Patricia McLeod, executive]

Thank you. Is there any discussion?

[Thomas Dawson, executive]

There are no questions, Madam Chair.

[Patricia McLeod, executive]

As there is no further discussion, I will now call for a vote on the motion before the meeting.

[Voting]

[Patricia McLeod, executive]

I am important that a majority of the votes submitted were in favor of the motion, and therefore, I declare the motion carried. The next item of business is the nonbinding advisory vote on executive compensation, also known as a say-on-pay. May I have a motion please and a seconder of that motion?

[Yvonne McLeod, executive]

Madam Chair. My name is Yvonne McLeod. I am a proxy holder, and I move that on an advisory basis and not to diminish the role and responsibilities of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the Management Information Circular.

[Adam Gray, executive]

Madam Chair, my name is Adam Gray, I'm a proxy holder, and I second the motion.

[Patricia McLeod, executive]

Thank you. Is there any discussion?

[Adam Gray, executive]

Madam Chair, there's no discussion.

[Patricia McLeod, executive]

If there's no discussion, I will now call for a vote on the motion before the meeting.

[Voting]

[Patricia McLeod, executive]

I'm informed that a majority of the votes submitted were in favor of the motion, and therefore, I declare the motion carried. I believe the polls are now closed. So I now ask if there's any other business to be brought before this meeting. Seeing and hearing that no other business is being brought before this meeting, I now declare the formal part of this meeting to be terminated. And I thank you for attending.

[Alfred Sorensen, executive]

Good meeting there. We will just make the presentation of the numbers. So I will -- primarily it will be I, Adam, Darcy, 3 of us. Myself, I will take the lead on our future, and then Adam and Darcy are going to do our regulators first quarter call and update the results for first quarter. So what I'd like to start with is talking a little bit about where is Pieridae going to from here. For the last 2 years, our company was built around the idea of building this LNG project on the East Coast of Canada. And as many of you may be aware, over the last year, the situation changed in Europe regarding the situation in Ukraine. There was a renewed interest on the project, but unfortunately, due to issues regarding transportation of primary gas across the country that we have decided that it makes more sense to concentrate our business on Western Canada.

Earlier this year, we began looking at a new strategy for the company, and we spent some time trying to figure out where does this business go from here. So we've come up with a new strategy that's going to focus mostly on our Western Canadian assets. So before you see the fancy-looking pyramid. And as of yesterday, our Board approved our new strategy to move forward with our corporation. Over the next year, we're going to focus on branding the company's identity on LNG business and producer and by taking advantage of our existing asset position, move parity more towards more conventional oil and gas producer.

We're going to take advantage of our existing asset position, focus on 8 key strategies around these assets, primarily what we can do on industry basis, where we continue to move our markets outside of Alberta. And clearly house, to take advantage of the marketplace and changes to the relative carbonization. So our strategy is going to -- for the next year has been a focus around several key things. We look to build our asset position. We are the largest producer in the Foothills, heading from Northeastern British Columbia to the border of U.S.-Canadian border.

We are the leader in the Foothills, and we're going to continue to grow that position which is starting with our new drilling program that we began early in late 2022 anticipated in the first quarter of '23. I will let Darcy speak more on that. As we look to look at other places that we can build on our market of success from those additional wells. One of the big advantages of the Foothills is these wells are high risk, but also high impact. We believe that we can take advantage of that situation as the Western Canadian market seems to change, particularly when that Canada comes on 2025 or '26. This will represent the single largest change in market demand in North America since about 1990, and we want to be prepared to participate in that change.

Yes, we do have old assets, but we're bringing new skills to those assets and new perspectives and how we can take advantage of assets that -- how long like and have the ability to bring existing value and perhaps create new value when we look at the fact that we are the largest unconventional -- largest conventional producer of sulfur, helps sulfur role and should play a greater role in food security around the world. We recognize that our company still has some gaps and barriers that we need to work on primarily to refinance our current debt position. We believe that we're in a good position to get that prior to the end of the quarter.

Now I'd like to talk a little bit about where we sit today with pricing and what's different between 2021 and 2023. Now many of you have been shareholders for a while. 2021 was a very difficult year for us. And as we see kind of before you on the page. If you look at us where we sat on '21 versus where we are today, we're a significantly different company, much more we're able to withstand lower natural gas prices that we are experiencing today. And probably the single biggest difference between '21 and '23 is certainly stronger oil prices. We do produce roughly about 8,000 barrels of natural gas liquids, we have that ability to somewhat withstand falling price of natural gas. We remain committed to repaying our debt, and that will be our primary focus for '23 is to continue to pay back balance.

As you can see since 2021, we reduced that by a little over that period of time. We continue to use hedging as a tool to protect the downside. And as we have seen in our first quarter results that hedge in Canada remains an important part of our strategy. So what are the primary risks to a successful 2023? Our business is very challenged at a commodity price below CAD 2.50 per Mcf. And as a result of that, we need to find ways to mitigate the decline. One of the ways we will be doing that is looking at a longer-term hedge program that will allow us to long for lack of a better term, to average sales pricing over the next 2 to 3 years. We are very well aware of our cost structure and also find that an important part of our business is managing that cost structure and bringing it more in line with industry staff. If we don't produce, we don't earn revenue. Unplanned outages are our enemy and we are working very hard to make sure that we have few of them than we have in the past. I already mentioned. We have seen scenarios where things happen. For example, what's going on right now with the wildfires in Alberta.

Our assets are all over. Maybe they will go up from 10 care, but we're managing it upside as a key part of how we think we can be successful. I believe for a company to continue to grow, we need to continue to be in the field, in order for us to grow. And we need to look for new financing. But this is a big part of who we are, who we need to become and we need to be able to react to market changes when it comes to the other types of also drill. But there is no doubt the big part of our newfound strategy is to become constant of new production to grow and use the assets we have to the best of their ability. Perhaps the biggest risk to the company, one that is not going to be a surprise to anyone is in October '23 we must refinance our debt buybacks. We continue to work very hard on that and our CFO had great, an outstanding job in managing an acquisition. We expect to have result of that in the near future.

Speaking of how that refinance is affecting our share price, I'd like to conclude my piece of the presentations afternoon. Was talking a little bit about how out stock operates over time. We are actually very correlated to natural gas prices. As you can see on the charts, the darker color, the gray color say being the price of natural gas. Green is our price, but we are very highly correlated to the movement in natural gas prices. When we reached our peak of roughly about $2, also very close to where the peak natural gas price was last year.

Our softwares will continue to be very volatile, mainly as a result of natural gas being one of the most volatile commodities on the planet, but also because the debt is overhanging on trust. If you look at the 2 who circles on our graph, starting to speak with . And those 2 places are 2 places where you've seen a discipline in natural gas prices and our stock price, how did that happen? In both of those cases, we were experiencing situation revenue close to either having to have a refinance occur or some kind of other events occur. A was September 2021, and it represents where we are today. You can sort of see our gas -- our stock prices sort of flattened out, our natural gas prices have continued to decline.

The principal reason behind that being that market is principally waiting for a -- we believe by influencing a hedge program that will operate the impact of volatility in our gas prices, that will be the path leading to a refinance business. We don't anticipate that we will be returning capital to shareholders at any time soon. The debt repayment is our primary concern at this time, and that will be until we are well below the kind of industry standard that [indiscernible]. With that I will now pass it to Darcy to begin with his piece of our first quarter discussion.

[Darcy Reding, executive]

All right. Thank you very much, Alfred. As we begin our review of the first quarter results, I'd like to first take a moment to send our thoughts to those affected and displaced from their homes by the Alberta wildfires and to thank the first responders and many others in our communities for doing such admirable work to protect people, property, forests and resources. With recent rains, we sincerely hope the situation has improved and will soon be fully controlled. To date, the wildfires have primarily impacted nonoperated facilities that we produce into in both our Central and Northern Alberta areas, resulting in temporary shut-in of operated and nonoperated wells. However, the more significant shut-ins have been largely short duration with most production already back online. We still have approximately 1,800 BOEs per day of shut-in due to the continued wildfire impact on 2 nonoperated gas plants, but we expect these facilities will begin accepting our production within the next week or so.

We expect the wildfire impact on our second quarter average production will be in the range of 500 BOEs per day. We are pleased to report a successful first quarter on several fronts. First, robust physical natural gas hedges boosted our realized gas sales price by more than $1.80 per Mcf, allowing the company to realize over $5 per Mcf on gas sales generating $50 million of net operating income and contributing to our strong cash flow for the quarter. We advanced our Foothills winter drilling program rig releasing, completing and flow testing the Brown Creek 6 of 35 well in the quarter, along with drilling the second well of the program at Brown Creek 6 of 29, which was also released in the rig released in the quarter. Adam will provide a few more details on our third -- on our third quarter highlight on this slide in a few moments. I'd like to point out that the photo on the accompanying slide is of the Savannah 686 drilling rig on location at our 629 well site in March of this year on one of those stereotypically sunny early spring days in Alberta. It's a beautiful photo.

Moving on to the next slide. Strong first quarter production of approximately 36,500 BOEs per day was impacted by the unplanned outage at our Caroline gas plant. This outage to repair a sulfur recovery heat exchanger, we've taken to maintain normal reliable operations during the cold weather months and actually commenced late in the fourth quarter of 2022 and extended into the first half of January. This outage impacted production by 1,300 BOEs per day in the first quarter.

Of note, our production mix remains gas weighted at 85% natural gas with the remaining 15% entirely comprised of associated natural gas liquids with approximately half of these liquids being condensate which fetches prices similar to or at a slight premium to light sweet crude oil. Because it is obviously not included in our production -- in our reported production numbers, it is also worth mentioning that first quarter sulfur production was more than 1,400 metric tons per day, which represents a significant revenue stream. Our position as one of the largest producers of sulfur in Western Canada will continue to be a competitive advantage for the company given our Foothills sour gas production and midstream asset ownership. First quarter operating expense of $66.5 million combined with the previously mentioned Caroline gas plant outage drove per barrel operating cost to $20.25 per BOE.

The Caroline plant outage not only impacted production for the quarter, as mentioned, but also contributed additional operating expense. These expenses included vessel repair costs, fuel gas purchase costs due to the outage being partially within a period of very cold winter conditions and increased emissions intensity costs under the Alberta tier carbon emissions program due to lower average facility throughput in the quarter. Of particular note, our reported operating costs do not include revenue from sulfur sales or from third-party processing income, both of which are possible because of our ownership in the gas processing infrastructure. These two revenue streams, in essence, serve to offset the cost of running our processing facilities.

In combination, these 2 items generated over $9 million in offsetting income in the quarter, resulting in our adjusted operating expense, which was $57 million, or $17.39 per BOE for the first quarter. The chart in the top right-hand side of the accompanying slide shows the relationship between the per barrel operating costs depicted by the green diamonds and the per barrel adjusted operating costs, which are depicted by the red dots. Capital expenditures for the quarter totaled just over $20 million with 3/4 of that invested into our previously mentioned winter drilling program in the Brown Creek area. In regard to our winter drilling program, our first well at Brown Creek 6 of 35 and was tied in and placed on production on April 14. As of May 4, immediately prior to being temporarily shut in as a result of the area wildfires, the well was producing nearly 6 million cubic feet a day of sales gas and is highly restricted with a downhole choke as the production capability of the well far exceeds the company's working interest capacity in the gas gathering system at the tie-in point.

The second well at Brown Creek 6 of 29 was drilled and rig released in the quarter, but the onset of spring breakup conditions truncated further operations, and the remaining completion and tie-in work is now deferred a weighting improvement in AECO natural gas pricing. Originally, a third well was scheduled for our winter drilling program. But with some of the company's robust first quarter gas hedges rolling off and lower AECO gas prices projected for the second and third quarters. The third well of the program was deferred to more effectively manage available free cash flow.

Similarly, we continue to evaluate originally scheduled noncritical summer maintenance activity and the scope of our deferment of the Waterton gas plant turnaround originally scheduled for the third quarter. As we continue to investigate opportunities to reduce discretionary spending in 2023 to better manage lower cash flows expected as a result of the aforementioned peak summer natural gas prices. At this time, I'd like to turn the call over to Pieridae's Chief Financial Officer, Adam Gray, for a review of quarterly financial results and a brief look ahead.

[Adam Gray, executive]

Thank you, Darcy. To follow up on Darcy's comments, during the quarter, we took a balanced approach to allocating our record cash flow from operations. We repaid $28 million of debt principal and invested $20 million into our capital development program. This allocation reflects that both repairing our leverage ratios and investing in Foothills development are essential elements of our strategic direction during periods of strong netback. On an absolute basis, our debt remains higher than we are comfortable with, so its reduction will remain a priority going forward.

However, when cash flows are supportive of doing so, we are also committed to investing in growth. Over the past 4 quarters, we've reduced our debt principal from $266 million to $189 million, a reduction of nearly 30%. The impact on our debt service cost is evident as we paid $5.9 million in total interest during the quarter versus $7.9 million in the first quarter of 2022. As it relates to our term debt, we continue to advance our refinancing initiatives. I understand there are some impatience around progress here, but want to assure our investors that this initiative is our #1 priority, and we will provide more information to the market as soon as possible.

Briefly turning to a few other elements of our financial results. Our royalties and transportation costs came in at $4.48 per BOE and $1.60 per BOE, respectively, both lower than the prior quarter as a result of lower benchmark commodity prices. And while we are disappointed in our operating expense results, I believe Darcy provided a fulsome overview of the abnormally impactful Caroline outage. And I believe with ongoing laser focus on cost reduction, we will see operating expense normalize through the remainder of the year. In spite of our operating cost results, Pieridae generated strong cash flow from operations during the quarter and net income of $0.08 per share on a fully diluted basis.

Turning to our next and final slide. Our hedge program continued to add revenue stability during the quarter. On a volumetric basis, we sold 64% of natural gas and 45% of condensate under fixed price forward sales contracts during the quarter, which in aggregate, added $9.40 per BOE to our netback. We also benefited from the very small quantum of financial hedge contracts, which we were successful layering in, in late Q4 and early Q1. Those are evident in our financial statements as they are mark-to-market, with an unrealized net gain of approximately $1 million.

As I have previously mentioned, it is a primary goal of our current refinance initiatives to provide senior secured collateral to future hedge partners which will enable us to implement a much more effective and sophisticated hedge program. For the time being, we have done what is possible on an unsecured basis. Going forward, the majority of our winter gas contracts, which were laid on in late Q3 last year have rolled off. However, we remain approximately 25% hedged on gas and 45% on condensate for the next 2 quarters at prices highly in excess of the current market prices.

We recognize that natural gas pricing is under pressure during the next few months and have taken very prudent and careful steps to reduce or defer our capital and operating expenditure plans to the extent possible. We are also managing G&A costs as evidenced by the decreasing G&A per BOE expense over the last couple of quarters. In conclusion, I'm very proud to the extent to which our balance sheet has improved over the past year, and our team remains focused on deleveraging and delivering resilient operating results. We are really pleased that our first onstream well has been a success and look forward to our second well and returning to the field as soon as possible. At this time, I'll turn the presentation back over to Dallas McConnell to wrap us up and take any questions that folks might have.

[Dallas McConnell, executive]

Thank you, Adam. We will now take questions submitted via the audio webcast and the phone line. So we'll just give folks a couple of minutes to put their questions in, if they have any. Operator, are there any questions on the phone conference?

[Operator]

There are no questions on the phone.

[Dallas McConnell, executive]

I do not have any on the webcast either.

So seeing no further questions, I would like to thank everyone for their participation in our annual shareholder meeting this afternoon and for your interest in Pieridae. Stay safe health -- stay safe and healthy, everyone, and have a good day.

[Operator]

This concludes the meeting. You may now disconnect.