Pine Cliff Energy Ltd
TSX:PNE
Earnings Call Analysis
Q4-2023 Analysis
Pine Cliff Energy Ltd
The company is navigating a challenging environment with natural gas prices below $2, opting to forgo drilling in 2024 and instead conserving capital. This decision comes as the average natural gas producer in Canada contends with a high decline rate of 31%. The company's executive team suggested that under these market conditions, prioritizing capital efficiency is crucial for maintaining a robust balance sheet and making prudent investments.
In 2023, the company slightly underspent its capital budget, primarily on the development of Pekisko wells. They planned for four but only completed three due to cost concerns and operational efficiencies. For 2024, a modest $7 million CapEx budget is set, which is not earmarked for any particular development activities yet, allowing flexibility in response to partner activity and the need for facility upgrades. Despite the excitement around new acquisition opportunities, there is currently no plan for operated drilling in 2024, unless there are significant changes in commodity prices.
The company continues to actively seek acquisitions, highlighting a history of 13 acquisitions over the past 12 years, including the recent Certus acquisition. They take pride in not having to issue equity for the last two acquisitions, emphasizing that any future equity issuing would need to be exceedingly accretive. Financially, the company is confident in meeting its debt covenants, which include not exceeding a consolidated debt to EBITDA ratio of 1.5x and maintaining an asset coverage ratio in line with its PDP reserve value. They also adhere to a debt covenant on their demand loan, standing firmly in compliance and not anticipating any breaches in 2024.
The company has hedged over 30% of its oil and 22% to 25% of its natural gas for 2024, considering this one of the most hedged positions it has ever taken. This strategy aligns with its transition to a dividend model, aiming to protect payouts to shareholders. On dividends, the company employs a variable approach, adapting the dividend levels based on cash flow strength, and plans to offer increased transparency on its dividend policy as the model matures. After earning a record $163 million in cash flow in 2022, and approximately $59 million in both '21 and '23, the company is committed to maintaining a balanced payout of dividends while preserving a strong balance sheet.
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Good morning, everybody. Thank you for joining us today on Pine Cliff's very first webcast. This is another attempt to try to use a different way to talk to our shareholders. We know we have a lot of retail shareholders, and we thought this would be a pretty good way to give them the opportunity to listen directly from us.It is a -- it was a lot of information that we just downloaded onto everybody here with the year-end financials and with our reserve report, with our guidance for the year. So I've pulled together some of our management team here in the boardroom with me today to answer whatever questions you've got.I've got Kris Zack, who's our VP, Finance. And as we announced in the press release, he's going to be succeeding Alan MacDonald as CFO in May. Alan is also here with me. Terry McNeill, the Chief Operating Officer, is also here to handle the more operational questions that you may have. And we also have Dan Keenan, who's with us and has been responsible for our reserves for many years now here at Pine Cliff.Again, I would just want to thank everybody for making the time to -- and this will be recorded and put on to our website for those who weren't able to attend in person. Many of you have already sent questions through to me last night. I talked to a lot of you last night, a lot of the shareholders talking about the -- both the year and frankly, the most -- the thing we probably spent the most time talking about was the dividend, and we will definitely talk about that today.I would invite anybody to send more questions. We've got -- several of them are in the queue already that you can -- if you're already online, you should have the ability to send the questions in. With -- it seems to be working because we're seeing them on this side.I'm not going to -- I've never been a fan of the quarterly conference calls where they just read the press release, and then they get to Q&A. I think I'd like to get to Q&A very, very quickly. I'll give a little bit of just overall comments on. And if you've read my president's letter, I think that sets out a pretty detailed and transparent analysis of the thinking that went behind our capital allocation.We've always been very transparent about the dividend. We've -- and I've got a lot -- increasing number of questions about the dividend in the last 6 months as natural gas prices continued on a decline. We've always said that we had no intention to be running the dividend with debt. And that is the situation we found ourselves in looking on the forward strip for 2024.Not a lot of debt, and we can look back 9 months from now, 12 months from now, and we'll have a better sense of did we -- were we too aggressive in the reduction of the dividend or not aggressive enough. But we wanted to give ourselves some room. We wanted to get that payout ratio back down into the [ 80s percent ] as opposed to being over 100%.To us, I think the most common word that was used yesterday in my conversations with some of our biggest shareholders was we're prudent. We've always run the business on a prudent fashion in any aspect of our business, whether it be from an operations standpoint, whether it be on the way we treat G&A, whether it be on the way we look at acquisitions, and it would be no different than the way we look at the dividend.We need to be disciplined. We've got -- we're not -- we're a $400 million company that is operating in a very volatile environment. We're very fortunate that we don't have this -- we're not subject to the same types of decline rates that a lot of our other peers in our business are. And therefore, we're not having to deal with that particular issue. But we still have to look at it from a capital allocation standpoint.
And then the big thing for us was, what is the value proposition? That's one of the questions I had from one of the people online. And I'd like to address that right off the top. I think that Pine Cliff, and this was described to me again -- repeated to me again by a shareholder this morning, is like a long call on natural gas, Western Canadian natural gas and you're getting paid to wait. But it's a long call option that doesn't expire.That's -- we've been -- this is our 13th year of business. We've grown from 100 barrels a day to over 25,000 BOE a day. We're about 79% gas weighted, so one of the most gas-weighted names in the Canadian markets with the lowest decline rate of any public company. We're under 10% decline rate.I think that the -- my own view is that -- and for those of you who are on my e-mail subscription list, you would have heard me talk about this or write about this in the e-mail you would have got last night is that Alberta is becoming an increasingly better place to be for a natural gas producer. That hasn't always been the case. Like I said, we've been around over a decade. We've seen what happened in 2019, 2020, where our natural gas prices suffered to the point that we had a lot of companies didn't make it through those -- that period of time.And from our perspective, it was a time to bat down the hatches kind of continue. We looked at more acquisitions. We did some of our best acquisitions, I think, in around that time period from a -- looking back on the cost of capital and what we paid for those assets. We think the acquisition that we just did in December is going to turn out to be a very good acquisition in the long haul. It's been very good. Production has been very strong right now. And so we touched on that. It's over 6,000 barrels a day at the end of the year. And so we are very happy with that acquisition.I was asked the question yesterday, whether or not we would do that same acquisition today? The answer is definitely yes. Would I pay the same amount? Probably not. We wouldn't bid the same amount just because forward strip has moved that much. But I do believe that the -- what we are expected to do as a management team is continue to look at capital allocation and make the tough decisions. And that may be tough decisions around acquisitions, around the dividend, around drilling.And that's from our perspective, and I hope your perspective as shareholders, that you've come to trust that we'll make those tough decisions. And I think the dividend was just one more aspect of what we're expected to do on the capital allocation standpoint.Another question we had is kind of what was the estimated cash flow, our 2024 cash flow based on current strip. That is in around that $59 million level. It moves around. Every $0.10 move in AECO is about $3.5 million of cash flow from a realized -- to Pine Cliff. So that number is something that is -- moves around on any given day given where strips at. But that's ballpark is where our cash flow is expected to be. And from -- when you take off our dividend, which is kind of the ongoing -- the dividend commitment for '24 is around $25 million. We set the CapEx budget at $17.5 million. We've got debt repayment that were going to happen in '24. We're kind of in and around that $8 million to $10 million extra free funds flow right now after paying for all that.The -- one of the questions we had is what -- kind of what our breakeven on gas prices would be. We touched on that in the new presentation, there's a slide in there that if you -- today's strips around $77 WTI. At that level, our AECO gas average to breakeven to cover -- after covering our CapEx, after covering our dividend, after covering all our debt repayments in 2024 would be around $1.80 an Mcf. And so like today, it's -- even with the depressed gas prices, we're above that $1.80 gas price this morning on AECO.So it is not a fun decision to have to have reduced the dividend. As those of you who have been shareholders for a while know that we put the dividend in place in 2022. We raised it twice since then. We've -- this is the first time we've had to reduce it. You also know that if you follow our story that management owns a lot of stock. So the pain is shared by everybody when we have to make those types of decisions. But it really is, in our view, the best decision to make for the long-term viability of the business.We do not want to impair or damage our balance sheet in any way. And if we were to continue paying the dividend, it's possible that we wouldn't have done that. But the -- we just did not want to take that chance. And so it was a decision that we wrestled with. We looked at a lot of different scenarios. And like I said, hopefully, we look back on this 6 months from now or 9 months from now and go, well, I guess, maybe we didn't either have to cut the dividend or maybe we shouldn't have cut it as much as we did. But that will be -- we don't want to run the risk of that not being the case.This summer is -- summers are always volatile around natural gas in Western Canada. The drought conditions and what impact that's going to have, we don't know yet. Whether or not there's going to be the same type of wildfire season that we had last year? Is there going to be more shut-ins happening from some of the bigger producers?Just to give people some context, the average natural gas producer in Western Canada or in Canada has a 31% decline rate. So what are they -- right now, I'm sure they're sitting around boardrooms deciding what they're going to do with their capital allocation. Do you continue to bring on your best wells in a sub-$2 gas environment? That's calls that they're going to have to make.From our perspective, we decided that we don't want to do any drilling here in 2024. We put some money aside in the back and maybe I'll pass over one of the questions we had was to Terry really on both our -- we didn't spend our full 2023 CapEx budget. And we just set a very nominal $7 million 2024 CapEx or growth budget. Maybe, Terry, you want to comment on those 2 numbers?
Sure. Thanks, Phil. Good morning, folks. With regards to 2023 capital budget, the development portion of it was underspent slightly. We originally budgeted for gross Pekisko wells in our Twining area, and we only drove 3 of them. The reason we dropped the fourth well, really, from a capital efficiency and from an operational efficiency perspective, it's best to drill those locations off 2 well pads. And we had one location queued up ready to go, but we decided to defer it for -- costs were coming in a touch higher than we would have liked. And also, as I'd indicated, it's better to drill off a 2-well pad. So we decided to defer that one location, which we never did drill at all in the year.And then with regards to 2024 and our capital allocation, we have not specifically assigned it to any development activity at this point in time. It's going to -- we'll wait and see what some partner activity might look at. We do have some regulatory items that we do want to do as far as facility upgrades.One of the things that we are most excited about, about the new Certus acquisition and some of the drilling upside that we have. And we do have to have a look at our facilities and egress options and maybe start to do some planning -- longer-term planning on our gas egress to make sure that we've got sufficient capacity, owned capacity and all the way to the sales meter a little bit more than what we have today. So those will be some of the capital that we will do.There are some modest reactivations that we're probably going to do, some regulatory compliance and then probably some partner activity. At this point in time, it doesn't look like we're going to do any operated drilling activity in 2024. I mean if commodity prices change, we'll revisit that later in the year. But at this point in time, that is the plan. So hopefully, that answers your questions.
Thanks, Terry. One of the other questions we got here that just is that are we still looking actively at acquisitions. We're always looking at acquisitions. And people are very familiar with the fact that the -- we've done about 13 acquisitions here in the last 12 years. There's very rarely a time that we're not looking at acquisitions.We're very proud of the fact that the last 2 acquisitions we were able to do without issuing any equity out. That may not be the case going forward. But I can guarantee that if it does involve equity, it's going to have to be on a very accretive basis. As many of you know, we are well aligned with our shareholders with management owning a significant amount of stock.One of the other questions was about the covenants on our term debt and our long -- both debt pieces that we put in place. Maybe I'll hand that over to Alan MacDonald, if you want to address that.
Thank you, Phil. Yes, we only have 2 covenants in our credit agreement. First covenant is a consolidated debt to EBITDA. Covenant shall not exceed 1.5x. And there's also an asset coverage ratio there and where our debt cannot exceed the 1.5x our PDP reserve value. Obviously, we're in -- we are clear with both of those covenants at the end of the calendar year and do not see any circumstances where we would breach either of those 2 covenants.On the demand loan that we have with our existing banker, we also have a debt covenant. It's a senior debt to net EBITDA. That's actually 3x on that particular covenant. The one criteria there is that the covenant actually -- or the net EBITDA includes our dividend payment. Having said that, again, we are in adherence with that covenant and see no circumstances where we would reach that covenant in 2024.
Another question we've got here is about our undiscounted PDP reserve value and on the discount rate. Perhaps, Dan, maybe you can take that question.
Sure. Thank you, Phil. Good morning, everyone. The difference in the discounted versus undiscounted is just the effect of ARO. Our ARO is spaced out in the future years and undiscounted, that'll have a bigger impact than when it's discounted.
Thanks, Dan. Another question was what our current hedging profile was. The presentation has now been updated on our website, and you'll see a slide that's been put in there. Just as a kind of ballpark, we've got a little over 30% of our oil is hedged for 2024 for the remainder. We're about the -- we've got some of our gas hedged in the summer is a little over 25%, for the whole year, it's about 22%. I think we've seen some opportunities to add to that. We'll continue to look at that and adding more -- a little bit more exposure probably for the summer.One of the things that we're seeing now is as we advance through the year is we're already into kind of halfway -- getting close to next week halfway of the third month is that we can -- the Contango in the forward strip prices got gas prices over $3 in 2024. And so some of the hedges that go out 12 months or 15 months, start to bring in that higher Contango price. And so that gives us a much better average price that we can apply to 2024 financials as well.So is the -- we'll probably continue to look to add to the hedging. This is, I think, one of the most hedged we've ever been at this time of the year and over the years. But as we move to the dividend model, we've -- definitely hedging has become a bigger component of that strategy. For us, it's about -- look, because we don't have a big CapEx program to protect. So instead, the dividend is definitely one of the things we need to protect.I think that segues into another broader question that I received is kind of on how do we think about the dividend. How do we think about base dividend versus variable dividend versus special dividends?I think we've talked about this over the -- since 2022 when we put the dividend in place. We watch the other models quite closely. So we're very familiar with the fact that some companies are using a special dividend. Others have set a low base dividend. From our perspective, because we've got the low decline rate, we really believe that we can continue to moderate the ability to have more of a, I guess, you'd call it a variable dividend in the sense that if we've got cash flow that's very strong, then we can move the dividend higher and in times like this, that's when we moved it down.It's not -- I think as we -- as the dividend model matures for Pine Cliff, I think we'll get to the point where we can have a lot of transparency in how the dividend is getting established and kind of what payout ratio that we want to maintain. Now again, we just started the dividend relatively short period of time ago. So we're still kind of modifying the model as we go along.We saw in 2022, we had very strong gas prices. And in that time frame, we went from $50 million of debt to $50 million of cash in the bank in a very short period of time. And that's when we started the dividend. I think in 2023, we knew that there was going to be some volatility in the market just as there is in '24. But these are still some of the best cash flow years we've had. I mean the 2022 was the best year we've had, $163 million of cash flow. '21 and '23 were both around $59 million. And as we just discussed, '24 is kind of looking at about that same level.So I think we did not -- it was a very conscious decision that to get the dividend back down to a reasonable payout ratio. And then we will then watch it very closely going forward. If we've got the ability to move it back up again, then we will definitely look at that. But we wanted to make sure that we are keeping the balance sheet in a very strong position. And again, that comes back to the most frequent word I heard last night when I was talking to shareholders was that it was just seen as a prudent decision, which hopefully has been -- is something that people have come to expect from our management team is that we will continue to make prudent decisions around our operations.Looking at the questions we've got here. I think the -- one question is about reserve -- about reverse split. I will quickly address that. We've talked about that in the past. We don't get consistent answers from our shareholders, whether or not -- what -- for those who may not be familiar with the term, what that would mean is reducing -- if you have 10 shares of Pine Cliff today, if you struck that by 1/3 and you then would get down to owning 3 shares and therefore, it would move the share price up.I understand the logic behind it because some people, either from a margin perspective, may want the price to be higher or it's -- if you're -- especially in the U.S., our share price would be under $1. And therefore, that seen as kind of a penny stock, so there's a bit of an optics. Financially, as we know, it makes no difference, how many shares are outstanding on the basis of the cash flow for the entity.I don't -- if we were to do a major transaction, I think we might think about doing it at that time, but it's not something that's on the front burner right now. The -- what's unfortunate is many companies that have had to do the consolidation have done those to stay listed on the stock exchange. Quite often, there's a minimum share price, for instance, on the New York Stock Exchange or Nasdaq, it's $1. And therefore, they consolidate.So the sample size of who does these transactions is typically companies that are having -- are in trouble a bit. And so it's -- there isn't a great financial background as to why you would do it. But it will be something that stays on our radar.But there was a question about the Biden decision and whether or not to halt new LNG applications. And it's interesting that got a lot of press because obviously, it's election year. It really was, in my mind, a decision that was to try to appease the left side of the political spectrum because Biden had allowed some recent LNG and application in Alaska. They took a lot of heat for that.So I think it was a way of saying that he's still on the side of limiting oil and gas expansion. What was it really, well, a lot of people didn't focus on was the fact that it only dealt with new LNG facility applications after the ones that are currently in construction. You'll see us -- a graph in our presentation and in my e-mail that went out is that there -- we're looking at the U.S. has got about 14 Bcf a day today of exports. In 2016, that number was 0. They're looking at doubling the number of exports over the next 4 years. And that has nothing to do with any kind of moratorium or pause that Biden is talking about. Those are all projects that are under construction today. That's a massive increase.And that's why you're seeing the Contango and natural gas prices going into '25, '26 and '27 because as you see those LNG export facilities come on, you're -- today, it's about 100 Bcf a day of production, and you're going to have another -- at that level, you're going to be between 25% and 30% of all of the gas produced in the United States will be exported.And it's similar in Canada. With LNG Canada coming on, we've got about 18 Bcf a day of exports -- or sorry, of production today in Canada with the LNG, just the first phase of LNG Canada, which is expected to start next year. The pipeline is already 100% complete. They expect to be commissioning the plant this year. That will be over 10% of all of Canada's production will be flowing out of just Phase 1 of LNG Canada. So that's what is really kind of the big prize at the end of the day is a lot of this LNG growth that's happening in North America.Mexico has LNG export capacity that's being built right now, even though they're a net importer of natural gas from Canada and the United States, but they're building an LNG export. And the reason why it's attractive for Mexico is the same reason it's attractive for Canada is because we're looking at 10 to 14 days shipping into the Asian markets versus a 24 shipping day schedule coming out of the Gulf of Mexico.And the 4 largest importers of LNG in the world are China, are Japan, are Taiwan and are Korea, all in the Asian market. So having the ability to ship to the Asian market from a time perspective, it lowers emissions and it lowers economics. So there's a lot of good things. And as I have touched on and you'll see some materials in the presentation, I'm a firm believer that Alberta, which has not been the best place to be selling your natural gas over the last few years, is going to increasingly become a better and better place to sell your natural gas. And it's not just because of LNG Canada.We put it in our presentation, you can see that there's a 0.5 Bcf a day of new -- or sorry, new natural gas demand that's coming on through industrial and through the completion of the coal to gas shift that's happened within Alberta. On top of that, you got the TMX pipeline. TMX pipeline is going to allow oil exports to the West Coast to go from 300,000 barrels to 900,000 barrels a day. Most of that growth is going to come out of the oil sands.The oil sands are the biggest single user of natural gas in North America. They use over 3 Bcf a day of gas. So if you allow them to increase their production, it means that they're going to use more natural gas to achieve those goals. And so I'm -- I understand why many of the producers have entered into long-term take-or-pay contracts and marketing agreements to take their gas away from the AECO market. My own view is that we're going to see a strengthening AECO market in the years to come here, and we're very well positioned to take advantage of that.One of the questions we had was there any shut-ins on lower prices possible. And the -- why sell the gas so cheap if we don't get paid enough? Maybe, Terry, do you want to take that one?
Sure. I can take that one on. I know it's a very, very good question. I think at today's commodity prices, we're not in a position to shut in any. Although some of our molecules are only marginally economic, they are still economic. We look -- we work closely with our marketing group and look at each property or each delivery point by delivery point.Typically, any field or any area that we operate that makes any appreciable amount of liquids is economic even at lower gas prices. And -- but the dryer fields will probably be a little bit more stressed at lower commodity prices. It depends on third-party revenue that we can generate from those. And it also depends on where we process the gas. If the gas is processed through our own owned facilities, quite often, our cost structure is quite a bit lower. So we can continue to support producing at lower prices. But if it goes through third-party facilities where we do pay a variable fee, those will come under pressure as the gas price lowers.So I think the vast majority of our properties will continue to produce at gas prices down to right around $1 an Mcf give or take. And then I think some of our volumes, dryer gas volumes that will tie into third-party facilities will start to come under stress under $1 an Mcf. And I think the one thing that we do have to keep an eye on is the volatility of the gas price.We don't want to have a position where we're shutting it in today, turning it on tomorrow and shutting it in the next day. We have to do our very, very best to work with our marketing department, understand the limitations on the system so that we're making decisions for multiple days at a time when it comes to the point of shutting in volumes.So it is something that we constantly look at and we will update those numbers going into summer, and its delivery point by delivery point based on a variety of conditions. So it is something that we would certainly consider if the price was low enough, but that's not where we're at rate today.
Thanks, Terry. Another question we have is what impact do we think LNG will have on Canada's domestic prices? I am not going to try to venture a guess as to what's going to happen. But what I can say, my own view is that we're going to continue to see strong volatility on natural gas for years and years to come, and it will continually be impacted by weather. But what I believe is going to happen is that, that band of volatility is going to continue to move up to the right on a price chart.The one piece of data that I would point to is that EQT, which has now become the U.S.'s largest natural gas producer, has been very vocal that they consider themselves to be one of the lowest cost natural gas producers that exist in the market, and they require a $3.50 gas price to be able to get a return on their investment.So I thought it was very -- and they -- some of you may have noticed that they just reduced their production here this -- they announced it yesterday, I think it was, that they're reducing their production about a Bcf a day because it makes no sense to be bringing on production into these prices.Make -- when I talk about that decline rate, that 31% natural gas decline rate for Western Canada, you have to realize that whatever drills -- whatever plans you have for your CapEx program, those are going to be your best locations. And so a lot of companies right now will be wrestling with the fact that they're bringing on their best locations with amazingly huge flush production into very depressed gas prices.One of the great advantages that we've had is technology is being able to drill out wells that are miles long underground and incredible initial production rates, but the decline rates are very, very high, they come with those wells. And so there will be a lot of people right now that are kind of -- a lot of producers that are wrestling with whether they want to continue those CapEx programs.The -- one of the questions -- we've got a couple of different questions that kind of touch on the same thing, which is when you look at our growth CapEx, how much of it will be spent on service, how much will it be spent on our old assets. The -- I think the -- I will let the guys jump in if they want. One of the things that we're -- in this pause that we're not spending, we're spending a lot of time looking at our current assets and getting ready for 2025 and beyond. Because pause in drilling that we've put in place for '24, we really think that there -- we will probably go back to a CapEx level, more in that $25 million to $35 million range going forward.We haven't set our budgets for 2025. We've got the $7 million that we've kind of allocated for the back half of this year, if it makes sense. I mean if prices have improved, then we'll look at whether or not we do something on the Certus assets we acquired or the Twining assets that where we have been drilling for the last few years. I don't know, Terry, if you want to add anything to that?
No, not a whole bunch. I think a lot of the time in 2024 will be our exploitation team to start to make sure that we've got our inventory less properly high graded. Right now, we've got 4 to 6 Pekisko locations in queue ready to go. At this point in time, we could drill them right away if we wanted to. But just being prudent with capital, we, in all likelihood, would not drill them certainly for the first half of the year and see where we're at in the last half of the year.We've also need to give our team a little bit of time to make sure that we fine-tune the locations that we would want to drill on the new Certus assets to make sure that we've got them as high graded as possible. We're working on some different ideas to improve our strategic position within the new Certus assets from an asset perspective. So there's a few of those initiatives going on to make sure, again, that we -- when we put the bit in the ground on the new Certus assets is going in on the very, very best locations.So -- and then there was a question here on basal quartz on some of our existing legacy assets, and we do continue to have a look. We've got part of our exploitation team looking at the basal quartz opportunities on our existing organic land base. We're quite excited what might come out of it and hope to be able to add some of that to our drilling inventory, but we do have to do a little bit more geological work and then some engineering work to make sure we understand where that stacks up on our prospect list.So again, as Phil had said, right now, for the time being, certainly for the first part of 2024, it's all about making sure that we cull through our inventory, make sure we've got our list updated and start doing some acquisitions on surface locations to get these locations drill ready for when we want to put the capital to work. So that's really what a lot of 2024 is certainly for the first half.
Thanks, Terry. Yes, I think just to add to that, I mean, one of the big reasons that we did the acquisition we did in December was really to add to our drilling inventory. For those of you who have heard me speak over the last few years, I've said all along that we knew that we needed to add some more inventory. Even though we had a single-digit decline rate, it's still a decline rate. And so in our industry, you always want to make sure that you've got the inventory to replace that.Our team was very excited about getting our hands on these -- the assets that we bought in December. These are assets that we've looked at multiple times over the years in different hands, different owners, but the timing was better for us to do the transaction when we did it. We waited -- for a company that's grown by acquisition, which is exactly how we've grown, we hung on and we didn't do any transaction for about 2 years because -- even though we had lots of -- we were sitting on $50 million of cash.I think that goes to the discipline that we've shown on all our acquisitions. We waited until the -- we saw the right asset that fit our model at the right time. We're very happy that we did that transaction. We've now kind of integrated into our system. We've got now -- our total locations from a book standpoint is we're up to almost 35 booked locations. We think that we identify another -- we're probably around more closer to 100 net locations.For a model like ours, that's a very good inventory. And so we're looking at kind of a 2P reserve life index, it's about 9.5. That's -- I think that's the longest our 2P inventory has ever been in the history of Pine Cliff.So the model has evolved, and we continue to tweak it. The -- I think we'll always be -- if I had to guess, we'll always be natural gas weighted just because we -- there's a fundamental belief that natural gas is going to be a very good place to be for decades to come. And so -- but the oil and liquids, without a doubt, have been the key reason that we were able to maintain the dividend at as high level as we did through '23 and that we can still continue to pay a dividend today, is that the oil and liquids, they punch well above their weight. Even though it's only 20% of our production at times, it's been between 40% and 50% of our cash flow.So it is -- and I think that's fundamentally, when I talk to our shareholders, I think it's that -- it's being paid that dividend is a key part of why they own Pine Cliff. And that's why we're very reluctant and very reticent to change it. But it really was, in our view, the right thing to do at this time. And again, we'll continue to watch it closely.One of the things -- one of the questions we have is, I touched a little bit on it before, is do we go with a low stable dividend and then possibly use a special mechanism -- use a special dividend going forward or have a very transparent and clear way of treating the variable dividend.These are things that we're going to continue to look at. I think in my mind, our dividend has always been a variable dividend. We moved it up because we had excess cash flow, and we've moved it down because we don't have a bunch of excess cash flow. Moving in to the level that we did allows us to continue to maintain a strong balance sheet, which I think is really critical because we are an acquisition company. We want to be -- in any given day, we want to be in a position that if a good transaction comes along, that's very accretive, that we think makes the story better, the models stronger, we want to be able to act on it.And so it was -- we couldn't be in that position if we were using debt to maintain the dividend, which is the #1 reason that we've decided that we need to reduce it at this time.One of the other questions we got here is around mergers and the question mentions a couple of players. I won't mention any players on our merger discussions. We are always looking at things. I think you're going to see -- we've already seen a lot of consolidation in our space. And I suspect you're going to see more consolidation. The -- we -- what we bring to the table is very strong cash flow, especially in a rising gas environment. The low dividend is something that helps us when we're looking at other potential acquisitions. We wouldn't shy away from liquids.The last 2 deals we've done were both liquid-weighted transactions. And so the -- we recognize that having oil and NGLs in the mix helps the sustainability of the dividend. So we'll continue to watch that. We are one of the few teams that doesn't have executive contracts on big balloon payments on takeover. There is no entrenchment here. I've always said that if anybody ever wanted to acquire Pine Cliff, they're more than welcome to come through the front door and talk to us about it.One thing I don't lose sleep about is [ activist ] shareholder because for someone to come in and own 5% of our stock or even 10% of our stock, that we've got -- our largest shareholder is AIMCo, the Alberta Investment Management Co. They own over 10% of us. They've owned us now for 7 years. They've been an excellent shareholder. I got nothing but good things to say about the way that we've interacted with them.We've got other large shareholders. We've got one shareholder who is just under 10%. We've got management that owns about 4%. We've got our former Chairman owns about 8%. I mean, so the point of that is that we've got a pretty good sense of where our shareholders are and what they expect from us. And I try to keep a pretty ongoing dialogue with our shareholders.This webcast is another example of us trying to find new ways to be able to talk to our shareholders. So I hope some of you appreciate it. We'll see what the feedback is, whether or not we continue using this type of format. But we're always trying new ones. We've been on the Twitter. We've been -- I've done podcasts. A lot of that is on our website if you haven't heard any of those, and I welcome you to come and listen to those.I think there is the -- we had one other question about our cash holdings in '23. I mentioned that earlier that we had -- we did -- we were sitting on about $50 million of cash before we did the Certus acquisition in December. That was a $108 million acquisition. We did that with the cash that we had in hand, and we also put in new term debt that Alan referred to.We think it's with a strong partner that the covenants are very light. It allows us to continue to run the business as we think it's a prudent way. There is no -- for instance, the dividend choice, that was our choice. That wasn't being imposed upon us by any of our debt providers. That's something that we just felt was the right thing to do at this time.And so going forward, I think we've got -- it was pretty apparent on the Certus transaction that we have access to capital. So that's key because not everybody has access to capital these days. We could have done equity. We were offering equity. We chose not to use equity because it just didn't feel like the -- there was a -- if we didn't need to issue equity, we won't issue equity.I think going forward, again, as I mentioned earlier in the call, if it's a really strong opportunity for us and if equity needs to be a part of it, then we will definitely consider it. I think 2024 could provide us with some pretty strong opportunities to make our model even stronger going into 2025.So we're on high alert, always willing to take phone calls and meetings with people that want to discuss potential transactions, whether we be a buyer or a seller. And we recently did a swap with one of our partners in the new area that we just acquired, and it's a good transaction for both sides. So it allows both sides to consolidate a little bit.I think that's most of the questions. I think the one other one that I had previously was about the -- about our reserve life index, but we also touched on that. The PDP was 6.5 years. The total [ prove ] was 6.9 years and our -- and the 2P was about 9.5 years. So that would answer that.I don't know if any of the management team have any questions that you've been receiving in the last day that you want to address while we've got the chance here? Hopefully, that was a good use of your time. You know that you can always reach out to us. For those of you that are not signed up for our quarterly e-mails, please do so. You can do that on our website. That's now up to a pretty -- we have a pretty large contingent of people that do get that quarterly e-mail. And one just went out yesterday.Thank you very much for your support. Thank you very much for continuing to trust us to run this model. And for those of you who have invested with Pine Cliff, thank you for trusting your dollars with us. We believe that we're going to be going into a very good period of time for Pine Cliff. But 2024 is going to be -- continue to be a volatile year. So again, I appreciate the time. Thanks for participating in this call.