Pine Cliff Energy (PNE) 2024 Southwest IDEAS Conference summary

Market and industry outlook

• Natural gas prices have rebounded sharply due to colder weather and increased LNG activity, with NYMEX and AECO prices rising rapidly in recent days.

• LNG exports from Canada are set to begin within seven months, marking a historic shift for the industry and expected to drive incremental demand.

• North American LNG export capacity is projected to nearly double in the next three years, with new facilities in Canada, Mexico, and the U.S. Gulf Coast.

• Global energy demand, especially from data centers, electric vehicles, and industrial users, is fueling long-term bullishness for natural gas.

• Storage constraints and rapid demand shifts are tightening the market, making prices more volatile and responsive to weather and supply changes.

Company performance and strategy

• Production has grown from 100 to 23,000 BOE/day over 13 years, with 80% natural gas focus and one of the lowest decline rates in North America at 9%.

• Maintains a strong balance sheet, with debt to cash flow at 1.5x and a goal to reduce it below 1x, supporting acquisition-driven growth.

• Dividend was introduced in 2022, yielding nearly 7% annually, and has been maintained through hedging and liquids production despite low gas prices.

• No wells were drilled in the past year due to low prices; focus remains on free cash flow, capital discipline, and opportunistic drilling as prices improve.

• Owns over 80% of infrastructure and 2 million acres of lease rights, providing operational flexibility and low OpEx.

Capital allocation and hedging

• Capital allocation prioritizes debt reduction and dividend maintenance, with drilling only pursued when economically justified.

• Hedging program is flexible, not mechanical, with 30-35% of 2025 production currently hedged and a preference for opportunistic hedging during price spikes.

• Hedges rarely extend beyond one year, with current average hedge prices around $3, supporting cash flow stability.

• Acquisitions are evaluated for free cash flow accretion and operational synergies, with all recent deals lowering OpEx and increasing per-share value.