Good morning, everyone. I think there's a few more still coming, so apologize for the noise as they trickle in. Welcome, and thank you all for attending our Biennial Investor Day. Before I get started, I'd like to introduce our directors in attendance. Our Chair, James Estey. Stand up, Jim. Thank you. Jane Gavan. Apologize in advance for comparing PrairieSky to the REITs, which will happen later. Anuroop Duggal . The remainder of the directors, we didn't wanna pay for their flights out here, so thank you for watching online. I think when you review the playbook and the materials, you'll appreciate all the work that goes into it. The individuals who put it together, a lot of them are in this room. I thought I'd just name them and have them say what they do for the company. Logan Fisher.
Hi, I'm Logan Fisher, corporate development engineer in training, and I just provide support for acquisitions and other special projects around the company.
Logan's also got a geology degree, geology and engineering degree, so he's a very valuable member of the team. Maria. Sorry, out of order back there.
Hi, everyone. I'm Maria Rajic. I'm Manager, Geosciences at PrairieSky. I'm a professional geologist by background and now have over 20 years experience in the industry. I oversee all the geological and geophysical evaluations at the company.
Michael Wasyliw .
Hello, everyone. My name is Michael Wasyliw . I'm a corporate development engineer with PrairieSky and a professional engineer with APEGA. I've been with the company for a little over four years. This is my third playbook I've been involved with now. My other responsibilities for the company include managing corporate reserves, production, tracking and forecasting as well as acquisition evaluations.
Thank you, Michael. Carla Selk.
Good morning. I'm Carla Selk. I'm the manager of financial reporting at PrairieSky. I'm a CPA chartered accountant, and I oversee the preparation of the quarterly and annual financial statements in MD&A, the tax compliance filings, including our estimate reporting, and I'm also heavily involved in our sustainability report and our ESG surveys. Happy to be here today. Thanks.
Dan Riva Cambrin .
Hello there. Dan Riva Cambrin . I'm the controller at PrairieSky, so I oversee the day-to-day finance and accounting function. I've been with the company since the IPO.
He knows all about the PPAs, so if anyone has any questions on . We get questions on every conference call, so if you want the expert, you should corner him at the 15-minute break. Cassandra Bardwell, but she's still out there working, so we'll have to wait for her. We have two hours allotted for the investor day today. It's likely to only take an hour and a half, so we'll get everyone back to their day. It's a pretty simple, old-fashioned business, and but we've got a lot of exciting stuff to talk about. Just a quick overview. Many of you are familiar with PrairieSky. PSK is the largest fee mineral title owner with 98% operating margins, no back-end liability, and more undeveloped land than developed land.
This undeveloped land will be the focus of our investor day today and the reason why we have a differentiated business from our peers. Already owning the assets that will provide our future growth is what allows our business to compound over time. Later in the presentation, we'll talk about future returns and a range of outcomes for the business. CAD 1.65 billion has been returned to our owners since our IPO, May 29, 2014. Over the next 10 years, that number will grow substantially. This is a really important map. This is kind of our scorecard of what we've accomplished since our IPO. The map on the left shows our original 5.2 million acre land base at the time of the IPO.
Our singular focus has been on acquiring oil-weighted royalties at better parts of the cost curve than our existing asset base. All acquisitions, small, medium or large, have been done accretively on a leverage neutral basis and executed on in commodity downturns. The original 130 million shares we issued on the IPO currently generate only 30% of our funds flow. The next 109 million shares we issued generates 70% of our funds flow for the company. It's a pretty powerful statement in terms of what we've accomplished since IPO. It is important to always look into the future. Patience is equally important. It is easier to be patient when you have an exceptional business. With acreage per share you own almost doubling, as shareholders we're poised to benefit through stronger terminal growth rates and higher future returns.
The production per share is what drives the cash returns in our business. At IPO, natural gas represented 60% of our production. Currently, oil and liquids represent 60% of our production. This is the highest cash generation that the company has experienced since IPO. The acreage and production per share numbers are more impressive when you consider that we returned the CAD 1.4 billion in dividends over the same period of time rather than reinvesting them in the business. Warren Buffett says that time is the enemy of a bad business and the friend of a great business. PrairieSky gets better with age. One of the simplest ways to understand our business is looking at proved reserves. We entered 2022 with 66.25 million barrels of reserves.
We produced 9.2 million of those barrels over the year, which generated half a billion in free cash flow. We exited the year with no acquisitions at 66.7 million barrels. We added 10 million barrels at an F&D cost of zero. That is the PrairieSky advantage. We did publish a large asset handbook. It details all the development locations within the company, something that doesn't show up in our approved reserves. I'm just gonna kinda outline what this triangle means and what's in that playbook that's sitting in front of you today. The bottom triangle are the booked reserves. That's the reserves we've just discussed. The teal blue wedge is what exists in the royalty playbook and summarizes all of our development locations. The top wedge in navy blue is the optionality you get in our business.
This includes new discoveries, step outs from existing pools, improved technology, and EOR schemes. No value is subscribed to any of those opportunities in the playbook. As an aside, pardon me, Our technical work shows that there are a number of gas plays that will be able to be exploited using under unsimulated multilaterals. Not to worry, we already own the lands on these plays, perhaps a top-up for the 2029 playbook. Figure out how this one works. This slide summarizes our methodology used to build the asset book. The bottom wedge is producing wells depleting daily. The middle wedge are the development locations directly offsetting proven production. This is what exists in the playbook and is highlighted in orange on the map. The top wedge is optionality. You own it, and it does not expire.
Interestingly, new exploration wells between 2017 and 2023. How did we get that on there? There it is. Move locations from uncalculated optionality, so that top wedge, into the middle wedge and into the playbook. Again, why time is your friend in our business. We own these mineral title lands in perpetuity, and every few years there's a new discovery, and it just adds new locations. This slide summarizes the undiscounted value of the bottom two wedges and totals CAD 26 billion at $70 WTI and CAD 3 per Mcf. In 2022, we had 850 wells drilled, and in this playbook, we detail 30,000 future drilling locations offsetting our approved production across our 18.3 million acre land base. This gives us comfort in the duration and durability of our asset base.
This slide summarizes the changes since the 2021 playbook. Acquisitions totaled 12 million BOE of booked reserves and 4,500 future locations. Undiscounted value since the last playbook grew by 70%. Significant inventory growth was noted in the Clearwater and in primary heavy oil. Net of all wells drilled, investors can expect continued material growth over the next 10 years on these assets. Since our 2021 playbook, we have produced out 16.5 million barrels of royalty reserves. We have added 16.8 million barrels of royalty approved reserves, more than offsetting production and CAD 95.2 million of future value, million barrels of future value. What we cannot take credit for in this asset book is the CAD 7.1 billion in future value directly attributable to higher pricing as seen above.
When we ran the 2021 playbook, we ran $55 oil forever, in this one it's $70. The next one it'll be different. Don't know if it'll be higher, don't know if it'll be lower, but that's one thing that does change every two years. I'm gonna start off just talking a little bit about the Clearwater and then hand it over to Ian, the Clearwater expert. Just a little more macro. Alberta oil production is at an all-time high of just under 4 million barrels per day today. A lot of people don't know that production's at an all-time high right now. More room for growth is on the horizon as the 590,000 barrel Trans Mountain pipeline begins line fill later this year.
With no major oil sands projects planned, this growth will come from conventional oil production. PrairieSky is the largest conventional royalty collector. Jurisdiction matters as we have seen from Panama to Chile. All of PrairieSky's royalties come from Canada. The first play I'd like to talk about is the Clearwater play. This is the fastest growing play in Canada, the most economic in North America, and PrairieSky has the premier land position in the play, allowing for decades of economic growth. We currently produce 1,700 BOE from the Clearwater and expect substantial growth over the short, medium, and long term down to $45 US WTI. Well suited to secondary and tertiary recovery, we also expect to increase recovery factors and extend the life of these significant discoveries through polymer and water floods.
A business that generates 98% operating margins and high levels of free cash flow through the cycles is hard to find. If you can take some of that free cash flow and invest in high return on invested capital assets and acquisitions, you can really accelerate the compounding of the business. Based on our CAD 65 and a half million dollar purchase price you can see on the screen and our 2022 net operating income after tax of CAD 16.7 million, we currently have a return on invested capital of 25%. As the NOI continues to grow on this asset, so will the ROIC. This is our Clearwater land picture today. The undiscounted value of CAD 1.9 billion is up almost 500% since 2021.
We expect value to continue to grow significantly over the long term, as these are the lowest cost barrels in North America. Over four years, this has been featured in the last two playbooks, so this is the third time this asset's been featured. Over foue years and two investor days, significant development has occurred in Nipisi. We still have only six wells per section booked, which is conservative given the separated sands or the stack sands. Even looking at the 2023 map on the far right, there's significant development potential remaining on the asset. It should also be noted that this is one of our most developed Clearwater assets. In 2021, we highlighted 1,050 drilling locations in the Clearwater. Since that book was published two years ago, 25% of those have already been drilled.
We now have 2,670 wells recorded in the 2023 playbook. This contemplates development of just 24% of our acreage and conservative drilling densities. Now we'll have the real Clearwater expert outline the play for us, talk about what makes this special, and what the ultimate potential is. Spur is our largest royalty payer and our fastest-growing royalty payer. Ian is an engineer and a closet geologist. He was in operations at Shell and an exploitation engineer at Renaissance, and a founder of both Profico and Spur, and has a strong history of creating value. Ian?
Morning, everyone. Recognize a lot of faces, and I see some new faces. Andrew and I both worked at Profico, and what he doesn't mention is Andrew was referred to as the first overall pick when we brought him on, and I was more the Mark Giordano never drafted guy. Anyways, we both did okay over time. Pleasure to talk about the Clearwater. Just get through a few of these. It is a rather remarkable formation and technique, and we're delighted to be part of that. Spur is exclusively focused on the Clearwater, that is now the largest conventional oil play in Canada at about 120,000 barrels a day.
Kinda Andrew alluded to it, this is a big deal for Canada because while despite us producing 4 million barrels a day, the oil sands are, you know, are doing no more greenfield developments, and condensate, we are still a net importer of condensate into the province. Even though the condensate production is growing, it just means we import less. Really neither oil sands nor condensate actually attribute to growth in Canada. Really the only remaining growth is the conventional oil plays, which over time have declined. The last 10 years have declined by about 25%, whereas the Clearwater came from virtually nothing in 2016 to 120,000 barrels today. It does now account for a little over 12% of Canada's conventional oil play from a standstill a couple years ago.
Spur specifically accounts for a third of that production. It is one of the most economic, if not the most economic plays in North America. Very low capital and operating costs and strong IP rates. This is a bit of an old slide, but one of the key, if not the most key factor of our strong growth is our low decline rate. As we show here on the slide, a median well should pay out twice in the first year and more than six times over its life, assuming about CAD 1.5 million capital costs and current WCS prices, which are about CAD 75 WCS. Now, you know, I love to say that Clearwater is built to withstand.
Our payouts are under CAD 30 per well, and at about CAD 50 WCS, which is about $50 WTI, the wells still pay out in under a year. Again, it's built for low prices. By contrast, when you look at fracked wells, with their precipitous early time decline, while they do still achieve very quick payouts, they're generally at 15%-20% IP of initial IP at payout time. There's very little to do additional payouts, and that's what differentiates the Clearwater being non-fracked.
Just as a fun fact, our discovery well, which was in December 2016, the mecca we always take investors or new people to that first well, the discovery well, that well in six and a half years has paid out seven times, and the last time it paid out was over the last 12 months. Still doing 40 barrels a day, still producing very well. How did we get there? That's probably the most common question is, how was this all missed? It's not really the right question. Since everyone always knew that the Clearwater oil was there, the real magic was how do they effectively re-recover that oil. The great analogy, the most obvious analogy is the Permian, which everyone knew the Permian oil was there.
It wasn't really until multi-stage fracks showed up that we're able to extract that oil and became the great play that it is today. Similarly to the Clearwater, it wasn't till Spur focused on the multilaterals to increase the effective flow area of the formation that we're able to extract that oil. The one great thing is that since everyone tried and failed to open up the Clearwater, there's incredible well density or log evaluation through it. It became very easy to actually move the play around. Really we're exploring for viscosity more than anything else. This is kinda my favorite matrix of kinda how we were. If you look in the upper left-hand corner, that's kinda where life was in the 1950s when we first started in the well.
we only really chased the high perm high oil quality areas. The industry just kind of moved in two different directions. On the left, as the rock became tighter and tighter, first, we had vertical fracs, and then we had the horizontal multi-stage fracking, which we have today. That's become a big part of the conventional and unconventional part of the basin. Then if you go kind of to the right, as you look at oil got heavier and heavier, first, we moved into that CHOPS, Lloyd area, and then we moved into the thermal and the oil sands area. What was interesting I always found is that the guy on the bottom left and the guy on the upper right never actually talked to each other. They almost became very distinct industries. The Clearwater is kind of the Goldilocks in the middle.
The rock is good qualities, definitely doesn't need to be fracked, but it's not great quality. When you frack it, you actually mobilize a lot of clay, and it impinges the reservoir, so it can't be fracked. Then the oil quality is kinda that 20 to 21 API, essentially WCS quality. It's not that light oil that others chase, but it's also not in the same realm of the true bitumen or which would be eight to 10 API. It's kinda the Goldilocks, and it was kinda left on loan. The key was the multilaterals. For those that don't know, again, the rock is competent, we drill, say, 1 mi, then we pull back, and we trough, and we drill right beside that original leg and drill another 1 mi. We're probably 50 meters apart.
We do this six times, eight times, 10 times. We've gone in eight years later and checked to make sure that all the legs stay open. They do. It's very competent rock. The multilateral technique is incredibly inexpensive. It takes about 24 hours to drill, pull back, and trough another leg. You can drill six legs in six days, essentially. It's a very inexpensive. In the meantime, you're opening up more effective wellbore area. You're up to 10 km, 14 km, we've gone as high as 18 km of effective flow area. It's kinda like a frac without the frac and mobilizing all those clays of a frac. That was the technique. We started with the very simple, multilateral techniques, and we've kind of evolved over the time. People like to talk baseball analogies.
I would say we're now in the sixth or seventh inning in terms of well design. We're not seeing that much new novels. The most new latest novel techniques is a little bit of the fishbone. We'll just show that in a minute. The kind of traditional, our go-to is the six-leg, 1 mi laterals that we like to drill. We also in areas where generally it's a little lighter oil or we have surface constraints, we like to go with 2 mi multilaterals, so each leg is 2 mi long. Generally, we only do four legs when we do that. The Escoba or broom, we have a lot of Argentinians in our office, so everything is Spanish. The Escoba layout is kind of that fan layout. Again, that's more to deal with surface constraints.
It's not as effective, I think, from a reservoir drainage, but it's very easy from surface constraint. The one that is gaining a lot of traction, which we kind of pioneered four or five years ago, is the fishbone. That's where you drill short little legs, and essentially you have one long leg in the middle with the short legs in between. You could run a slotted liner if you so choose. It has a lot more appeal in the heavier or unconsolidated sand area. We generally find the fishbone gives you about 10%-15% better productivity, and it's about 10%-15% more expensive. We have all these techniques. We'll be curious in a couple of years if there's a new name, something else that shows up.
This shows Spur's production growth since our inception in January 2017. We're currently at 36,000 barrels a day, practically all through the drill bit. That's a 60% CAGR. Spur's raised a total of cash of $67 million, has paid out $433 million in dividends and has material cash balance. A few milestones. In 2017, we bought 600 sections at a Crown land sale, with PSK backing. We had our Nipisi discovery in 2019. 2017, our Cadotte discovery, where development was delayed due to surface constraints. That has now been solved. We had our McLeod Lake and Utikuma discovery last winter. This winter, we had the McMullen discovery, which is another big, big play for us. Very, very consistent growth. This is an overview of Spur's Land.
Another important note which Andrew referred to is this is oil sands tenure, which is effectively infinite tenure. That allowed us to early back at the land sale of 2017 to buy as much land as we could when we didn't have all the answers. We're now just getting to some of those plays today. Again, incredibly positive and optionality on land. The plays, Marten Hills, which is currently doing 14,000 barrels a day. Nipisi is at 19,000 barrels a day. Cadotte, which we talked to, we just brought on three wells, the best wells doing about 175 barrels a day. That is a huge play for us. McLeod Lake, there's a rig there currently. Utikuma, and of course, McMullen.
PrairieSky has a go on basically everything shown, except for a portion of the McMullen pool, highlighted in bright green. We're looking at on the screen about 9-10 billion barrels in place, and that's on what we believe as de-risked pools. Spur believes we can grow production to 75,000 barrels a day over the next five years at about an increase of about 25% per year, while still paying out dividends. Further potential upside with water flood or polymer flood is not included in those numbers, and then additional exploration and delineation initiatives. The table shows the estimated excess cash flow after growth, CapEx, and after tax on a per basic share. Note that even at $50 WTI, we should still be able to maintain our base dividend and grow at about 25% per year.
The world has changed in terms of what we're looking for and free cash flow is the current rage for good reason. Free cash flow is really based on three parameters: capital efficiency, commodity price, and decline. Those are the three key components. The Clearwater really gets top marks in all three of those categories. Again, has the lowest, especially early time decline of any play. The capital efficiency will rank with any asset. Again, the terminal decline is very exceptional. Spur's path forward is reasonably well-defined. We will continue to grow production and delineate reservoirs. We have, in our estimation, 10+ years of drilling inventory, and that's continues to grow. We have a very aggressive exploration component. We will continue to pursue those organic exploration initiatives.
As I alluded to with the infinite land tenure, we're still exploring on land we bought five, six years ago. We also have a very aggressive return of capital to shareholders. Again, we're a private company. Dividend is the most efficient use of mechanism to return capital to shareholders. Are we doing questions now or later?
Yeah. Questions. Oh, sorry.
Yeah. If anyone had any questions, happy to take them.
I'm not remembering the exact term. I think the term like oil sands. Tenure?
Tenure? Yeah. Sure. The province 50 years ago or at some point correctly broke the province, the Crown lands into two categories, normal petroleum natural gas tenure and oil sands tenure. The normal petroleum natural gas tenure is four to five years, i.e., if you don't drill a well within that time, that land is returned back to the Crown to further release. On oil sands tenure, they recognize that these are long lead project that need much longer periods of time, so they granted 15 years, 15 years of tenure. After that, they escalate the rent, but at a very marginal rate.
If you have oil sands tenure, and it was just, you know, the Clearwater gods again were smiling on Spur that the Clearwater landed within the oil sands tenure, so we're able to have that very, very long tenure. Go ahead.
Can I make.
Oh.
When you originally made the decision to partner with PrairieSky to, you know, finance the land purchase, I'd be curious how you weighed the royalty financing relative to equity or debt.
I was hoping someone would ask that question. It's. We haven't actually. Andrew and I haven't talked about this in a long time. I consider it a true win-win. Interestingly enough, I think if you go back to the deals we've done with either PrairieSky and/or Range, Spur has lost on eight of the 10 deals in terms of they actually made money, more money than we expected, which is why this kind of deal happens. The obvious question is, why is Spur doing this? If you look at Spur, we raised $50 million, it was a spin co from the previous Spur. I didn't. I had a duty to my shareholders not to raise incremental equity that outsiders would have to pay.
We only raised CAD 50 million, and then land sale itself was CAD 50 million. In essence, when you look back, we only raised half the equity we needed, in order to do it all 100%, subject to the royalty paid. I think it worked out very well for both sides over time. Yeah.
We had a number of shareholders who weren't super happy with us spending CAD 50 million on unbuffed land too, but I think now they forgive us.
Andrew, are you gonna talk about the bust in the playbook between what you say the resource base is versus the 9-10 billion barrels that we need to save stuff for the future so we don't get fired?
I gotta go fly back to Calgary 'cause I got 600 locations I gotta drill. That's the part I picked up on. Yeah. Yeah. Sorry, go ahead.
I was just wondering if you could provide a little bit of color with respect to the waterflood or secondary recovery here. I believe that you said it's not really included in the 75,000 BOE per day that you have here through 2027, and maybe any sort of quantification of what sort of impact that could potentially have.
The 75,000, and Scott's here to help if you have any further questions, but we essentially attribute it to what we consider de-risk. At Pedot, where, again, is a massive pool, but we only kind of assigned 10%-15% of that under primary. The same with McMullen, 'cause we haven't extended the wells, particularly the waterflood and polymer flood. Waterflood in particular is kinda gone back to the dark arts. If you look through the history, waterflood was incredibly prevalent in all conventional oil pools. Then we started drilling horizontal frack wells, so we made the reservoir very heterogeneous and still tried to do waterflood. It almost universally failed in every sense. We've kind of created a generation of engineers and analysts that hate waterflood because it was on the wrong reservoir.
If you look at the Clearwater and some of. You know, our Upper Nipisi is a perfect example. It's 4 mi of absolutely homogeneous reservoir, beautiful reservoir and will flood beautifully. We have eight projects of waterflood currently. The data suggests we'll double recovery factor. We're not doubling NPV though. It's not as economic as primary. Then the math on the polymer, which generally works in a little more heavy viscous area with large pore throat sizes, that also doubles the waterflood recovery. You're talking 5% primary, 10% waterflood, 20% on polymer. Again, when we provided that 75,000, we wanna show our shareholders what has been, we believe, de-risked, and in that case, it wasn't. We didn't really include that. I was talking last night.
One of my jobs over the next year or two is to find a balance. You know, I have many, many masters. Find a balance on still having distributions, still advancing the primary 'cause it's a better IRR. At the same time, also advancing the secondary recovery. You'll see us. We're spending about a quarter of our capital on secondary recovery, which is primarily waterflood at this time. Nipisi and Marten Hills, in my opinion, will only be waterflood candidates. The project we have in place all show that we're doubling the recovery and still very, very strong economics, just not as strong as primary. Over time, we'll kind of massage that and work our way through.
We sense that some of the newer plays, McLeod, specifically McMullen, will be a polymer candidate, and we're looking at a pilot this fall or early spring. Is that what you're looking for? Okay, thank you.
Wait for the mic.
Sorry. Just a couple of questions.
Oh.
Ian, just confirm, the royalty rate on, each secondary is the same royalty rate as primary?
Generally, there is a. We're now talking Crown. Andrew gets his cut no matter what. In terms of the Crown royalties, there is a waterflood project which you can apply for. Oddly, well, I think because I alluded to earlier because it's gone the way of the dodo bird, no one's really applied for it in a decade or two. We are in talks with Alberta Crown. That allows you to maintain that royalty at the 5% longer till payout, and then it jumps up. Somewhat analogous to the oil sands royalty. That is in place, although it hasn't been used for a decade. We're working on that.
Looking at the various multilateral techniques, are any of these techniques more or less suitable for secondary recovery?
That's kind of one of the challenges I have. We'll use Marten Hills as example. Marten Hills is very easy to do primary design because the secondary waterflood design is the exact same design. In Marten Hills, where we're 30 meters thick, which is over 110 feet thick. We're drilling 3 tiers of drills. We drill a 6-legger. We go down 10 meters, drill another 6-legger, go down 10 meters and drill another 6-legger. Over time, after that lower legger, the bottom tier waters out, we then convert that to a waterflood. When the middle tier waters out, we convert that to a waterflood. That works very well, and it's very easy for me because it's the same design, primary or secondary.
At Nipisi, which is quite a bit thinner, You're better off with a lateral design. Tamarack's, I think they call it, the trident. We call it the Texas two-step, where you're drilling an injector and then you have two to three legs on either side producing. You have to make that decision early, which is why it's a little bit harder. We're certainly drilling the primary wells that way now because I am that confident in the waterflood will work. Our pilot and the Tamarack pilot are lights out in terms of how well that incremental recovery is working.
I think the mic's.
Thanks. Mike Dunn with Stifel FirstEnergy. Ian, is Spur still going forward, going to be in the business of, I guess, acquiring new lands? If so, might PrairieSky be involved in that? Are you exclusively focused on the Clearwater? I think, was it McMullen? Did you do a land purchase without bringing PrairieSky in to finance it via GOR?
I'll answer the last question first, if I may. McMullen is a bit of a different beast. We identified the McMullen asset five years ago and had made multiple offers to Husky, which were summarily not looked at. Cenovus took over. They also didn't look at any of our offers. I'll give kudos to Headwater. They kind of paved the way with Cenovus by allowing Cenovus to retain a GOR. They bought the asset, this is at Marten Hills, and then Cenovus retained a GOR, and then sold that a GOR at a later point. We used that template with Cenovus, and were able to, I think it's worked well for them because they're not, they're not taken advantage of, if that's the term.
They get the primary, plus they get the primary acquisition cost. They can sell the GOR later. We just mirrored that template when we bought Cenovus. We continue to look at Clearwater. We continue to look at other formations that we believe would equally work well with multilaterals. I think it's important, imperative for Spur to continue to explore and grow. That's the true sign of a healthy organization. We have done. Specifically, PrairieSky, we've kinda had some more legacy areas that continue to work with. Again, we don't need the money as much. I truly value the relationship. We'll see where that takes us. Sure.
Ian, now that you've had such good success, what about the impact of tax on your financials, on our financials as shareholders? How does that play out? I guess a second question, 'cause nobody's asked us, asked it yet. I know it gets asked in your presentations a lot now that you've got an entity that's worth some considerable value, and while it doesn't. It self-finances or more than self-finances, at some point in time, some shareholders might think a more liquid form of vehicle, i.e., public, would be desirable. I'm not particularly one of them, but how do you think about that?
Sorry, what was the first question? That was a long second question. Tax. Oh, yeah. That's why I forgot. It instantly blacked out. Yeah. Yeah. It's a bit of a badge of honor. I do not anticipate Spur doing any tax vehicles. We're kinda a year or two ahead of the industry. I mean, it is what it is. I think companies that try and do deals simply to avoid for tax avoidance is. That's gonna end up biting them significantly. We're just. It is what it is, a bit of a badge of honor. In terms of going public, you can see my throat's getting dry. I truly believe Spur's been able to achieve what it's been able to achieve by being private.
I recognize, you know, we kinda went where the puck was going rather than everyone else chasing everything. I do acknowledge at some point, we will need to provide greater liquidity to shareholders. Currently, there seems to be no issue with that those seeking liquidity, both buying and selling, are able to go through the gray market. I don't sense that's on the near-term horizon, but I'll never rule that out at some point. Thanks, everyone. I will be around at the end if anyone has any other questions. Thanks, Andrew, for the opportunity to speak here.
Thank you.
Yeah.
All right. That was a tougher business to follow. We're gonna move into our next feature area, which is the Cenovus mineral title lands. It ties to the Clearwater. Our acquisition of the Cenovus mineral title lands, the largest remaining mineral title position in Canada's heavy oil fairway, was made just at the inflection of differentials and the development of a new technology to extract the resource more effectively. Our large dataset of Clearwater wells indicated that this region could be exploited using multilateral wells. This zoomed-in map outlines the 1.1 million acre land base across the heavy oil fairway that PrairieSky owns. While underbooked in the asset book today, the strong leasing and drilling activity should add significantly to our already large booked inventory.
The Elk Point region is characterized by good grain size and consolidated sands. This oil is typically in the range of 12 API crude with in-situ viscosities of 5,000 to 30,000 centipoise. This is quite different than the Clearwater in terms of the oil quality. It's a lot heavier crude, a lot more viscous. The difference here is we have very, very good grain size and consolidated sands. What started to happen, and CNRL was the first one to pioneer these techniques, bringing it further south, these heavier oil regions are very conducive to multilateral drilling. We've seen now 4 different horizons, the Sparky, the Waseca, the Upper Cummings, and Lower Cummings, all successfully exploited with this technique. What's unique about this as well is Devon Canada, for 25 years, drilled verticals through all these reservoirs.
Very low recovery factors, primary heavy oil. We have this massive dataset through this whole Cenovus package that we just recently bought that shows all of those vertical wells, for the most part, can be now drilled horizontally, and you can take the recovery factor from, in some cases, as low as 2%-5% to 10%-15% using the multilaterals. Early indications are that this will be a major growth area in volumes for PrairieSky, given the leasing and some of the new drilling results we've seen. This is a good log, and this is important to understand all the different zones within this heavy oil stack. There are three to five stack pay sections within the Mannville Heavy Oil Wedge in Elk Point, in the Elk Point region of Alberta.
In some areas, up to 30 wells per section will be required to fully exploit this resource. We have seen up to 50,000 centipoise oil produced economically using multilaterals in the area, and that's basically bitumen somehow coming out of the reservoir. Significant growth in this asset is expected over the short, medium, and long term, and we believe these will be some of the barrels that fill Trans Mountain over time. PrairieSky has almost no future wells booked to this area. This is significant as four separate zones have been successfully tested with projected EURs well over 100,000 barrels. Because our royalties here are 17.5%, our gearing to growth on the asset is material. Look for evidence of growth here on our average royalty rate over time.
Our technical team has also worked on various heavy oil opportunities in the Provost region. This is another asset that was acquired with the Heritage fee mineral title lands. This has resulted in numerous leasing arrangements and the successful discovery of Sparky oil accumulations. In addition, we've received CAD 1.8 million in lease issuance bonus over the trailing year on this play alone for short-term leases. The continuous evolution of fluid systems and drilling techniques is unlocking multiple zones throughout the area. Spuds, as seen on the bottom right of the graph, continue to trend higher. The last bar, by the way, is lower, but that's just a single quarter. The logs on this slide highlight the oil pay in three separate Mannville sands. Economic oil inventory per share has increased significantly with the Heritage acquisition. That was the next section.
We go through a number of other plays, and then we head into the financial section and the range of outcomes. We'll definitely get everyone out early. This is a 15-minute break to reload your coffee and use the washroom. Thank you for being patient through that whole presentation, and hope everyone doesn't just go out and buy Spur.
Have a good look.
I'll say something. Pardon me? I'll give him a minute. It's all good. Okay, guys, we're ready to move on to the next section. Still a couple away from the most fun one, the financial section. A little more technical, just walk through some of the plays and how they've progressed over the last two years and what they represent for future value for PrairieSky. We will start with the Duvernay. After seeing activity decline over COVID, the Duvernay is making a resurgence. A large operator on our play has plans to grow from 3,500 barrels per day to 50,000 and keep it flat there for 10 years.
This is an important play for PrairieSky owners as there are large oil, gas, and NGL reserves, and it balances our portfolio as the oil is in the range of 40 degree API, some of the lightest in the basin. There we go. Decades of inventory remain on this light oil resource play. With higher intensity fracture simulations, we are seeing a significant improvement in type curves over the last year. Our lands on this play line in an area that has year-round surface access and numerous takeaway options for the produced hydrocarbons. Onto the Viking. The Viking light oil play continues to be a workhorse for the company at 10% of production. 500 wells were drilled on PrairieSky lands between 2021 and 2022, leaving decades of economic inventory remaining at no future cost to PrairieSky.
Waterfloods are extending the life and increasing recovery factors in this shallow resource play. As Canadian dollar WTI still today trades over CAD 100 per barrel, we expect an active back half of the year on this play. While type curves have decreased slightly this year, economics remain robust. In 2022, we received CAD 100 million in revenue from this single play. We have recently done some leasing on a new Viking play that could uncover an extension to an already sizable oil accumulation with a very reputable operator. On to the Montney. Production from the Montney on PrairieSky lands will likely double over the next 10 years. 18 wells were drilled in Q1 at a 3.6% royalty. The majority of these wells will come on in Q3, Q4 of this year.
Many of our investments in this play are very early stage, undeveloped land, similar to how we bought the Clearwater. They do take time to develop. Over the past five years, these lands that we bought have been significantly de-risked. The lands in the Two Rivers play where we bought, we spent about CAD 12 million five years ago. We've now proven up two distinct zones, the Turbidite and the Upper Montney, and they both look very economic. They're overpressured, and they sit just north of Tourmaline, ARC and Shell, north of Peace River. We think there'll be a major development at some point, and we'll see a big bump in numbers for our owners at some point there with no future capital.
One of the things I like to do, like, we really think about what our undeveloped land is worth, and it's really hard to price optionality. It's really hard to price 2,860 or 28,600 individual mile by mile parcels. This is just one example. It's one of those 1 mi parcels. This single section of land in Carr was acquired as part of our 2014 Range Royalty acquisition. No value or volumes were attributed to it at the time of the purchase. Seven Generations was the operator. The first license came this year, eight years later. It does have wells surrounding it, as you can see on the map.
When fully developed, this section will add CAD 59 million of value to PrairieSky or 10% of the entire purchase price of Range Royalty. This is a great example of optionality and the importance of owning that undeveloped land piece. Other plays which don't show up in the asset book are also an important part of the value for the company. They represent considerable value to the company, but they're not assigned in the royalty playbook. To highlight the value of these unbooked plays, we show a Charlie Lake well that generated almost CAD 1 million in revenue in 2022, net to PrairieSky. 20 wells per year are drilled on these other plays. It can be as high as 25-30, it can be as low as 15.
In summary, before I hand the next section over to Cam, the top wedge, which is not in our booked reserves, not in our playbook, includes other plays, improvements in technology, new discoveries, secondary and tertiary recovery, and significant step-outs. Cam? Whoops. That was a bit of a fail.
Yeah. No worries.
Thanks, Andrew. We have name tags up here. I'm just gonna put mine up here in case you need to read them. I'm Cam Proctor. I'm the COO of the company. I've been with PrairieSky since the beginning in 2014, and I'm gonna talk a little bit about ESG. What I'll do is I'll walk through.
The company's philosophy, some of the performance, from a ratings perspective, and then we'll get into talking about some of the opportunities that exist on the land from a carbon capture perspective, other minerals. We will walk through some of what we talked about at the last Investor Day to give an update on where those things are at. Some of it's good, some of it's neutral. Some things just aren't moving along, some things are going at a different pace. Okay, our ESG approach is pretty simple. We run a very differentiated business with no environmental liabilities, no back-end obligations. We don't own any wellbores, don't own any pipelines, any facilities. We're purely a royalty owner.
If you looked on the registry of operators in Alberta and looked for a license liability rating or a license management rating, you wouldn't find us there 'cause simply we don't operate anything in the field. We're very low environmental impact. Probably the top dark wedge is where we spend most of our time focusing. We focus on profit. We do focus on governance and leadership, as well as health and safety and engaging with shareholders. We do have many shareholders in the business who are very focused on this. We're one of the only energy holdings in their portfolio, in some cases, the only energy holding, and part of it's because of this profile that we have. From a ratings standpoint, not a lot's changed over the last two years.
Still sitting at the top of the pile. Part of the reason for that is the way we do our deals, the way we run our business, and some of the factors I talked about previously. As you can see, we're ranked number one in Sustainalytics universe. That's across oil and gas producers, and number 51 globally across over 15,000 companies. Very proud of that. On MSCI, we're AAA rated, which is the top. On S&P, we're 70 out of 100, which doesn't sound that impressive, but it's actually top decile. Very, very good ratings. Recently, one of our peers asked me, "How do you get there? How do you get to AAA?
How do you get to sort of number one on Sustainalytics? There's a few factors, one of which is we have a really supportive board who focused on this very early. Jim was very early on in the company, saw that this was an aspect of our business that was very differentiated, encouraged us to spend time on it, and we did. The biggest reason, frankly, is Pam. Pam does a lot of work on this. We started doing it nine years ago. For those of you who fill these things out or look at these things, some of the timelines on them are pretty odd. It's usually December 31st or July 30th. It's a summertime program or it's over the Christmas holidays. I wanna recognize Pam.
Pam does an immense amount of work on this. We started on it very early. Proud of the accomplishments, and we're committed to continuing to see improvement in the business over time. It does feel a little disingenuous that I'm the one giving this presentation on ESG. Pam does a lot of work on it. Thanks for the applause on that for Pam. Just a note on some global ESG rankings. This is from Scotia recently. I know so many of you know Pat Brian, I know Jason's here today from Scotia. Wanna recognize that we were recently published in one of their notes and reports as being one of the top-rated ESG companies globally in energy and other sectors as well. That's just for your reference.
Okay, we'll get into a little bit of the other minerals side of the business. This is a deal that we talked about a couple years ago, Civitas Resources. This transaction's unique for a couple different perspectives. It's an in situ gasification transaction where the leases are cut for a single zone for coal and also natural gas. The process is to basically do a gasification process below the surface, bring that syngas to surface, process it into methanol and hydrogen with a cogeneration aspect, and then reinject the flue gas and the CO2 downhole. Where we get paid on this is we've received bonus. We will receive royalties in the future. What's a little bit unique from PrairieSky's perspectives, it was the first deal where we structured something to take royalty on different commodities down the value chain.
We have the option to take the royalty on methanol or hydrogen. We actually have an opportunity to take a royalty on the power as well it's generated, but we have a carbon credit royalty as well. This is the first proof of concept deal that we did, and we've duplicated it in a few other different scenarios along the way. The project has advanced from where we talked about it last time. They drilled two test wells, and you can see them in the stars there. We've received $10 million in federal funding, and they've raised around $20 million in third-party capital towards running the commercial plant. I know Maria and Mike introduced themselves at the beginning. If you have any questions about this, I'd encourage you to talk to them after.
They did a field tour to the asset with the management team a couple of years ago, where they had Air Liquide on site doing carbon injection to prove out that there was going to be bonding with the coal seams below the surface, and it was very successful. They are moving ahead towards commercialization of this, which we would expect an FID on it within the next year or so. Not as exciting, hydrogen and CCUS. We talked a little bit about this at the last Investor Day. We have three deals on hydrogen, and this is focused on SMR, so steam methane reforming, so turning natural gas combined with water and then reinjecting the carbon dioxide downhole.
These deals have not advanced much in the last few years, and part of the reason for that is the current situation with CCUS in the province is somewhat opaque as it relates to these areas outside of Edmonton where most of the emissions are, and we'll get to that in a moment. We've received bonus on these transactions. They're coming up to term. We expect that some of them will be extended, although not all of them. Certainly, as the CCUS picture in Southern Alberta becomes a little bit clearer, we expect these deals will progress. It may be, as Andrew referred to in that wedge, about 2029 playbook, we might be talking about this more earnestly at that point in time. Okay.
We'll talk about Meadowbrook a little bit, and we do get some questions about this from time to time. Just for context, the Alberta government, the way they're managing CCUS is they ran an initial process in the province to award tenures in and around the high emissions area around Edmonton. Out of the dozens and dozens of applications, they granted 6 original tenures. And we were the recipient of one of the first 6. I'm gonna talk about Meadowbrook. They ran a second process about a year later to grant tenures in different parts of the province, and we were also successful getting a hub awarded in that process as well. We've since elected to remove ourselves from that project for a variety of different reasons.
Primarily, we don't see it being worth a lot of near-term effort, but one of the biggest reasons is it's in and around Drumheller, which is an area where we're seeing a lot of mineral exploration right now. We're a little bit concerned about conflicts between injecting carbon dioxide below the surface and potential extraction of future minerals. We're not picking sides necessarily right yet, but our focus is definitely on the leasing for mineral extraction. This is Meadowbrook. This is just a little bit north of Edmonton. And so we're an 18% partner in this project currently. We do have an option to drop down to what looks more like a royalty interest. It's a single digit profit interest where we can take profit or loss, but we don't actually have to contribute any capital.
What we have contributed is we've contributed seismic, we've contributed tenured leases for the Cooking Lake, Leduc, and then we're expanding this project to an additional zone to give it optionality. It's currently scoped to be somewhere between 3 to 5 million tons per annum for a 25-year period, but it could get scaled up. Why we like this project? Location. Jane will appreciate this being from the real estate side. Location is everything. This is a map of the emissions in and around the Meadowbrook area. Just for context, this is very, very deep. This is a deep reservoir. Some of you would have seen that Baytex recently made a Clearwater-esque discovery in and around here in Morinville. This will in no way interfere with that. This is way down deep.
3 million tons per annum. As you can see in the two graphs, I apologize for the. These came right from our application and the graphics aren't that clear. Within a 100 kilometer radius, you can see significant emissions, over 35 million tons per annum. Basically, we're in an area where we have deep reservoir that can take the carbon dioxide, and we have a lot of emitters. That's the perfect scenario for this project. There are some other projects in and around here, but what's different here is that there's not a lot of interference with oil and gas, and there's very few old abandoned wellbores in and around this zone that could be tampered with. This is why we like this area. We're gonna be focused on the power producers.
We're gonna be focused on petrochemical producers. Ultimately, what do we need to get this thing going? It can be developed in phases. Right now, the partnership and the partners on the side are listed, Bison, Enerflex, and Indian Resource Council. We're focused on getting an emitter in the project. Preferably an emitter who can bring sizable emissions, but also partner with us on a transportation solution. We'll need a little bit of pipe that can be tied into the ACTL, or it can be tied in directly to emissions in the area. Right now we have our evaluation permit. That's for 5 years. We've conducted community and stakeholder engagement in the area. We're drilling the first test well here this year. After that, we'll adjust our front-end engineering design protocols.
We'll do some monitoring and verification. Based on that, we'll go for regulatory approvals next year and hopefully get an FID at the end of 2024. If we have a large emitter, that could look like a bigger FID with more capital being spent. If we don't get that big emitter, then we've talked to multiple smaller emitters, and we can do it on a smaller scale to start. That's Meadowbrook. If you have any questions about that, I'd be happy to take them at the end. We'll get into helium and lithium here a little bit. So we talked a bit about this at the last Investor Day. This was a sizable deal that we did down in the Lethbridge area. On helium, we'll talk about three distinct deals. These aren't all the deals we've done.
This is just a subset of some transactions we've done recently. The one in Lethbridge started out as a big exploratory block, 4.2% for helium, and then standard royalty rates on the natural gas. What's interesting about this is they are drilling quite deep for this, and so we're gonna get all the data that goes through those zones in areas where there hasn't been a lot of exploration over recent years.
That's the most exciting part.
It is, yeah.
They drill verticals. You only find helium in the deep-seated structures 'cause from the decay of radioactive materials, which is the very basement. We're gonna get the whole stack.
They're gonna find two oil pools and a gas pool probably if they do it.
Well, yeah. In fact, this operator who their first exploration well was outside of this block, but they actually found an oil pool along the way. And of course, as you can see from the blocks we own, we own everything surface to basement here, petroleum and natural gas. This deal is advanced. It's advanced to further delineate and sort of taper down the box. We did receive between $600,000 and $700,000 in bonus on this transaction. No wells to date, but they are planning on drilling a well this year. That will validate part of it, but then really what we're looking at is further extension bonus on this transaction. We'll talk about the Med Hat area as well, which is now seeing some interest in helium as well as Provost, which is the next slide.
Probably what's most interesting about this is the royalty rate on the first deal went from 4.25%, which is the Crown equivalent. We're seeing enough demand that we're seeing the royalty rates creep up here. While there's no real production and the exploration wells are still being sort of drilled, we are able to take the royalty rate up because there is competition in this area. We're excited to see what happens there. There is a well plan here for next month. Hopefully in two years we'll have something more to talk about on this. It's encouraging to see that this idea is stepping out into different geologic zones. Same can be said for Provost.
This is a very well-worn oil and gas area, lots of infrastructure, lots of surface access, very early stage. We are excited about this transaction, not only because of the higher royalty rates we're gonna get, but we are getting some wells drilled in this over the near term as well. What I should mention as well is we have seismic over this entire area. To the extent that we don't own all the land and the seismic is granted, we get an overriding royalty on any Crown that this operator purchases. That's consistent across all of these types of transactions. It's typically 2.5% for helium, and then a 5% royalty on any natural gas. We'll move over to lithium.
We're just gonna talk about a small piece of the lithium. There's a lot of different lithium ideas floating around in Alberta and Saskatchewan, but we're gonna talk about Grounded Lithium specifically. Many of you have heard of E3. That's a company that we do business with. It's a company that we, you know, are working out a partnership with. They have a joint venture with Imperial. That's an idea that's focused more on developing their own technology and taking lithium brines from old oil wells and refining them. It's a really interesting project, and obviously, it could be impactful for us over time. But there are some challenges, and there's some reasons why we really like this.
On E3, they're spending a lot of capital developing their own technology, whereas on Grounded Lithium, they've just gone to the best-in-class direct lithium extraction technology. From a capital allocation perspective, more of the money is going into the ground as opposed to developing the technology. This is Saskatchewan, which, as I think most people in this room know, is a great jurisdiction to do business in. We're very proud to have a massive land position there and being partnering with great companies. We've leased a very big block of land down in the Kindersley area for lithium extraction, and this is, again, to Andrew's point, very deep. All the drilling that's done here will go down to the Duperow, which is the Leduc analog in Saskatchewan.
They've drilled two test wells in this area, and both of which were on PrairieSky lands, both of which were very successful. Success on this play looks like commercial concentrations of lithium, so between 70 and 90 milligrams per liter and consistent flow rates. Each of the two test wells continue to flow at between 3,000, 4,000 barrels of water a day, so you can extract the lithium in commercial concentrations. We also get a royalty on any crown land that's picked up in here as well. It's still very early stage, although it's very successful at the original test stage. What we like about this as well is it's pure exploration, and so whereas in some of the old oil well lithium brine strategies, you do get cross-contamination.
There's no cross-contamination here, so you're getting a purer product, which means lower cost. What does this look like going forward? Well, they have a 24 well plan in place that's gonna be drilling 24 wells over the next year and a half to two years. Then they'll make the regulatory applications. They're trying to get a commercial operation up and running by 2026. When we do this next book in 2025, hopefully we'll have an FID on that project. They've done a resource assessment. You know, there's a lot of assumptions in it, but around 4.2 million tons of inferred lithium resource just across our lands. It's a really interesting project, of those 24 wells that are gonna be drilled, 12 of which will be on PrairieSky lands.
Exciting going forward. We had this slide in last time, and I think some people found it helpful to see what else is in the bundle of rights. There's a lot of things. There's some other things that aren't on this table. I think as you know, we collect potash royalties. Just anecdotally, after we did the Heritage transaction at the end of 2021, we got an unsolicited offer from someone else saying, "We'd like to buy all your potash royalties that you just bought," which of course, we wouldn't do. Those have increased significantly with pricing over the last year and a half, and we expect that Nutrien will expand the Rocanville project at some point in time, which should see additional growth. We've also leased for shale.
We've leased for a new limestone quarry in Manitoba. This is again, one of the reasons why you like to own minerals and own the optionality. With that, I'll turn it back to Andrew.
Thank you, Cam. Let's see if I can put these back together in order here. The final two sections, is to provide a brief financial update and then, look at range of outcomes for the business over the next three, five, and 10-year period. The first slide, this is, our oil production and some of the major constituents of it. We thought we'd, just like last investor day, walk through these major contributing plays, to PrairieSky and just kinda directionally where we see these growing. This slide here shows where our industry-leading production per share growth came from over the last two years. We...
The majority of the peers in Canada and the U.S., we were 300%-400% higher than they were in organic growth, very, very good year, very good years over the last 2 years. The next 10 years, we expect the Viking to remain flat, the Mannville oil to grow substantially, thermal volumes to grow by 50%, the Clearwater to grow by 200%-300%, depending on pricing, and units and other plays to stay flat. The Duvernay will also grow substantially, it's from a small base, it did not make this list. Probably makes the list on the next one. Probably the other piece is to talk about natural gas. Natural gas represents 40% of our production, but only 20% of our revenue today.
A full one-third of our natural gas production now comes from solution gas, and growth is therefore a derivative of tight oil drilling. With new offtake options from the basin and infrastructure buildouts, we expect our natural gas portfolio to grow over the next 10 years. We, as many of you in this room would know, we're kind of perma bears on natural gas, just given the very, very efficient finding costs across all of North America. Every price response, every price signal we get, we get an almost instantaneous supply response. Last year was one of the most staggering things I've ever seen. You had exceptional pricing the front half of the year, and you added 5 Bcf from one play at the Haynesville.
We just believe that, you know, gas will be capped for probably the next decade at certain levels and we never sell our gas royalties. It's pure optionality, and we do think they grow, but we're more bullish on the oil side, the low-cost oil side. I think it jumped ahead one here. Not only do we not pay operating costs, transportation costs, finding costs, and abandonment costs, our business is also sheltered from inflation, which has been a big topic in the oil and gas business over the last six months. Low cost wins when it comes to energy, and PrairieSky's the ultimate low-cost producer. Other revenues are another differentiator for our business. Recurring lease rentals, lease bonus revenue show how the lands can be recycled through the various cycles.
Since our IPO, 1 million acres have expired and come back to the company in inventory. We have leased, over that same period of time, 1.5 million acres. You know, I can't tell you exactly what the next 10 years looks like, but it probably looks like another 1.5 million acres of new lands leased. What's unique about that, with 10 million unleased, undeveloped acres in a variety of different zones, it's. Any new discovery opens up another full stratigraphic layer that you can then lease on. There's new things being discovered every day. There's new technologies trying to exploit existing resources that are known to be there, and we'll be capturing those over time. Both production and mineral taxes and cash G&A per barrel have come down since our May 29, 2014 IPO.
We always look for efficiencies that can be achieved in our business. As our production continues to grow and our administration expenses stay flat, per barrel numbers should improve over time. On the bank debt, the first bank debt slide Pam gave me was blank, I was like, "Okay, perfect. We'll just say it's at 0 next year." She did finally fill it out. PrairieSky has a CAD 725 million bank facility with an accordion feature to take it to CAD 800 million. In 2021, we financed just under CAD 800 million of the CAD 1 billion in M&A we executed on with this facility. First time we've used significant debt in the company. The entire debt will be repaid in full next year. Probably enough on that. Taxes, the less fun part about being profitable.
PrairieSky's always been a taxable business since IPO. We paid CAD 86.5 million in cash tax in 2022. Again, it's an unfortunate consequence of generating strong cash flows and spending very little. In 2023, the first CAD 155 million pre-tax cash flow will be sheltered. The remainder will be taxed at the statutory tax rate of 23.5%. For your models, that's what it looks like, and then we'll grind that CAD 155 million off the COGP balance, and it'll be even lower next year. Now the fun part, the valuations and returns to shareholders. Discipline is required when managing a business. Cash and liquidity provide optionality. In nine years, we've acquired in the lows and been active leasing in the strong cycles.
It's easy to get caught up in the short-term gloom or euphoria. One of our strengths is zigging when others zag. We can probably have a moment of silence while looking at this graph. The picture kind of says it all up and to the right. This is near-term leasing activity. This is obviously a precursor to drilling in the future, but very, very active. Our leasing teams have been very, very active. Give them credit, and industry is very interested in adding inventory right now. Roll-up strategies and MLPs must buy throughout all cycles. In frothy times, we lease land and save up for the next downturn. Note the red dots on this current graph, more spuds and higher average royalties. That higher average royalties on more spuds will be a theme going forward.
Once again, a map of WTI and when PrairieSky timed its acquisitions and buybacks. All acquisitions are measured against buying back stock in a terminally growing business. This instills discipline. I should also note that despite the drop in WTI, CAD dollar WTI still trades over CAD 100 because of the weak Canadian dollar. We are in a frothy time right now. Land leasing remains our core priority. As inventory concerns continue to plague industry, PrairieSky is the land bank for future growth. A big part of the reason people like Franco-Nevada, Wheaton Precious Metals, the royalty companies in general, is all the call options that are inherent within the business. It's not just the strong high-margin cash flow stream, it's the call options you get, and you get them for free, and they don't expire.
You know, call options that don't expire have tremendous value. This optionality within our business comes in many forms. Every 10 years, there's a new play discovered or a new technology to exploit already known reserves. As perpetual fee title owners, we already own these reserves. The big question is, what do you pay for decades of inventory, an option on all new technological advancements, new discoveries, and the largest land position in North America's lowest cost play? The answer is you can buy it for half price. Between 2016 and 2020, Texas Pacific Land Corporation, or TPL, their ticker on the New York Stock Exchange, grew faster than PrairieSky. Over the last two years, we have grown faster organically. In addition, we traded half the multiple of Wheaton Precious Metals and Franco-Nevada with less jurisdiction risk and a stronger organic growth profile.
Our returns screen very well on Bloomberg, there's an important add back to get to the correct value. The DD&A number that we report in our financials is industry's number, not ours. In 2022, if you add back the CAD 145 million of depletion, depreciation, and amortization, our return on equity is 16%, return on assets, 13%, and our return on capital employed is 17%. The XEG has outperformed PrairieSky over 9 years. Given our superior business model, competitive growth rates, inflation protection, balance sheet, capital and liability-free model, we should outperform over the long term. A few comparators. A lot of people compare us to E&P companies, they're totally different businesses, and it doesn't really work when you walk through the graph. We've got ourselves and midstream companies here.
Pipeline and midstream businesses share many strong attributes with PrairieSky. The main differences are maintenance and growth capital, as well as balance sheet. PrairieSky, at a lower multiple, lower risk, better balance sheet, and projected dividend growth that is stronger, offers investors the same long-duration cash flow stream. If the REITs on this page paid their debt down to zero to reach PrairieSky's 2024 leverage profile, it would take 15 years using their 2023 free funds flow. Over that same period of time, if PrairieSky used its free funds flow to buy back shares and the shares stayed at CAD 22, we'd cancel 120% of our shares outstanding. Flip to the next 1. Now to focus on our returns instead of picking on others.
The following table sets out our free cash flow after tax, after G&A over the next 10 years. What we've done in this chart that Pam built, and Pam has 100 models always running that we update all the time with a variety of price sensitivities, but a variety of drilling activity sensitivities as well. What we did in here is keep it simple. We used $5,200 oil in the grid and slightly negative to slightly positive growth rates. As we did two years ago. Let's flip to the next one here. We provide a range of outcomes for the business over the next 10 years.
To simplify this, we assume all of the free cash flow cancel shares, and the stock stays at CAD 22.65 per share, which is where it traded a couple days ago when we finally printed this book. Before we show you the final outcomes, it's probably good to go back and show you what we showed you two years ago from the exact same range of outcomes. This is what we presented to you two years ago, pretty much the same day. We gave four ranges of outcomes, the black bar, the orange bar, the blue and the green on the bottom. Our returns are on the orange dot, so a top quartile result since our last Investor Day. Now to the projected returns for the future from today.
What we've done here is take the chart from a few back and just plot that on this graph to find out what those potential returns would look like in that situation where you take all the free cash flow with, by the way, below what we expect in terms of growth rates. This time, we just have three scenarios. The blue one, the low one that takes you to $32 a share at the end of the period. $59 per share on the orange line. The black line takes you to $124 per share. The low scenario with declining production and $60 WTI, a mid scenario with today's price and no growth, and a modest growth scenario and $80 oil in block.
We're well aware that there are a number of other scenarios, both higher and lower, that could occur on this chart. If a lower scenario unfolds, we'll have a CAD 1 billion in liquidity to take advantage of it. If a higher than $80 WTI environment happens, we'll lease more land and return more money to you in dividends. Again, when you really synthesize this business down, it's a very simple business. We don't know exactly what the free cash flow will generate over the next 10 years is, but it looks somewhere in the range of CAD 4.5 billion plus. The big magic will be how we return that to you. We talked about that high return on invested capital project that we did.
We can find things that have a higher return than our existing business, then that would be a wonderful place to spend some of the excess free cash flow. Again, it is the ultimate dividend-paying type of a business. We'll continue to work hard to lease land and compound it over time. I guess one thing to finish off with, we really appreciate our shareholder base. They typically share similar time horizons as management. This allows us to build a more durable business and have patience to execute on opportunities at the right times. I'd just like to thank everyone for coming here. I know we probably got you out of here a little early. We can open up to questions for anyone in the room. We'll even take comments.
You guys talked about ROIC and the payout of the Spur deal. I'd be curious what those numbers looked like for CNQ, Range Royalties, Onion Lake, Lindbergh.
Yeah.
You might not have them off the top of your head, but just order of magnitude would be interesting.
Yeah. It's a good question. Probably the worst one, to answer your question, would be Lindbergh, and it would be kinda mid-single digit, Aaron. That was a result of we projected the next phase of that thermal project to happen by now, and it hasn't. That brought what we thought would be the conservative, even at the time, IRR down lower. CNRL was exceptional, and part of the reason was we bought CNRL at $55 oil. We projected lower drilling activity. There were a number of new discoveries on the lands. We got very active in 2016. That one's. We don't brag about that one out loud 'cause that was almost a merger. That one worked out very, very well for us.
Range Royalty has also had above what we anticipated for returns. M&A is the riskiest thing you can do, and that's one of the reasons why we have such stringent criteria to evaluate these opportunities. You look at our business, we have the best business. We own 73% of all of Canada's fee mineral title lands. You can't replicate that. There's smart geologists and engineers working all across the basin, finding new things and new ways to make things work better, and we're a natural collector of those great ideas. Stuart?
Yeah. Why are you looking to reduce your debt to zero? It's pretty modest right now, CAD 300 million. Like, rather than giving it back to shareholders.
Yeah, I think, you know.
Can you repeat the question? I'm okay.
Sure, yeah. The question was, why are you looking to pay your debt down to zero? It's very modest as it is today, then you can return more money to shareholders. I think, you know, when we look at this, if you look at even what Franco-Nevada did, and everyone thinks it happened overnight, but it was, you know, pre being bought by Newmont, then they IPO'd it after. Like, it was probably 40 years of working on that business. Whenever you have cash, you have optionality, and an opportunity arises, and you're one of the only ones who can do it, and you can do it well below intrinsic value, you can get a higher IRR. We're pretty conservative people. My last EMP had a CAD 100 million unused bank line and CAD 10 million cash when we sold.
I just think it always provides optionality. Jim, the road to hell is paved with debt. We're just not debt people. It's not in our nature, and I think we'll sacrifice better total returns for better risk-adjusted returns in this model. Could use your line of credit to buy it maybe, to simulate it. Just an option. Mitch?
Thanks. I'm just curious what the market for the other 27% looks like.
It would be a couple ways. The majority of our fee mineral title land came from CN and CP Rail, and those were the big grants in exchange for linking the West Coast with the East Coast. That was the big mineral title piece, and that's what we've captured. There are other companies that own small fractions of it from the old Amoco days when they sold off properties, those kind of things. The remainder are mostly farmers and individual landowners who own a quarter section or a half section.
What happened in the very early days is if you showed up here as a settler and you cleared the land and built a structure, you got the mineral rights. What's happening now is in the U.S., it's really far along, so it'd be like the 10th family now. It's very scrappy. Like, you can buy a 1/18 interest, and you don't control it. Whereas here, it's still pretty well put together. You just gotta talk to the aunts all over and say, you know, "Who wants to sell their 1/6?" We're always working on that. We don't really talk about it, but we're buying fee mineral title every day. There's a few you feel bad.
Like, there was one, we saw a Duvernay play coming right towards it, this old lady wanted to sell her fee, we said, you know, "This is what we're willing to pay for it, there's a shale play coming, and we think this is gonna be worth way more than it is five years from now. It's not gonna get drilled in the near term, that's why we're buying it, we just wanted you to know that." She said, "I still wanna sell. I'm getting a new truck," it was fine. As long as we're open about it, she's not gonna feel bad. She'll drive by that in a brand-new F250.
The only part I don't believe is that you slept well. I slept okay.
Thanks, Mike Dunn with Stifel FirstEnergy. Andrew, maybe I'm showing my ignorance here, I'm not sure, but you have 1.3 million acres of Clearwater lands. Are those predominantly already all leased out to operators, or is there some you've held back that you're still doing deals with? I've got a second question.
Yes. It's a two-part answer to that. A lot of the Crown lands that we bought in that oil sands region, from Marten Hills all the way up to EV Cadotte, those would all be spoken for 'cause you know, what we found is we wanna partner with an exceptional operator that's well-capitalized, that knows how to execute and will probably do a better job of everything along the way, including infrastructure, cost structure, the water floods, the polymer floods. Those are all spoken for. What's changed is the... If you go back to one of the slides I showed with the Heritage acquisition, the old Cenovus mineral title lands, those same type of plays and similar EURs are creeping onto our 17.5% fee.
There are a number of opportunities for if y ou may not wanna call it Clearwater. It's Mannville effectively, but they're using Clearwater drilling techniques, Clearwater fluid systems, and finding a way to get that primary heavy oil that, you know, Devon Canada drilled hundreds of verticals. It's all proven up. You just gotta find out if it works. I think that's an area where that's unleased, and a lot of the leasing we're doing right now is for that. I think we had 10 startups lease from us over the last three months. I can't even remember 10 startups in 2018, 2017, the entire year. That's not necessarily in that 1.3 number. Yeah. I got that. Okay. Your second question?
Yeah. I don't know if it's in the documents today, but I think in your April slide deck, you mentioned some further opportunities for thermal projects on your lands. Now I took that to mean, is that small scale SAGD, like, what's in Saskatchewan? Or maybe can you just put some more. Talk a bit about more about those opportunities?
For sure. I think, you know, the one place that industry's found to have very successful small scale SAGD projects has been on the Saskatchewan side. I know Cenovus, when they bought Husky, did a full review of the assets and said, "These are actually very competitive. They make sense." We had, prior to them selling, done a number of deals, 10-year deals with Husky. Their commitments were to shoot seismic and evaluate the lands and then ultimately drill a test hole. I think that's about five years into the deal now, so they've gotta get active on some of those. They're proven thick hydrocarbon packages, and it. You know, we're pretty comfortable that SAGD's gonna work.
Don't know what the SOR looks like, don't know what the capital looks like in this inflationary environment. We've done a number of those. The other one was a company that just sold, Serafina. Serafina sold to Waterous'.
Strathcona.
Strathcona. Thank you. We had a number of projects with him as well, where we'd done the leasing on our lands for that. What's neat about that is we talked about the one section in the Montney out of 28,600 you own as a shareholder. Well, there's one single section in Saskatchewan, if you do SAGD on it, could be like a 6,000 barrel a day producing zone. We really like that. It's big capital, that's the issue, but I think there'll be more of those in Saskatchewan going forward. Thanks again.
Maybe this one's for Cam. I'm gonna ask you to speculate a little bit. You talked about the opportunities on hydrogen, helium, lithium, CCUS. If you looked out five years or 10 years from now, what could we expect that to generate in revenue?
Sorry.
Bilkoski . I can't tell you. I can't tell you, Aaron. I could tell you that we're gonna generate a lot more lease issuance bonus.
We Are taking lease issuance bonus on those deals. It's going to be a function of how fast the capital is deployed and obviously pricing. I think that we'll probably see more revenue on the lithium side than we will on the helium. Obviously the focus of our business is hydrocarbon development. To the extent that we can take this, call it dormant inventory and try and bring PV forward on it. That's really the mandate of this effort. What will it look like? I can't tell you. We'll be smart about it. We'll make sure we get our fair share of what's going to be developed, both from a lease issuance bonus and also royalty revenue bonus going forward, try and encourage those developments in the future.
I'm particularly interested in the helium because you've got the biggest reserves of helium in the world. They're supposed to be in Texas, but the truth is they're in Belarus and Russia, who's no longer exporting them. There's a huge shortage and to clean a microchip, build an MRI machine, you need helium. Second smallest element on the periodic table, so it's very, very expensive to transport 'cause it can sneak through just about any valve. Again, I do think Canada has the technology and expertise to do it. We have the fifth largest helium reserves in the world. There's definitely. We're sitting beside the biggest user of it, the $22 trillion a year economy right south of us, and all these are on southern Alberta or southern Saskatchewan.
There's some opportunities there, but as Cam mentioned, we get lease bonus, we get lease rentals, we get data, we get wells drilled through other zones that might produce hydrocarbons. There's no risk to us. It could be really small, but it could be meaningful over time.
Yeah. Aaron would know this, but just for some other people, that is at zero cost to us. You know, any dollar of revenue is a great return.
Yeah.
Hey, guys. Just looking out into 2024 as you sort of extinguish the debt or project to extinguish the debt here, how are you thinking about the return of capital mechanism? You've obviously made a pretty compelling case here for buying your stock and the IRR on that. I know you know, you're obviously very focused on M&A and the IRR hurdles there. You addressed the dividend in November. You've talked previously about pre-funding the buyback with the leverage you took on the previous transaction. As we extinguish that debt, how are you reevaluating these return on capital mechanisms?
Yeah. It's a good question. I think we look at it wholesomely. Things are always changing, so you wanna really understand what your opportunity set looks like and what the future business looks like. You know, the answer to your question is very different if we saw oil drop to 30 when we're getting closer to that February dividend decision for the upcoming year or if it was at 100. Again, I think, you know, our payout ratio is low. We will have our debt at 0 by next year, and it'll just give us a number of different opportunities. A lot of companies, including Devon, successfully laid out a very stringent return of capital profile. They got a bit more cost of capital. Their multiple went up. People liked it.
All of a sudden it boxes you in and you can't do anything else other than what you promised them. We just don't like to do that. We wanna have ultimate flexibility, and there could be other things that we can't think of right now that'll create opportunities. I do think just a very simple answer to your question is, as we head into February, debt's getting closer to zero. There's probably room for a nice dividend increase. How nice is the. You have to talk to board members in this room, but which will still leave excess capital for buybacks, et cetera. Did that answer your question?
Any other questions?
Great. Well, thank you everyone very much for coming. Hope your spouses enjoy reading the royalty asset book as much as you do. We'll look forward to seeing you in two years.