Good day, ladies and gentlemen. My name is James, and I will be your conference operator. At this time, I would like to welcome everyone to the NXT Energy Solutions 2020 First Quarter Operating and Financial Results Conference Call. [Operator Instructions] I would now like to turn the meeting over to our speaker today, Mr. George Liszicasz, our President and CEO of NXT Energy Solutions Inc. Please go ahead.

Thank you, James. Welcome, and thank you, everyone, for joining us for the NXT Energy Solutions First Quarter 2020 Financial and Operating Results Conference Call. This is George Liszicasz, and joining me on today's conference call is Eugene Woychyshyn, Vice President of Finance and Chief Financial Officer; Rashid Tippu, Director of Geosciences for Africa, Asia and Middle East; Enrique Hung, Director of Geosciences for the Americas; and Mohammad Saqib, Operations Director and Head of Interpretation. The purpose of today's call is to briefly discuss the highlights of the release of NXT's first quarter 2020 financial and operating results and to update the market on our business activities since our last call about a month ago on April 14, 2020. Following our update, we will open the line for questions. Please note, all statements made by the company and management during this call are subject to the reader's advisory regarding forward-looking information and non-GAAP measures set forth in our 2020 results, press release and MD&A issued last week. All dollar amounts discussed in today's conference call are in Canadian dollars unless otherwise stated. The company financial and operating results and condensed consolidated interim financial statement for the first quarter of 2020 were published May 14 and are available on NXT's website as well as on SEDAR's website. Now over to Eugene for the financial review.

Thank you, George, and welcome, everyone. As George mentioned, our first quarter 2020 financial statements and management discussion and analysis were filed on SEDAR's website last Thursday and EDGAR on Friday. From a financial perspective, the focus remained on continuing to control and optimize noncore corporate costs in support of the business development efforts. We're also actively applying for various COVID-19 government support programs. For the first quarter, our financial results were as follows. There were no revenues earned in the first quarter, but we did collect USD 466,000 in our Nigerian SFD survey. We have now collected just over 94% of the revenue. The final payment of approximately USD 500,000, which is, in fact, a performance bond, is expected to be paid in Q3. We elected not to enforce until either upon the completion of a new contract with PE Energy or at the closure of the current contract. For the quarter, NXT recorded a net loss of approximately $1.33 million or basic and diluted $0.02 per share based on 64.4 million weighted average common shares outstanding. This compares to a net loss of $1.76 million in Q1 of 2019. Total operating expenses for the quarter were $1.7 million, including survey costs. This included a noncash expense of $0.47 million related to amortization and stock-based compensation expenses. Operating activities used $0.63 million of cash during the quarter. Cash and short-term investments were $6.24 million at March 31, 2020, and net working capital was $6.16 million. This includes receipt of the USD 466,000 of payments for the Nigerian SFD survey on March 25. G&A expenses increased 6% or $52,000 in Q1 2020 compared to Q1 2019 as a result of the following: salaries, benefits, consulting charges actually decreased by $36,000 or 8% primarily due to one less head count; business development costs increased by $90,000 or 219%, primarily due to negotiation of further African surveys; and Q1 2019 resources were focused on the implementation of the Nigerian SFD survey contract. To summarize some key financial points. We ended the quarter with $6.24 million of cash and short-term investments on hand and a net working capital balance of $6.16 million. Net loss for the quarter was $1.33 million. Cash used in operations was $0.65 million. We continue to focus on cost control. I would now like to hand the call back over to George to further discuss our business update and forward plans.

Thank you, Eugene. Let us revisit some of the discussion points covered during our last call on April 14. First, there is a noticeable change in the approach regarding COVID-19 virus. There's a breath of fresh air as the U.S. and Canada are reopening the economies in stages. We see the same effort taking place worldwide. We all hope that an effective vaccine will be found. The economic engine of the mighty U.S.A. is now restarted, and I'm confident that the process will continue. The second good news is the steady rise of oil price. At the time of our last call on April 14, WTI was trading at $20 a barrel. Today, it was trading at $32 per barrel. As I mentioned on the last call, I expect WTI to stabilize about $45 during September. The oil war between Saudi Arabia and Russia ended with OPEC+ agreement on a historic production cut. I believe the stored oil will be dried up by the end of June. Global demand for oil is expected to increase as more countries are returning to normal operations and consumption. Oil price will also be affected by the ability of the shale industry to recover. Many billions of dollars invested have been already lost. In addition, we can expect a shrinking supply due to the shut-in wells, reduction of shale production and a steady decline of exploration activities and discoveries. That brings us to the business at hand and the opportunities NXT is pursuing currently. NXT has focused most of its business development on national oil companies, NOCs, given their longer strategic planning time horizon, large fiscal resources, general stability, available land base and their relative insulation from the day-to-day happenings of the hydrocarbon markets. Our contract history to date, while still unmeasured, has demonstrated the success of this effort. In many countries, NOCs contribute significantly to the nation's economic well-being over the long term, which means that they have multiple reasons to continue their exploration and production activities. Given the current fiscal state of the industry, they have find new -- find ways to explore and produce more effectively and at a lower cost. NXT provides the NOCs with a proven and patented upstream geophysical methods that can be rapidly deployed at a competitive cost and with the potential of significantly enhancing success while fitting effectively within the established exploration cycle. With respect to the business travels under the COVID-19 restrictions, I would emphasize that NXT continues to communicate with customers via available communication methods such as teleconferences and online video conferencing. We are hopeful that the lifting of restrictions and no significant secondary wave, that we can move to the final steps in our negotiations with our customers. Furthermore, NXT had a very busy first quarter, where my team and I engaged in a broad scale international market business development effort, which included signed memorandum of understanding with an independent oil company with interest in East Central Africa. With the recent uptick in oil price, we expect greater momentum regarding this opportunity. NXT is focused on minimizing risks and continues to advance discussions for SFD survey opportunities within Nigeria, East Central Africa, Mexico, Colombia and selected Asian countries, primarily via video conferences. Given the essence -- essential status supportive to the oil and gas industry, these remain operational. And in spite of the COVID-19-related hurdles, the parties stay committed to advancing their SFD survey project. With respect to Nigeria, I am to report that travel restrictions will be reviewed early -- in early June, and we expect ease of current restrictions. As previously disclosed, there are multiple business initiatives in advanced stages of discussion in Nigeria involving state-owned entities. Furthermore, these opportunities and our work done to date will gain NXT invaluable exposure to the international majors who are regional stakeholders throughout Africa. As to our Mexico initiative, NXT with its local resources continued the effort to reactivate the long-term framework agreement with international procurement department of PEMEX. All relevant decision makers have been engaged and presented to, and a road map now exists towards continued SFD operations in Mexico. The -- using the results of the 2012 SFD survey covering 6 basins and the 2017 SFD survey over the 2.1 bid-round blocks offshore have been instrumental in reaching this state. Finally, I would like to share some relevant news regarding reactivating opportunities in the Colombia market. Recently, NXT has been aware and independently confirmed of a successful drilling of an SFD recommendation made in 2009. So it's 10 years later. Early estimates indicate in-place hydrocarbon volumes of about 100 million barrels equivalent. As we speak, this success has sparked additional interest in Colombia for SFD surveys and associated geological and geophysical integration work. Regarding our research and development progress, let me state that besides the patents granted in 44 countries, NXT has now completed the first step of new sensor systems, and flights are scheduled in the near future. The company expects improved efficiency, better resolution and increased data acquisition capacity. SFD data acquired over the Queen Charlotte Fault offshore British Columbia is being evaluated. The purpose of the continuing QFC (sic) [ QCF ] study is to identify seismically active areas and to differentiate subsurface stress states in deep water settings. QFC (sic) [ QCF ] stands for the Queen Charlotte Fault. In conclusion, notwithstanding the COVID-19, we are advancing our initiatives in Africa, Asia, Latin America and secure -- to secure SFD surveys. We will continue delivering results and growth for our shareholders. On behalf of the Board of Directors and the entire NXT team, I want to thank you all of our shareholders for your continued support in these trying times. We wish the best of health to you and your families. I now ask our operator, James, to open the line for us to take a few of your questions. And standing by is Rashid and Enrique and Mo and Eugene and myself to answer. Thank you so much.

[Operator Instructions] We have our first question coming from Charles.

[ Charles Aqua ]. I'm a private investor. How are things?

Well, could be a little bit better, but the truth is that we are moving forward and progressing. So can barely wait to get out of here and go to Nigeria and the other countries.

Right. My question has to do with the contracts that you were expecting in December that you held over until January. I think it was $25 million. Whatever became of those?

These are the same contracts. They haven't changed. Because of the COVID in February, we came to a screeching halt. And it's an unfortunate situation, but I can't do too much about it.

Right. But the question is that those contracts were supposed to be let in December, and January is way before COVID hit. So why aren't they there? And why aren't things progressing where we have some business rather than just hopefully having business?

Okay. I did mention a couple of reasons. One was that the entire NNPC team and NPDC team from the top 2 meets -- the management have been replaced. So the people that we work with or PE Energy, whom I am very satisfied with their work, they worked tirelessly to engage the new management. And you know that there was a discovery drilled in Nigeria as well after 17 dry holes, and the president was supposed to go and make a speech at the well before everything else continues. So these things created a delay in our situation and ability to close any of the contracts, but they are all there. As you know, 2 of them, I mentioned it before, have been approved and the funds allocated. So the purchasing of the data, the funds have been allocated and also have been approved. Also for the new program that I talked about, you were not on the call last time, I believe, we discussed that 11 assets that are being operated by international companies, we will be evaluating for our clients. And that is a significant amount of work and money involved. So everything is on track, what you know.

Okay. Well, I guess that follows up with things apparently progressing like you think. A little promotion and some help with the stock price would certainly be nice. I noticed today, it is in the toilet again, and it will be nice if you guys could provide some promotion. I know I've asked that question before and really gotten nowhere so I guess I'd reask it. Why not promote the stock a little bit?

Well, the promotion of the stock is -- how would you put it? It is something -- we don't mind disseminating information, but promoting the stock is not something that we would undertake because we want to do everything based on the deliverables -- correct, on performance. And we believe that, that is coming shortly. So it's unfortunate that the oil price is tanked. And we were supposed to -- actually, we signed the agreement in the East Central Africa for a significant dollar amount, and we could not finish it because the oil price is tanked and the COVID came in, and that's it. We have to wait until oil prices recover, which should be about soon because we just closed about $31, some cents. So we're getting progressively better. And I believe that within a month, there will be an ease of the restrictions of travel, and also there will be a much better oil price in place. And we will just continue moving forward. And thank you for your question.

Our next question comes from Mike Mork with Mork Capital Management.

You mentioned Colombia, that you had a successful drill down there. Do you have a complete library now of all of your recommendations and whether they've been successful or not? Has there been enough that you can put this into like a library-type thing? So it could be part of your presentation or you could send it out the stockholders. Because I've heard numbers before, 60%, 70% success. How many are in that database? And is it a number that's meaningful to potential customers you have?

Mike, yes, we have quite a few wells in that -- like in the database. We are in the process of putting the library together, as you mentioned. It's -- some of the information that we need to reach a meaningful conclusion is not the easiest to obtain or is usually confidential to the clients. So it's a work in progress, and we are hoping to finalize it as soon as we can, pending -- obtaining some of this information. And yes, and as soon as it's ready, we hope to be able to share it with everyone.

Maybe speak about the discovery.

Okay. That sounds good, and then just another question. You talked about -- I presume with this COVID, the lockdown, you are able to spend a lot more time on R&D. And you mentioned in the press release, you're upgrading your sensors and whatnot. Is this -- is it going to be something major? Is this like a 5%, 10% increase? Or is this going to be -- in the past, you had some quantum leaps at sensor development like the reservoir sensor, things like this. Are you working on something that you could say we'll be able to tell if it's oil and gas and not water? Or are we talking about an incremental increase in its -- the efficiency of these things, 5%, 10%?

What kind of cup it's called? There's a cup. The golden cup or -- what is it?

The Holy Grail?

The Holy Grail. That's it. If there is a technology on this planet that can identify directly the hydrocarbons and the amount of hydrocarbons at 5,000 meters or 15,000 feet, let me know. Nobody has ever done it. Hopefully, we are moving in that direction slowly. This particular work had to be done for various reasons. Number one, we wanted to improve the efficiency. We're going to get a better resolution. And also, we are going to have multiple channels, further increasing data acquisition speed, samples per second, for example. The other thing is that we are also planning to have redundancy and reduce the -- basically, what we are thinking about is that sooner or later, we're going to need 2 airplanes. And as a result of that, we are going to need additional systems, and so this is a very important project from that perspective so that we build additional systems and so on.

Okay. That's fine. And then just one final question with that Queen Charlotte Fault flyover. I know you were thinking potentially of coordinating out with the Stanford or the lady up in Calgary. Is that moving ahead, too? Or do you have to do more flyovers over the Queen Charlotte Fault?

We do have to repeat flyovers with an airplane with longer range. And I mentioned before that one of the issues that we had that we've flown out of Victoria, which is sitting on a fault zone and we did not know. We thought that the fault zone is going to be more towards the ocean itself, but it turns out that some of these fault zones are hundreds of kilometers wide. So it's not just a 2-kilometer break. It is fractured up and is broken up, and you have signals for many, many kilometers and so on and so forth. So it has to -- it was a -- I would say it was a very successful undertaking. However, we have to now do a rigorous work and very well-designed program and have the people from Stanford and the lady from here who is graduate from Stanford University with a PhD in stress to design a much better program for evaluating these small systems.

[Operator Instructions] Our next question comes from Peter Mork from Mork Capital Management (sic) [ Capital Partners ].

I thought I'd jump in with just one bit of clarification on that recent discovery you guys talked about in Colombia. So you flew that in '09. Is -- I know there's been a lot of changes in the companies down there. I think you flew it for, what, a total of like 3 or 4 companies? Is the client you flew for? Or can you disclose who that is? Or is it still the same operator? And then could you repeat the size of the fund? I didn't quite get that.

of Interpretation" type="E" /> Peter, so no, the parties who made the discovery is not the same as who we flew it for because that land that we flew for has obviously changed hands a number of times since then. So it was a new party that made the discovery. It's 100 MMBOE approximate that have been what we know from so far that's in place in this discovery. And yes, that has caused some additional people to sit up and take notice. And hopefully, that leads somewhere.

That's helpful. And one more question for Mo. It's just with regards to -- so this was discovered. It was on line kilometers that you were paid for and contracted with because I know you guys have a significant data library as well just going to and from these blocks. But this was one on -- you have essentially a recommendation you provided to a client at the time.

of Interpretation" type="E" /> That's correct.

It can be verified. Okay.

And also, Peter, the client -- the former client, some of the executives are in this company. They're working with them or they are consultants or something like, yes. Enrique was contacted so he knows all the details more, but the microphone is too far away from him because of COVID-19. Okay. You go ahead.

There's only -- there's like a trend of a play in this area of the basin in Colombia. And in one of -- I think there's 2. Two wells are inside our recommendation, and this is a -- 3 was in total. And the amount -- the volumes estimated in place is 100 million barrels, close to 100 million barrels.

Enrique, when were those drilled? Was this in the last quarter? Or is this something that is just kind of coming to your attention now but has been drilled in the past?

Just now.

of Interpretation" type="E" /> Okay. The first discovery in the vicinity was actually made back in 2016. And just recently within the last month, they drilled another one that is squarely inside the SFD normally. So that's the one that we are focusing on.

Our next question is coming from [ Stan Sterling with NXT Energy Solution ].

No, I'm not with NXT, but I wish I was. A couple of questions. I need a little more clarification on what the new sensors will do for you. I know that you're saying that they're going to be more accurate, they give you more resolution. But what does it mean to the layman? What are the advantages you are going to see from these new sensors?

Well, I have -- thank you, Stan, for your questions. I have contributed my thoughts regarding the ability to fly additional aircraft. We had also reduced the uncertainty. Remember, these are quantum sensors, so by definition, you have to have a number of them declaring, so to speak, or indicating that this area is conducive to fluid entrapment. Also, we'd get better resolution and increasing our acquisition capacity, and maybe Mo can also add to the improvements to various other components. Mo?

of Interpretation" type="E" /> Okay. Now with regards to the sensors, basically a number of -- like in the last year or so, we have field in numerous requests regarding the identification of smaller fields, bypass plays and things of that nature. And these newer sensors, they give us a better ability to deal with these opportunities. The existing sensors are defined more for the larger accumulations, bigger than 2, bigger than 3 kilometers kind of thing. And the newer sensors let us take advantage of some of these further things that have come up recently, so things like the field extensions. And people ask like, "Can I drill 1 kilometer away from an existing field and find something?" Now you have more ability to answer that question. If it's to do with smaller accumulations, compartmentalize things, which are more common now than they used to be, so the sensors address that void that used to exist.

Okay. So basically we open up to more potential sites we're drilling?

of Interpretation" type="E" /> More potential sites and more clients as well that can take advantage. Yes, there's increased application of the technology within the same sector, of course, and more people can now use a technology or will be able to use the technology once everything is settled and finalized.

Okay. And when will these sensors be available?

They are available now. The first set has been done. There's 3 sets planned. So...

And how many do you intend to -- how many sets do you intend to...

Each set consists of 8 independent SFD sensors with different attributes. And it's very important what Mo mentioned. And it's a good question, Stan, because now we have the ability to utilize the sensor not just in a frontier matter, in a frontier exploration setting, geological setting, but also in a production area where the client wants to evaluate the assets, wants to see compartmentalization, extension of field and...

of Interpretation" type="E" /> Marginal.

And marginal, yes, marginal fields and so on. So it's...

Will it help you be able to analyze the data more efficiently?

Of course. I mean this one requires -- actually, you are maybe not aware of this, but the guys, Mo and Dr. Xiang Gui and also [ Hai Fung ] and Enrique, they have been working on various algorithms and programs. And they actually developed something very, very significant and important ability to evaluate these smaller signals and use them to identify the smaller marginal fields and so on and so forth. So it's been a great run for the company in R&D terms. We are working on the new sets right now, and we're going to take these ones for a test flight.

Well, this is some -- this is pretty significant information. The other thing, too. My last question is, can you give us any sort of time line on when we might see progress on Mexico?

There is the man, Enrique.

We are speaking with our kind of a set of a team of very -- people on the ground in a weekly basis. In fact, we're going to have a teleconference call right after this call with -- directly with Mexico and one of the FPOs. So they have all the information that they need to reactivate the PPI agreement, which is a long-term framework contract agreement for services. After that, the pathway is going to be that we need to update our services as they are in the original contract because it's past some years. And then after that, we will have -- we assume we're going to have some contracts. Presumably, I have put it in my reports, fourth quarter this year.

Fourth quarter this year?

Everybody will know, it's earlier than that. We will first have like a request of first services coming through the PEMEX Procurement International in Houston. So that's what we're waiting for, and we're about to have...

When will you have the updated agreement on the contract?

Well, that depends on the request that the -- we are working on the request. After the request comes, the office from Houston will call us to say we are still active. We will make them know. We have everything in place to make them know and start right after that. But we don't have a date. Mexico, it's going under the same quarantine, and they have some provisions. But the assets where we are talking, they are operating and working, so...

What seems to me that Mexico is in great heat for explanation because there -- I don't know if they're even going to meet their own domestic demands.

That's correct. That's correct. And then they also -- they need to save money on their budget. They've been cut drastically. And our technologies want to lower cost and focus the development in, let's say, the prospective areas. So -- and they are -- and they understand so -- because they use the tool before. So that's where we are.

I just would like to add, Stan, that -- for others as well, that as soon as we get the -- this PPI, this procurement agreement with -- in Houston with PEMEX, we would announce it. So it's a multiyear agreement.

Excellent. Well, I can't wait to make my introduction to the Nobel Prize physicist to the company.

Well, first, we talk to the old guy, who discovered the gravitational waves, and then we can continue the rest. Let's get his approval first.

Our next question comes from [ KC Baker ].

Congratulations on the quarter. A quick question. You answered already something I was going to ask you on Mexico, but what -- can you go into a little more depth on what's happening on the patent front? I see on your last release, you put out the European Patent Office, and it takes to 44. But like how sticky, how thick are these patents? And what's the next step before these things get, I guess, validated?

We have received the first U.S. patent in 2018. We also received at that time the Japanese, Chinese, the Mexican and the Canadian patent along the same time, and the Russian patent. So I think we had that time at 6. Now the European Patent Office issues patents for various countries, and there are 38 countries that are involved. And we have, after 1.5 years now -- 1.5 years later, now we have been granted the patents in all those 38 countries. NXT will elect to select, elect to select -- will select 8 or 9 countries that are crucial for our patent protection. And also, we have an independent patent application still in Brazil and also in India. So the European patents have been granted, all of them. So we just need to make sure now that which are the ones, the U.K. patent, the German, the French, and so on and so forth, the ones that really matter for us to hold the patent, the valid patent. Does it answer your question, [ KC ]?

Yes, somewhat. I guess how much of the -- this may be too general question. But the technology, how much of it is wrapped up in this patent? Is every one of these patents in different countries the exact same? Or do they alter?

No. They are slightly different. I'll give you an example. For example, the Japanese Patent Office asked NXT to break up the technology to 3 different components because the propagation of phononic waves through plasma has been a big problem in science. And they said, "You should patent that independently because that is worth more than the entire oil value of the patent." So they wanted to break it down into 3 different patents. These are reviewed by quantum physicists, Nobel Prize physicists, universities and so on. So once the country gets it, they disseminate it and they give it to experts. And then the experts ask questions from NXT. I'll give you another example. 95 pages of questions were asked by the U.S. Patent Office. So you can imagine how long it takes to go through all the details. A patent has to be disclosed in order that anybody in the art can reproduce it. Now that never happens because usually, it's impossible because there are some certain things, that certain manufacturing procedures, certain depositions of layers that is done differently than other institutions would do it. And that makes a huge difference, for example, in stream polarization and so on. So it is disclosed by the framework. The patent is granted not for the theory. The patent is granted for the technology itself. Does it work? Or does it not work? And so in their opinion, the technology works, and these are the questions that you have to answer in order to grant the patent. If you want to take it off-line, I'm more than happy to go through the entire patent with you or Dr. Xiang Gui can do that as well.

Yes, I'd love to do that because I think that, that's where in a small-cap world of what bring the value, that the value for you guys is going to be showing how the big boys can't come in and compete just by throwing money at it, yes?

Yes.

And our last question comes from Jerome Hass with Lightwater Partners.

George, I just wanted to make sure that I was hearing correctly. Did I hear you talking about a second plane? Could you clarify that for me, please?

It's -- first, it's the redundancy, okay? So it's not -- the second plane would be like Nigeria is thinking of having their own plane because the amount of work that we are planning to do there is it's going to take a whole set of experts, interpreters.

Sensors.

And sensors and a whole year of being locked down in the entire country. So that's why I'm saying that there are plans by the Nigerian government and PE Energy to make a plane available what we have right now. So that was the concept. I just didn't go into the details because I don't want to put the carriage ahead of the horses.

Yes. Given the past history of plane procurement for the company, I think shareholders would like to see a signed, long-term and substantial contract before there's any discussions of any purchases of any claims.

We are not purchasing anything. They are making it available. It's different.

Okay. And secondly, I was wondering if we could have feedback on suggestion for a normal course, your substantial issuer bid. Has the Board debated the issues?

So Jerome, it's Eugene. So there's really no change since our last call last month. So it's always an option. But again, we want to also -- we need to get through this difficult period and through the pandemic before we would be applying cash towards an issuer bid. But yes, it's always on the table and especially the Board.

We talked, we discussed in general, and there is support for it. But as Eugene just said, let's get through this -- I'm going to be so happy, you won't believe it, to do so. That's my opinion. I might just put my personal opinion, but I agree with the Board that we have to get through this pandemic and crushed oil prices and get the company healthy. Thank you so much. And thank you, everybody. There is nobody else in the queue now. We really appreciate your participation and your questions and looking forward to update you on our next investors conference call. Stay healthy. James?

Thank you, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.