Peyto Exploration & Development Corp. press release

Peyto Reports Second Quarter 2025 Results

2025-08-12

TSX - Toronto Stock Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada

CALGARY, Alberta, Aug. 12, 2025 (GLOBE NEWSWIRE) -- Peyto Exploration & Development Corp. (TSX: PEY) ("Peyto" or the "Company") is pleased to report operating and financial results for the second quarter of 2025.

Q2 2025 Highlights:

Peyto reported $191.3 million in funds from operations 1 , 2 ("FFO"), or $0.95/diluted share, and generated $83.7 million of free funds flow 3 in the quarter. Strong FFO was driven by the Company’s industry-leading low cash costs 4 and a realized natural gas price after hedging of $3.53/Mcf, 57% higher than the AECO 7A monthly benchmark. Earnings for the quarter totaled $87.8 million, or $0.43/diluted share, and Peyto returned $66.0 million as dividends to shareholders. Net debt 5 was reduced by $39.9 million in the quarter and by $105.6 million from December 31, 2024 to $1.24 billion at the end of the quarter. Second quarter production volumes averaged 131,754 boe/d (696.6 MMcf/d of natural gas, 15,650 bbls/d of NGLs), a 8% increase year over year (5% on a per share basis), driven by the Company's capital program. Peyto recorded $52.6 million in realized hedging gains and exited the quarter with a hedge position protecting approximately 479 MMcf/d and 410 MMcf/d of natural gas production for H2 2025 and 2026, respectively, at approximately $4/Mcf. Peyto’s natural gas and liquid hedging has secured approximately $655 million of revenue for 2026. Cash costs totaled $1.31/Mcfe for the quarter, including royalties of $0.14/Mcfe, operating expense of $0.54/Mcfe, transportation of $0.31/Mcfe, G&A of $0.06/Mcfe and interest expense of $0.26/Mcfe. Peyto continues to have the lowest cash costs of all Canadian producers in the oil and natural gas industry. Total capital expenditures 6 of $104.6 million were recorded in the quarter. Peyto drilled 19 wells (17.7 net), completed 19 wells (16.9 net), and brought 21 wells (18.9 net) on production. Peyto delivered a solid operating margin _7 _of 70% and profit margin 8 of 28%, resulting in a 10% return on capital employed 9 ("ROCE") and a 12% return on equity 9 ("ROE"), on a trailing 12-month basis.

Second Quarter 2025 in Review

Production averaged 131.8 Mboe/d, up 8% year over year. Peyto maintained its cadence in the quarter operating four drilling rigs in the Greater Sundance and Brazeau areas, with minor operational delays related to wet spring break-up conditions. The AECO 7A monthly gas benchmark was relatively flat through Q2 2025, averaging $1.96/GJ for the quarter. However, AECO daily spot prices remained under pressure due to seasonally high storage levels and ongoing NGTL maintenance. The 5A daily index averaged just $0.76/GJ in June. In contrast, U.S. benchmarks performed better during Q2 2025. The NYMEX Henry Hub (last day) index averaged US$3.44/MMBtu—69% higher than Q2 2024—supporting Peyto’s diversified market exposure in Ventura, Chicago, and Dawn. With approximately 70% of volumes hedged at fixed prices from April to October 2025, Peyto's realized gas price, after hedging and market diversification, averaged $3.53/Mcf ($3.07/GJ) for the quarter—57% higher than AECO 7A. Other income increased to $0.07/Mcfe in the quarter, driven by new third-party gathering and processing contracts, as well as the monetization of excess Empress transportation service. Peyto’s disciplined risk management strategy combined with Peyto's low-cost structure, generated FFO of $191.3 million, which funded $104.6 million of capital expenditures and $66.0 million of shareholder dividends. The Company's net debt was reduced by $39.9 million in the quarter.

| | Three Months Ended June 30 | % | Six Months Ended June 30 | % | | | | | | | | | | | 2025 | | 2024 | | Change | 2025 | | 2024 | | Change | | | | Operations | | | | | | | | | | | | | | Production | | | | | | | | | | | | | | Natural gas (Mcf/d) | 696,619 | | 642,754 | | 8 | % | 703,501 | | 644,994 | | 9 | % | | NGLs (bbl/d) | 15,650 | | 15,174 | | 3 | % | 15,562 | | 16,159 | | -4 | % | | Thousand cubic feet equivalent (Mcfe/d @ 1:6) | 790,521 | | 733,796 | | 8 | % | 796,875 | | 741,951 | | 7 | % | | Barrels of oil equivalent (boe/d @ 6:1) | 131,754 | | 122,299 | | 8 | % | 132,812 | | 123,658 | | 7 | % | | Production per million common shares (boe/d) | 659 | | 627 | | 5 | % | 666 | | 635 | | 5 | % | | Product prices | | | | | | | | | | | | | | Realized natural gas price – after hedging and diversification ($/Mcf) | 3.53 | | 2.87 | | 23 | % | 3.85 | | 3.47 | | 11 | % | | Realized NGL price – after hedging ($/bbl) | 58.43 | | 69.44 | | -16 | % | 60.68 | | 64.62 | | -6 | % | | Net sales price (2) ($/Mcfe) | 4.27 | | 3.95 | | 8 | % | 4.59 | | 4.42 | | 4 | % | | Royalties ($/Mcfe) | 0.14 | | 0.26 | | -46 | % | 0.19 | | 0.25 | | -24 | % | | Operating ($/Mcfe) | 0.54 | | 0.52 | | 4 | % | 0.54 | | 0.53 | | 2 | % | | Transportation ($/Mcfe) | 0.31 | | 0.30 | | 3 | % | 0.30 | | 0.30 | | 0 | % | | Field netback (1) ($/Mcfe) | 3.36 | | 2.90 | | 16 | % | 3.62 | | 3.37 | | 7 | % | | General & administrative expenses ($/Mcfe) | 0.06 | | 0.06 | | 0 | % | 0.06 | | 0.06 | | 0 | % | | Interest expense ($/Mcfe) | 0.26 | | 0.36 | | -28 | % | 0.27 | | 0.36 | | -22 | % | | Financial ($000, except per share) | | | | | | | | | | | | | | Natural gas and NGL sales including realized hedging gains (2) | 306,999 | | 263,832 | | 16 | % | 661,267 | | 596,373 | | 11 | % | | Funds from operations (1) | 191,283 | | 154,866 | | 24 | % | 416,618 | | 359,525 | | 16 | % | | Funds from operations per share - basic (1) | 0.96 | | 0.79 | | 22 | % | 2.09 | | 1.85 | | 13 | % | | Funds from operations per share - diluted (1) | 0.95 | | 0.79 | | 20 | % | 2.07 | | 1.83 | | 13 | % | | Total dividends | 65,957 | | 64,365 | | 2 | % | 131,633 | | 128,523 | | 2 | % | | Total dividends per share | 0.33 | | 0.33 | | 0 | % | 0.66 | | 0.66 | | 0 | % | | Earnings | 87,832 | | 51,437 | | 71 | % | 201,949 | | 151,313 | | 33 | % | | Earnings per share – basic | 0.44 | | 0.26 | | 69 | % | 1.01 | | 0.78 | | 29 | % | | Earnings per share – diluted | 0.43 | | 0.26 | | 65 | % | 1.00 | | 0.77 | | 30 | % | | Total capital expenditures (1) | 104,649 | | 100,451 | | 4 | % | 206,776 | | 214,214 | | -3 | % | | Decommissioning expenditures | 2,944 | | 391 | | 653 | % | 5,816 | | 4,597 | | 27 | % | | Total payout ratio (1) | 91 | % | 107 | % | -15 | % | 83 | % | 97 | % | -14 | % | | Weighted average common shares outstanding - basic | 199,868,585 | | 195,045,669 | | 2 | % | 199,445,518 | | 194,731,189 | | 2 | % | | Weighted average common shares outstanding - diluted | 202,226,837 | | 196,520,101 | | 3 | % | 201,339,814 | | 195,967,653 | | 3 | % | | | | | | | | | | | | | | | | Net debt (1) | | | | 1,242,983 | | 1,337,577 | | -7 | % | | | | | Shareholders' equity | | | | 2,732,009 | | 2,691,716 | | 1 | % | | | | | Total assets | | | | 5,417,649 | | 5,393,524 | | 0 | % | | | |

(1) This is a Non-GAAP financial measure or ratio. See "non-GAAP and Other Financial Measures" in this news release and in the Q2 2025 MD&A (2) Excludes marketing revenue and other income

Capital Expenditures

Peyto drilled 19 gross (17.7 net) horizontal wells in the second quarter including 10 Wilrich, 1 Falher, 4 Notikewin, and 4 Cardium wells in the core Brazeau and Sundance areas. The Company also completed 19 gross (16.9 net) wells and brought 21 gross (18.9 net) wells on production in the quarter resulting in total well-related capital expenditures of $86.2 million. The 4 gross (3.2 net) Cardium wells targeted the lower portion of the Cardium zone in Chambers, vastly improving drilling penetration rates and the revised wellbore design allowed for a more aggressive completion stimulation than in the past. In combination, these two factors resulted in a 37% reduction in drilling and completion cost per horizontal meter over previous wells drilled by Peyto in the area. The new wellbore design should provide future economic benefit to the Company’s large Cardium inventory. Additionally, Peyto invested $18.5 million in gathering and processing facilities in the second quarter that included optimization projects, plant upgrades, and the initial construction of a new field compressor station in Sundance, the bulk of which will be completed in the third quarter. Second quarter average completion costs were slightly higher than the prior quarter, which was attributed to completing longer laterals. However, pad drilling and longer laterals combined to lower per-meter costs for both drilling and completions compared to the first quarter of 2025.

| | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | 2024 Q1 | 2024 Q2 | 2024 Q3 | 2024 Q4 | 2025 Q1 | 2025 Q2 ( 1 ) | | | | | | | | Gross Hz Spuds | | 70 | | 61 | | 64 | | 95 | | 95 | | 72 | | 75 | | 18 | | 20 | | 21 | | 16 | | 19 | | 19 | | Measured Depth (m) | | 4,020 | | 3,848 | | 4,247 | | 4,453 | | 4,611 | | 4891 | | 5,092 | | 5,220 | | 5,364 | | 4,804 | | 4,987 | | 4,976 | | 5,021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Drilling ($MM/well) | $ | 1.71 | $ | 1.62 | $ | 1.68 | $ | 1.89 | $ | 2.56 | $ | 2.85 | $ | 2.90 | $ | 3.05 | $ | 2.89 | $ | 2.81 | $ | 2.85 | $ | 3.01 | | 2.94 | | $ per meter | $ | 425 | $ | 420 | $ | 396 | $ | 424 | $ | 555 | $ | 582 | $ | 569 | $ | 585 | $ | 539 | $ | 585 | $ | 572 | $ | 605 | $ | 585 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Completion ($MM/well) | $ | 1.13 | $ | 1.01 | $ | 0.94 | $ | 1.00 | $ | 1.35 | $ | 1.54 | $ | 1.70 | $ | 1.80 | $ | 1.75 | $ | 1.56 | $ | 1.66 | $ | 1.56 | $ | 1.71 | | Hz Length (m) | | 1,348 | | 1,484 | | 1,682 | | 1,612 | | 1,661 | | 1,969 | | 2,184 | | 2,223 | | 2,350 | | 2,224 | | 1,989 | | 1,961 | | 2,311 | | $ per Hz Length (m) | $ | 751 | $ | 679 | $ | 560 | $ | 620 | $ | 813 | $ | 781 | $ | 776 | $ | 809 | $ | 744 | $ | 703 | $ | 834 | $ | 793 | $ | 740 | | $ ‘000 per Stage | $ | 51 | $ | 38 | $ | 36 | $ | 37 | $ | 47 | $ | 52 | $ | 52 | $ | 55 | $ | 49 | $ | 48 | $ | 56 | $ | 56 | $ | 47 |

(1) Based on field estimates and may be subject to minor adjustments going forward.

Peyto also spent $0.6 million during the quarter on acquiring mineral rights and divested a minor property for $1.0 million.

Commodity Prices and Realizations

In the second quarter, Peyto realized a natural gas price after hedging and diversification of $3.53/Mcf, or $3.07/GJ, 57% higher than the average AECO 7A monthly benchmark of $1.96/GJ due to realized hedging gains and the Company's market diversification to non-AECO hubs. Peyto’s natural gas hedging activity resulted in a realized gain of $0.75/Mcf ($47.4 million) while Peyto’s diversification activities contributed $0.53/Mcf (net of diversification costs) in the quarter.

Condensate and pentanes averaged $81.67/bbl for the quarter, down 21% year over year, consistent with the change in Canadian dollar WTI ("WTI CAD"), which fell 20% to $88.22/bbl over the same period. Other NGL volumes were sold at an average price of $24.21/bbl, or 27% of WTI CAD. Peyto's combined realized NGL price was $54.75/bbl before hedging, and $58.43/bbl including a realized hedging gain of $3.68/bbl ($5.2 million) in the second quarter.

Netbacks

The Company’s realized natural gas and NGL sales yielded a combined revenue stream of $3.54/Mcfe before hedging gains of $0.73/Mcfe, resulting in a quarterly net sales price of $4.27/Mcfe, 8% higher than the $3.95/Mcfe realized in Q2 2024. Other income rose to $0.07/Mcfe in the quarter from $0.02/Mcfe in Q2 2024, reflecting increased third-party gathering and processing revenue, and higher sales of unutilized transportation service. Cash costs totaled $1.31/Mcfe in the quarter, 13% lower than $1.50/Mcfe in Q2 2024 due to lower royalties and interest costs. Operating costs totaled $0.54/Mcfe, up from $0.52/Mcfe in Q2 2024, primarily driven by increased property taxes and other government expenses. Peyto expects per-unit operating costs to trend downward in the second half of 2025 with lower chemical costs and increased production volumes in the fourth quarter. The Company's cash netback (net sales price including other income, net marketing revenue, realized gain on foreign exchange, less total cash costs) was $3.03/Mcfe, resulting in a solid 70% operating margin. Historical cash costs and operating margins are shown in the following table:

| | 2022 | | 2023 | | 2024 | | 2025 | | | | | | | | | | | | | | | | | | | | | | | ($/Mcfe) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 (2) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | | | | | | | | | | | | | | | | Revenue (1) | 5.25 | | 5.48 | | 5.01 | | 5.74 | | 5.10 | | 4.07 | | 4.32 | | 4.83 | | 4.92 | | 3.97 | | 3.99 | | 4.34 | | 4.95 | | 4.34 | | | Royalties | 0.60 | | 0.95 | | 0.70 | | 0.72 | | 0.53 | | 0.18 | | 0.29 | | 0.30 | | 0.24 | | 0.26 | | 0.18 | | 0.21 | | 0.25 | | 0.14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Op Costs | 0.41 | | 0.39 | | 0.38 | | 0.41 | | 0.50 | | 0.47 | | 0.44 | | 0.55 | | 0.55 | | 0.52 | | 0.54 | | 0.50 | | 0.53 | | 0.54 | | | Transportation | 0.28 | | 0.27 | | 0.26 | | 0.22 | | 0.24 | | 0.29 | | 0.29 | | 0.26 | | 0.30 | | 0.30 | | 0.31 | | 0.27 | | 0.29 | | 0.31 | | | G&A | 0.03 | | 0.02 | | 0.02 | | 0.02 | | 0.03 | | 0.05 | | 0.04 | | 0.06 | | 0.06 | | 0.06 | | 0.03 | | 0.05 | | 0.06 | | 0.06 | | | Interest | 0.21 | | 0.20 | | 0.21 | | 0.21 | | 0.22 | | 0.22 | | 0.28 | | 0.40 | | 0.36 | | 0.36 | | 0.38 | | 0.33 | | 0.29 | | 0.26 | | | Cash cost pre-royalty | 0.93 | | 0.88 | | 0.87 | | 0.86 | | 0.99 | | 1.03 | | 1.05 | | 1.27 | | 1.27 | | 1.24 | | 1.26 | | 1.15 | | 1.17 | | 1.17 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Cash Costs 10 | 1.53 | | 1.83 | | 1.57 | | 1.58 | | 1.52 | | 1.21 | | 1.34 | | 1.57 | | 1.51 | | 1.50 | | 1.44 | | 1.36 | | 1.42 | | 1.31 | | | Cash Netback 11 | 3.72 | | 3.65 | | 3.44 | | 4.16 | | 3.58 | | 2.86 | | 2.98 | | 3.26 | | 3.41 | | 2.47 | | 2.55 | | 2.98 | | 3.53 | | 3.03 | | | Operating Margin | 71 | % | 67 | % | 69 | % | 72 | % | 71 | % | 70 | % | 69 | % | 67 | % | 69 | % | 62 | % | 64 | % | 69 | % | 71 | % | 70 | % |

(1) Revenue includes other income, net marketing revenue and realized gains (losses) on foreign exchange. (2) First quarter of Repsol assets included in Peyto's results

Depletion, depreciation, and amortization charges of $1.33/Mcfe, along with provisions for current tax, deferred tax, performance-based compensation and stock-based compensation resulted in earnings of $1.22 /Mcfe, for a 28% profit margin. Dividends to shareholders totaled $0.92/Mcfe.

Hedging and Marketing

The Company has been active in hedging future production with financial and physical fixed price contracts to protect a portion of its future revenue from commodity price and foreign exchange volatility. The following table summarizes Peyto's hedge position for the second half of 2025, calendar 2026, and calendar 2027.

| | Q3 2025 | Q4 2025 | 2026 | 2027 | | Natural Gas | | | | | | Volume (MMcf/d) | 510 | 447 | 410 | 84 | | Average Fixed Price (1) ($/Mcf) | 3.94 | 4.34 | 4.00 | 3.94 | | WTI Swaps | | | | | | Volume (bbls/d) | 4,500 | 3,800 | 1,693 | - | | Average Fixed Price ($/bbl) | 93.99 | 90.56 | 85.93 | - | | WTI Collars | | | | | | Volume (bbls/d) | 500 | 500 | 248 | - | | Put–Call ($/bbl) | 90.00–110.00 | 90.00–100.50 | 87.50–100.25 | - | | Propane | | | | | | Volume (bbls/d) | 500 | 500 | 123 | - | | Average Fixed Price (US$/bbl) | 33.60 | 33.60 | 33.60 | - | | USD FX Contracts | | | | | | Amount sold (USD 000s) | 63,000 | 59,000 | 112,500 | 16,345 | | Rate (CAD/USD) | 1.352 | 1.353 | 1.355 | 1.353 |

(1) At 1.37 CAD/USD FX rate for USD contracts

The Company's fixed price contracts combined with its diversification to multiple hubs in North America allow for revenue security and support Peyto's capital expenditure program, continued shareholder returns through dividends, and debt reduction. Details of Peyto’s ongoing marketing and diversification efforts are available on Peyto’s website at https://www.peyto.com/Marketing.aspx .

Activity Update

Since the start of the third quarter, Peyto has continued with an active drilling program across all core areas with 7 wells (7 net) drilled, 8 wells (8 net) completed, and 5 wells (5 net) brought on production. The Company intends to continue with a steady capital program for the remainder of 2025 but may delay bringing wells onstream depending on spot natural gas prices.

The back half of the drilling program for 2025 includes an increase in highly profitable Notikewin locations as well as several follow-ups to the prolific Falher channel Peyto has targeted in the Sundance area over the past year. The Falher drilling will further delineate the channel feature across the Company’s land position, giving additional confidence in over 20 internally identified locations. Additionally, Peyto is following up on prior successes in the Viking and Bluesky formations and plans to drill approximately 6 wells in these formations by the end of the year.

Peyto has commenced construction of a compressor project in the Sundance area. The new field compressor station will gather low pressure, liquid-rich Cardium gas and redirect it to the Edson Gas Plant where incremental natural gas liquids will be recovered. This will alleviate current congestion in the gathering system and accommodate multiple years of additional drilling activity in the area. The current facility is designed to move 30 MMcf/d and can be expanded to 60 MMcf/d, if required. Peyto expects the compressor station to be commissioned near the end of the third quarter.

The Company has planned turnarounds at the Oldman and Oldman North gas plants in September that are timed with other third-party maintenance operations and typically low seasonal natural gas prices. Peyto plans to swing volumes to adjacent interconnected plants to minimize production impacts during the two-week period.

Outlook

The Company remains bullish on long-term natural gas prices with the recent start-up of LNG Canada combined with continued natural gas demand for AI driven data centres in North America. Further, Peyto is well-positioned with its hedge book and market diversification in the short term to provide shareholders with both revenue security and exposure to commodity price upside. Over the next several years, the Company has significant volumes exposed to premium demand markets in the US and Canada providing a superior price over current AECO pricing while offering a diversity of markets for price risk mitigation.

Peyto’s 2025 capital guidance of $450 to $500 million remains unchanged with a steady drilling and completion program and greater spending on facilities in the second half of the year. The Company is planning to ramp up production in the fourth quarter, timed with expected higher winter natural gas prices. As always, the program is designed with flexibility to adjust to changing commodity prices and business environment. Peyto will manage production to minimize exposure to weaker priced markets, when necessary, while the Company’s systematic hedging and market diversification programs secure revenues to support future dividends and further strengthening the balance sheet.

Conference Call and Webcast

A conference call will be held with senior management of Peyto to answer questions with respect to the Company’s Q2 2025 results on Wednesday, August 13, 2025, at 9:00 a.m. Mountain Time (MT), or 11:00 a.m. Eastern Time (ET).

Access to the webcast can be found at: https://edge.media-server.com/mmc/p/xo39rhkr . To participate in the call, please register for the event at: Participant Call Link . Participants will be issued a dial in number and PIN to join the conference call and ask questions. Alternatively, questions can be submitted prior to the call at info@peyto.com. The conference call will be available on the Peyto Exploration & Development website at www.peyto.com .

Management’s Discussion and Analysis

A copy of the second quarter report to shareholders, including the MD&A, unaudited consolidated financial statements and related notes, is available at http://www.peyto.com/Files/Financials/2025/Q22025FS.pdf and at http://www.peyto.com/Files/Financials/2025/Q22025MDA.pdf and will be filed at SEDAR+, www.sedarplus.com at a later date.