Peyto Exploration & Development Corp. press release
CORRECTION - Peyto Reports Strong Fourth Quarter and 2024 Annual Results
TSX - Toronto Stock Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
CALGARY, Alberta, March 11, 2025 (GLOBE NEWSWIRE) -- In a release issued under the same headline on Tuesday, March 11, 2025, by Peyto Exploration & Development Corp., please note that in the table under Hedging , the following amounts in the line for " Natural Gas " should be "4.14" for 2025 and "4.02" for 2026 , not "4.01" and "4.51", respectively. The corrected release follows:
Peyto Exploration & Development Corp. ("Peyto" or the "Company") (TSX: PEY) is pleased to report operating and financial results for the fourth quarter and 2024 fiscal year, and senior management additions.
Full Year and Q4 2024 Highlights:
Delivered $199.0 million in funds from operations 1 , 2 ("FFO"), or $1.00/diluted share, and $79.6 million of free funds flow 3 in the quarter. Annual FFO totaled $712.8 million or $3.62/diluted share, and annual free funds flow totaled $246.7 million. Annual capital expenditures 4 of $457.6 million resulted in record production of 136 Mboe/d (720.7 MMcf/d gas, 15,708 bbl/d NGLs) in December, yielding a trailing 12-month capital efficiency 5 of $9,700 boe/d. Peyto booked a record 6.0 Bcfe of Proved Developed Producing ("PDP") reserves per well in 2024, up 40% from 2023. Peyto delivered a 66% annual operating margin _6 _and a 24% annual profit margin 7 , resulting in a 9% return on capital employed 8 ("ROCE") and a 10% return on equity 8 ("ROE"), on a trailing 12-month basis. The Company's disciplined hedging and diversification program in 2024 protected revenues from the sharp decline in benchmark natural gas prices. The 2024 average price for the AECO daily benchmark sunk to an annual average of $1.38/GJ, yet Peyto realized an average price of approximately $2.89/GJ ($3.32/Mcf). The Company exited 2024 with a strong hedge position, which currently protects approximately 480 MMcf/d and 366 MMcf/d of natural gas production for 2025 and 2026, respectively, at prices greater than $4/Mcf. Peyto’s hedging and diversification program protects future revenues for the sustainability of the Company's dividends, capital program, and debt repayment. Additionally, this program minimizes the impacts of potential US tariffs. Peyto generated earnings of $78.2 million, or $0.39/diluted share, in the quarter and $280.6 million, or $1.42/diluted share, in 2024. Approximately 92% of earnings, or a record $258.4 million ($1.32/share) of dividends were returned to shareholders in 2024. Since inception, Peyto has returned over $3 billion of dividends to shareholders or a cumulative $22.63/share. As previously announced, Peyto developed a record 457 BCFe of PDP reserves and increased reserves by 7%, 5%, and 5% in the PDP, Total Proved ("TP"), and Total Proved plus Probable ("P+P") reserves categories, respectively. PDP Finding, Development and Acquisition 9 ("FD&A") costs of $1.00/Mcfe are amongst the lowest in the industry. When combined with an average field netback of $3.26/Mcfe in 2024, this resulted in a 3.3 times recycle ratio 10 (2.6 times on an after-tax cash netback 11 basis), the Company's best recycle metrics over the last 20 years. _Refer to more details in the _February 20, 2025 press release. Fourth quarter production volumes averaged a record 133,426 boe/d (708.1 MMcf/d of natural gas, 15,409 bbls/d of NGLs), an 11% (7% per share) increase year over year, mainly due to strong well results from Peyto’s drilling program. Annual production averaged 125,202 boe/d during 2024, a 19% (9% per share) increase from 2023 due to the Company's drilling program and a full year of operations from the Repsol Canada Energy Partnership acquisition (the "Repsol Acquisition"). Quarterly cash costs 12 totaled $1.36/Mcfe, including royalties of $0.21/Mcfe, operating expense of $0.50/Mcfe, transportation of $0.27/Mcfe, G&A of $0.05/Mcfe and interest expense of $0.33/Mcfe. Peyto achieved the 10% target reduction of operating expense announced earlier in 2024 in the quarter bringing costs of the Repsol assets closer to Peyto’s legacy assets. Peyto continues to have the lowest cash costs of Canadian producers in the oil and natural gas industry. Total capital expenditures were $117.5 million in the quarter. Peyto drilled 16 wells (16.0 net), completed 23 wells (23.0 net), and brought 23 wells (23.0 net) on production.
| | | | | | | | | | | | | | | | Three Months Ended Dec 31 | % | Year Ended Dec 31 | % | | | | | | | | | | | 2024 | 2023 | Change | 2024 | 2023 | Change | | | | | | | | Operations | | | | | | | | | | | | | | Production | | | | | | | | | | | | | | Natural gas (Mcf/d) | 708,105 | | 622,963 | | 14 | % | 659,209 | | 553,745 | | 19 | % | | NGLs (bbl/d) | 15,409 | | 16,175 | | -5 | % | 15,334 | | 12,657 | | 21 | % | | Thousand cubic feet equivalent (Mcfe/d @ 1:6) | 800,558 | | 720,014 | | 11 | % | 751,212 | | 629,686 | | 19 | % | | Barrels of oil equivalent (boe/d @ 6:1) | 133,426 | | 120,002 | | 11 | % | 125,202 | | 104,948 | | 19 | % | | Production per million common shares (boe/d) | 676 | | 631 | | 7 | % | 640 | | 587 | | 9 | % | | Product prices | | | | | | | | | | | | | | Realized natural gas price – after hedging and diversification ($/Mcf) | 3.43 | | 3.87 | | -11 | % | 3.32 | | 3.57 | | -7 | % | | Realized NGL price – after hedging ($/bbl) | 64.78 | | 64.32 | | 1 | % | 65.77 | | 70.22 | | -6 | % | | Net sales price ($/Mcfe) | 4.28 | | 4.79 | | -11 | % | 4.26 | | 4.56 | | -7 | % | | Royalties ($/Mcfe) | 0.21 | | 0.30 | | -30 | % | 0.22 | | 0.32 | | -31 | % | | Operating ($/Mcfe) | 0.50 | | 0.55 | | -9 | % | 0.53 | | 0.49 | | 8 | % | | Transportation ($/Mcfe) | 0.27 | | 0.26 | | 4 | % | 0.30 | | 0.27 | | 11 | % | | Field netback ( 1) ($/Mcfe) | 3.35 | | 3.73 | | -10 | % | 3.26 | | 3.51 | | -7 | % | | General & administrative expenses ($/Mcfe) | 0.05 | | 0.06 | | -17 | % | 0.05 | | 0.05 | | 0 | % | | Interest expense ($/Mcfe) | 0.33 | | 0.40 | | -18 | % | 0.36 | | 0.29 | | 24 | % | | Financial ($000, except per share) | | | | | | | | | | | | | | Natural gas and NGL sales including realized hedging gains (losses) ( 2) | 315,098 | | 317,246 | | -1 | % | 1,172,079 | | 1,046,925 | | 12 | % | | Funds from operations ( 1) | 198,956 | | 200,319 | | -1 | % | 712,758 | | 670,471 | | 6 | % | | Funds from operations per share - basic ( 1) | 1.01 | | 1.05 | | -4 | % | 3.64 | | 3.75 | | -3 | % | | Funds from operations per share - diluted ( 1) | 1.00 | | 1.05 | | -5 | % | 3.62 | | 3.72 | | -3 | % | | Total dividends | 65,140 | | 63,811 | | 2 | % | 258,369 | | 239,006 | | 8 | % | | Total dividends per share | 0.33 | | 0.33 | | 0 | % | 1.32 | | 1.32 | | 0 | % | | Earnings | 78,228 | | 87,795 | | -11 | % | 280,570 | | 292,635 | | -4 | % | | Earnings per share – basic | 0.40 | | 0.46 | | -13 | % | 1.43 | | 1.64 | | -13 | % | | Earnings per share – diluted | 0.39 | | 0.46 | | -15 | % | 1.42 | | 1.62 | | -12 | % | | Total capital expenditures ( 1) | 117,525 | | 115,218 | | 2 | % | 457,607 | | 412,919 | | 11 | % | | Corporate acquisition | - | | 699,358 | | -100 | % | - | | 699,358 | | -100 | % | | Total payout ratio ( 1) | 93 % | | 90% | | 3 | % | 102 % | | 98% | | 4 | % | | Weighted average common shares outstanding - basic | 197,388,049 | | 190,196,093 | | 4 | % | 195,737,374 | | 178,894,013 | | 9 | % | | Weighted average common shares outstanding - diluted | 198,746,631 | | 191,271,677 | | 4 | % | 197,084,973 | | 180,311,890 | | 9 | % | | | | | | | | | | | | | | | | Net debt ( 1) | | | | 1,348,574 | | 1,362,777 | | -1 | % | | | | | Shareholders' equity | | | | 2,696,329 | | 2,714,943 | | -1 | % | | | | | Total assets | | | | 5,505,890 | | 5,909,642 | | -7 | % | | | |
(1) This is a Non-GAAP financial measure or ratio. See "non-GAAP and Other Financial Measures" in this news release and in the Q4 2024 MD&A (2) Excludes revenue from sale of third-party volumes
2024 in Review
The year 2024 was one of Peyto’s most successful in 26 years of operations. Natural gas prices sunk to multi-year lows across North America as storage inventories remained elevated coming out of a warm 2023/2024 winter. The Company, nevertheless, delivered a strong year of results with its disciplined hedge strategy and diversified market portfolio, record well results from the drilling program, and continued industry leading cost structure. Peyto’s field netback of $3.26/Mcfe and PDP FD&A costs of $1.00/Mcfe combined to generate a recycle ratio of 3.3 times, meaning the Company is generating 3.3 times the cash flow, at the field operating level, relative to the cost of finding and developing new reserves. On an after-tax cash netback basis (including G&A, interest costs and current tax), Peyto delivered a strong 2.6 times recycle ratio. Integration and optimization of the Repsol assets was a significant focus for Peyto in 2024. The Company successfully executed multiple projects, including the shut-in of approximately 3,500 boe/d of low-value sour gas and ethane production to reduce operating expenses, resulting in per-unit costs decreasing from $0.55/Mcfe in Q1 to $0.50/Mcfe in Q4. Since closing the Repsol Acquisition, Peyto has grown production on the acquired lands to 50,000 boe/d with a drilling program that outperformed recent years by 40%. The Company reported funds from operations of $712.8 million, earnings of $280.6 million, and returned $258.4 million of dividends to shareholders while decreasing net debt by $14.2 million from year-end 2023. Additionally, Peyto grew production volumes to a record 136 Mboe/d day (720.7 MMcf/d gas, 15,708 bbl/d NGLs) in December 2024 from 127 Mboe/d (656.2 MMcf/d gas, 17,166 bbl/d NGLs) in December 2023, representing a $9,700/boe/d exit capital efficiency. Operating and profit margins remained strong in 2024 at 66% and 24%, respectively, despite the significant drop in benchmark gas prices.
Capital Expenditures
Peyto drilled 75 gross (73.3 net) horizontal wells in 2024 and brought 72 gross (70.3 net) wells on production. The combination of longer horizontal wells, refreshed inventory resulting from the Repsol Acquisition, and high grading the locations on legacy Peyto lands has resulted in sustained production improvements of 25%, as compared to prior years and a 40% increase in per-well recovery, on a PDP basis, as per the Company’s most recent reserves report. Drilling costs per meter were down 2% from 2023, while completion costs per meter were down 1%. The Company continued to increase the number of extended reach horizontal wells drilled in 2024, resulting in an 11% increase in average horizontal length from 2023.
| | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | | Gross Hz Spuds | 99 | 123 | 140 | 126 | 135 | 70 | 61 | 64 | 95 | 95 | 72 | 75 | | Measured Depth (m) | 4,179 | 4,251 | 4,309 | 4,197 | 4,229 | 4,020 | 3,848 | 4,247 | 4,453 | 4,611 | 4891 | 5,092 | | | | | | | | | | | | | | | | Drilling ($MM/well) | $2.72 | $2.66 | $2.16 | $1.82 | $1.90 | $1.71 | $1.62 | $1.68 | $1.89 | $2.56 | $2.85 | $ 2.90 | | $ per meter | $651 | $626 | $501 | $433 | $450 | $425 | $420 | $396 | $424 | $555 | $582 | $ 569 | | | | | | | | | | | | | | | | Completion ($MM/well) | $1.63 | $1.70 | $1.21 | $0.86 | $1.00 | $1.13 | $1.01* | $0.94 | $1.00 | $1.35 | $1.54 | $ 1.70 | | Hz Length (m) | 1,409 | 1,460 | 1,531 | 1,460 | 1,241 | 1,348 | 1,484 | 1,682 | 1,612 | 1,661 | 1,969 | 2,184 | | $ per Hz Length (m) | $1,153 | $1,166 | $792 | $587 | $803 | $751 | $679 | $560 | $620 | $813 | $781 | $ 776 | | $ ‘000 per Stage | $188 | $168 | $115 | $79 | $81 | $51 | $38 | $36 | $37 | $47 | $52 | $ 52 |
_*Peyto’s Montney well is excluded from drilling and completion cost comparison. _
Facilities and pipeline expenditures in 2024 totaled $75.2 million, to complete several significant pipeline and compressor upgrade projects to optimize gathering systems in both the Greater Sundance and Greater Brazeau area. Additionally, a once-in-ten-year turnaround at the strategic Edson Gas Plant was completed in two phases to extend useful life and simplify operations.
Peyto continued to be active pursuing high quality opportunities at crown land sales as well as through swaps, purchases, and farm-ins. In total, the Company spent $1.8 million to acquire 11.25 net sections of land across the Company’s core areas.
Reserves
Delivering on the expectations from the Repsol Acquisition, a highly successful capital program provided growth across all reserves categories. The value of Peyto's reserves per share decreased in the Total Proved and Proved plus Probable categories due to the reduction of commodity price forecasts used in the GLJ Ltd. ("GLJ") report. However, the strong capital program generated a 14% increase in PDP reserves value per share over last year. The following table illustrates the change in reserve volumes and Net Present Value ("NPV") of future cash flows, discounted at 10%, before income tax and using the 3-Consultant average forecast pricing.
| | As of December 31 | % Change, per share (basic outstanding) 1 | | | | | 2024 | 2023 | | | | Reserves (BCFe) | | | | | | Proved Developed Producing | 2,843 | 2,661 | 5% | | | Total Proved | 5,255 | 4,983 | 3% | | | Total Proved + Probable | 8,202 | 7,820 | 3% | | | | | | | | | Net Present Value 2 ($millions) Discounted at 10% | | | | | | Proved Developed Producing | $ 4,879 | $4,199 | 14% | | | Total Proved | $ 7,051 | $7,403 | -7% | | | Total Proved + Probable | $ 9,569 | $10,073 | -7% | |
1 Basic shares outstanding as at Dec 31, 202 4 were 197,829,480 and Dec 31, 20 23 were 193,678,975 2 It should not be assumed that the estimates of future net revenues presented in the tables above represent the fair market value of the reserves. See " Information Regarding Disclosure on Oil and Gas Reserves" in the advisory section of this news release . _Note: based on the GLJ Ltd Petroleum Consultants ("GLJ") report effective December 31, 2024. The GLJ 3-consultant price forecast is available at www.GLJPC.com . _
For more information on Peyto’s reserves, refer to the Press Release dated February 20, 2025, announcing the Year End Reserve Report which is available on the website at www.peyto.com. The complete statement of reserves data and required reporting in compliance with NI 51-101 will be included in Peyto's Annual Information Form to be released by March 31, 2025.
Fourth Quarter 2024
Peyto continued with steady drilling activity throughout the fourth quarter of 2024 up until mid-December with four rigs running across the Company’s Deep Basin core areas. Drilling and completions capital of $90.5 million was invested to drill 16 gross (16 net) wells and complete 23 gross (23 net) wells. In addition, $6.1 million was invested in the tie-in of 23 gross (23 net) wells, while $17.7 million was invested in facility and major pipeline infrastructure which included several pipeline looping projects across both Greater Sundance and Greater Brazeau and a new compressor installation at the Cecilia gas plant.
During the quarter, 2 gross (2 net) wells were completed and brought on production in the Kakwa area. These wells were drilled on lands that have been assembled through a series of crown land sales and asset swaps over the past two years. Production from the wells filled the capacity of the Peyto-operated 25 MMcf/d Kakwa gas plant. The results of these wells are consistent with adjacent competitor wells in the area. The Company expects to drill follow-up locations later in 2025 to assess the extent of the play, and future development may include the expansion of the Kakwa plant to 50 MMcf/d, or more.
Production volumes for the quarter averaged 133,426 boe/d (708.1 MMcf/d gas, 15,409 bbl/d NGLs), up 11% from Q4 2023 from strong well results delivered by Peyto's drilling program. Natural gas production was up 14% from Q4 2023, while NGL production declined 5%. The year-over-year decline in NGL production was due to the rejection of low-value liquid ethane back into the gas phase to lower operating costs and improve netbacks.
The Company’s realized price for natural gas for the quarter was $3.43/Mcf including hedging gains, while its realized liquids price was $64.78/bbl including hedging gains, which yielded an average net sale price of $4.28/Mcfe. The net sale price per unit for the quarter was down 11% from $4.79/Mcfe in Q4 2023 due to a sharp decline in benchmark natural gas prices, year over year. Total cash costs for the quarter of $1.36/Mcfe decreased 13% from $1.57/Mcfe for Q4 2023, reflecting lower royalties, operating costs, interest and financing, and G&A, partially offset by higher transportation. The total Q4 2024 cash cost included royalties of $0.21/Mcfe, operating costs of $0.50/Mcfe, transportation of $0.27/Mcfe, interest and financing of $0.33/Mcfe, and G&A of $0.05/Mcfe. Peyto's cash netback (before performance-based compensation and current tax expense) was $2.98/Mcfe, down 9% from Q4 2023, and yielded a 69% operating margin in the quarter.
Peyto generated funds from operations of $199.0 million for the quarter, or $1.00/diluted share. Q4 2024 funds from operations decreased by only 1% from $200.3 million for Q4 2023, as the sharp decline in natural gas prices was mostly offset by increased production volumes and realized hedging gains. The Company's profit margin in the quarter was 24%, down from 27% in Q4 2023.
Marketing
Commodity Prices
For the fourth quarter, Peyto realized a natural gas price after hedging and diversification of $3.43/Mcf, or $2.98/GJ, 2.13 times higher than the average AECO daily benchmark of $1.40/GJ. Peyto’s natural gas hedging activity resulted in a realized gain of $1.16/Mcf ($75.3 million) in the quarter, as a result of lower AECO and Henry Hub benchmark prices.
In the quarter, Peyto commenced its 10-year, 50,000 GJ/day firm transportation service agreement on the TC Energy mainline from Empress to Union Parkway Belt in Ontario.
Condensate and pentanes averaged $90.87/bbl for the quarter, down 6% year over year, while Canadian dollar WTI ("WTI CAD") decreased 8% to $98.30/bbl over the same period. Other NGL (mainly butane and propane) volumes were sold at an average price of $31.81/bbl, or 32% of WTI CAD, up 3% from $30.86/bbl in Q4 2023. Peyto's combined realized NGL price in the quarter was $63.85/bbl before hedging, and $64.78/bbl including a hedging gain of $0.93/bbl.
Hedging
The Company has been active in hedging future production with financial and physical fixed price contracts to protect a portion of its future revenue from commodity price and foreign exchange volatility. The following table summarizes Peyto's hedge position for calendar 2025, and calendar 2026.
| | 2025 | | 2026 | | | Natural Gas | | | | | | Volume (MMcf/d) | 480 | | 366 | | | Average Fixed Price ($/Mcf) | 4.14 | | 4.02 | | | WTI Swaps | | | | | | Volume (bbls/d) | 3,291 | | 296 | | | Average Fixed Price ($/bbl) | 98.07 | | 92.92 | | | WTI Collars | | | | | | Volume (bbls/d) | 623 | | 248 | | | Put–Call ($/bbl) | 88.75–103.34 | | 87.50–100.25 | | | Propane | | | | | | Volume (bbls/d) | 125 | | - | | | Average Fixed Price (US$/bbl) | 33.86 | | - | | | USD FX Contracts | | | | | | Amount sold (USD 000s) | 227,000 | | 112,500 | | | Rate (CAD/USD) | 1.351 | | 1.355 | | | | | | | |
The Company's fixed price contracts combined with its diversification to the Cascade power plant and other premium market 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 .
The Peyto Strategy
The Peyto strategy has been one of the most consistent strategies in the Canadian Energy industry over the last two and a half decades and has focused simply on maximizing the returns on shareholders’ capital by investing that capital into the profitable development of long life, low cost, and low risk natural gas resource plays. Peyto’s strategy of maximizing returns doesn’t just focus on the efficient execution of exploration and production operations in the field but continues in the head office where the management of corporate costs, including the cost of capital, is carefully controlled to ensure true returns are ultimately realized. The alignment of goals between what is good for the Company, its shareholders, its employees and what is good for the environment and all stakeholders is critical to ensuring the greatest returns are achieved. Evidence of Peyto’s success deploying this strategy through the years is illustrated in the following table.