Peyto Exploration & Development Corp. press release

Peyto Reports Record First Quarter 2026 Results and 9% Dividend Increase

2026-05-12

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

CALGARY, Alberta, May 12, 2026 (GLOBE NEWSWIRE) -- Peyto Exploration & Development Corp. ("Peyto" or the "Company") (TSX: PEY) is pleased to report record operating and financial results for the first quarter of 2026, and a $0.01 per share (9%) increase to its monthly dividend.

Q1 2026 Highlights:

Peyto delivered record first quarter production volumes of 147,513 boe/d (777.6 MMcf/d of natural gas, 17,919 bbls/d of NGLs), a 10% increase year over year (7% on a per share basis), driven by the Company's successful capital program. Reported its highest quarterly funds from operations1,2("FFO") of $293.0 million ($1.41/diluted share), and generated $139.7 million of free funds flow3in the quarter. Strong FFO was driven by the Company’s industry-leading low cash costs4and realized natural gas price after hedging of $4.69/Mcf, 73% higher than the AECO 7A monthly benchmark. Earnings for the quarter totaled $171.1 million, or $0.82/diluted share, setting more new records for Peyto on an absolute and per share basis. The Company returned $67.6 million of dividends to shareholders in the quarter and reduced net debt5by $89.2 million from December 31, 2025. Peyto's Debt/EBITDA leverage ratio was reduced from 1.2 times at December 31, 2025 to 1.0 times at March 31, 2026. Peyto recorded $20.2 million in realized hedging gains in the quarter and has a hedge position protecting approximately 514 MMcf/d of natural gas production for April–December 2026 and 348 MMcf/d for 2027, at $3.96/Mcf and $3.35/Mcf, respectively. Generated a 77% operating margin_6_and a 39% profit margin7in the quarter, resulting in a 17% return on capital employed8("ROCE") and a 16% return on equity8("ROE"), on a trailing 12-month basis. Quarterly cash costs9totaled $1.28/Mcfe, 10% lower than Q1 2025, and included royalties of $0.21/Mcfe, operating expense of $0.52/Mcfe, transportation of $0.29/Mcfe, G&A of $0.06/Mcfe and interest expense of $0.20/Mcfe. Capital expenditures totaled $150.5 million in the quarter. Peyto drilled 23 wells (23.0 net), completed 23 wells (23.0 net), and brought 21 wells (21.0 net) on production. Additionally, the Company purchased 41 gross (27.8 net) sections of undeveloped land through crown land sales and mineral land acquisitions.

First Quarter 2026 in Review

Peyto was active in the quarter with five drilling rigs in the Greater Sundance and Brazeau areas, as well as with pipeline and compression projects that expanded the existing gathering systems to accommodate incremental production volumes. First quarter production averaged 147,513 boe/d, up 10% year over year, setting a new record for the Company. Natural gas prices varied in the quarter with cold winter weather driving up demand, particularly in the US Midwest and Eastern markets where Peyto had exposure to daily market prices. The AECO 7A monthly gas price averaged $2.36/GJ while NYMEX Henry Hub (last day) averaged US$5.04/MMBtu. Peyto’s diversification to premium winter markets helped to fetch a strong realized natural gas price, before hedging, of $4.32/Mcf ($3.76/GJ), 59% higher than AECO 7A. Additionally, the Company recorded $0.37/Mcf of realized hedging gains on its gas volumes in the quarter from its mechanistic risk management strategy. All in, Peyto's realized gas price after hedging totaled $4.69/Mcf or 73% higher than AECO 7A monthly price. The strong gas price, combined with Peyto's low-cost structure, boosted FFO to a record $293.0 million, up 20% from Q4 2025. This record FFO funded $150.5 million of capital expenditures, $67.6 million of shareholder dividends and allowed for a $89.2 million reduction in net debt in the quarter.

| | | | Three Months Ended Mar 31 | % | | | | | | | | | | | 2026 | | 2025 | | Change | | | Operations | | | | | | | | | | | Production | | | | | | | | | | | Natural gas (Mcf/d) | | | | 777,567 | | 710,459 | | 9 | % | | NGLs (bbl/d) | | | | 17,919 | | 15,473 | | 16 | % | | Thousand cubic feet equivalent (Mcfe/d @ 1:6) | | | | 885,079 | | 803,299 | | 10 | % | | Barrels of oil equivalent (boe/d @ 6:1) | | | | 147,513 | | 133,883 | | 10 | % | | Production per million common shares (boe/d) | | | | 720 | | 673 | | 7 | % | | Product prices | | | | | | | | | | | Realized natural gas price – after hedging ($/Mcf) | | | | 4.69 | | 4.17 | | 12 | % | | Realized NGL price – after hedging ($/bbl) | | | | 62.84 | | 62.97 | | 0 | % | | Net sales price ($/Mcfe) | | | | 5.39 | | 4.90 | | 10 | % | | Royalties ($/Mcfe) | | | | 0.21 | | 0.25 | | -16 | % | | Operating ($/Mcfe) | | | | 0.52 | | 0.53 | | -2 | % | | Transportation ($/Mcfe) | | | | 0.29 | | 0.29 | | 0 | % | | Field netback(1)($/Mcfe) | | | | 4.49 | | 3.88 | | 16 | % | | General & administrative expenses ($/Mcfe) | | | | 0.06 | | 0.06 | | 0 | % | | Interest expense ($/Mcfe) | | | | 0.20 | | 0.29 | | -31 | % | | Financial ($000, except per share) | | | | | | | | | | | Natural gas and NGL sales including realized hedging gains (losses)(2) | | | | 429,601 | | 354,268 | | 21 | % | | Funds from operations(1) | | | | 292,998 | | 225,335 | | 30 | % | | Funds from operations per share - basic(1) | | | | 1.43 | | 1.13 | | 27 | % | | Funds from operations per share - diluted(1) | | | | 1.41 | | 1.12 | | 26 | % | | Total dividends | | | | 67,576 | | 65,676 | | 3 | % | | Total dividends per share | | | | 0.33 | | 0.33 | | 0 | % | | Earnings | | | | 171,089 | | 114,117 | | 50 | % | | Earnings per share – basic | | | | 0.84 | | 0.57 | | 47 | % | | Earnings per share – diluted | | | | 0.82 | | 0.57 | | 44 | % | | Total capital expenditures(1) | | | | 150,449 | | 102,129 | | 47 | % | | Decommissioning expenditures | | | | 2,865 | | 2,872 | | 0 | % | | Total payout ratio(1) | | | | 75% | | 76% | | -1 | % | | Weighted average common shares outstanding - basic | | | | 204,779,537 | | 199,017,749 | | 3 | % | | Weighted average common shares outstanding - diluted | | | | 208,181,438 | | 200,359,842 | | 4 | % | | | | | | | | | | | | | Net debt(1) | | | | 1,088,363 | | 1,282,891 | | -15 | % | | Shareholders' equity | | | | 2,985,070 | | 2,593,128 | | 15 | % | | Total assets | | | | 5,517,949 | | 5,356,226 | | 3 | % | | | | | | | | | | | |

(1) This is a Non-GAAP financial measure or ratio. See "non-GAAP and Other Financial Measures" in this news release and in the Q1 2026 MD&A (2) Excludes marketing revenue and other income

Capital Expenditures

Peyto continued with a five-rig program in the first quarter and spud 23 gross (23.0 net) horizontal wells, including 2 Cardium, 2 Viking, 6 Notikewin, 6 Falher, 6 Wilrich, and 1 Bluesky well in the core Sundance and Brazeau areas. The Company also completed 23 gross (23.0 net) wells and brought 21 gross (21.0 net) wells on production in the quarter, resulting in total well-related capital expenditures of $120.6 million. As part of the program, Peyto followed up with two Cardium wells in a new area of Brazeau using the same drilling and completion design that produced strong results in 2025. The wells were recently brought onstream and are exceeding expectations both from a productivity and liquid yield perspective. Additionally, Peyto invested $26.1 million in gathering and processing facilities that included upgrades to plant compression and LPG storage along with field pipeline projects to accommodate new development in the greater Sundance area. Drilling costs per meter were down 8% as compared to Q4 2025, as Peyto drilled some of the longest wells in the Company’s history. Completion costs per meter were up slightly from Q4 2025 as higher stage density completions were deployed in several wells in Q1 2026. Peyto’s historical drilling and completion costs are summarized in the following table.

| | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2025 Q1 | 2025 Q2 | 2025 Q3 | 2025 Q4 | 2026 Q1(1) | | Gross Hz Spuds | 70 | 61 | 64 | 95 | 95 | 72 | 75 | 82 | 19 | 19 | 20 | 24 | 23 | | Measured Depth (m) | 4,020 | 3,848 | 4,247 | 4,453 | 4,611 | 4,891 | 5,092 | 4,963 | 4,976 | 5,021 | 4,921 | 4,834 | 5,206 | | | | | | | | | | | | | | | | | Drilling ($MM/well) | $1.71 | $1.62 | $1.68 | $1.89 | $2.56 | $2.85 | $2.90 | $2.93 | $3.01 | $2.94 | $2.97 | $2.84 | $2.83 | | $ per meter | $425 | $420 | $396 | $424 | $555 | $582 | $569 | $591 | $605 | $585 | $603 | $587 | $543 | | | | | | | | | | | | | | | | | Completion ($MM/well) | $1.13 | $1.01 | $0.94 | $1.00 | $1.35 | $1.54 | $1.70 | $1.67 | $1.56 | $1.71 | $1.63 | $1.70 | $1.70 | | Hz Length (m) | 1,348 | 1,484 | 1,682 | 1,612 | 1,661 | 1,969 | 2,184 | 2,123 | 1,961 | 2,311 | 2,185 | 2,036 | 2,011 | | $ per Hz Length (m) | $751 | $679 | $560 | $620 | $813 | $781 | $776 | $787 | $793 | $740 | $747 | $837 | $843 | | $ ‘000 per Stage | $51 | $38 | $36 | $37 | $47 | $52 | $52 | $51 | $56 | $47 | $47 | $55 | $57 | | | | | | | | | | | | | | | |

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

Peyto was also successful acquiring a total of 41 gross (27.8 net) sections of undeveloped land in the Company’s core areas through crown land sales and mineral land acquisitions totaling $3.6 million ($201/acre) to bolster drilling inventory.

Marketing

Commodity Prices In the first quarter, Peyto realized a natural gas price after hedging of $4.69/Mcf, or $4.08/GJ, 73% higher than the average AECO 7A monthly benchmark of $2.36/GJ, driven by strong realized prices at the Company's non-AECO hubs, including Dawn, Parkway, Ventura, Chicago and Henry Hub, as well as realized hedging gains. Peyto’s diversification activities contributed $1.61/Mcf (net of diversification costs) in the quarter, while the Company's natural gas hedging activity resulted in a realized gain of $0.37/Mcf ($25.6 million). The value of Peyto's natural gas market diversification and hedging activities over the past eight quarters, relative to the AECO 7A benchmark, is detailed in the following table.

| ($/Mcf) | Q2 2024 | | Q3 2024 | | Q4 2024 | | Q1 2025 | | Q2 2025 | | Q3 2025 | | Q4 2025 | | Q1 2026 | | | AECO 7A1 | 1.56 | | 0.89 | | 1.59 | | 2.21 | | 2.25 | | 1.08 | | 2.55 | | 2.71 | | | Diversification value2 | 0.09 | | 0.75 | | 0.68 | | 1.13 | | 0.53 | | 1.11 | | 0.70 | | 1.61 | | | Realized hedging gain | 1.22 | | 1.31 | | 1.16 | | 0.83 | | 0.75 | | 1.38 | | 0.76 | | 0.37 | | | Realized natural gas price after hedging | 2.87 | | 2.95 | | 3.43 | | 4.17 | | 3.53 | | 3.57 | | 4.01 | | 4.69 | | | % premium to AECO 7A | 84% | | 233% | | 116% | | 89% | | 57% | | 229% | | 57% | | 73% | | | | | | | | | | | | | | | | | | | |

1. AECO 7A monthly benchmark has been converted to $/Mcf at Peyto's average heat content of 1.15 GJ/Mcf. 2. Diversification value represents the difference between Peyto's realized natural gas price (after diversification cost but before realized hedging gain/loss) and the AECO 7A monthly benchmark price.

Condensate and pentanes averaged $94.82/bbl for the quarter, up 4% year over year due to tighter oil differentials over the same period. Other NGL volumes were sold at an average price of $31.04/bbl, or 31% of Canadian dollar WTI. Peyto's combined realized NGL price was $66.18/bbl before hedging, and $62.84/bbl including a realized hedging loss of $3.34/bbl ($5.4 million) in the first quarter of 2026.

Hedging The Company has been actively 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 April–December 2026, and calendar 2027. Peyto’s natural gas and liquid hedging program has secured over $715 million and $510 million of revenue for April–December 2026 and calendar 2027, respectively.

| | Q2–Q4 2026 | 2027 | | | Natural Gas | | | | | Volume (MMcf/d) | 514 | 348 | | | Average Fixed Price ($/Mcf) | 3.96 | 3.35 | | | WTI Swaps | | | | | Volume (bbls/d) | 5,532 | 2,298 | | | Average Fixed Price ($/bbl) | 90.68 | 91.47 | | | WTI Collars | | | | | Volume (bbls/d) | 634 | 500 | | | Put–Call ($/bbl) | 82.08–99.05 | 75.00–87.25 | | | WTI Call Options | | | | | Volume (bbls/d) | - | 1,500 | | | Call ($/bbl) | - | 100.00 | | | Propane | | | | | Volume (bbls/d) | 1,000 | 247 | | | Average Fixed Price (US$/bbl) | 34.23 | 34.23 | | | USD FX Contracts | | | | | Amount sold (USD 000s) | 117,421 | 96,504 | | | Rate (CAD/USD) | 1.362 | 1.356 | | | | | | |

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 the Company’s ongoing marketing and diversification efforts are available on Peyto’s website at https://www.peyto.com/Marketing.aspx.

Netbacks

The Company’s realized natural gas and NGL sales yielded a combined revenue stream of $5.14 /Mcfe before hedging gains of $0.25/Mcfe, resulting in a quarterly net sales price of $5.39/Mcfe, 10% higher than the $4.90/Mcfe realized in Q1 2025. Cash costs totaled $1.28/Mcfe in the quarter, 10% lower than $1.42/Mcfe in Q1 2025 due to decreased royalties, operating and interest costs. Operating costs totaled $0.52/Mcfe, down from $0.53/Mcfe in Q1 2025; royalties totaled $0.21/Mcfe, down from $0.25/Mcfe in Q1 2025; and interest totaled $0.20/Mcfe, down from $0.29/Mcfe in Q1 2025. The Company's cash netback (net sales price including other income, net marketing revenue, realized gain on foreign exchange, less total cash costs) was $4.22/Mcfe, resulting in a strong 77% operating margin. Historical cash costs and operating margins are shown below:

| | 2023 | 2024 | 2025 | 2026 | | | | | | | | | | | ($/Mcfe) | Q1 | Q2 | Q3 | Q4(2) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | | Revenue(1) | 5.10 | 4.07 | 4.32 | 4.83 | 4.92 | 3.97 | 3.99 | 4.34 | 4.95 | 4.34 | 4.35 | 4.70 | 5.50 | | Royalties | 0.53 | 0.18 | 0.29 | 0.30 | 0.24 | 0.26 | 0.18 | 0.21 | 0.25 | 0.14 | 0.08 | 0.18 | 0.21 | | | | | | | | | | | | | | | | | Op Costs | 0.50 | 0.47 | 0.44 | 0.55 | 0.55 | 0.52 | 0.54 | 0.50 | 0.53 | 0.54 | 0.51 | 0.49 | 0.52 | | Transportation | 0.24 | 0.29 | 0.29 | 0.26 | 0.30 | 0.30 | 0.31 | 0.27 | 0.29 | 0.31 | 0.30 | 0.30 | 0.29 | | G&A | 0.03 | 0.05 | 0.04 | 0.06 | 0.06 | 0.06 | 0.03 | 0.05 | 0.06 | 0.06 | 0.06 | 0.05 | 0.06 | | Interest | 0.22 | 0.22 | 0.28 | 0.40 | 0.36 | 0.36 | 0.38 | 0.33 | 0.29 | 0.26 | 0.26 | 0.21 | 0.20 | | Cash cost pre-royalty | 0.99 | 1.03 | 1.05 | 1.27 | 1.27 | 1.24 | 1.26 | 1.15 | 1.17 | 1.17 | 1.13 | 1.05 | 1.07 | | | | | | | | | | | | | | | | | Total Cash Costs10 | 1.52 | 1.21 | 1.34 | 1.57 | 1.51 | 1.50 | 1.44 | 1.36 | 1.42 | 1.31 | 1.21 | 1.23 | 1.28 | | Cash Netback11 | 3.58 | 2.86 | 2.98 | 3.26 | 3.41 | 2.47 | 2.55 | 2.98 | 3.53 | 3.03 | 3.14 | 3.47 | 4.22 | | Operating Margin | 71% | 70% | 69% | 67% | 69% | 62% | 64% | 69% | 71% | 70% | 72% | 74% | 77% | | | | | | | | | | | | | | | |

(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 $1.28/Mcfe, along with provisions for current tax, deferred tax, performance-based compensation and stock-based compensation resulted in earnings of $2.15/Mcfe, for a 39% profit margin. Dividends to shareholders totaled $0.85/Mcfe.

Activity Update

Drilling activity has slowed for spring breakup with two rigs active in the Sundance area. Since the end of the first quarter, 4 gross (4 net) wells have been drilled, 7 gross (7 net) wells have been completed, and 6 gross (6 net) wells have been brought on production. Breakup operations are concentrated in Sundance, where the Company’s ownership and control of infrastructure can reduce costs associated with moving equipment in the field.

Peyto will continue to develop high deliverability Falher and Wilrich targets through the remainder of breakup. Post breakup, the Company expects to operate 4 to 5 rigs for the balance of the year. In response to stronger liquids pricing, Peyto has adjusted its drilling program to increase exposure to liquid-rich opportunities, particularly in the Cardium and Falher formations, resulting in a higher proportion of liquids-weighted wells in the remaining program.

Effective April 1, 2026, Peyto entered into a new agreement with a midstream operator to process approximately 75 MMcfd of sales gas from select facilities in the Sundance area. This agreement is expected to generate approximately 1,000–1,500 barrels per day of incremental Propane, Butane, and Pentanes+ volumes. The additional volumes coincide with increases to liquids pricing and are anticipated to enhance netbacks while not increasing operating costs.

Dividend Increase

Over the past 2 ½ years, Peyto has increased production organically from ~123.0 Mboe/d upon closing the Repsol acquisition to average 147.5 Mboe/d in the first quarter, representing a 7.5% compound annual growth rate. During the same period, Peyto's net debt was reduced by $275 million from December 31, 2023, while the debt/EBITDA leverage ratio decreased from 1.7 times at December 31, 2023, to 1.0 times at March 31, 2026. Furthermore, the Company's debt maturities are well-structured, with its senior notes maturing between 2028 and 2034, and the syndicated credit facility maturing in October 2029. Based on current strip prices, management continues to forecast further debt repayment.

Looking forward, the Company's mechanistic hedging program, market diversification, industry-leading cost structure, and high reserve life index combine to secure funding for planned capital programs, debt repayments and dividends. Peyto's methodical natural gas and liquid hedging program, currently securing over $715 million of revenue for the rest of 2026 and $510 million of revenue for 2027, protects cash flows and the sustainability of the Company's dividend if natural gas price weakens moving forward.

In keeping with Peyto's strategy of returning excess free funds flow to shareholders, the strength of the Company's financial position, and the consistent results from planned capital programs, the Board of Directors of Peyto is pleased to approve a monthly dividend of $0.12/share starting in May for shareholders of record as of May 31, 2026, and paid on June 15, 2026. This new dividend represents a 9% increase over the current $0.11/share dividend.

Outlook

The recent geopolitical tensions and energy supply shocks have underscored the importance of secure, reliable and affordable energy. Peyto believes it is in the enviable position of supplying this exact type of energy to the world. The recent volatility in commodity prices makes capital programs challenging to plan. Fortunately, Peyto’s low risk capital plans have been protected through market diversification, a mechanistic hedging program, and an industry-leading cost structure. The Company is on track with its 2026 capital program which will invest between $450 to $500 million to add 43,000 to 48,000 boe/d of new production by yearend. In the meantime, Peyto will manage production to limit exposure to weaker priced markets through the summer, if necessary.

Conference Call and Webcast

A conference call will be held with senior management of Peyto to answer questions with respect to the Company’s Q1 2026 results on Wednesday, May 13, 2026, 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/hm6d2bwv. 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.

Annual General Meeting

Peyto’s Annual General Meeting of Shareholders is scheduled for 3:00 p.m. on Thursday, May 21, 2026, at the Eau Claire Tower, +15 level, 600 – 3rd Avenue SW, Calgary, Alberta. Shareholders are encouraged to read the Information Circular and vote in advance of the proxy voting deadline of Tuesday, May 19 at 3:00 p.m. (Calgary time) and attend this in-person meeting. Leading independent proxy advisory firms have recommended Peyto shareholders ("Shareholders") vote "FOR" all the proposed resolutions. Shareholders who have questions or need assistance with voting their shares should contact Peyto’s strategic advisor and proxy solicitation agent, Laurel Hill Advisory Group, by telephone at 1-877-452-7184 or by email at assistance@laurelhill.com. Shareholders who do not wish to attend are encouraged to visit the Peyto website at www.peyto.com where there is a wealth of information designed to inform and educate investors and where a copy of the AGM presentation will be posted. A monthly report from the President can also be found on the website which follows the progress of the capital program and the ensuing production growth.