Peyto Exploration & Development Corp. press release

Peyto Reports Second Quarter 2026 Results

2026-08-11

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

CALGARY, Alberta, Aug. 11, 2026 (GLOBE NEWSWIRE) -- Peyto Exploration & Development Corp. (TSX: PEY) ("Peyto" or the "Company") is pleased to report its operating and financial results for the second quarter of 2026.

Q2 2026 Highlights:

Peyto delivered second quarter production volumes of 145,320 boe/d (758.2 MMcf/d of natural gas, 18,959 bbls/d of NGLs), a 10% increase year over year (7% on a per share basis), driven by the Company's successful capital program. Funds from operations1,2("FFO") of $227.7 million ($1.09/diluted share, up 15%) was recorded, and $140.6 million of free funds flow3was generated in the quarter. Strong FFO was driven by the Company’s industry-leading low cash costs4and realized natural gas price after hedging and diversification activities of $3.42/Mcf, 108% higher than the AECO 7A monthly benchmark. Adjusted earnings5(earnings excluding unrealized gains or losses on financial instruments and foreign exchange) for the quarter totaled $105.0 million, or $0.50/diluted share, and rose 19% from $0.42/diluted share in Q2 2025. The Company returned $71.8 million of dividends to shareholders in the quarter and reduced net debt6by $72.4 million from March 31, 2026. Peyto recorded $36.7 million in realized hedging gains in the quarter and has a hedge position protecting approximately 505 MMcf/d of natural gas production for the second half of 2026 and 404 MMcf/d for 2027, at $4.02/Mcf and $3.31/Mcf, respectively. The Company’s natural gas and NGL hedges combine to secure revenue of approximately $485 million for the second half of 2026 and $590 million for calendar 2027, thus far. The Company bolstered its diversification program with the signing of a long-term natural gas supply agreement with Centrica Energy ("Centrica"). Under the agreement, Peyto will deliver 50,000 MMBtu/d to Centrica over a 10-year period commencing in 2029. Deliveries will be made at the NIT (AECO) hub and will be priced against the Dutch Title Transfer Facility ("TTF") benchmark, less deductions. A 71% operating margin_7_and a 29% profit margin8were generated in the quarter, resulting in an 18% return on capital employed9("ROCE") and a 16% return on equity9("ROE"), on a trailing 12-month basis. Cash costs10totaled $1.32/Mcfe in the quarter, including $0.28/Mcfe of royalties. Cash costs before royalties totaled $1.04/Mcfe, 11% lower than Q2 2025 and back to levels prior to the Company’s acquisition of the Repsol Assets in Q4 2023. These costs included operating expense of $0.50/Mcfe, transportation of $0.30/Mcfe, G&A of $0.05/Mcfe and interest expense of $0.19/Mcfe. Capital expenditures totaled $84.9 million in the quarter. Peyto drilled 10 wells (10.0 net), completed 14 wells (14.0 net), and brought 15 wells (15.0 net) on production. Additionally, the Company purchased 26 gross (26 net) sections of undeveloped land through crown land sales and mineral land acquisitions bringing H1 2026 total mineral land acquisitions to 67 gross (53.8 net) sections.

Second Quarter 2026 in Review

Peyto slowed capital activity in the quarter during a wet spring and early summer period. Second quarter production averaged 145,320 boe/d, up 10% year over year. The AECO 7A monthly gas price averaged only $1.43/GJ during the quarter, however, Peyto’s diversification to downstream markets and mechanistic hedging strategy helped to achieve a realized natural gas price of $3.42/Mcf ($2.97/GJ), more than double the AECO price. The Company continued to add to the diversification portfolio with a 50,000 MMBtu/d natural gas supply agreement linked to European TTF pricing starting in 2029. At the start of the quarter, Peyto began delivering approximately 85 MMcf/d of sales gas to a third-party processor which has enhanced NGL recoveries by an incremental 1,500 bbls/d. Strong production and realized pricing during the quarter, combined with Peyto's lowest controllable costs since acquiring the Repsol assets, contributed to FFO of $227.7 million, up 19% (15% per diluted share) from Q2 2025. The FFO supported $84.9 million of capital expenditures, $71.8 million of shareholder dividends and allowed for a $72.4 million reduction in net debt in the quarter.

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1_This press release contains certain non-GAAP and other financial measures to analyze financial performance, financial position, and cash flow including, but not limited to "operating margin", "profit margin", "return on capital", "return on equity", "netback", "funds from operations","adjusted earnings","free funds flow", "total cash costs", and "net debt". These non-GAAP and other financial measures do not have any standardized meaning prescribed under IFRS®Accounting Standardsand therefore may not be comparable to similar measures presented by other entities. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as earnings, cash flow from operating activities, and cash flow used in investing activities, as indicators of Peyto’s performance. See "Non-GAAP and Other Financial Measures" included at the end of this press release and in Peyto's most recently filed MD&A for an explanation of these financial measures and reconciliation to the most directly comparable financial measure under IFRS._ 2Funds from operations is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q22026MD&A. 3Free funds flow is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q22026MD&A. 4_Cash costs is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release._ 5_Adjusted earningsis a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q22026MD&A._ 6_Net debt is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q22026MD&A._ 7_Operating Margin is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release._ 8_Profit Margin is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release._ 9_Return on capital employed and return on equity are non-GAAP financial ratios. See "non-GAAP and Other Financial Measures" in this news release and in the Q22026MD&A._ 10_Cash costs is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release._

| | Three Months Ended June 30 | % | Six Months Ended June 30 | % | | | | | 2026 | 2025 | Change | 2026 | 2025 | Change | | Operations | | | | | | | | Production | | | | | | | | Natural gas (Mcf/d) | 758,165 | 696,619 | 9% | 767,813 | 703,501 | 9% | | NGLs (bbl/d) | 18,959 | 15,650 | 21% | 18,442 | 15,562 | 19% | | Thousand cubic feet equivalent (Mcfe/d @ 1:6) | 871,917 | 790,521 | 10% | 878,462 | 796,875 | 10% | | Barrels of oil equivalent (boe/d @ 6:1) | 145,320 | 131,754 | 10% | 146,410 | 132,812 | 10% | | Production per million common shares (boe/d) | 708 | 659 | 7% | 714 | 666 | 7% | | Product prices | | | | | | | | Realized natural gas price – after hedging ($/Mcf) | 3.42 | 3.53 | -3% | 4.06 | 3.85 | 5% | | Realized NGL price – after hedging ($/bbl) | 64.98 | 58.43 | 11% | 63.95 | 60.68 | 5% | | Net sales price ($/Mcfe) | 4.38 | 4.27 | 3% | 4.89 | 4.59 | 7% | | Royalties ($/Mcfe) | 0.28 | 0.14 | 100% | 0.25 | 0.19 | 32% | | Operating ($/Mcfe) | 0.50 | 0.54 | -7% | 0.51 | 0.54 | -6% | | Transportation ($/Mcfe) | 0.30 | 0.31 | -3% | 0.30 | 0.30 | 0% | | Field netback(1)($/Mcfe) | 3.38 | 3.36 | 1% | 3.94 | 3.62 | 9% | | General & administrative expenses ($/Mcfe) | 0.05 | 0.06 | -17% | 0.06 | 0.06 | 0% | | Interest expense ($/Mcfe) | 0.19 | 0.26 | -27% | 0.19 | 0.27 | -30% | | Financial ($000, except per share) | | | | | | | | Natural gas and NGL sales including realized hedging gains (losses) | 347,769 | 306,999 | 13% | 777,370 | 661,267 | 18% | | Funds from operations(1) | 227,655 | 191,283 | 19% | 520,653 | 416,618 | 25% | | Funds from operations per share - basic(1) | 1.11 | 0.96 | 16% | 2.54 | 2.09 | 22% | | Funds from operations per share - diluted(1) | 1.09 | 0.95 | 15% | 2.50 | 2.07 | 21% | | Total dividends | 71,831 | 65,957 | 9% | 139,407 | 131,633 | 6% | | Total dividends per share | 0.35 | 0.33 | 6% | 0.68 | 0.66 | 3% | | Earnings | 106,259 | 87,832 | 21% | 277,348 | 201,949 | 37% | | Earnings per share – basic | 0.52 | 0.44 | 18% | 1.35 | 1.01 | 34% | | Earnings per share – diluted | 0.51 | 0.43 | 19% | 1.33 | 1.00 | 33% | | Adjusted earnings(1) | 104,983 | 84,900 | 24% | 277,004 | 198,965 | 39% | | Adjusted earnings per share – basic(1) | 0.51 | 0.42 | 20% | 1.35 | 1.00 | 35% | | Adjusted earnings per share – diluted(1) | 0.50 | 0.42 | 19% | 1.33 | 0.99 | 35% | | Total capital expenditures(1) | 84,927 | 104,649 | -19% | 235,376 | 206,776 | 14% | | Decommissioning expenditures | 2,158 | 2,944 | -27% | 5,023 | 5,816 | -14% | | Total payout ratio(1) | 70% | 91% | -23% | 73% | 83% | -12% | | Weighted average common shares outstanding - basic | 205,212,848 | 199,868,585 | 3% | 204,997,389 | 199,445,518 | 3% | | Weighted average common shares outstanding - diluted | 208,565,042 | 202,226,837 | 3% | 208,473,530 | 201,339,814 | 4% | | | | | | | | | | Net debt(1) | | | | 1,015,920 | 1,242,983 | -18% | | Shareholders' equity | | | | 3,044,650 | 2,732,009 | 11% | | Total assets | | | | 5,538,122 | 5,417,649 | 2% |

(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 2026 MD&A

Capital Expenditures

Peyto spud 10 gross (10.0 net) horizontal wells in the second quarter, including 3 Cardium, 1 Notikewin, 3 Falher, and 3 Wilrich wells in the core Sundance and Brazeau areas as the Company slowed drilling activity through the traditional wet break-up period. Despite slower drilling, Peyto managed to complete 14 gross (14.0 net) wells and brought 15 gross (15.0 net) wells on production in the quarter, resulting in total well-related capital expenditures of $67.8 million. As part of the program, Peyto spud the first well on a three-well Cardium pad in Sundance that will test the extended reach design which has proven to be successful in Brazeau, improving capital efficiencies for the play. Additionally, Peyto invested $13.6 million in facilities, pipeline optimization projects, and turnarounds at the Kakwa, Cecilia and Brazeau gas plants. Drilling costs per meter increased 17% as compared to Q1 2026, as Peyto drilled shorter laterals in Spirit River channels in the quarter and ran into isolated operational problems on two wells that resulted in higher average per well drill costs. Completion costs per meter were up marginally from Q1 2026 due to species mix. Peyto’s historical drilling and completion costs are summarized in the following table.

| | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2025 Q1 | 2025 Q2 | 2025 Q3 | 2025 Q4 | 2026 Q1 | 2026 Q2(1) | | Gross Hz Spuds | 61 | 64 | 95 | 95 | 72 | 75 | 82 | 19 | 19 | 20 | 24 | 23 | 10 | | Measured Depth (m) | 3,848 | 4,247 | 4,453 | 4,611 | 4,891 | 5,092 | 4,963 | 4,976 | 5,021 | 4,921 | 4,834 | 5,206 | 4,747 | | | | | | | | | | | | | | | | | Drilling ($MM/well) | $1.62 | $1.68 | $1.89 | $2.56 | $2.85 | $2.90 | $2.93 | $3.01 | $2.94 | $2.97 | $2.84 | $2.83 | $3.00 | | $ per meter | $420 | $396 | $424 | $555 | $582 | $569 | $591 | $605 | $585 | $603 | $587 | $543 | $633 | | | | | | | | | | | | | | | | | Completion ($MM/well) | $1.01 | $0.94 | $1.00 | $1.35 | $1.54 | $1.70 | $1.67 | $1.56 | $1.71 | $1.63 | $1.70 | $1.70 | $1.90 | | Hz Length (m) | 1,484 | 1,682 | 1,612 | 1,661 | 1,969 | 2,184 | 2,123 | 1,961 | 2,311 | 2,185 | 2,036 | 2,011 | 2,222 | | $ per Hz Length (m) | $679 | $560 | $620 | $813 | $781 | $776 | $787 | $793 | $740 | $747 | $837 | $843 | $853 | | $ ‘000 per Stage | $38 | $36 | $37 | $47 | $52 | $52 | $51 | $56 | $47 | $47 | $55 | $57 | $52 |

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

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To further bolster drilling inventory, Peyto successfully acquired 26 gross (26 net) sections in the Company’s core areas through crown land sales and mineral land purchases totaling $1.9 million. This includes 14 sections in the Brazeau area targeting recent Cardium success and brings the total capital invested on land acquisitions and new inventory in the first half of 2026 to $5.5 million to acquire 67 gross (53.8 net) sections at average cost of $158/acre.

Peyto also spent $2.2 million towards abandonment and reclamation activities during the quarter as part of the planned $13 million budget for 2026.

Marketing

Commodity Prices In the second quarter, Peyto realized a natural gas price after hedging of $3.42/Mcf, or $2.97/GJ, 108% higher than the average AECO 7A monthly benchmark of $1.43/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 $0.93/Mcf (net of diversification costs) in the quarter, while the Company's natural gas hedging activity resulted in a realized gain of $0.85/Mcf ($58.1 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 illustrated in the following table.

| ($/Mcf) | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | Q1 2026 | Q2 2026 | | AECO 7A1 | 0.89 | 1.59 | 2.21 | 2.25 | 1.08 | 2.55 | 2.71 | 1.64 | | Diversification value2 | 0.75 | 0.68 | 1.13 | 0.53 | 1.11 | 0.70 | 1.61 | 0.93 | | Realized hedging gain | 1.31 | 1.16 | 0.83 | 0.75 | 1.38 | 0.76 | 0.37 | 0.85 | | Realized natural gas price after hedging | 2.95 | 3.43 | 4.17 | 3.53 | 3.57 | 4.01 | 4.69 | 3.42 | | % premium to AECO 7A | 233% | 116% | 89% | 57% | 229% | 57% | 73% | 108% |

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 $125.42/bbl for the quarter, up 54% year over year driven by higher WTI oil prices from escalating geopolitical tension in the Middle East. Other NGL volumes were sold at an average price of $28.48/bbl, or 22% of Canadian dollar WTI. Peyto's combined realized NGL price was $77.40/bbl before hedging, and $64.98/bbl including a realized hedging loss of $12.42/bbl ($21.4 million) in the second quarter of 2026.

During the quarter, the Company entered into a long-term natural gas supply agreement with Centrica. Under the agreement, Peyto will deliver 50,000 MMBtu/d to Centrica over a 10-year period commencing in 2029. Deliveries will be made at the NIT (AECO) hub operated by NGTL in Alberta. The natural gas will be priced against the Dutch TTF benchmark, less deductions. With this new agreement, Peyto has over 400 MMcf/d of natural gas exposed to non-AECO markets starting in 2028 and beyond. The diversification portfolio includes physical or financial agreements that are linked to markets at Dawn/Parkway, Chicago/Ventura, Henry Hub, Empress, Emerson 2, Dutch -TTF, and Alberta power prices. Natural gas at these markets can be hedged to secure revenue or left to float on daily or monthly prices.

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 the second half of 2026, calendar 2027 and calendar 2028. Peyto’s natural gas and liquid hedging program has secured revenue of approximately $485 million for the second half of 2026 and $590 million for calendar 2027.

| | H2 2026 | 2027 | 2028 | | Natural Gas | | | | | Volume (MMcf/d) | 505 | 404 | 123 | | Average Fixed Price ($/Mcf) | 4.02 | 3.31 | 2.88 | | WTI Swaps | | | | | Volume (bbls/d) | 5,900 | 2,795 | 349 | | Average Fixed Price ($/bbl) | 93.05 | 93.24 | 96.26 | | WTI Collars | | | | | Volume (bbls/d) | 700 | 500 | 249 | | Put–Call ($/bbl) | 79.29–98.54 | 75.00–87.25 | 85.00–101.00 | | WTI Call Options | | | | | Volume (bbls/d) | - | 1,500 | - | | Call ($/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) | 79,136 | 118,314 | 8,265 | | Rate (CAD/USD) | 1.361 | 1.359 | 1.369 |

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 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 $3.92 /Mcfe before hedging gains of $0.46/Mcfe, resulting in a quarterly net sales price of $4.38/Mcfe, 3% higher than the $4.27/Mcfe realized in Q2 2025. Cash costs totaled $1.32/Mcfe in the quarter, 1% higher than $1.31/Mcfe in Q2 2025 due to increased royalties. Cash costs before royalties decreased 11% from Q2 2025 and have been reduced to levels prior to the acquisition of Repsol Assets in Q4 2023, achieving Peyto’s strategy to fully integrate the assets into the Company’s low-cost model. Operating costs totaled $0.50/Mcfe, down from $0.54/Mcfe in Q2 2025 while interest costs totaled $0.19/Mcfe, down from $0.26/Mcfe in Q2 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 $3.16/Mcfe, resulting in a solid 71% 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 | Q2 | | 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 | 4.48 | | 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 | 0.28 | | | | | | | | | | | | | | | | | | 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 | 0.50 | | 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 | 0.30 | | 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 | 0.05 | | 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 | 0.19 | | Cash costs pre-royalties | 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 | 1.04 | | | | | | | | | | | | | | | | | | Total Cash Costs11 | 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 | 1.32 | | Cash Netback12 | 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 | 3.16 | | Operating Margin | 71% | 70% | 69% | 67% | 69% | 62% | 64% | 69% | 71% | 70% | 72% | 74% | 77% | 71% |

(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

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Effective April 1, 2026, Peyto entered into a new agreement with a midstream operator to process natural gas at its deep cut facility from certain gas plants in the Sundance area. Since then, The Company has been delivering approximately 85 MMcf/d of sales gas and generated approximately 1,500 barrels per day of incremental Propane, Butane, and Pentanes+ volumes.

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 $1.31/Mcfe, for a 29% profit margin. Dividends to shareholders totaled $0.91/Mcfe.