Peyto Exploration & Development Corp. press release

Peyto Reports First Quarter 2025 Results

2025-05-13

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

CALGARY, Alberta, May 13, 2025 (GLOBE NEWSWIRE) -- Peyto Exploration & Development Corp. (TSX: PEY) ("Peyto" or the "Company") is pleased to report operating and financial results for the first quarter of 2025.

Q1 2025 Highlights:

Peyto reported $225.2 million in funds from operations 1 , 2 ("FFO"), or $1.12/diluted share, and generated $120.2 million of free funds flow 3 in the quarter. Strong FFO was driven by a realized natural gas price after hedging of $4.17/Mcf, 89% higher than the AECO 7A monthly benchmark, and the Company’s industry-leading low cash costs 4 . Earnings for the quarter totaled $114.1 million, or $0.57/diluted share, and Peyto returned $65.7 million as dividends to shareholders. Net debt 5 was reduced by $65.7 million from December 31, 2024 to $1.28 billion at the end of the quarter. First quarter production volumes averaged 133,883 boe/d (710.5 MMcf/d of natural gas, 15,473 bbls/d of NGLs), a 7% increase year over year (5% on a per share basis), driven by strong well results from the Company's capital program. Recorded $50.8 million in realized hedging gains and exited the quarter with a hedge position protecting approximately 489 MMcf/d and 406 MMcf/d of natural gas production for Q2–Q4 2025 and 2026, respectively, at approximately $4/Mcf. Peyto’s natural gas and liquid hedging has secured approximately $875 million of revenue for 2025 and $605 million for 2026. Cash costs totaled $1.42/Mcfe for the quarter, including royalties of $0.25/Mcfe, operating expense of $0.53/Mcfe, transportation of $0.29/Mcfe, G&A of $0.06/Mcfe and interest expense of $0.29/Mcfe. Peyto continues to have the lowest cash costs of Canadian producers in the oil and natural gas industry. Total capital expenditures 6 of $102.1 million in the quarter. Peyto drilled 19 wells (18.2 net), completed 13 wells (13.0 net), and brought 14 wells (14.0 net) on production. Peyto delivered a solid operating margin 7 of 71% and profit margin 8 of 32%, resulting in a 10% return on capital employed 9 ("ROCE") and an 11% return on equity 9 ("ROE"), on a trailing 12-month basis.

First Quarter 2025 in Review

Peyto was active in the quarter with four 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. Natural gas prices recovered in the quarter due to large draws on storage inventories from a relatively cold North American winter, coupled with increased U.S. LNG feed gas demand. The AECO 7A monthly gas price rose 39% from Q4 2024 and averaged $1.92/GJ. Peyto's realized gas price, before hedging, averaged $3.34/Mcf ($2.90/GJ), 51% higher than AECO 7A, driven by the Company's diversification to premium demand markets in the US and Canada. Additionally, the Company recorded $0.83/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 $4.17/Mcf or 89% higher than AECO 7A monthly price. The increased realized gas price, combined with Peyto's low cost structure, boosted FFO by 13% from Q4 2024 to $225.2 million, which funded $102.1 million of capital expenditures, $65.7 million of shareholder dividends and allowed for a $65.7 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", "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 and 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. _2 _Funds from operations is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q1 2025 MD&A. _3 _Free funds flow is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q1 2025 MD&A. _4 _Cash costs is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release. _5 _Net debt a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q1 2025 MD&A. _6 _Total capital expenditures is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q1 2025 MD&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.

| | Three Months Ended Mar 31 | % | | | | 2025 | 2024 | Change | | Operations | | | | | Production | | | | | Natural gas (Mcf/d) | 710,459 | 647,234 | 10 % | | NGLs (bbl/d) | 15,473 | 17,145 | -10 % | | Thousand cubic feet equivalent (Mcfe/d @ 1:6) | 803,299 | 750,105 | 7 % | | Barrels of oil equivalent (boe/d @ 6:1) | 133,883 | 125,018 | 7 % | | Production per million common shares (boe/d) | 673 | 643 | 5 % | | Product prices | | | | | Realized natural gas price – after hedging and diversification ($/Mcf) | 4.17 | 4.05 | 3 % | | Realized NGL price – after hedging ($/bbl) | 62.97 | 60.36 | 4 % | | Net sales price (2) ($/Mcfe) | 4.90 | 4.87 | 1 % | | Royalties ($/Mcfe) | 0.25 | 0.24 | 4 % | | Operating ($/Mcfe) | 0.53 | 0.55 | -4 % | | Transportation ($/Mcfe) | 0.29 | 0.30 | -3 % | | Field netback (1) ($/Mcfe) | 3.88 | 3.82 | 2 % | | General & administrative expenses ($/Mcfe) | 0.06 | 0.06 | 0 % | | Interest expense ($/Mcfe) | 0.29 | 0.36 | -19 % | | Financial ($000, except per share) | | | | | Natural gas and NGL sales including realized hedging gains (2) | 354,268 | 332,541 | 7 % | | Funds from operations (1) | 225,218 | 204,622 | 10 % | | Funds from operations per share - basic (1) | 1.13 | 1.05 | 8 % | | Funds from operations per share - diluted (1) | 1.12 | 1.05 | 7 % | | Total dividends | 65,676 | 64,158 | 2 % | | Total dividends per share | 0.33 | 0.33 | 0 % | | Earnings | 114,117 | 99,875 | 14 % | | Earnings per share – basic | 0.57 | 0.51 | 12 % | | Earnings per share – diluted | 0.57 | 0.51 | 12 % | | Total capital expenditures (1) | 102,129 | 113,762 | -10 % | | Decommissioning expenditures | 2,872 | 4,206 | -32 % | | Total payout ratio (1) | 76 % | 89% | -15 % | | Weighted average common shares outstanding - basic | 199,017,749 | 194,416,710 | 2 % | | Weighted average common shares outstanding - diluted | 200,359,842 | 195,159,389 | 3 % | | | | | | | Net debt (1) | 1,282,891 | 1,339,558 | -4 % | | Shareholders' equity | 2,593,128 | 2,683,990 | -3 % | | Total assets | 5,356,226 | 5,373,202 | 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 Q1 2025 MD&A (2) Excludes marketing revenue and other income _

Capital Expenditures

Peyto drilled 19 gross (18.2 net) horizontal wells in the first quarter including 10 Wilrich, 1 Falher, 4 Notikewin, 3 Dunvegan, and 1 Cardium well in the core Brazeau and Sundance areas. The Company also completed 13 gross (13.0 net) wells and brought 14 gross (14.0 net) wells on production in the quarter resulting in total well-related capital expenditures of $85.6 million. Additionally, Peyto invested $15.5 million in gathering and processing facilities that included optimization projects and a pipeline to connect third-party volumes to Peyto's Brazeau plant for long-term fee income. First quarter average drilling costs were slightly higher than the prior quarter, which was attributed to both cold weather operations and the execution of a uniquely over-pressured three-well pad in the Edson area. This was offset by lower completion costs, which fell 6% on a per-well basis from Q4 2024.

| | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2024 Q1 | 2024 Q2 | 2024 Q3 | 2024 Q4 | 2025 Q1 (1) | | Gross Hz Spuds | 135 | 70 | 61 | 64 | 95 | 95 | 72 | 75 | 18 | 20 | 21 | 16 | 19 | | Measured Depth (m) | 4,229 | 4,020 | 3,848 | 4,247 | 4,453 | 4,611 | 4891 | 5,092 | 5,220 | 5,364 | 4,804 | 4,987 | 4,976 | | | | | | | | | | | | | | | | | Drilling ($MM/well) | $1.90 | $1.71 | $1.62 | $1.68 | $1.89 | $2.56 | $2.85 | $2.90 | $3.05 | $2.89 | $2.81 | $2.85 | $ 3.01 | | $ per meter | $450 | $425 | $420 | $396 | $424 | $555 | $582 | $569 | $585 | $539 | $585 | $572 | $ 605 | | | | | | | | | | | | | | | | | Completion ($MM/well) | $1.00 | $1.13 | $1.01 (2) | $0.94 | $1.00 | $1.35 | $1.54 | $1.70 | $1.80 | $1.75 | $1.56 | $1.66 | $ 1.56 | | Hz Length (m) | 1,241 | 1,348 | 1,484 | 1,682 | 1,612 | 1,661 | 1,969 | 2,184 | 2,223 | 2,350 | 2,224 | 1,989 | 1,961 | | $ per Hz Length (m) | $803 | $751 | $679 | $560 | $620 | $813 | $781 | $776 | $809 | $744 | $703 | $834 | $ 793 | | $ ‘000 per Stage | $81 | $51 | $38 | $36 | $37 | $47 | $52 | $52 | $55 | $49 | $48 | $56 | $ 56 | | | | | | | | | | | | | | | |

(1) Based on field estimates and may be subject to minor adjustments going forward. (2) Peyto’s Montney well is excluded from drilling and completion cost comparison.

Peyto also spent $0.8 million during the quarter on acquiring mineral rights, seismic, and minor acquisitions.

Commodity Prices and Realizations

In the first quarter, Peyto realized a natural gas price after hedging and diversification of $4.17/Mcf, or $3.63/GJ, 89% higher than the average AECO 7A monthly benchmark of $1.92/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 $0.83/Mcf ($53.0 million) in the quarter.

Condensate and pentanes averaged $90.88/bbl for the quarter, down 1% year over year, while Canadian dollar WTI ("WTI CAD") decreased 1% to $102.49/bbl over the same period. Other NGL volumes were sold at an average price of $32.41/bbl, or 32% of WTI CAD, up 3% from $31.37/bbl in Q1 2024. Peyto's combined realized NGL price in the quarter was $64.56/bbl before hedging, and $62.97/bbl including a hedging loss of $1.59/bbl.

Netbacks

The Company’s realized natural gas and NGL sales yielded a combined revenue stream of $4.20/Mcfe before hedging gains of $0.70/Mcfe, resulting in a quarterly net sales price of $4.90/Mcfe, consistent with $4.87/Mcfe realized in Q1 2024. Cash costs totaled $1.42/Mcfe in the quarter, 6% lower than $1.51/Mcfe in Q1 2024 due to lower operating, transportation and interest costs. Operating costs are typically highest in the colder, first quarter and Peyto expects per-unit operating costs to trend downward throughout 2025. Peyto's cash netback (net sales price including other income, net marketing revenue, realized gain on foreign exchange, less total cash costs) was $3.53/Mcfe, the highest since Q1 2023, driving a solid 71% 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 | | 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 | | 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 | | | | | | | | | | | | | | | | | 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 | | 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 | | 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 | | 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 | | 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 | | | | | | | | | | | | | | | | | 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 | | 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 | | Operating Margin | 71% | 67% | 69% | 72% | 71% | 70% | 69% | 67% | 69% | 62% | 64% | 69% | 71 % | | | | | | | | | | | | | | | |

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

Depletion, depreciation, and amortization charges of $1.34/Mcfe, along with provisions for current tax, deferred tax, performance-based compensation and stock-based compensation resulted in earnings of $1.58 /Mcfe, or a 32% profit margin. Dividends to shareholders totaled $0.91/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 Q2–Q4 2025, calendar 2026, and calendar 2027.

| | Q2 2025 | Q3 2025 | Q4 2025 | 2026 | 2027 | | Natural Gas | | | | | | | Volume (MMcf/d) | 510 | 510 | 447 | 406 | 61 | | Average Fixed Price (1) ($/Mcf) | 3.90 | 3.90 | 4.32 | 3.99 | 4.05 | | WTI Swaps | | | | | | | Volume (bbls/d) | 5,000 | 3,800 | 2,400 | 745 | - | | Average Fixed Price ($/bbl) | 98.94 | 95.51 | 93.14 | 86.19 | - | | WTI Collars | | | | | | | Volume (bbls/d) | 500 | 500 | 500 | 248 | - | | Put–Call ($/bbl) | 90.00–100.25 | 90.00–110.00 | 90.00–100.50 | 87.50–100.25 | - | | Propane | | | | | | | Volume (bbls/d) | 500 | 500 | 500 | 123 | - | | Average Fixed Price (US$/bbl) | 33.60 | 33.60 | 33.60 | 33.60 | - | | USD FX Contracts | | | | | | | Amount sold (USD 000s) | 69,000 | 63,000 | 47,000 | 112,500 | - | | Rate (CAD/USD) | 1.352 | 1.352 | 1.355 | 1.355 | - |

(1) At 1.39 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 .

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10 _Total Cash costs is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release. _11 Cash netback is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release and in the Q1 2025 MD&A.

Activity Update

Since the start of the second quarter, Peyto has continued with an active drilling program across all core areas with 8 wells (6.7 net) drilled, 11 wells (9.4 net) completed, and 12 wells (12.0 net) brought on production. The Company intends to continue with a steady capital program through spring break-up and the rest of 2025.

Last month, Peyto completed a third Falher well in Sundance, as a follow-up to the two wells that discovered a new channel last year. The results to date from these wells have demonstrated top decile internal rate of returns and the team has identified at least 20 additional locations on Peyto lands. The Company plans to drill three more wells in the channel before the end of the year, which will help further delineate the trend and prove up productivity.

Recently, the Company applied an alternate drilling technique and liner design on two low working-interest Cardium wells. This technique, which targets drilling just below the Cardium sand, allowed Peyto to achieve significantly longer laterals while reducing per unit drill costs below historical levels in the area. A cemented ball drop system allowed for the deployment of 60 stages in each well—a new record for Peyto. Early results from these wells are encouraging and the Company plans to follow up with additional wells this year to further test the design. With continued success, Peyto sees the opportunity to apply the new design to other Cardium inventory which comprises approximately 25% of the Company’s undrilled, booked reserves volumes.

Beginning in April, Peyto commissioned a new pipeline to accept approximately 8 MMcf/d of natural gas from a third party at its Brazeau gas plant, relating to a multi-year gas processing agreement which utilizes spare capacity at the facility. This new pipeline also provides a future opportunity to serve other third-party volumes.

Outlook

While the recent weakness in oil prices has a minimal effect on Peyto’s cash flow, it could be constructive to natural gas prices if the fall in oil prices lowers oil activity and associated gas production in the US. The Company remains bullish on forward natural gas prices with the recent start-up of US LNG export facilities and the ramp up of LNG Canada throughout 2025, 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 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, which offer a superior price above the current AECO market.

Despite the political volatility and global economic uncertainty, Peyto remains committed to its 2025 capital guidance of $450 to $500 million. The program is designed with flexibility in the back half of the year to adjust to changing commodity prices and the 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 strengthen 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 Q1 2025 results on Wednesday, May 14, 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/svumnnnm . 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 and Special Meeting

Peyto’s Annual and Special Meeting of Shareholders is scheduled for 3:00 p.m. on Thursday, May 22, 2025, 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 20 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.