Peyto Exploration & Development (PEY) Q3 2024 earnings summary

Executive summary

• Safely executed a major turnaround at the Edson Gas Plant, managing production by opportunistically shutting in volumes during low AECO prices, and completed a major turnaround expected to lower operating costs.

• Achieved industry-leading costs and cycle times through disciplined operations and strong team execution.

• Funds from operations reached CAD 154.3 million ($0.78/diluted share), with earnings of $51.0 million ($0.26/diluted share), and $64.7 million in dividends returned to shareholders.

• Production averaged 120,031 boe/d, up 23% year-over-year, driven by the Repsol acquisition.

• Disciplined hedging and market diversification protected revenues amid weak AECO gas prices, with realized gas prices nearly 4x the AECO benchmark.

Financial highlights

• Delivered CAD 154.3 million of funds from operations, matching the previous quarter despite low AECO prices averaging CAD 0.65/GJ.

• Natural gas and NGL sales including hedging gains totaled $260.6 million, up 12% year-over-year.

• Cash costs were $1.44/MCFE, down from Q2 due to lower royalties and G&A, offset by higher interest, transport, and operating costs.

• Operating margin reached 64%, among the highest in the sector, with a profit margin of 19%.

• Net debt rose 55% year-over-year to $1.36 billion; shareholders’ equity increased 19% to $2.74 billion.

Outlook and guidance

• Preliminary 2025 capital budget set at $450–$500 million, targeting 70–80 wells and production additions of 43,000–48,000 BOEs/day to offset a 26–28% base decline.

• Production expected to remain flat in H1 2025, ramping up in H2, aligned with anticipated LNG startup.

• Hedged close to $800 million of fixed revenue for 2025, supporting capital execution, dividends, and debt reduction.

• Net debt reduction expected by year-end 2024 despite challenging gas prices.

• Bullish outlook on natural gas demand due to LNG egress and power sector growth.