Prairiesky Royalty (PSK) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenues reached $117.3 million, with $111.5 million from royalty production and $5.8 million from other revenues, including $4.1 million in lease bonuses from 54 new leasing arrangements.

• Oil royalty production volumes averaged 12,733 barrels per day, up 5% year-over-year, while total royalty production averaged 24,422 BOE per day, down 4% due to declines in natural gas and NGL production.

• Achieved 5% organic oil volume growth over Q3 2023 and 6% year-to-date, driven by strong licensing and well spud activity on company acreage.

• Clearwater and Mannville Stack plays now represent over 20% of oil production, with Clearwater oil production up 19% year-over-year and Mannville Stack multilateral production in Cold Lake region up 87% year-over-year.

• Duvernay royalty production increased 76% year-over-year, reaching over 700 BOE per day.

Financial highlights

• Funds from operations in Q3 2024 were $92.4 million ($0.39/share), consistent with Q3 2023, and a dividend of $0.25 per share ($59.7 million) was declared, representing a 65% payout ratio.

• Net earnings for Q3 2024 were $47.3 million ($0.20/share), down from $55.4 million ($0.23/share) in Q3 2023.

• Net debt at September 30, 2024, was $149.6 million, down $72.5 million since year-end 2023 and 33% from year-end.

• Operating netback per BOE was $41.12 in Q3 2024.

• Royalty operating margin for the nine months ended September 30, 2024, was 99%.

Outlook and guidance

• Management expects continued organic growth in oil royalty production, with 2024 YTD organic growth of 6% per share versus the same period in 2023.

• 2025 activity levels expected to be similar to 2024, barring major pricing changes.

• Duvernay expected to grow from 700 to 4,000–6,000 net royalty barrels over the next decade.

• Clearwater projected to grow to over 3,000 barrels per day even at CAD 50 oil.

• Management remains focused on investing in low-cost oil plays and leveraging fee mineral title acreage for future growth.