Prairiesky Royalty (PSK) Q4 2024 earnings summary

Executive summary

• Achieved 6% organic oil royalty production growth in 2024, marking the third consecutive year of high single-digit growth per debt-adjusted share, with record annual oil royalty production of 13,125 bbl/d driven by strong third-party activity in key plays like Clearwater and Mannville Stack.

• Entered 219 leases with over 100 counterparties, receiving CAD 30.8 million in lease issuance bonuses.

• Increased annual dividend policy by 4% to CAD 1.04 per share, with a quarterly dividend of CAD 0.26 per share effective March 2025, and maintained a 63% payout ratio.

• Closed four acquisitions totaling CAD 73 million, including $57.3 million in royalty interest acquisitions, and a $50 million acquisition of fee lands and royalty interests expected to add 350 BOE/d.

• Net debt reduced by 39% year-over-year to CAD 134.9 million at year-end 2024.

Financial highlights

• 2024 total revenues were CAD 509.2 million, with royalty production revenue at CAD 465.8 million, and funds from operations of CAD 380.5 million (CAD 1.59/share).

• Q4 oil royalty production averaged 13,317 bbl/d; annual average was 13,125 bbl/d, up 6% from 2023.

• Oil royalties accounted for 87% of total royalty revenue for both Q4 and the full year.

• Net earnings for 2024 were CAD 215.3 million, with Q4 net earnings of CAD 60.2 million.

• Operating margin remained high at 91% for 2024, with a royalty operating margin of 99%.

Outlook and guidance

• Anticipates higher activity levels in 2025, supported by increased rig counts and strong capital programs in key plays, with Duvernay royalty production volume growth of 50%-100% year-over-year.

• Expects continued momentum in Clearwater and Mannville Stack oil plays, with incremental well licensing in Duvernay to drive high netback light oil growth in 2025.

• 2025 pricing sensitivities: $5/bbl WTI change impacts funds from operations by CAD 23.5 million; $0.25/MCF AECO change impacts by CAD 4 million.

• Management remains focused on sustainable returns through a high-margin, low-cost business model and expects continued funds from operations and dividend growth over the next decade.