Prospera Energy (PEI) Investor update summary

Market environment and supply dynamics

• Ongoing Iran-Hormuz crisis has blocked the Strait of Hormuz, disrupting 20% of global oil supply and causing tanker traffic to drop to near zero.

• Oil prices spiked to $117–$119, with Brent averaging $98 in March, the highest in four years, benefiting E&P producers.

• U.S. shale production has peaked and is now in decline, with inventory degradation and higher breakevens, especially in the Permian, Bakken, and Eagle Ford.

• U.S. producers are showing capital discipline, not adding rigs despite high prices, and the drilled but uncompleted well count has dropped sharply.

• U.S. Strategic Petroleum Reserve (SPR) is at a 40-year low, with ongoing drawdowns unable to offset global supply disruptions.

Company operational and financial performance

• March revenue reached CAD 1.96 million, a 68% increase over February, driven by higher commodity prices and a tight WCS differential.

• Netback per BOE in March was $40, the best in 12 months, with field operating netback at CAD 872,000, nearly matching the entire Q1 total.

• Operating costs dropped to $35 per BOE in Q1, a 15% YoY reduction, with further cost optimization targeted through fixed cost management.

• Cuthbert and Luseland assets represent 72% of production and 80% of net operations, with Luseland identified as the main growth engine via well reactivations.

• The company remains largely unhedged, allowing full exposure to high prices, but is selectively hedging WTI-WCS differentials.

Reactivation strategy and asset optimization

• Focus is on reactivating existing wells rather than drilling new ones, with 40 Tier One reactivation candidates identified for 2026.

• Reactivation targets are chosen based on a blend of high-impact and reliable producers, with engineering and field learnings iteratively improving selection.

• Payback timelines are generally well understood, with variable costs for reactivations much lower than average OpEx, leading to rapid returns.

• Capital deployment for reactivations is measured, with inventory and equipment pre-ordered to ensure readiness post-spring break-up.

• Weather had minimal impact on production due to proactive asset management and infrastructure upgrades.