Peyto Exploration & Development (PEY) Q2 2024 earnings summary

Executive summary

• Delivered strong operational and financial performance in Q2 2024 despite the lowest AECO gas prices since 2019, supported by systematic hedging and industry-leading low cash costs.

• Achieved funds from operations of $154.8 million and net earnings of $51.4 million, with $64.4 million returned to shareholders as dividends.

• Production averaged 122,299 boe/d, up 24% year-over-year, driven by the Repsol acquisition and successful drilling programs.

• Maintained a 62% operating margin, outperforming peers even in a weak price environment.

Financial highlights

• Funds from operations reached $154.8 million and earnings were $51.4 million for Q2 2024.

• Realized $68 million in hedge gains, contributing to stable revenues.

• Cash costs were $1.50 per Mcfe ($1.24 per Mcfe excluding royalties), with a temporary $0.05 per Mcfe increase due to a royalty adjustment.

• Dividends paid totaled $64.4 million in Q2, with a payout ratio of 107%.

• Net debt rose 54% year-over-year to $1.34 billion, reflecting the Repsol acquisition.

Outlook and guidance

• Capital spending for 2024 is expected to be at the low end of $450–$500 million, targeting a year-end exit rate of 135,000 BOE/d, assuming price improvement.

• Production will be managed to remain flat through Q3, with potential ramp-up deferred to November if prices do not improve.

• Royalty rates expected at 7%-8% pre-hedge, or 5%-6% including hedge gains.

• Significant gas volumes hedged into 2025 and 2026 at or above $4/MCF, supporting dividends and capital program.

• Anticipates improved market conditions with new LNG capacity and increased power demand in North America.