Peyto Exploration & Development (PEY) Q3 2024 earnings summary

Executive summary

• Safely executed a major turnaround at the Edson Gas Plant and managed production by opportunistically shutting in volumes during periods of low AECO prices.

• Q3 2024 production rose 23% year-over-year to 120,031 boe/d, driven by the Repsol acquisition and strong drilling results.

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

• Funds from operations increased 4% to $154.3 million, while earnings declined 11% to $51.0 million compared to Q3 2023.

• Realized natural gas price after hedging was $2.95/Mcf, nearly 4x the AECO daily benchmark, supported by disciplined hedging.

Financial highlights

• Delivered approximately CAD 154 million of funds from operations, matching the previous quarter despite low AECO prices averaging CAD 0.65/GJ.

• Cash costs were CAD 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 19% profit margin and 9% ROCE.

• Net debt stood at $1.36 billion, up from $877 million a year ago, reflecting acquisition financing.

• Free funds flow for Q3 was $26.5 million, down 50% year-over-year.

Outlook and guidance

• Expect to further reduce net debt in Q4 with improved prices and higher production.

• Preliminary 2025 capital budget set at $450–500 million, targeting 70–80 wells and production additions of 43,000–48,000 BOEs/day.

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

• Hedged close to $790 million of fixed revenue for 2025, supporting capital execution, dividends, and debt reduction.

• Market fundamentals expected to improve in late 2025 as LNG projects and new demand sources come online.