Peyto Exploration’s Earnings Call Highlights Growth and Strategy

Peyto Exploration & Dev ((TSE:PEY)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Peyto Exploration & Development showcased a generally positive sentiment, with the company reporting substantial production growth, effective cost management, and successful hedging strategies. These factors contributed to increased funds from operations and significant debt reduction, overshadowing challenges such as operational interruptions from fires and higher property taxes.

Increased Production and Reduced Costs

Peyto reported impressive production figures for the second quarter of 2025, with production just under 132,000 BOEs per day, marking an 8% increase from the same period last year. Additionally, the company successfully reduced cash costs by 13%, bringing them down to $1.31 per Mcfe, highlighting their efficient cost management strategies.

Hedging and Diversification Success

The company’s strong hedge book was a significant contributor to its financial success, adding $53 million in total gains and contributing $0.75 per Mcf to realized gas revenue. Furthermore, market diversification efforts added an additional $0.53 per Mcf net of transportation costs over AECO pricing, showcasing Peyto’s strategic prowess in navigating market conditions.

Significant Increase in Funds from Operations

Peyto experienced a notable increase in funds from operations, which rose by 24% year-over-year. The company generated $191 million in the quarter, translating to $0.95 per diluted share, a 20% increase from the previous year, underscoring its robust financial performance.

Debt Reduction

The company made significant strides in reducing its debt, paying down $40 million of net debt in the quarter and $105 million year-to-date. This reduction is part of Peyto’s broader strategy to strengthen its financial position.

Successful Drilling Program

Peyto’s drilling program was marked by success, with 19 wells drilled, completed, and 21 tied in during the quarter. Notably, the company achieved a 37% reduction in drilling and completion costs per meter for Cardium wells, demonstrating operational efficiency.

Promising New Discoveries

The company reported promising results from a well completed in the Falher channel trend, which produced over 1 Bcf of gas, marking the best outcome in this trend to date. This discovery underscores Peyto’s potential for future growth.

Operational Interruptions Due to Fires

Despite the positive outcomes, Peyto faced operational interruptions due to fires near Fort Mac, which caused oil sands shut-ins and affected natural gas demand in the province. This challenge was one of the few setbacks during the quarter.

Higher Operating Costs Due to Property Taxes

Peyto experienced slightly higher operating costs due to an unexpected increase in the 2025 property tax bill. Despite this, the company managed to maintain overall positive financial performance.

Forward-Looking Guidance

Looking ahead, Peyto provided guidance for the remainder of the year, with plans to spend between $450 million to $500 million in 2025. The company aims to achieve a capital efficiency rate of $10,000 to $11,000 per BOE per day by year-end. Peyto expects royalty rates to remain around 5%, with interest costs decreasing due to lower interest rates and reduced bank debt. The company plans to continue its drilling activities, particularly in the Falher channel trend, and anticipates ramping up production in Q4 to take advantage of better winter pricing.

In summary, Peyto Exploration & Development’s earnings call reflected a strong performance with substantial production growth, effective cost management, and successful hedging strategies leading to increased funds from operations and significant debt reduction. Despite challenges such as fires and higher property taxes, the company’s positive outcomes and forward-looking strategies position it well for future growth.