Peyto Exploration & Development Corp (PEYUF) Q3 2024 Earnings Call Highlights: Strong ...

GuruFocus News
4 min read

In This Article:

  • Funds from Operations: $154 million for the third quarter.

  • Cash Costs: $1.44 per Mcfe, down from the second quarter.

  • Operating Margin: 64% for the quarter.

  • Production Increase: Doubled production from Repsol lands from 23,000 to 46,000 BOEs a day.

  • New Private Notes Issued: $75 million at 5.64% for a 10-year term.

  • Monthly Production High: Averaged 130,000 BOEs a day in October.

  • Capital Guidance: $450 million for the year, with a preliminary budget of $450 million to $500 million for 2025.

  • Hedged Revenue for Next Year: Close to $800 million fixed.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Peyto Exploration & Development Corp (PEYUF) successfully executed a major turnaround at the Edson gas plant, showcasing strong operational efficiency and safety.

  • The company managed to deliver $154 million of funds from operations despite low AECO prices, thanks to disciplined hedging and low-cost operations.

  • Peyto achieved a 25% improvement in well productivity without increasing drilling and completion costs, indicating enhanced capital efficiency.

  • The company doubled production from acquired Repsol lands within a year, demonstrating effective integration and operational execution.

  • Peyto secured a new $75 million private note at a favorable interest rate, reflecting strong lender confidence in the company's business plan.

Negative Points

  • Daily AECO prices averaged a low $0.65 GJ, impacting revenue potential despite hedging strategies.

  • Operating costs increased slightly due to production curtailment and non-capitalized turnaround costs at the Edson gas plant.

  • The company faced higher government-related costs, including unexpected increases in property taxes and the orphan well levy.

  • Peyto's net debt remained neutral year-to-date, with capital expenditures and dividends exceeding free funds flow in the third quarter.

  • The company anticipates a higher production decline rate of 26% to 28% next year, requiring significant new production to offset.

Q & A Highlights

Q: What led to the identification of the new Flare prospect on Peyto's legacy lands? A: JP Lachance, President and CEO, explained that the discovery was due to extensive drilling in the area, particularly at the well-rich level, which provided valuable information. The combination of seismic data and actual well results helped identify new plays. The successful drilling program on the Repsol lands also allowed Peyto to test new prospects that were previously uncertain.

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