Headwater Exploration – Substantial 2025 reserves and production growth

[Petroleum economist]

Headwater Exploration is a small Canadian exploration company producing heavy oil in Alberta. Headwater also owns the McCully gas field in New Brunswick which produces gas in the winter gas for eastern Canada. Headwater reported its 2025 production and reserves.

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Reserves
• Headwater proven reserves over the last seven years (2019-2025) have risen by a factor thirty-two, from 3.0 M BoE (2019) to 68.3 M BoE (2025).
• 2025 reserves (68.3 M BoE) were an astonishing 59% above the 2024 reserves (43.1 M BoE).
• The growth in 2025 was full autonomous, with only some acreage acquisitions with no production. The reserves included exceptional results with pool discoveries in the Grand Rapids formation in West Marten Hills and the Wabiskaw formation in Greater Pelican.
• The Reserves Replacement Ratio (RRR) over the last six years (2019-2025) can only be calculated once the annual information form is published in early March.
• Based on data at hand the 2019-2025 RRR was a very high 2.97 (industry average is 0.89-0.95).
• The estimated 2025 RRR was an extremely high 4.04.
• The 2025 reserves are equivalent to 7.6 years of 2026 production (industry average 9.5-10.0 years). The 7.6 years is still low, but is a step up from 5.5 years based on the 2024 reserves.
• The combination of the low reserves with the consistent high RRR, feeds the belief that Headwater can continue to grow its production over the next few years.

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• The reserves are 93% liquids and 7% gas.

Production
• Headwater production has grown massively over the last seven years, from 0.6 K BoE/d (2019) to 22.750 K BoE/d (2025).
• 2025 production (22.750 K BoE/d) was above the Headwater 2025 outlook (22.3 K BoE/d).
• 2025 production (22.750 K BoE/d) was 12.4% above 2024 production (20.3 K BoE/d), while Q4 production (24.250 K BoE/d) was 8.8% above Q3 (22.523 K BoE/d).
• Based on the reserves and the RRR, I believe that the production can grow to 30 K BoE/d in 2030 and further thereafter.

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Conclusions
Headwater Exploration proven reserves continued to display a fast growth in 2025. Growth is through autonomous reserves bookings. Production growth in 2025 also continued at a high rate. In my ranking of 80-oil and gas companies, Headwater Exploration ranks inside the top25 at a good 22nd position.

[dan_s]

TipRanks Premium on January 19th: "BMO Capital raised the firm’s price target on Headwater Exploration (CDDRF) to C$11.00 from C$9.50 and keeps an Outperform rating on the shares. The firm says the Clearwater formation is one of the most economic plays in Canada. Headwater is among the select few publicly traded companies with exposure to it, the analyst tells investors in a research note."