Peyto Exploration – 2024 results
Posted: Wed Mar 12, 2025 12:15 pm
Peyto Exploration is a Canadian mid-size gas producer (ranked fifth in Canada), operating conventional gas fields in the Deep Basin in Alberta.
Summary
Peyto Exploration reported solid 2024 results. Peyto has ample growing reserves and also the production is growing fast. The balance sheet is in a reasonable state but needs some reinforcement in 2025. Profitability is good and the PE is low. Shareholder returns are already high in 2025 and can increase further starting 2026.
Out of 84 oil and gas companies Peyto ranks a high 4th in my oil and gas ranking. Without the impact of US import tariffs Peyto would be heading up the ranking (1st).
Reserves
• Peyto has ample reserves.
• Proven reserves have grown with 66% over the last six years - from 3.2 tcf (2019) to 5.3 tcf (2024). The growth was mostly autonomous.
• Reserves growth continued with 5% in 2024 from 4.983 tcf (2023) to 5.256 tcf (2024).
• The annual information form has not yet been issued. However, based on preliminary estimates the six-year Reserves Replacement Ratio (RRR) over the period 20192-2024 should a very high 1.89 (industry average (0.89-0.95) and the 2024 RRR a good 2.00.
• The reserves are equivalent to a very high 18.1 years of 2025 production (industry average = 9.5-10 years).
• The reserves and RRR combined allow a substantial growth of production (6-8%/year).
Production
• Peyto Exploration has seen extensive production growth over the last six years.
• Production has grown with 55% from 484 MM scfe/d (2019) to 750 MM scfe/d (2024).
• 2024 production (750 MM scf/d) was announced previously and was 19.3% above 2023 (630 MM scfe/d). Q4 production (801 MM scfe/d) was well above Q3 (720 MM scfe/d).
• Production in 2025 got off to a good start. Production was 810 MM scfe/d in January and 804 MM scfe/d in February.
• Peyto outlook for the whole of 2025 is 828 MM scfe/d. Production in 2025 is expected to pick-up in H2 2025 with the start of Canadian LNG exports and increasing power demand.
• 2026 production could reach 820-860 MM scfe/d, 70% of the volumes would be for firm contracts while the remaining 30% “floats” at various hubs.
• From 2027 onwards, Peyto is hopeful on gas contracts for LNG and new power stations. 2026 outlook is 960 MM scfe/d.
• Fluids consist of 88% gas and 12% NGL (13.7%). There is no oil
• Fluids (88/12) are aligned with reserves (86/14) and the composition will not change in the future.
Balance sheet
The balance sheet is a reasonably shape, recovering from the late 2023 Repsol Canada acquisition (US$ 468 M).
• The late 2024 equity ratio (=equity/balance sheet total) is a moderate 49.0%, flat versus the 49.3% in late 2023.
• Higher gas prices in 2025 will lead to more FCF and an improving balance sheet. The equity ratio should recover to a better 52.5-53.0% in late 2025.
• Net debt at the end of 2024 was C$ 1,295 M, leading to a highish 2024 debt/EBITDA ratio of 1.5.
• With higher production and higher gas prices, the debt/EBITDA ratio can improve to a good 1.15 in 2025 and 0.7-0.8 in 2026.
• The balance sheet allows moderate shareholder returns, which can pick up towards the end of 2025.
Profitability
• Peyto is a very profitable company.
• Peyto manages to fetch decent realized prices for it gas and NGL., TheQ4 realized gas price was only U$ 0.27/MM Btu below Henr Hub and the NGL price$ 14.30/bbl above the Mont Belvieu C5 prices.
• 2024 eps (C$ 1.42) was slightly above expectation mostly due to realized gas and NGL prices being better than anticipated.
• Royalties were a reasonable 7.18%. Costs were as anticipated.
• Peyto has hedged 29% of the 2025 gas production at Nymex prices of US$ 2.95-3.07 /MM Btu.
• Peyto states that it is not sensitive to import tariff. Despite this I am reducing the realized gas price with 5%.
• For 2025, with higher production and gas prices (realized CS 4.29/MM Btu = HH $ 3.25/MM Btu), and with US imports implemented, I expect the eps to increase to C$ 1.95 (PE=8.0). Without import tariffs the 2025 eps could be C$ 2.22 (PE=7.0).
• With a growing production the eps can increase to C$ 3.67 (PE=4.3) by 2029. Without tariffs the eps would be C$ 4.02.
Shareholder returns
• Peyto does not buy back shares.
• Peyto pays a monthly dividend of C$ 0.11, or C$ 1.32 on an annual basis.
• The dividend is equivalent to a high yield of 8.7%.
• After 2025 the shareholder returns can increased to a very high 10-16% once the balance sheet reinforcement has been completed.
Conclusions
Peyto Exploration reported solid 2024 results. Peyto has ample growing reserves and the production is growing fast. The balance sheet is in a reasonable state but needs some reinforcement in 2025. Profitability is good and the PE is low. Shareholder returns are already high in 2025 and can increase further starting 2026.
Out of 84 oil and gas companies Peyto ranks a high 4th in my oil and gas ranking. Without the impact of US import tariffs Peyto would be heading up the ranking (1st).
Summary
Peyto Exploration reported solid 2024 results. Peyto has ample growing reserves and also the production is growing fast. The balance sheet is in a reasonable state but needs some reinforcement in 2025. Profitability is good and the PE is low. Shareholder returns are already high in 2025 and can increase further starting 2026.
Out of 84 oil and gas companies Peyto ranks a high 4th in my oil and gas ranking. Without the impact of US import tariffs Peyto would be heading up the ranking (1st).
Reserves
• Peyto has ample reserves.
• Proven reserves have grown with 66% over the last six years - from 3.2 tcf (2019) to 5.3 tcf (2024). The growth was mostly autonomous.
• Reserves growth continued with 5% in 2024 from 4.983 tcf (2023) to 5.256 tcf (2024).
• The annual information form has not yet been issued. However, based on preliminary estimates the six-year Reserves Replacement Ratio (RRR) over the period 20192-2024 should a very high 1.89 (industry average (0.89-0.95) and the 2024 RRR a good 2.00.
• The reserves are equivalent to a very high 18.1 years of 2025 production (industry average = 9.5-10 years).
• The reserves and RRR combined allow a substantial growth of production (6-8%/year).
Production
• Peyto Exploration has seen extensive production growth over the last six years.
• Production has grown with 55% from 484 MM scfe/d (2019) to 750 MM scfe/d (2024).
• 2024 production (750 MM scf/d) was announced previously and was 19.3% above 2023 (630 MM scfe/d). Q4 production (801 MM scfe/d) was well above Q3 (720 MM scfe/d).
• Production in 2025 got off to a good start. Production was 810 MM scfe/d in January and 804 MM scfe/d in February.
• Peyto outlook for the whole of 2025 is 828 MM scfe/d. Production in 2025 is expected to pick-up in H2 2025 with the start of Canadian LNG exports and increasing power demand.
• 2026 production could reach 820-860 MM scfe/d, 70% of the volumes would be for firm contracts while the remaining 30% “floats” at various hubs.
• From 2027 onwards, Peyto is hopeful on gas contracts for LNG and new power stations. 2026 outlook is 960 MM scfe/d.
• Fluids consist of 88% gas and 12% NGL (13.7%). There is no oil
• Fluids (88/12) are aligned with reserves (86/14) and the composition will not change in the future.
Balance sheet
The balance sheet is a reasonably shape, recovering from the late 2023 Repsol Canada acquisition (US$ 468 M).
• The late 2024 equity ratio (=equity/balance sheet total) is a moderate 49.0%, flat versus the 49.3% in late 2023.
• Higher gas prices in 2025 will lead to more FCF and an improving balance sheet. The equity ratio should recover to a better 52.5-53.0% in late 2025.
• Net debt at the end of 2024 was C$ 1,295 M, leading to a highish 2024 debt/EBITDA ratio of 1.5.
• With higher production and higher gas prices, the debt/EBITDA ratio can improve to a good 1.15 in 2025 and 0.7-0.8 in 2026.
• The balance sheet allows moderate shareholder returns, which can pick up towards the end of 2025.
Profitability
• Peyto is a very profitable company.
• Peyto manages to fetch decent realized prices for it gas and NGL., TheQ4 realized gas price was only U$ 0.27/MM Btu below Henr Hub and the NGL price$ 14.30/bbl above the Mont Belvieu C5 prices.
• 2024 eps (C$ 1.42) was slightly above expectation mostly due to realized gas and NGL prices being better than anticipated.
• Royalties were a reasonable 7.18%. Costs were as anticipated.
• Peyto has hedged 29% of the 2025 gas production at Nymex prices of US$ 2.95-3.07 /MM Btu.
• Peyto states that it is not sensitive to import tariff. Despite this I am reducing the realized gas price with 5%.
• For 2025, with higher production and gas prices (realized CS 4.29/MM Btu = HH $ 3.25/MM Btu), and with US imports implemented, I expect the eps to increase to C$ 1.95 (PE=8.0). Without import tariffs the 2025 eps could be C$ 2.22 (PE=7.0).
• With a growing production the eps can increase to C$ 3.67 (PE=4.3) by 2029. Without tariffs the eps would be C$ 4.02.
Shareholder returns
• Peyto does not buy back shares.
• Peyto pays a monthly dividend of C$ 0.11, or C$ 1.32 on an annual basis.
• The dividend is equivalent to a high yield of 8.7%.
• After 2025 the shareholder returns can increased to a very high 10-16% once the balance sheet reinforcement has been completed.
Conclusions
Peyto Exploration reported solid 2024 results. Peyto has ample growing reserves and the production is growing fast. The balance sheet is in a reasonable state but needs some reinforcement in 2025. Profitability is good and the PE is low. Shareholder returns are already high in 2025 and can increase further starting 2026.
Out of 84 oil and gas companies Peyto ranks a high 4th in my oil and gas ranking. Without the impact of US import tariffs Peyto would be heading up the ranking (1st).