Earnings call transcript: Advantage Energy Q2 2025 beats EPS expectations

Advantage Energy Limited (Market cap: $1.32 billion) reported its second-quarter 2025 financial results, showcasing a significant earnings per share (EPS) beat, with actual EPS at $0.41 compared to the forecasted $0.155, marking a 164.52% surprise. Despite this positive earnings surprise, the company faced a revenue shortfall, reporting $164.59 million against a forecast of $194.17 million. Following the earnings announcement, the stock experienced a minor decline of 0.09% in after-hours trading, closing at $10.84. According to InvestingPro analysis, the stock appears fairly valued, with analysts maintaining a consensus "Buy" recommendation.

Key Takeaways

• Advantage Energy’s EPS exceeded expectations by 164.52%.
• Revenue fell short of forecasts by 15.23%.
• Stock price slightly decreased by 0.09% in after-hours trading.
• Production increased by 18% year-over-year.
• Operating costs reduced, enhancing profitability.

Company Performance

Advantage Energy demonstrated robust operational performance in Q2 2025, with production reaching 78,108 barrels of oil equivalent (BOEs) per day, an 18% year-over-year increase. The company also reported a 66% rise in liquids production, which contributed to the strong EPS results. Despite these gains, revenue fell short of expectations, reflecting the challenging pricing environment for natural gas.

Financial Highlights

• Revenue: $164.59 million, down from the forecasted $194.17 million.
• EPS: $0.41, significantly above the forecast of $0.155.
• Operating costs: Reduced to $4.9 per BOE, below the previous guidance range.

Earnings vs. Forecast

Advantage Energy’s EPS of $0.41 surpassed the forecast of $0.155 by 164.52%, marking a substantial positive surprise. However, revenue underperformed, coming in at $164.59 million compared to the expected $194.17 million, a 15.23% shortfall. This mixed performance highlights the company’s ability to control costs and improve production efficiency, even as revenue targets were missed.

Market Reaction

Following the earnings release, Advantage Energy’s stock price experienced a slight decline, closing at $10.84, down 0.09%. This movement reflects investor caution due to the revenue miss, despite the positive EPS surprise. The stock has demonstrated relatively low price volatility, with a beta of 0.7, and has delivered a strong 21.25% return over the past year. Currently trading at $7.88, the stock sits between its 52-week range of $5.68 to $9.27. InvestingPro analysis reveals two additional promising trends that suggest potential upside for investors.

Outlook & Guidance

The company maintains its annual production guidance of 80,000 to 83,000 BOEs per day. It aims to reduce net debt to $450 million by year-end and plans to resume aggressive share buybacks. Additionally, Advantage Energy is focused on establishing a new conservative debt range to enhance financial stability. InvestingPro data indicates strong revenue growth prospects, with analysts forecasting 80% growth for FY2025. The company maintains a healthy gross profit margin of 57.4%, suggesting operational efficiency despite market challenges.

Executive Commentary

CEO Mike Belenke highlighted the company’s operational improvements, stating, "We’ve significantly improved well productivity versus historical and cost structure." He emphasized the proactive approach to market challenges: "We’re not just sitting around and hoping that the AECO market improves."

Risks and Challenges

• Volatile natural gas prices could impact future revenue.
• AECO cash pricing challenges may persist.
• Dependence on LNG Canada export capacity for market improvement.
• Potential impacts from strategic gas well shut-ins.
• Macro-economic conditions affecting commodity markets.

Q&A

During the earnings call, analysts inquired about the company’s sustainable operating cost reductions and its gas shut-in pricing strategy. Executives also addressed minimal disposition plans and strategies to mitigate impacts from the CSB Albright facility.

Full transcript - Advantage Oil & Gas Ltd. (AAV) Q2 2025:

Andrew, Conference Call Operator: morning, ladies and gentlemen, and welcome to the Advantage Energy Limited Q2 twenty twenty five Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 08/07/2025. I would now like to turn the conference over to Brian Bagnall, Director of Commodities and Capital Markets.

Please go ahead.

Brian Bagnall, Director of Commodities and Capital Markets, Advantage Energy Limited: Thanks, Andrew, and welcome everybody to Advantage’s conference call to discuss our second quarter twenty twenty five results. Before we get started, I’d like to refer you again to our advisories on forward looking statements contained in the news release as well as advisories contained in Advantage’s MD and A and annual information form, both of which are available on SEDAR and on our website. We’ve also posted an updated corporate presentation. I’m here today with Mike Belenke, President and CEO of Advantage and Craig Blackwood, our CFO as well as other members of our executive team. We’ll start to speak into some of our financial and operational highlights.

Once Mike has finished speaking, we’ll pass it back to the operator for questions. And as usual, we’d ask that if you have any detailed modeling questions that you follow-up with us individually after the call. With that, I’ll turn it over to Mike Belenke. Mike, please go ahead.

Mike Belenke, President and CEO, Advantage Energy Limited: Thanks, Brian, and thanks to everyone for joining us today. Q2 was another solid quarter for Advantage. Despite challenging market conditions, we delivered strong results across the board. Adjusted funds flow came in at CAD 88,900,000.0 or $0.05 3 per share, and we reduced net debt by CAD33 million to about CAD570 million. Production in the second quarter averaged 78,108 BOEs per day, up 18% year over year, while liquids production rose 66% despite significant impacts from third party facility delays and outages.

We’re on track to achieve our annual production guidance of 80,000 to 83,000 BOEs per day. And we’ve also continued our strategy of shutting in dry gas wells at times of low AECO prices as we prioritize value over volumes. Operating costs were $4.9 per BOE, continuing to beat our expectations thanks to the successful integration of our June 2024 asset acquisition and a lot of hard work from our team. These successes have allowed us to reduce full year operating cost guidance to between $4.95 and $5.3 per BOE. Our new guidance midpoint represents a reduction of 8% from original guidance.

Our Chartered Lake program continues to outperform our expectations. We now have a full twelve months of actual results since the June 2024 asset acquisition, and the results have validated the potential we saw a year ago. We’ve significantly improved well productivity versus historical and cost structure. These helped deliver an AFFO per share, a cash flow per share that was 38% higher corporately than it would have been standalone without the assets. Huge increase in value for the company.

Average crude production from our first seven operated wells in the Trail Lake has averaged 38% above our budget type curve over the first thirty days. Operating costs on the acquired assets have been reduced by over 25% over last year, which has helped drive a 50% increase in our operating netback. And there’s lots more to do and optimized by the team that will benefit Advantage for many years to come. Turning to natural gas markets. It’s no secret that NGTL reliability has been exceptionally poor since June, although the word exceptional is probably becoming obsolete now, and that looks likely to continue through August.

Of course, this has led to some terrible AECO cash pricing. By shutting in dry gas production, we eliminate variable operating costs, conserve our premium resource, reduce our depletion expense and defer capital that would otherwise be required to replace that depletion. To be clear, we still collect our hedging gains regardless of shut ins. And from time to time, we’ve actually bought gas back from the market when prices were negative at a profit. We’ll plan to shut in up to one third of our corporate gas production at times.

When it makes financial sense to do so, then we use a sophisticated algorithm to figure out how much to shut in on a day to day basis, and that will change rapidly as prices change rapidly. And we remain baffled to see so many of our peers dumping their resources into AECO and Station two at a loss on a regular basis. Despite perennial NGTL issues, we do see near term fundamentals as encouraging, with oversupply conditions easing as LNG Canada export capacity ramps up. This rebalancing increases the likelihood that AECO basis will tighten and result in better prices than what we currently see in the forward market, even though the forward market is healthy. But we’re not just sitting around and hoping that the AECO market improves, we have a balanced program, and even on the current strip, we expect to generate more than $500,000,000 of free cash flow over our three year program.

Staying on the marketing front, we’ve hedged 44% of our natural gas and 41% of our oil and condensate for the remainder of this year, and we also added another 25,000,000 a day of physical transportation to Dawn starting in April 2027, further diversifying our market exposure. Looking ahead, our strategy remains focused on maximizing cash flow per share, while maintaining balance sheet strength. As we approach our $450,000,000 net debt target around the end of this year, we intend to establish a new conservative range and resume aggressive share buybacks. So with that, I’d like to thank our employees and our Board and our shareholders for your continued support, and I’ll pass it back to Brian for questions.

Brian Bagnall, Director of Commodities and Capital Markets, Advantage Energy Limited: Thanks, Mike. And Andrew, I think we’ll pass it to you to see if there are any questions in the queue.

Andrew, Conference Call Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Session. There are no questions at this time. Please proceed with closing remarks.

Brian Bagnall, Director of Commodities and Capital Markets, Advantage Energy Limited: Sure. We do have questions on the webcast, so we’ll get started here. The first one is, we see that operating costs have continued to be lower than expected. Can you provide some more color on the sustainability of those operating costs?

Mike Belenke, President and CEO, Advantage Energy Limited: Sure. Thanks, Brian. Yes, so operating costs, as we saw with the reduction to our guidance, operating costs have continued to go in the right direction. We’re very pleased with the work that’s been done. And I want to just offer a quick shout out to the entire operations team both in Calgary and in the field for having achieved these outcomes.

What’s been most refreshing about the accomplishments from reducing operating costs is that these operating cost reductions have been sustainable. So at first, we were concerned that we’d be able to get quick wins that would be temporary after the asset acquisition. What we’re finding now though is these are structural changes allowing us to keep a lower less vehicle travel time, fewer unnecessary facilities, reduced rentals and so on. And we’ve also had some success in reducing exposure to third party fees, contracts that we inherited from the company. So the outlook is strong.

That’s what allowed us to move our entire range downwards. So appreciate the question and our sort of ability to think on a flat level going forward is gaining. Things will change over time, especially as we see different service come on and expire, but stability of that $495,000,000 to $530,000,000 range is looking pretty positive. Okay. Thanks, Mike.

Brian Bagnall, Director of Commodities and Capital Markets, Advantage Energy Limited: Another question on the webcast, this time from Jamie Kubik. Can you discuss the potential for dispositions in the current environment?

Mike Belenke, President and CEO, Advantage Energy Limited: Yes. Thanks, Jamie, the question. Yes. So in terms of dispositions, we have always thought about our non core disposition program as being useful in ensuring that we keep our balance sheet where we want it to be. And the good news is right now that our balance sheet is exactly where we want it to be.

There’s probably a couple of little things that we would expect to do in the coming, call it six months, that might just be rounding error sort of double digit millions at a time, which just prop us up a little bit, it’s slightly increased our ability to buy back more shares. The things that we look to sell, broadly speaking, aren’t price sensitive. So Jamie, hope that answers the question. We probably will proceed with a few small things. Okay.

Brian Bagnall, Director of Commodities and Capital Markets, Advantage Energy Limited: One follow-up question from Jamie. Can you provide any further color on the ramp up of the CSB Albright facility and the expected timing?

Mike Belenke, President and CEO, Advantage Energy Limited: Well, it’s an interesting question. So we have limited exposure to CSB Albright. We do have long term plans to be not even long term, we expect to see our 04/21 gas plant, which is in the same vicinity as the Albright plant. That four twenty one gas plant comes on stream in the second quarter of next year. So while there may be some limited ability for us to, in the near term, reroute excess production to avoid exposure to CSB outbreak, by second quarter of next year, this is something that actually we have once again excess gas processing capacity in the area.

So we haven’t really focused on ramp up of CSB El Albright. We’ve successfully mitigated pretty much all the volumes that we were looking forward to using for some of our upcoming drilling. So any information we have really is the same kind of information that we would have to other companies that are more exposed to that issue.

Brian Bagnall, Director of Commodities and Capital Markets, Advantage Energy Limited: One more question from the webcast, this time from Chris at Desjardins. Can you remind us of your price trigger to return curtailed dry gas volumes?

Mike Belenke, President and CEO, Advantage Energy Limited: Yes, sure. So once it trigger, we do have an algorithm which is multivariate. And of course, there’s certain gas that has a higher cost structure, certain gas that has a lower cost structure. So as prices go lower, we increase the amount of shut ins. We start to think seriously about shut ins, I’d say seriously, we start to see meaningful volumes get shut in when we’re below $1 At $0.80 it grows.

At $0.30 we’re pretty much maxing out that one third. At lower volumes sorry, lower prices like negative prices, we’ll buy back gas and use that to fill our volumes. I think it’s probably not a very simple answer, Chris, in being a single number, but we watch very carefully and we make sure that each well is treated like a separate revenue source as opposed to sort of a deterministic single number, which might be a bit more ham fisted. This is a nuanced game, and we want to make sure we win it.

Brian Bagnall, Director of Commodities and Capital Markets, Advantage Energy Limited: I might add to that, that in our Investor Day, we did add a slide that kind of highlighted our behavior during periods of price weakness around this time last year. So that might be helpful. Andrew, we’ll turn it back to you to the phone lines to check one last time for any questions. And otherwise, we can end the call.

Andrew, Conference Call Operator: Please press the star key followed by the number one. We’ll pause a moment for questions. There are no further questions at this time. So ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.