Earnings call transcript: Greenfire Resources Q2 2025 highlights operational shifts

Greenfire Resources Ltd. (GFR) held its Q2 2025 earnings call, highlighting significant operational adjustments and strategic initiatives aimed at overcoming historical financial challenges. The company, currently valued at $318.84 million, is actively addressing its past over-leveraging and underinvestment issues, while focusing on production and technological advancements in the Alberta oil sands sector. InvestingPro analysis suggests the stock is currently undervalued, with strong financial health metrics supporting its recovery potential. The stock remained stable, closing at $4.54, unchanged in premarket trading.

Key Takeaways

• Greenfire Resources is targeting a 2025 production of 15,016 barrels of bitumen per day.
• The company accelerated $35 million in capital expenditure for Pad 7 development from 2026 to 2025.
• A key boiler repair is scheduled for completion by the end of 2025 to restore full production capacity.
• Greenfire is exploring shorter cycle drilling opportunities to enhance production efficiency.

Company Performance

Greenfire Resources is navigating a challenging market environment for junior oil and gas producers, particularly in the Alberta oil sands region. The company is transitioning from a capital-constrained, high-risk operational model to a more conventional and lower-risk development strategy. This includes the development of its first SAGD Pad 7 with 13 well pairs, expected to produce first oil by Q4 2026.

Financial Highlights

• Expected production for 2025: 15,016 barrels per day.
• 2025 capital expenditure guidance: $130 million.
• Accelerated $35 million of Pad 7 capital from 2026 to 2025.

Outlook & Guidance

Greenfire Resources has set a 2025 production target of 15,016 barrels per day, with Pad 7 development as its primary growth strategy. Trading at an attractive P/E ratio of 2.33, the company is also considering additional infill and redrill opportunities to sustain and potentially increase production levels. While no specific guidance for 2026 was provided during the earnings call, InvestingPro data reveals the company has maintained profitability over the last twelve months, with analysts predicting continued profitability this year. Get access to the complete GFR Pro Research Report, part of InvestingPro’s coverage of 1,400+ US equities, for comprehensive analysis and actionable insights.

Executive Commentary

Executive Chairman Adam Watrous highlighted the company’s shift in operational strategy, stating, "Much of the past operational decisions of the company came from ’look Ma no hands’." He emphasized the company’s commitment to operational transformation and balance sheet restructuring, noting, "The business still remains grossly over-levered."

Risks and Challenges

• Historical over-leveraging and underinvestment pose ongoing financial challenges.
• Market conditions remain difficult for junior oil and gas producers.
• Operational inefficiencies, such as the offline boiler, impact production capacity.
• Compliance with emissions standards requires investment in sulfur removal technology.

Greenfire Resources is actively addressing these risks through strategic investments and operational improvements, aiming to enhance its competitive position in the oil sands industry.

Full transcript - Greenfire Resources Ltd (GFR) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen. Welcome to the Greenfire Resources Second Quarter twenty twenty five Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. I will now turn the meeting over to Mr.

Robert Lobach, Vice President, Commercial. Please go ahead, Robert.

Robert Lobach, Vice President, Commercial, Greenfire Resources: Thank you, operator. Good morning and welcome to Greenfire’s conference call for our Q2 twenty twenty five results. Please note that today’s call includes forward looking statements and references non GAAP and other financial measures. We encourage you to review the associated risks detailed in our latest MD and A. Unless stated otherwise, all monetary figures discussed today are in Canadian dollars.

Capital expenditures and production figures presented today are based on our working interest net to Greenfire unless noted otherwise. Joining us on today’s call are key members of the Greenfire leadership team including Adam Wadris, Executive Chairman Colin Germaniak, President Jonathan Kandurka, Chief Operating Officer. Upon conclusion of our prepared remarks, we’ll open the floor to questions from analysts. I will now hand the call over

Colin Germaniak, President, Greenfire Resources: to Colin. Good morning and thank you everyone for joining Greenfire’s Q2 twenty twenty five conference call. On this morning’s call, there

Robert Lobach, Vice President, Commercial, Greenfire Resources: are three topics I would

Colin Germaniak, President, Greenfire Resources: like to discuss before opening the call up to questions from our analysts. First, I will provide an update on Greenfire’s current year operations. Second, I will provide a progress update on our longer term development plans. And third, I’ll provide some brief background on our Greenfire’s new VP Finance, Travis Vilak, we are very excited about. As previously discussed last quarter, 2025 has been a challenging year for Greek Fire operationally, which to recap is due to three reasons.

One, in February, one of our four boilers of the expansion asset unexpectedly had to be taken offline for repairs, which has reduced our production by approximately 1,500 to 2,300 barrels a day since that time. Two, also in February, it was brought to the company’s attention that Greenfire’s sulfur dioxide emissions may have risen above the maximum level permitted by the Alberta Energy Regulator. And three, Greenfire has historically under invested in new well pairs, which has resulted in most of the existing production today being relatively mature with relatively high recovery factors. Over the past few months, Greenfire has made considerable progress addressing each of these challenges, which I would like to briefly touch on. Regarding the boiler outage, the boiler repair remains on schedule with full steam capacity available by year end 2025.

Regarding the sulfur emissions, Greenfire is currently procuring a sulfur removal unit to be installed at the expansion asset, which we expect to be operational by year end 2025. And regarding the historical underinvestment in new well pairs, Greenfire has considerably advanced our inaugural SAGD pad, PADD seven, which is expected to start drilling in Q4 of this year. Finally, now that the Greenfire team has a better handle on the trajectory of current year operations, we are prepared to share our 2025 production and capital guidance. In 2025, we expect to produce between 15,016 barrels a day of bitumen and we expect to invest $130,000,000 in capital expenditures. Greenfire’s planned 2025 capital program includes acceleration of approximately $35,000,000 of Pad seven capital from 2026 into 2025 with the intention of potentially achieving first steam on Pad 7 at an earlier date.

I would now like to move on to the second topic that being the advancement of our longer term development plans. Over the past few months, the primary focus of our team has been on the development of Pad 7. Pad 7 is situated to the northeast of our expansion central processing facility and directly offsets existing production at PADD 6, giving us high confidence in the region’s recoverable resource. The current plan is for the PADD 7 well pairs are to include 13 well pairs at PADD 7 with lateral lengths ranging from 800 meters to 1,400 meters. Drilling is expected to start in the fourth quarter of this year with first oil forecasted to be in Q4 twenty twenty six.

Furthermore, given the long cycle times associated with new SAGD pad development, Greenbrier is also evaluating some shorter cycle drilling opportunities to be completed concurrently with Pad seven in 2026, including the potential for infill wells at the expansion and redrill wells at the demo. Lastly, moving to the third topic, it was announced in this morning’s news release that Greenfire has hired a new VP of Finance, Travis Belak, who will replace Greenfire’s prior CFO and VP of Finance and become the most senior person in charge of Greenfire’s finance team. Travis was most recently the Corporate Controller at HWN Energy and brings approximately fifteen years of experience in upstream oil and gas, financial reporting, corporate planning, tax and treasury. Travis, together with the leadership of the Watrous Energy Fund team, leaves Greenfire in the hands of excellent financial stewards of capital. And finally, I’d like to thank Tony Kraljic for his contributions to Greenfire.

His leadership and efforts have left a lasting positive impact on the company and we’re grateful for the role he played in helping shape our path forward. This concludes our planned remarks for the Q2 conference call and we’ll now open it up to questions.

Conference Operator: Thank you. We will now begin the question and answer session. Our first question today will come from Jason Wangler of Imperial Capital. Please go ahead.

Jason Wangler, Analyst, Imperial Capital: Good morning all. I wanted to just ask, obviously, the production level at the demo asset really looked pretty strong. You mentioned there was some optimization, but just curious if you could expand on kind of what you’re seeing there. Is that something that can continue, I guess, there and as well, obviously, as you move to the expansion?

Colin Germaniak, President, Greenfire Resources: Yes. It’s Colin Jermak here. We drilled two wells earlier in Q1 that have been coming online and ramping up nicely. We’re adding 800 barrels roughly each. It’s really boost production there.

And we’re looking at more options at the demo and the expansion similar to these wells.

Jason Wangler, Analyst, Imperial Capital: Okay. And maybe it goes to that question. You talked about a few minutes ago, looking at some shorter cycle things at expansion as well as obviously, the kind of the drilling that you’re going be doing for the next, in the next quarter. How do you look at ’26? I know it’s early, obviously, but do you think that the CapEx run rate of kind of where you’re looking this year is similar?

Is it more? That’s obviously it’s also ways away, but just how do you guys look at what your thoughts are next year as you kind of continue to get everything where you want to operationally?

Robert Lobach, Vice President, Commercial, Greenfire Resources: This is Adam Watrous. Jason, I’ll take that call.

Conference Operator: So we’re not

Robert Lobach, Vice President, Commercial, Greenfire Resources: at a point yet where we can provide guidance for 2026. Maybe just to step back, sometimes it’s easy to get kind

Colin Germaniak, President, Greenfire Resources: of lost in all the numbers

Robert Lobach, Vice President, Commercial, Greenfire Resources: and it’s good to try and just understand that if you are trying to pick 2026, is to try to understand maybe where the transition of companies coming from. So the I’d put it more simply is that much of the past operational decisions of the company came from I would describe it, look Ma no hands, it was a this is a company that look Ma no equity. And the company when they bought the Jaycos asset, we’re very proud of the fact that they put no equity in the business and it was entirely debt financed, like that was some kind of trick. That was some kind of accomplishment. Overleveraging the balance sheet, which is what the net result of that caused a lot of decisions operationally, which we are having to unwind.

And the first sort of impact on that, which led to a very highly, highly capital constrained business is there were only short cycle wells drilled, so which we generally were fast decline. The second problem was a lot of basic maintenance was not done. And most obviously, there was not proper sulfur emissions infrastructure put in place and what that led to is the deterioration of at least one boiler on it. So it was the, hey, you know what, we don’t need to put oil in the engine, we’ll skip through the regular oil changes. And now the engine got ruined on it.

And the third thing that happened is that the development plan was extremely ambitious in terms of very long wells that went through multiple different heights and turns. With the thought, hey, we’ll go super long wells and save money by doing that on a per meter basis. Now these were the double backflip with the full twist wells. So what we have had to do is on all three of those things that change how the business is being operated. Number one, we’re going to be drilling the first well pairs that Greenfires actually ever drilled.

The second is we’re obviously putting in sulfur recovery units and repairing the boiler. And the third thing is on this PADD seven, this is going to is designed to be a much more conventional type of development pad and hopefully therefore considerably less execution risk. But all of that is in the context of the business still remains grossly over levered. I mean, the original bonds that were put in place are still in place and that is causing a huge amount of interest to be paid, only but also just restrictions on how the business is being operated, how much capital gets spent. So I just give that by way of background, Jason, the your question is a very fair and reasonable one is, Geez, what do think about next year, 2026?

But I would emphasize the very dramatic change in the operations that’s been required as part of the turnaround on this. Now, we said all that, we do expect to be able to provide at a later time more guidance for 2026, but we just can’t at this time.

Jason Wangler, Analyst, Imperial Capital: No, the answer is a lot better than the question was. Maybe just ask a different way just for our understanding, How much of this year is that, I guess, unwinding of spend? And how much maybe more is next year? Or are you predominantly done and then you kind of get to start how you want to run the programs as you get to ’26? Is that a fair way to look at it?

Robert Lobach, Vice President, Commercial, Greenfire Resources: I think it’s fair to look at that. We have unwound a loss of what has happened. But we are just at the very beginning stages of executing the development plan. But there’s always certain unwinding process and then there is a move forward process. But I would really emphasize your question is a reasonable one about that for 2026, but we’re just not in a position to be able to provide specific guidance at this time.

Jason Wangler, Analyst, Imperial Capital: No, I appreciate it. Thanks for the answers.

Conference Operator: Ladies and gentlemen, at this time, we will be concluding the question and answer session. I would like to turn the conference back over to Mr. Robert Lobach for any closing remarks.

Robert Lobach, Vice President, Commercial, Greenfire Resources: Thank you, operator. On behalf of Greenfire, we appreciate you joining us in our Q2 twenty twenty five results conference call. Have a great day.

Conference Operator: And the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.

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