Earnings call transcript: Kiwetinohk Energy Q3 2025 beats forecasts with strategic gains

Kiwetinohk Energy Corp reported its Q3 2025 earnings, surpassing both revenue and earnings per share (EPS) forecasts. The company posted an EPS of $0.39, slightly above the forecasted $0.38, and a revenue of $161.1 million, exceeding expectations by 11.8%. Despite these positive results, the company’s stock price remained unchanged in the latest trading session, closing at $24.51.

Key Takeaways

• Kiwetinohk Energy outperformed revenue expectations by 11.8%.
• The company achieved a top-tier operating netback of $31.37 per barrel of oil equivalent (BOE).
• Strategic infrastructure expansions and cost management have bolstered operational efficiency.
• The company drilled the longest single-leg horizontal well in Canadian history.

Company Performance

Kiwetinohk Energy’s Q3 2025 performance was marked by significant operational achievements and financial discipline. The company averaged 31,814 BOE per day, with liquids making up 47% of total production. This quarter’s focus on cost efficiency and infrastructure expansion has positioned the company well against industry peers. The completion of the Simonet 531 plant expansion and the extension of the Alliance Pipeline commitment until 2035 are notable milestones.

Financial Highlights

• Revenue: $161.1 million, up from the forecasted $144.1 million.
• Earnings per share: $0.39, slightly beating the forecast of $0.38.
• Operating costs: $6.09 per BOE.
• Free funds flow: $28 million in Q3, nearly $100 million year-to-date.

Earnings vs. Forecast

Kiwetinohk Energy’s actual EPS of $0.39 surpassed the forecasted $0.38 by a margin of 2.63%. The company’s revenue of $161.1 million exceeded expectations by 11.8%, marking a significant positive surprise. This performance reflects a strategic focus on cost management and market expansion, contributing to the earnings beat.

Market Reaction

Despite the positive earnings report, Kiwetinohk Energy’s stock price remained stable, closing at $24.51. The lack of movement may suggest that the market had already anticipated strong performance, or it could reflect broader market conditions. The stock is trading close to its 52-week high of $24.74, indicating investor confidence in the company’s long-term prospects.

Outlook & Guidance

Looking ahead, Kiwetinohk Energy has raised its low-end annual production guidance by 1,000 BOE per day and reduced its top-end royalty guidance by 1% of revenue. The company has also lowered its operating cost guidance to $6.00-$6.25 per BOE and transportation guidance by $0.25 per BOE. Capital guidance has been adjusted to $280-$288 million, with an increased cash flow projection of $395-$410 million.

Executive Commentary

Kevin Nielsen, VP Corporate Controller, stated, "We are proud to have drilled the longest single-leg horizontal well in Canadian history at 9,500 meters." Mike Backus, Chief Operating Officer Upstream, emphasized the company’s operational focus, saying, "A safe, reliable operation is our mantra, and the team is delivering." Chief Financial Officer Jacob Rogowski highlighted financial strength, noting, "Our balance sheet is now meaningfully stronger."

Risks and Challenges

• Market volatility could impact commodity prices and demand.
• Potential regulatory changes may affect operational costs.
• Supply chain disruptions could hinder production and delivery timelines.
• Competitive pressures in the energy sector may affect market share.
• Macroeconomic factors such as interest rates and inflation could influence financial performance.

The earnings call did not feature a Q&A session, indicating a straightforward communication of results and strategic plans.

Full transcript - Kiwetinohk Energy Corp (KEC) Q3 2025:

Jim, Conference Operator: Good morning, everyone. My name is Jim, and I will be your conference operator today. I would like to welcome everyone to the Kiwetinohk 2025 third-quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star and then the number one on your telephone keypad. If you find your question has been asked and you’d like to remove yourself, press star one once again, and that will also remove you from the queue. To get us started today with opening remarks and introductions, I’m pleased to turn the floor over to Mr. Kevin Nielsen. Welcome, sir.

Kevin Nielsen, VP Corporate Controller and Investor Relations, Kiwetinohk Energy: Thank you, Jim, and good morning, everyone. Welcome, and thank you for joining us for the third-quarter 2025 Kiwetinohk Energy Investor Call. On behalf of Pat Carlson, CEO, my name is Kevin Nielsen, VP Corporate Controller and Investor Relations, and I will be leading you through the call this morning. I’ll ask Janet Annesley, our Chief Sustainability Officer, to do our Indigenous land recognition. Please go ahead, Janet.

Janet Annesley, Chief Sustainability Officer, Kiwetinohk Energy: Thank you, Kevin. Kiwetinohk conference call today is coming from Calgary, the traditional territories of the people of Treaty 7, which includes the Blackfoot Confederacy, comprised of the Siksika, the Piikani, and the Kainai First Nations, the Tsuut’ina First Nation, and the Stoney Nakoda, including the Chiniki, Bearspaw, and Goodstoney First Nations. Calgary is also home to the Otipemisiwak Métis Government’s Districts 5 and 6. Kiwetinohk has operations across Alberta, Treaties 6, 7, and 8, and we recognize the diversity of First Nations and Métis people in all these places that we call home. Back to you, Kevin.

Kevin Nielsen, VP Corporate Controller and Investor Relations, Kiwetinohk Energy: Thank you, Janet. Joining me today, in addition to Janet, are Jacob Rogowski, Chief Financial Officer; Mike Backus, Chief Operating Officer Upstream; Mike Hench, Senior Vice President Midstream and Market Development; Fareen Sunderji, President Power; and Lisa Wong, Senior Vice President Business Systems. We would like to use the first part of the call to provide you with a summation regarding our third-quarter release from yesterday. The telephone line will then be opened up to allow participants to ask questions. Before going through the results, I’ll remind everyone the conference call includes forward-looking information and non-GAAP financial measures with the associated risks and disclaimers detailed in our news release and MD&A. The news release, financial statements, and MD&A, and all of the company’s official disclosures are available on our website and SEDAR+.

During the third quarter, the company successfully managed planned infrastructure downtime, including that of third-party processing, and executed on some of our key development milestones, which will be further expanded upon later in the call. We are proud to have drilled the longest single-leg horizontal well in Canadian history at 9,500 meters, expanded our infrastructure with Simonet, which enables 40,000 BOE a day of production, and extended our commitment on the Alliance Pipeline until 2035, providing the company with access to the historically higher-priced Chicago market for its natural gas production. Our strong execution during the quarter has put the company in a position to make further positive revisions to our full-year 2025 upstream guidance, which Jacob will talk to later in this call.

On October 28, 2025, we announced the conclusion of the formal business strategy review with a plan of arrangement entered into with Signet Energy to acquire the company. As management has already disclosed and hosted a conference call to review the arrangement, we will not be going into further details on this call. I would like to thank our shareholders on behalf of the board and our team for their continued support and urge all shareholders to vote at the upcoming special meeting of shareholders in December. I will now ask Jacob to provide more information on the quarterly results from the CFO’s perspective.

Jacob Rogowski, Chief Financial Officer, Kiwetinohk Energy: Thanks, Kevin, and good morning, everybody. The company continued to demonstrate the strength of our Placid and Simonette asset base this quarter, delivering strong operational and financial results. Let me touch on a few highlights. Production averaged 31,814 BOE per day in Q3, with liquids at 47% of the total. The quarter-over-quarter decline was expected due to the planned downtime for facilities turnaround and expansion work. However, the team executed exceptionally well, mitigating downtime and producing ahead of plan. Our performance through the quarter and into November supported raising the low end of annual production guidance by 1,000 BOE per day. Our top-tier operating netback of $31.37 per BOE continues to be driven by strong market access and disciplined cost management. Operating costs remain below expectations at $6.09 a BOE, and with planned downtime now behind us, we anticipate continued improvements as production increases and infrastructure is filled.

Transportation costs are trending lower, and we are reducing our guidance by $0.25 per BOE, reflecting both lower NGL transportation and a reduction in Alliance Pipeline tolls effective this month. Access to the Chicago natural gas market continues to be a major competitive advantage. We recently extended our Alliance Pipeline commitment to 2035, ensuring long-term exposure to this premium market. Since early 2024, Chicago pricing has averaged roughly 200% over ACO, with Q3 premiums reaching over 500%. When combined with expected strong U.S. natural gas demand growth supported by LNG and data centers and a significant 22% toll reduction, the extension was a compelling strategic decision. In addition to the strong production and cost performance, we achieved lower drilling and completion capital costs, along with gains from marketing and hedging activities.

Other income streams, including road use, a settlement related to the Alliance Pipeline and shippers, and proceeds from power sales added a further $1.57 per BOE in the first nine months. These factors resulted in $28 million of free funds flow in the quarter and nearly $100 million of free funds flow year to date. After funding $208 million in capital spending year to date, free cash flow supported both debt reduction and share purchases through our NCIB program. Our balance sheet is now meaningfully stronger, with the net debt to annualized adjusted cash flow reduced to 0.48 times, down from one times at year-end.

Given our year-to-date performance, we have made several positive adjustments to 2025 guidance: increased the low end of production guidance by 1,000 BOEs per day, reduced top-end royalty guidance by 1% of revenue, lowered operating cost guidance to $6.00-$6.25 per BOE, reduced our transportation guidance by $0.25 per BOE, lowered capital guidance by approximately $10 million to $280 million-$288 million, and increased cash flow guidance by approximately $15 million to a range of $395 million-$410 million. To close, I’m extremely proud of what our team has delivered so far this year and look forward to completing our previously announced plan of arrangement with Signet by year-end. Thank you for your time this morning and hope everyone has a great end to their year. I’ll now hand things over to Mike to walk through our upstream accomplishments.

Mike Backus, Chief Operating Officer Upstream, Kiwetinohk Energy: Yeah, thanks, Jacob, and good morning, everyone. I’m pleased to provide you with an update on the progress in our upstream business through the third quarter of this year. We’ve continued to meet or beat our operational targets again in the third quarter. We did this safely with great performance across all aspects of the business. As we enter Q4, the strong performance to date and the confidence we have in our program looking forward has allowed us to improve our guidance, as you have seen in our announcement and mentioned earlier by Jacob. The downtime in our Placid operation due to an extended third-party facility turnaround was mitigated by outperformance across the rest of our asset base. We also had ongoing expansion work at our Simonet 531 plant, which just recently has been completed.

With this work behind us, we are now set up for a strong fourth quarter, evidenced early by achieving new daily and weekly production records. During the quarter, we had three new wells come online at our 127 pad in Simonet. This included two Juvenile wells and a follow-up Mony well to the very strong lower turbidite well that we brought on around this time last year. The Juvenile wells each achieved peak 30-day rates of 6.9 million cubic feet per day of gas and gas liquids, in addition to 1,500 barrels per day of condensate or 2,650 equivalent barrels per day. The Mony well took a bit of time to clean up but averaged 4.6 million cubic feet a day of gas and gas liquids, in addition to 500 barrels a day of condensate or about 1,270 BOEs per day.

We’ve continued to see this money well ramp up and have now seen gas rates over 6 million cubic feet a day more recently. In Placid, the two wells that came on stream during the quarter have been at or slightly above our initial expectations. They’ve each achieved peak 30-day rates of 3 million cubic feet a day of gas and gas liquids, in addition to 640 barrels per day of condensate or 1,140 BOEs per day. It’s already been mentioned. You will have noted another very strong quarter in our operating cost levels at just over $6 per barrel. Our strong production and efficient spending levels drove this performance despite having the third-party outages impact our Placid volumes for roughly half the quarter, as well as the downtime at our 531 plant expansion.

I wanted to just give you a quick update on our current and remainder of year activity. Here’s what’s going on. We’re currently completing three juvenile wells in our Simonet area at the 9 of 11 pad. This is the location where we’ve drilled the record-length 9,500 m well. These wells are expected to come online around the beginning of December. Our rig is currently drilling three new wells in the southwest part of our core development area in Simonet at the 3 of 14 pad. These should be done in mid to late December, and these wells will be completed in January. It’s been a strong year with new production records, improving capital and operating costs, and some achievements from our team that I’m very proud of, like the 9,500 m longest well in Canada done safely in record time and under budget.

A safe, reliable operation is our mantra, and the team is delivering. We’re always looking for a marginal gain along the way. Thanks a lot for your time today, and I’ll now turn it back to Kevin.

Kevin Nielsen, VP Corporate Controller and Investor Relations, Kiwetinohk Energy: Thank you, Mike. This concludes our second quarter conference call, and I’ll now pass it back to Jim for any questions.

Jim, Conference Operator: Thank you. To our phone audience joining today, if you would like to ask a question at this time, simply press the star and the digit one on your telephone keypad. Pressing star and one will place you into a queue, and I will open your lines one at a time. Once again, ladies and gentlemen, that is star and one if you would like to ask a question. If you find your question has been asked and answered, you may remove yourself simply by repeating the step of star and one. We’ll pause just for a moment, ladies and gentlemen, to give our entire audience the moment to signal. Again, ladies and gentlemen, if you’re joining today on a speakerphone, please return to your handset prior to pressing star and one to be certain that your signal does reach our equipment.

At this time, we presently have no signals, but I want to give everyone the opportunity to signal us with star and one. Mr. Nielsen, it appears we have no signals from our audience this morning.

Kevin Nielsen, VP Corporate Controller and Investor Relations, Kiwetinohk Energy: Okay. Thank you, Jim. Thank you, everyone, for joining our call today, and I’ll wish everybody a good day.

Jim, Conference Operator: Ladies and gentlemen, we do thank you all for joining today’s Kiwetinohk Energy conference call. You may now disconnect your lines, and we hope that you enjoy the rest of your day.

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