Earnings call transcript: PrairieSky Royalty misses Q2 2025 EPS forecasts

PrairieSky Royalty Ltd reported its Q2 2025 earnings, revealing a notable miss on earnings per share (EPS) forecasts. The company posted an EPS of $0.24, significantly below the expected $0.5684, resulting in a surprise of -57.78%. Despite this, the stock price saw a slight uptick of 0.99% to close at $23.57. Revenue for the quarter stood at $123.6 million, with royalty production revenue contributing $111.2 million. According to InvestingPro data, the company currently maintains a market capitalization of $808.59 million and trades at a high revenue valuation multiple.

Key Takeaways

• PrairieSky missed EPS forecasts by 57.78%.
• Stock price increased by 0.99% despite the earnings miss.
• Record royalty oil production reached 14,376 barrels per day.
• The company declared dividends of $0.26 per share.
• Net debt was reported at $242 million at the end of the quarter.

Company Performance

PrairieSky Royalty Ltd demonstrated resilience in Q2 2025, with an 8% year-over-year increase in royalty oil production, reaching 14,376 barrels per day. The company maintained stable natural gas volumes, and funds from operations were reported at $96.7 million, equivalent to $0.41 per share. Despite missing EPS forecasts, the company’s diverse portfolio and strong mineral position provide a solid foundation for future growth.

Financial Highlights

• Total royalty production revenue: $111.2 million.
• Oil production revenue: $95.7 million.
• Natural gas and NGL revenue: $15.5 million.
• Dividends declared: $61.2 million ($0.26 per share).
• Payout ratio: 63%.
• Net debt: $242 million.

Earnings vs. Forecast

PrairieSky’s actual EPS of $0.24 fell short of the forecasted $0.5684, marking a significant negative surprise of 57.78%. This miss contrasts with previous quarters where the company either met or exceeded expectations, highlighting a challenging period for the firm in Q2 2025.

Market Reaction

Despite the earnings miss, PrairieSky’s stock price increased by 0.99% to $23.57, within its 52-week range of $21.97 to $30.66. This movement suggests investor confidence in the company’s long-term potential, possibly influenced by its strong production performance and strategic initiatives.

Outlook & Guidance

Looking ahead, PrairieSky expects natural gas volume growth in 2026 and plans to leverage its increased credit facility of $600 million for further development. The company remains focused on high-productivity plays and potential long-duration oil projects. Trading near its 52-week low of $30.85, InvestingPro analysis indicates the stock generally trades with low price volatility. Subscribers can access 8 additional ProTips and comprehensive financial metrics through the platform’s detailed research reports.

Executive Commentary

• Andrew Phillips, President and CEO, emphasized the company’s "very large mineral position with complementary 3D ownership."
• Mike Murphy, VP Capital Markets, noted improvements in "initial well productivity in the Duvernay oil window."
• Pam Cazell, CFO, highlighted the increased credit facility providing "incremental liquidity and financial flexibility."

Risks and Challenges

• Volatility in oil and gas prices could impact revenue.
• Exploration and production challenges in new growth plays.
• Potential regulatory changes affecting operations.
• Macroeconomic pressures and interest rate fluctuations.
• Competition from other oil and gas companies.

Q&A

There were no questions asked during the earnings call, leaving some investor queries about future strategies and market conditions unanswered.

Full transcript - PrairieSky Royalty Ltd (PSK) Q2 2025:

Conference Operator: Good day, and welcome to PrairieSky Royalty Limited Announce their Second Quarter twenty twenty five Financial Results. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded.

I would now like to turn the call over to Andrew Phillips, President and CEO. Please go ahead.

Andrew Phillips, President and CEO, PrairieSky Royalty Limited: Thank you, Michelle. Good morning, everyone, and thank you for dialing into the PrairieSky Royalty Q2 twenty twenty five earnings call. On the call from PSK are Pam Cazell, CFO Dan Bertram, COO Mike Murphy, VP, Capital Markets and myself, Andrew Phillips. Before we begin, there are certain forward looking information and statements in our commentary. So I would ask listeners and investors to review the forward looking statements qualified in our press release and MD and A, which can be found on our website.

PrairieSky achieved record royalty oil production of 14,376 barrels per day, up 8% from the same quarter the year before. In 2018, for reference, PrairieSky had $235,000,000 shares outstanding and produced 9,000 net royalty oil barrels. Today, with the same $235,000,000 shares outstanding, we have 14,000 net royalty oil barrels, an excellent result. We now have three plays with strong growth rates and decades of inventory. The Clearwater is now over 2,500 barrels per day, The Mandeville stack is approaching 1,000 barrels per day.

And the Duvernay with strong spud count should double this year, adding high netback light oil barrels. In Southern Alberta, a number of new discoveries have been made in the Basal Quartz formation. This is a light oil play with liquids rich solution gas. Payouts on the play are fast, so we expect continued activity on the play. PrairieSky has a very large mineral position with complementary three d ownership.

Ownership of mineral title provides investors with optionality across the basin. A number of small scale SAGD projects will also be built on PrairieSky acreage over the next ten years, adding long duration oil projects to our reserves and cash flow stream. Finally, PrairieSky has a massive natural gas royalty resource, and in spite of the very weak pricing, volumes remain stable. Our expectation is for the volumes to show some growth in 2026. I’ll now turn the call over to Mike.

Mike Murphy, VP, Capital Markets, PrairieSky Royalty Limited: Thanks, Andrew. We saw a similar level of drilling activity relative to last year with 117 spuds in Q2 twenty twenty five versus 115 in Q2 twenty twenty four. We had 61 multilateral spuds in the quarter, representing 52% of all new wells, which is a new high watermark for proportion of multilateral spuds in a quarter. Multilaterals were focused in the Clearwater with 47 wells spud, but also included wells targeting Mandel heavy oil and Mississippian light oil in Southeast Saskatchewan. We are also seeing a high pace of development in the Duvernay light oil play with 14 wells spud in the quarter and 30 spud year to date relative to 33 spud in all of 2024.

We are encouraged by step change improvements in initial well productivity in the Duvernay oil window in the West Shale Basin and expect improved half cycle economics to drive meaningful growth programs for third party operators in this region moving forward, positively impacting our royalty oil volumes. I’ll now pass it over to Pam to discuss the financials.

Pam Cazell, CFO, PrairieSky Royalty Limited: Thank you, Mike. Good morning, everyone. Royalty production revenue totaled $111,200,000 in Q2 twenty twenty five, driven by our record 14,376 barrels per day of oil production, which generated 95,700,000 of revenue. Natural gas and NGL revenue added $15,500,000 on relatively flat volumes compared to Q2 twenty twenty four. We generated an incremental $12,400,000 of other revenues, which included bonus consideration of $8,500,000 from entering into 47 new leases with 37 different counterparties.

During the quarter PrairieSky’s funds from operations totaled $96,700,000 or $0.41 per share. We declared dividends of $61200000.0.00 $26 per share with the resulting payout ratio of 63%. Excess funds from operations were used to acquire incremental royalty interest totaling $6,500,000 primarily targeting Mandel Oil and we repurchased and cancelled $2,000,000 worth of stock. We continued to purchase shares under our automatic share purchase plan throughout blackout, committed to spend an incremental $11,000,000 PrairieSky exited the quarter with net debt of $242,000,000 Subsequent to quarter end, we also exercised the accordion feature of our credit facility, increasing it by $250,000,000 to $600,000,000 Increasing the facility provides us with incremental liquidity and financial flexibility. We will now turn it over to the moderator to proceed with the Q and A.

Conference Operator: Thank I’m not showing any questions at this time. I’d like to turn the call back over to Andrew Phillips.

Andrew Phillips, President and CEO, PrairieSky Royalty Limited: Well, thank you very much for dialing into the PrairieSky Q2 conference call and please feel free to call Pam, Mike or myself with any questions. I guess printing right after stampede keeps the question count low. Hope everyone has a great day.

Conference Operator: Thank you for your participation. This does conclude the program and you may now disconnect. Everyone, have a great day.

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