CALGARY, Alberta, May 14, 2024 (GLOBE NEWSWIRE) -- Peyto Exploration & Development Corp. (TSX:PEY) ("Peyto" or the "Company")  is pleased to report operating and financial results for the first quarter of 2024. Q1 2024 Highlights: Delivered $204.6 million in funds from operations1,2, or $1.05/diluted share, which funded $113.8 million of capital expenditures3 and $64.2 million of dividends to shareholders. Peyto generated earnings of $99.9 million, or $0.51/diluted share, and reduced net debt4 by $23.2 million in the quarter. First quarter production volumes averaged 125,018 boe/d (647.2 MMcf/d of natural gas, 17,145 bbls/d of NGLs), a 21% increase year over year, mainly due to the Repsol Canada Energy Partnership acquisition that closed in the fourth quarter of 2023 (the "Repsol Acquisition" or "Repsol Assets"). The successful drilling program on the Repsol Assets continued during the quarter with sustained increases to average well productivity of approximately 30% above Peyto's recent annual drilling programs. The Company's disciplined hedging and diversification program protected first quarter revenues from the sharp decline in benchmark natural gas prices. Peyto's realized natural gas price for the quarter of $4.05/Mcf (or $3.52/GJ) was 49% higher than the average AECO daily price of $2.37/GJ. The Company exited the quarter with a strong hedge position, which currently protects approximately 70% and 60% of forecasted gas production for summer 2024 (April–October 2024) and calendar 2025, respectively. The securing of future revenues supports the sustainability of the Company's dividends, capital program, and continued strengthening of the balance sheet. Quarterly cash costs5 totaled $1.51/Mcfe, including royalties of $0.24/Mcfe, operating costs of $0.55/Mcfe, transportation of $0.30/Mcfe, G&A of $0.06/Mcfe and interest expense of $0.36/Mcfe. Peyto's operating costs have increased due to the higher cost structure of the Repsol facilities. The Company expects to reduce operating costs by at least 10% by the end of 2024 with continued optimization and increased utilization of the acquired gas processing plants. Peyto continues to have the lowest cash costs in the Canadian oil and natural gas industry. Total capital expenditures were $113.8 million in the quarter. Peyto drilled 18 wells (17.5 net), completed 14 wells (14.0 net), and brought 15 wells (15.0 net) on production. Peyto delivered a 69% operating margin6 and a 30% profit margin7, resulting in a 9% return on capital employed8 ("ROCE") and a 11% return on equity8 ("ROE"), on a trailing 12-month basis. First Quarter 2024 in Review Natural gas storage levels in the US and Canada started 2024 at the high end of the five-year average after strong production gains in 2023 and a warmer than normal start to winter. The cold weather finally arrived in January causing short-lived production freeze-offs and spiking gas prices in the spot market, followed by mild temperatures for the rest of winter. Consequently, natural gas storage levels remained elevated, and spot prices declined sharply in February and March, leading to weak summer 2024 prices. Despite the gas price decline, Peyto delivered a strong quarter with production averaging 125,018 boe/d (647.2 MMcf/d of natural gas and 17,145 bbls/d of NGLs), funds from operations totaling $204.6 million ($1.05/diluted share) and free funds flow9 totaling $86.7 million, as hedging gains from the Company's mechanistic risk management program mitigated the decline in natural gas prices. Peyto's profit margin of 30% remained solid and drove quarterly earnings of $99.9 million ($0.51/diluted share), allowing the Company to declare $64.2 million in dividends to shareholders. Operationally, Peyto continued to outperform on its land position acquired from Repsol with average sustained well productivity that is approximately 30% higher than the Company's recent annual drilling programs. Capital expenditures totaled $113.8 million and Peyto incurred $4.2 million of decommissioning expenditures in the quarter.   Three Months Ended Mar 31 %   2024 2023 Change Operations       Production       Natural gas (Mcf/d) 647,234 544,278 19% NGLs (bbl/d) 17,145 12,205 40% Thousand cubic feet equivalent (Mcfe/d @ 1:6) 750,105 617,509 21% Barrels of oil equivalent (boe/d @ 6:1) 125,018 102,918 21% Production per million common shares (boe/d) 643 589 9% Product prices       Realized natural gas price – after hedging and diversification ($/Mcf) 4.05 3.91 4% Realized NGL price – after hedging ($/bbl) 60.36 79.03 -24% Net Sales Price ($/Mcfe) 4.87 5.01 -3% Operating expenses ($/Mcfe) 0.55 0.50 10% Royalties ($/Mcfe) 0.24 0.53 -55% Transportation ($/Mcfe) 0.30 0.24 25% Field netback(1)($/Mcfe) 3.82 3.82 0% General & administrative expenses ($/Mcfe) 0.06 0.03 100% Interest expense ($/Mcfe) 0.36 0.22 64% Financial ($000, except per share)       Natural gas and NGL sales including realized hedging gains (losses)(2) 332,541 278,332 19% Funds from operations(1) 204,622 179,817 14% Funds from operations per share – basic(1) 1.05 1.03 2% Funds from operations per share – diluted(1) 1.05 1.02 3% Total dividends 64,158 57,678 11% Total dividends per share 0.33 0.33 0% Earnings 99,875 89,981 11% Earnings per share – basic 0.51 0.51 0% Earnings per share – diluted 0.51 0.51 0% Total capital expenditures(1) 113,762 121,802 -7% Decommissioning expenditures 4,206 – – Total payout ratio(1) 89% 100% -11% Weighted average common shares outstanding - basic 194,416,710 174,778,048 11% Weighted average common shares outstanding - diluted 195,159,389 176,570,311 11%         Net debt(1) 1,339,558 877,827 53% Shareholders' equity 2,683,990 2,305,076 16% Total assets 5,373,202 4,119,135 30% (1) This is a Non-GAAP financial measure or ratio. See "non-GAAP and Other Financial Measures" in this news release and in the Q1 2024 MD&A.(2) Excludes revenue from sale of third-party volumes. Capital Expenditures Peyto drilled 18 wells (17.5 net), completed 14 wells (14.0 net) and brought 15 wells (15.0 net) on production for total drilling, completion, equipping and tie-in costs of $93.9 million in the first quarter. Facilities and pipeline projects totaled $18.1 million in the quarter, which included pipeline debottlenecking and integration projects, compressor upgrades to accommodate future higher pipeline pressures anticipated on the NGTL system and plant upgrade projects. The Company drilled 9 wells on the acquired Repsol lands in the quarter (including 6 Wilrich and 3 Notikewin), which remain a core part of Peyto's 2024 capital program. To the end of the quarter, Peyto has brought on production a total of 15 wells on the Repsol lands. These wells exhibit a sustained average productivity increase of approximately 30% greater than Peyto's recent annual drilling programs. The Company continued to increase the average length of horizontal wells in the quarter to over 2,200 meters, or a 14% increase over the previous quarter. Drilling costs per meter in the quarter were down 3%, while completion costs per meter were up 7% as compared to Q4 2023.   2016 2017 2018 2019 2020 2021 2022 2023 2023Q1 2023Q2 2023Q3 2023Q4 2024Q1(1) Gross Hz Spuds 126 135 70 61 64 95 95 72 19 15 19 19 18 Measured Depth (m) 4,197 4,229 4,020 3,848 4,247 4,453 4,611 4,891 5,198 4,768 4,728 4,868 5,220 Drilling ($MM/well) $1.82 $1.90 $1.71 $1.62 $1.68 $1.89 $2.56 $2.85 $3.05 $2.74 $2.64 $2.94 $3.05 $ per meter $433 $450 $425 $420 $396 $424 $555 $582 $587 $574 $559 $603 $585                             Completion ($MM/well) $0.86 $1.00 $1.13 $1.01(2) $0.94 $1.00 $1.35 $1.54 $1.73 $1.64 $1.38 $1.48 $1.80 Hz Length (m) 1,460 1,241 1,348 1,484 1,682 1,612 1,661 1,969 1,947 2,140 1,853 1,949 2,223 $ per Hz Length (m) $587 $803 $751 $679 $560 $620 $813 $781 $888 $776 $743 $759 $809 $ ‘000 per Stage $79 $81 $51 $38 $36 $37 $47 $52 $59 $50 $46 $53 $55 (1) Based on field estimates and may be subject to minor adjustments going forward.(2) Peyto's Montney well is excluded from drilling and completion cost comparison. In addition to the capital program, Peyto incurred $4.2 million on decommissioning expenditures in the quarter as part of the Company's responsible asset retirement plan in 2024. Commodity Prices and Realizations During Q1 2024, Peyto realized a natural gas price after hedging and diversification of $4.05/Mcf, or $3.52/GJ, 49% higher than the average AECO daily price of $2.37/GJ. Peyto's natural gas hedging activity resulted in a realized gain of $1.59/Mcf ($93.6 million) due to the sharp decline in AECO and Henry Hub natural gas prices during the quarter. Condensate and pentanes averaged $91.72/bbl in the quarter, down 11% from $103.06/bbl in Q1 2023, while Canadian dollar WTI ("WTI CAD") increased 1% over the same period. The decrease in the condensate and pentanes price is due to declining benchmark condensate differentials, which decreased to a $5.84/bbl discount to WTI CAD in the quarter compared to a $5.34/bbl premium to WTI CAD in Q1 2023. Butane, propane and ethane averaged $31.37/bbl, down 20% from $39.20/bbl in Q1 2023 due to a higher percentage of lower priced ethane production in the quarter from the Repsol Assets. Peyto's combined realized NGL price in the quarter was $60.50/bbl before hedging, and $60.36/bbl including a hedging loss of $0.13/bbl. Netbacks The Company's realized natural gas and NGL sales yielded a combined revenue stream of $3.50/Mcfe before hedging gains of $1.37/Mcfe, resulting in a net sales price of $4.87/Mcfe in the quarter. Peyto's net sales price was 3% lower than the $5.01/Mcfe realized in Q1 2023 due to the sharp decline in natural gas prices, partially offset by hedging. Total cash costs of $1.51/Mcfe were consistent with $1.52/Mcfe in Q1 2023 due to lower royalties that offset higher operating, transportation, G&A and interest costs. Peyto's cash netback (net sales price including other income, third-party sales net of purchases, realized gain on foreign exchange, less total cash costs), was $3.41/Mcfe resulting in a strong 69% operating margin which allowed the Company to fund the capital program, pay dividends to shareholders, and repay debt during the quarter. Historical cash costs and operating margins are shown in the following table:   2021 2022 2023 2024 ($/Mcfe)