CALGARY, Alberta, Aug. 13, 2024 (GLOBE NEWSWIRE) -- Peyto Exploration & Development Corp. (TSX:PEY) ("Peyto" or the "Company") is pleased to report operating and financial results for the second quarter of 2024. Q2 2024 Highlights: Delivered $154.8 million in funds from operations1,2 ("FFO"), or $0.79/diluted share, generated earnings of $51.4 million, or $0.26/diluted share, and returned $64.4 million of dividends to shareholders. Production volumes averaged 122,299 boe/d (642.8 MMcf/d of natural gas, 15,174 bbls/d of NGLs), a 24% 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 second quarter revenues from the lowest AECO daily benchmark natural gas prices since 2019. Peyto's realized natural gas price for the quarter of $2.87/Mcf (or $2.50/GJ) was more than double the average AECO daily price of $1.12/GJ. The Company exited the quarter with a strong hedge position, which currently protects approximately 449 MMcf/d, 455 MMcf/d and 260 MMcf/d of gas production for the second half of 2024, calendar 2025, and calendar 2026, respectively, at an average gas price near $4/Mcf. The securing of future revenues supports the sustainability of the Company's dividends, capital program, and continued strengthening of the balance sheet.  Quarterly cash costs3 totaled $1.50/Mcfe, including royalties of $0.26/Mcfe, operating costs of $0.52/Mcfe, transportation of $0.30/Mcfe, G&A of $0.06/Mcfe and interest expense of $0.36/Mcfe. Peyto's operating costs have decreased 5% from the first quarter of 2024, and are on target to achieve a 10% reduction by the end of 2024. Peyto continues to have the lowest cash costs in the Canadian oil and natural gas industry. Total capital expenditures were $100.5 million in the quarter.  Peyto drilled 20 wells (18.8 net), completed 19 wells (17.5 net), and brought 13 wells (13.0 net) on production.   Peyto delivered a 62% operating margin4 and a 19% profit margin5, resulting in a 9% return on capital employed6 ("ROCE") and a 11% return on equity8 ("ROE"), on a trailing 12-month basis.  Second Quarter 2024 in Review Natural gas prices sunk to near five-year lows across North America in the second quarter as storage inventories remain elevated coming out of a warm winter season. The AECO daily benchmark averaged just $1.12/GJ, while Peyto realized $2.50/GJ on account of the Company's disciplined hedging strategy that delivered $71.4 million of natural gas hedging gains for the quarter. Peyto's operating costs of $0.52/Mcfe were reduced by 5% from Q1 2024, partially due to the redirection of natural gas volumes from a third-party operated, deep-cut facility to Peyto's owned and operated Edson gas plant, which resulted in a reduction of approximately 2,000 bbl/d of NGLs that were primarily low value liquid ethane. The Company remains committed to its goal to reduce operating costs by 10% from first quarter levels by the end of 2024. Peyto's strong hedge book and low-cost structure combined to deliver FFO of $154.8 million ($0.79/diluted share) and free funds flow7 totaling $54.0 million despite the downward pressure on natural gas prices. Peyto's profit margin of 19% drove quarterly earnings of $51.4 million ($0.26/diluted share).  First half 2024 FFO of $359.5 million and free funds flow of $140.7 million exceeded dividends of $128.5 million allowing for continued debt reduction. __________________________________________________________ 1 This press release contains certain non-GAAP and other financial measures to analyze financial performance, financial position, and cash flow including, but not limited to "operating margin", "profit margin", "return on capital", "return on equity", "netback", "funds from operations", "free funds flow", "total cash costs", and "net debt". These non-GAAP and other financial measures do not have any standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other entities. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as earnings, cash flow from operating activities, and cash flow used in investing activities, as indicators of Peyto's performance. See "Non-GAAP and Other Financial Measures" included at the end of this press release and in Peyto's most recently filed MD&A for an explanation of these financial measures and reconciliation to the most directly comparable financial measure under IFRS.2 Funds from operations is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q2 2024 MD&A.3 Cash costs is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release.4 Operating Margin is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release.5 Profit Margin is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release.6 Return on capital employed and return on equity are non-GAAP financial ratios. See "non-GAAP and Other Financial Measures" in this news release and in the Q2 2024 MD&A.7 Free funds flow is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q2 2024 MD&A.   Three Months Ended June 30 % Six Months Ended June 30 %   2024 2023 Change 2024 2023 Change Operations             Production             Natural gas (Mcf/d) 642,754 526,732 22% 644,994 535,457 20% NGLs (bbl/d) 15,174 10,989 38% 16,159 11,593 39% Thousand cubic feet equivalent (Mcfe/d @ 1:6) 733,796 592,665 24% 741,951 605,017 23% Barrels of oil equivalent (boe/d @ 6:1) 122,299 98,777 24% 123,658 100,836 23% Production per million common shares (boe/d) 627 565 11% 635 577 10% Product prices             Realized natural gas price – after hedging and diversification ($/Mcf) 2.87 3.13 -8% 3.47 3.53 -2% Realized NGL price – after hedging ($/bbl) 69.44 69.28 0% 64.62 74.38 -13% Net Sales Price ($/Mcfe) 3.95 4.07 -3% 4.42 4.55 -3% Operating expenses ($/Mcfe) 0.52 0.47 11% 0.53 0.49 8% Royalties ($/Mcfe) 0.26 0.18 44% 0.25 0.36 -31% Transportation ($/Mcfe) 0.30 0.29 3% 0.30 0.27 11% Field netback(1)($/Mcfe) 2.90 3.15 -8% 3.37 3.49 -3% General & administrative expenses ($/Mcfe) 0.06 0.05 20% 0.06 0.04 50% Interest expense ($/Mcfe) 0.36 0.22 64% 0.36 0.22 64% Financial ($000, except per share)             Natural gas and NGL sales including realized hedging    gains (losses)(2) 263,832 219,409 20% 596,373 497,742 20% Funds from operations(1) 154,835 142,354 9% 359,461 322,171 12% Funds from operations per share - basic(1) 0.79 0.81 -2% 1.85 1.84 1% Funds from operations per share - diluted(1) 0.79 0.81 -2% 1.83 1.83 0% Total dividends 64,365 57,715 12% 128,523 115,393 11% Total dividends per share 0.33 0.33 0% 0.66 0.66 0% Earnings 51,437 57,415 -10% 151,313 147,396 3% Earnings per share – basic 0.26 0.33 -21% 0.78 0.84 -7% Earnings per share – diluted 0.26 0.33 -21% 0.77 0.84 -8% Total capital expenditures(1) 100,451 82,319 22% 214,214 204,121 5% Decommissioning expenditures 391 - - 4,597 - - Total payout ratio(1) 107% 98% 9% 97% 99% -2% Weighted average common shares outstanding - basic 195,045,669 174,895,215 12% 194,731,189 174,836,955 11% Weighted average common shares outstanding - diluted 196,520,101 176,305,942 11% 195,967,653 176,460,770 11%               Net debt(1)       1,337,577 869,550 54% Shareholders' equity       2,691,716 2,309,845 17% Total assets       5,393,524 4,093,448 32%               (1) This is a Non-GAAP financial measure or ratio. See "non-GAAP and Other Financial Measures" in this news release and in the Q2 2024 MD&A(2) Excludes revenue from sale of third-party volumes Capital Expenditures Peyto drilled 20 wells (18.8 net), completed 19 wells (17.5 net) and brought 13 wells (13.0 net) on production for total drilling, completion, equipping and tie-in costs of $86.6 million in the quarter.  Facilities and pipeline projects totaled $13.3 million in the quarter, which included the first phase of the Edson gas plant turnaround, continued Repsol gas gathering system integration, and several pipeline debottlenecking projects.   The Company operated four drilling rigs during the quarter that were situated on three-well pads to minimize equipment moves through the wet spring-breakup period and was prudent with timing of completions and tie-ins to avoid incremental costs during low natural gas prices. Peyto's drilling program featured 16 Wilrich, 1 Falher, 2 Notikewin, and 1 Dunvegan well. Twelve of the 20 wells drilled in the quarter were drilled on the Repsol Assets, with all twelve wells being drilled to the deeper Wilrich formation which helps further define many additional shallower targets. The results from these wells are largely outperforming previous wells in the area, mostly due to the application of the Company's current drilling and completion methodology. Additionally, the drilling program near Edson has been a key contributor to increasing utilization at the nearby Edson gas plant as part of Peyto's plan to reduce operating costs where plant inlet production has increased from 85 MMcf/d to over 125 MMcf/d by the end of the second quarter. Since the acquisition, Peyto has brought on production a total of 21 wells drilled on the Repsol Assets. These wells continue to exhibit a sustained average productivity increase of approximately 30% as compared to Peyto's recent annual drilling programs. The Company continues to drill longer horizontal wells to increase reserves recovery efficiencies with average horizontal length of wells in the quarter extended to 2,350 meters, or 6% longer than Q1 2024. Peyto improved drilling and completion costs per meter in the quarter by 8%, as compared to Q1 2024, summarized in the following table.   2017 2018 2019 2020 2021 2022 2023 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 2024 Q2(1) Gross Hz Spuds 135 70 61 64 95 95 72 19 15 19 19 18 20 Measured Depth (m) 4,229 4,020 3,848 4,247 4,453 4,611 4,891 5,198 4,768 4,728 4,868 5,220 5,364 Drilling ($MM/well) $1.90 $1.71 $1.62 $1.68 $1.89 $2.56 $2.85 $3.05 $2.74 $2.64 $2.94 $3.05 $2.89 $ per meter $450 $425 $420 $396 $424 $555 $582 $587 $574 $559 $603 $585