Canada’s Peyto reverses Q3 loss, names president

Canadian Deep Basin producer Peyto Exploration & Development reported Q3 2021 earnings of C$29.3mn (US$23.5mn) on November 9, reversing a year-ago loss of C$11.3mn on stronger – but still volatile – commodity prices.

It also said Jean-Paul Lachance would assume the role of president, alongside his existing role as chief operating officer. Darren Gee remains as CEO.

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And its monthly dividend, replaced with a quarterly dividend in the spring of 2020 as the impacts of Covid-19 took hold, will be re-instated at C$0.05/share starting in November 2021.

“Over the past 12 months, Peyto has returned to its historic levels of profitability, with cumulative earnings of $147mn on capital expenditures of $324mn, or C$0.45 of profit/dollar invested,” Peyto said, adding that this earnings ratio is expected to grow “significantly” over Q4 2021 and through all of 2022, supporting a reinstatement of the monthly dividend.

Peyto actively marketed its entire production stream in Q3 2021 across most major North American natural gas hubs, with Henry Hub attracting 51% of its quarterly production of 473mn ft³/day, which was an 18% increase over Q3 2020 production. Its average realised natural gas price increased to C$2.48/’000 ft³ from C$1.64/’000 ft³, reflecting generally stronger, but still volatile, commodity prices, especially in Alberta, where ongoing work on TC Energy’s Nova Gas Transmission Limited (NGTL) system continued to restrict access to storage.

“AECO daily natural gas prices, while substantially higher, were extremely volatile with recorded highs of C$4.80/GJ and lows of C$1.02/GJ,” Peyto said. “This was the result of insufficient access to EGAT (East Gate Alberta) storage reservoirs during periods of NGTL restrictions.”

Elsewhere, the company expects to begin construction in the New Year on a new 50mn ft³/day gas plant in the South Brazeau region west of Edmonton. When completed by the end of Q1 2022, the plant will be the most environmentally-efficient in Peyto’s portfolio, with waste heat recovery technology to reduce the need for gas-fired utility heat and zero emission controls and instrumentation systems.

Also on the environmental front, Peyto has completed an in-house study of saline reservoirs in its core Greater Sundance area to determine their suitability for future carbon capture and storage (CCS) of CO₂ emissions from its operations in the area.

“Preliminary results from this study concluded that, based on Peyto’s existing and future forecasted emissions, the company expects to have access to enough storage capacity for all future CO₂ disposal requirements,” it said. “While current government policy, taxation levels, carbon credit systems, and facility designs and technologies are rapidly evolving, Peyto envisions a future whereby a large proportion of its CO₂ emissions are captured and injected.”

Peyto is also actively pursuing a number of methane emissions reduction initiatives, including an inline pipeline turbine generator to provide emissions-free power at remote wellsites. Field testing began in September, and the company is encouraged that programmes such as this will lead to additional reductions of vented methane emissions.

Its efforts so far have already resulted in a 50% reduction in methane emissions, to about 175,000 mt of CO2-equivalent (mtCO₂e)/year from 378,275 mtCO₂e/year in 2016, and it is now targeting a 75% reduction in vented and flared methane emissions intensity from 2016 levels by 2023.