Advantage Energy Q3 2026 Earnings Results & Report

Advantage Energy EPS Results

• Actual EPS: C$0.33
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A
• EPS Beat Rate: 3 of last 8 quarters

Advantage Energy Revenue Results

• Actual Revenue: C$166.32 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Advantage Energy (TSE:AAV) Ltd supplies clean, affordable, reliable, and sustainable Canadian energy to power the needs of Canada and the world. It is focused on the development and delineation of its Montney natural gas and liquids resource at Glacier, Wembley/Pipestone, Valhalla, and Progress, Alberta.

Advantage Energy Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Production and costs improved: Third-quarter production rose 23% sequentially to approximately 87,000 BOE per day, while operating, transportation, G&A, and interest costs per BOE all declined.
• Positive Sentiment: Balance sheet strengthened and buybacks accelerated: Net debt fell 58% from the prior quarter to CAD 233 million following the Wembley disposition, and CAD 35.9 million of free cash flow was directed to share repurchases. Management expects to repurchase up to 5% of shares in the second half of 2026 and an additional 10% in 2027.
• Positive Sentiment: Greater focus on liquids-rich assets: Management plans to shift more 2027 capital toward Progress, Valhalla, and Charlie Lake, citing encouraging Progress well results and more than 1,000 identified drilling locations across these assets.
• Positive Sentiment: Lower near-term tax burden expected: The proposed Productivity Mega Deduction could defer Advantage becoming cash taxable from 2028 to 2031 under current plans and commodity-price assumptions.
• Neutral Sentiment: CEO search nearing completion: The interim CEO said the process is in its “late innings” and that the company expects a resolution shortly, but no permanent CEO has yet been announced.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the Advantage Energy Ltd. Third Quarter 2026 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Friday, October 30th, 2026. I would now like to turn the conference over to Brian Bagnell. Please go ahead.

[Brian Bagnell, VP of Commodities and Capital Markets at Advantage Energy Ltd]

Thank you, Joanna, and welcome everyone to today's conference call to discuss Advantage's third quarter results. Before we begin, I would like to remind listeners that our remarks today will include forward-looking information and references to specified financial measures. Advisories on those items are contained in our news release, MD&A, and annual information form, which are available on our website and on SEDAR+. I am joined today by Advantage's executive team, including John Festival, our Interim CEO, and Craig Blackwood, our CFO. As usual, if you have any detailed questions, we would ask that you follow up with us individually after the call. With that, I will turn it over to John.

[John Festival, Interim CEO at Advantage Energy Ltd]

Thank you, Brian, and thanks to everyone for joining us this morning. The third quarter was an important one for Advantage. We delivered stronger production and lower cost following the completion of our major infrastructure program. We completed the Wembley disposition, we materially reduced debt, and began directing significant free cash flow to share repurchases. The Wembley transaction sharpened our asset base, significantly reduced our leverage, and accelerated our shareholder return strategy. At the same time, our operations continue to perform exceptionally well. Production increased 23% from the second quarter to approximately 87,000 BOE per day, as the Progress Gas Plant ramped up and the Glacier Gas Plant returned to full operations following the planned turnaround in Q2. Our cost structure also improved meaningfully.

[John Festival, Interim CEO at Advantage Energy Ltd]

A greater utilization of owned infrastructure, a more focused asset base, and lower leverage reduced our operating, transportation, and G&A costs, and our interest costs on a per BOE basis. With our financial position significantly strengthened and the 2026 capital program substantially complete, all free cash flow is being directed to share repurchases, while we retain substantial flexibility to advance our liquids-rich inventory at Progress, Valhalla, and in the Charlie Lake. Now, Craig will walk through our quarter in more detail. Craig, over to you.

[Craig Blackwood, CFO at Advantage Energy Ltd]

Thanks, John. Before I begin, the financial and operating results I will discuss relate to Advantage Energy only and excludes Entropy Inc. Starting with the financial results for the quarter, adjusted funds flow was CAD 96.8 million, or CAD 0.58 per share. After exploration and development expenditures of CAD 60.9 million, we generated CAD 35.9 million of free cash flow, which was dedicated to shareholder returns through share repurchases. We ended the quarter with just CAD 233 million of net debt. That was down 58% from the second quarter. This reduction reflects the application of the proceeds from the Wembley disposition. With the balance sheet now substantially stronger, we have the capacity to execute our share repurchase strategy while continuing to invest selectively in high-quality liquids-rich opportunities. As John mentioned, our cost structure also improved significantly from the second quarter. Operating expense declined 16% to CAD 4.86 per BOE.

[Craig Blackwood, CFO at Advantage Energy Ltd]

Transportation expense declined 10% to CAD 3.71 per BOE, and combined G&A and interest expense declined 41% to CAD 1.73 per BOE. These improvements reflect the increased utilization of Advantage-owned infrastructure, more focused asset base following the Wembley sale, and much lower leverage. Turning to operations, production for the third quarter averaged approximately 87,000 BOE a day, including 452 million cubic feet per day of natural gas and 11,623 barrels per day of liquids. Full production increased 23% from the second quarter following commissioning of the Progress Gas Plant and completion of the planned 21-day turnaround at the Glacier Gas Plant, both of which occurred in the second quarter. Liquids production declined 8%, and that was primarily due to the Wembley disposition and just natural declines. Well performance has remained strong.

[Craig Blackwood, CFO at Advantage Energy Ltd]

At Glacier, the wells brought on production this year had achieved average IP30 rates of 16 million cubic feet per day of raw natural gas. At Valhalla, our three-well Montney pad that came on stream last quarter has now achieved an average IP90 rate of approximately 1,100 barrels of equivalent per day per well, including 35% liquids. At Progress, we drilled two Montney wells from our 5-32 pad, offsetting a successful 16-36 well that we drilled back in 2019. These wells were completed in October with encouraging initial test results over 48 and 62 hours respectively. Both wells demonstrated higher length-normalized productivity than that 16-36 well. The 16-36 well had achieved an IP30 of more than 1,100 bpd of oil and liquids, and has now produced approximately 265,000 barrels. The new wells were brought on production this week, and we expect to provide IP30 results in early December.

[Craig Blackwood, CFO at Advantage Energy Ltd]

Based on these initial results, though, we now plan to drill two additional Progress Montney wells in the first quarter of 2027. In the Charlie Lake, we are now preparing to drill our first open hole multilateral well during the fourth quarter, and that will be funded by the additional proceeds we received from the Wembley disposition. Industry results using this well design could demonstrate strong productivity with lower capital costs, which could further improve our returns from this important oil-weighted asset. Turning to hedging and market diversification, which remains an important component of our strategy, for the fourth quarter of 2026, we have hedged approximately 46% of forecast natural gas production and 54% of forecast liquids production. For 2027, we have hedged 37% of forecast natural gas production and 34% of forecast liquids production. We have also hedged approximately 35% of forecast natural gas production in 2028 and 15% in 2029.

[Craig Blackwood, CFO at Advantage Energy Ltd]

Together with our market diversification, this reduces our direct AECO exposure to just 16% in 2027 and 8% in 2028. Finally, as many will know, the Department of Finance recently announced the proposed Productivity Mega Deduction, which allows most new capital investment and development expenditures deducted immediately rather than over time. Based on our current plans and commodity price assumptions, we would now expect that the proposed measure to defer Advantage becoming cash taxable from 2028 to 2031. With that, I'll turn the call back to John.

[John Festival, Interim CEO at Advantage Energy Ltd]

Thanks, Craig. Advantage is in a very strong position. We are entering the final quarter of 2026 with a focused asset base, a substantially stronger balance sheet, a lower cost structure, and a deep inventory of liquids-rich development opportunities. Our focus is on maximizing shareholder returns. Following the Wembley disposition and the substantial completion of our 2026 capital program, all free cash flow is being dedicated to share repurchases. We expect this to allow us to repurchase up to 5% of our common shares outstanding in the second half of 2026 and up to an additional 10% in 2027. We've already repurchased approximately 6 million shares in 2026, representing 3.6% of the shares outstanding as at December 31, 2025. So we're well on our way to fulfilling our buyback commitment of CAD 300 million over 24 months. We expect to retain substantial financial flexibility after fulfilling this commitment.

[John Festival, Interim CEO at Advantage Energy Ltd]

That flexibility allows us to balance direct shareholder returns with disciplined investment in the liquids-rich Montney at Progress and Valhalla, and in the Charlie Lake, all supported by our new owned and operated Progress Gas Plant. Across these three areas, we've identified more than 1,000 drilling locations, including more than 300 currently identified as Tier 1 locations. Together, these assets represent approximately half our total drilling inventory and provide a strong foundation for long-term liquids growth. We expect to release our formal 2027 budget in early December, together with an updated three-year plan focused on developing the significant liquids-rich inventory. Finally, I want to provide a short update on our CEO search process. That process is in the late innings, and we expect to have resolution on this process shortly. I continue to be very impressed with the Advantage team.

[John Festival, Interim CEO at Advantage Energy Ltd]

Despite having no permanent CEO over the last four months, the team has closed an accretive disposition and right-sized the balance sheet, returned to significant share buybacks, completed a complex plant turnaround, and created new optionality for liquids-rich development. In closing, I would like to thank our employees, contractors, our board, shareholders for their continued support. With that, I'll turn the call back to Brian.

[Brian Bagnell, VP of Commodities and Capital Markets at Advantage Energy Ltd]

Thanks, John. Joanna, that concludes our prepared remarks, and we will go to the phone lines in the event there are any questions. Thank you.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Again, please press star one now if you have any questions. Question on the line from Jamie Kubik with CIBC. Please go ahead.

[Jamie Kubik, Analyst at CIBC]

Yeah. Good morning, guys. Thanks for taking my question here. I am just curious a bit more on Progress. Can you talk about potential plans that that asset might have for capital spending in the future here and how big the prospect could be in the portfolio given what you see on the recent wells? Thanks.

[Darren Tisdale, VP Geoscience at Advantage Energy Ltd]

Hi, Jamie. It is Darren Tisdale, VP Geoscience. We have identified a pretty robust inventory to follow up on after this first two wells, or most recent two wells. This is a result of six-seven years of delineation across the whole block, so we are now very confident we understand what is happening here. So we do have a substantial drilling inventory. I will not comment specifically on numbers, but it is definitely bookended by our drilling and competitor drilling in the area.

[Craig Blackwood, CFO at Advantage Energy Ltd]

Maybe just a comment on our 2027 plans. We are currently in our budget development cycle right now, so I guess you will have to wait till December, and we will have a three-year plan laid out. Clearly, we are excited about the possibility at Progress. If you look at our IR deck, we had some 392 wells identified in that area, but it has been a while since we have been in the Progress area. So, our views on that are clearly changing, and we are definitely, like I said, excited about the future for Progress.

[Jamie Kubik, Analyst at CIBC]

Great. Thanks. I guess maybe just to follow on with where oil prices are at relative to gas pricing, would you want to shift as much capital in 2027 into your liquids targets to try and maximize returns on that side? Or how should we think about the, I guess, the liquids profile and Advantage potentially changing next year?

[Craig Blackwood, CFO at Advantage Energy Ltd]

Yeah. Answer is yes. When you look on the gas side, our wells are top decile among our peers. We have long inventory on gas and so on. We do not need to be producing all that out with AECO at $1.80 or something like that next year. So, we are very cognizant on shareholder returns. So, you should expect that we will be leaning a lot more into liquids next year. We have Progress, our last wells at Valhalla have been great, and we are definitely excited about the Charlie Lake as well. So, it will be a lot more focused on liquids and moving that dial. Now, we have a very significant foundation of gas, so moving to liquids can definitely be significant for us. If you look at us having 15% liquids, it is probably 55% of our revenue this year.

[Craig Blackwood, CFO at Advantage Energy Ltd]

Every little bit of movement in percent is important and meaningful, and we can actually move the dial pretty significantly in that area. I will say stay tuned for our budget and our three-year plan.

[Jamie Kubik, Analyst at CIBC]

Okay. That's all for me. Thank you.

[Operator]

Thank you. We have no other questions on the phone lines. Please proceed.

[Brian Bagnell, VP of Commodities and Capital Markets at Advantage Energy Ltd]

Thank you, everybody, for joining the call today. If you have any follow-up questions, please get in touch, but otherwise, have a good weekend.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Participants

Executives

• Brian Bagnell, VP of Commodities and Capital Markets
• John Festival, Interim CEO
• Craig Blackwood, CFO
• Darren Tisdale, VP Geoscience

Analysts

• Jamie Kubik, Analyst at CIBC