Advantage Energy TSE: AAV reported second-quarter 2026 adjusted funds flow of C$88.8 million, or C$0.53 per share, as the company completed major infrastructure work and said it is shifting toward lower capital intensity and increased free-cash-flow generation.
Net capital expenditures totaled C$88.8 million during the quarter, with more than 70% of the company’s planned 2026 capital program now executed, Chief Financial Officer Craig Blackwood said. He said the first half carried the heavier capital load, while spending in the second half is expected to be “materially lighter.”
Net debt ended the quarter at C$560.2 million, substantially unchanged during the first half despite the capital program, planned downtime at the Glacier Gas Plant and weak natural gas prices, Blackwood said.
Infrastructure Projects Completed
Interim Chief Executive Officer John Festival said Advantage completed a 21-day turnaround at its Glacier Gas Plant, an operation that involved more than 500 people at the site at times. The company also completed and commissioned the Progress Gas Plant during the quarter.
Festival described the projects as major infrastructure phases within the company’s three-year plan. He said the Progress plant is expected to reduce reliance on third-party processing, increase use of company-operated infrastructure and lower operating costs per barrel of oil equivalent.
Advantage exited the second quarter producing approximately 90,000 barrels of oil equivalent per day, a company record, Festival said. Blackwood said the company expects to maintain production around that level through the end of 2027, subject to normal operating variability.
With its infrastructure investments completed, Advantage expects operating costs to be about C$5 per BOE during the second half of 2026 and to trend toward the lower end of its full-year guidance range, according to Blackwood.
Quarterly Production Affected by Glacier Turnaround
Average production was 70,611 BOE per day in the second quarter, declining from the first quarter as expected because of the Glacier turnaround. Liquids production averaged 12,650 barrels per day, up 4% sequentially.
Liquids represented 18% of total production during the quarter but generated 67% of total sales, Blackwood said.
The company highlighted several operating developments across its asset base:
- A three-well Montney pad at Valhalla was brought online during the second quarter, delivering average per-well 30-day initial production rates of 1,375 BOE per day, with liquids accounting for about 44% of output.
- At Progress, Advantage spudded a two-well pad offsetting its initial 16-36 discovery well, which Blackwood described as having strong oil-weighted production.
- Glacier brought nine wells online during 2026 to date, with average peak 30-day initial production rates of 16.4 million cubic feet per day of raw natural gas.
- A three-well pad at Wembley was being completed and was expected to enter production during the third quarter.
Senior Vice President Neil Bokenfohr said Advantage expects to maintain flat liquids production through the second half. About 60% of remaining 2026 capital is weighted toward oil, while gas-related spending is primarily directed to completing previously drilled wells, he said.
Bokenfohr said the Progress Gas Plant provides flexibility to direct Charlie Lake and Montney production into the facility. He added that the plant has limited remaining capacity for additional liquids and gas volumes during the balance of the year, while the company’s interconnected infrastructure gives it flexibility in allocating capital and positioning wells.
Hedging, Financing and Shareholder Returns
Advantage said it had hedged approximately 48% of forecast natural gas production and 43% of forecast crude oil and natural gas liquids production for the second half of 2026. For 2027, the company had hedged about 34% of forecast natural gas production and 26% of forecast crude oil and NGL production.
Blackwood said those positions leave direct AECO exposure at roughly 12% for the second half of 2026 and about 16% for 2027. The company is also continuing to add hedges extending through 2029.
During the quarter, Advantage transitioned to a new covenant-based credit facility with C$650 million of borrowing capacity and a term extending to June 2029. Blackwood said the three-year facility offers greater flexibility and lower borrowing costs than the company’s prior reserve-based structure.
Festival said that, based on current commodity prices, Advantage expects to reach its net-debt target range of C$400 million to C$500 million during the second half of 2026 while repurchasing up to 5% of its shares outstanding. He said share buybacks would be the company’s primary method of shareholder returns while management believes its shares are trading below intrinsic value.
Looking beyond 2027, management said it has not yet established plans for production in 2028. Brian Bagnell, vice president of commodities and capital markets, said the company is beginning work on its next three-year planning period and will evaluate whether future development should be more liquids-focused or more gas-focused in northeast British Columbia. Blackwood said the company will prioritize shareholder returns rather than pursue production growth for its own sake.
Festival also said the board has begun a formal search for a permanent chief executive officer. He said the company is approaching the process “thoughtfully and deliberately” while continuing to execute its capital program during the leadership transition.
About Advantage Energy (TSE:AAV)
Advantage Energy 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.
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