PrairieSky Royalty TSE: PSK reported stronger second-quarter 2026 production, cash flow and leasing activity, with management pointing to higher oil activity across Western Canada and continued development in the Duvernay, Clearwater and Mannville Stack as drivers for the remainder of the year.
On the company’s earnings call, President and Chief Executive Officer Andrew Phillips said oil production increased 7% from the first quarter, supported by “stronger activity levels across the basin.” He said spot activity on PrairieSky lands during the quarter was encouraging for the balance of the year, noting that a CAD 0.71 dollar and U.S. WTI crude above $70 placed Canadian light oil near CAD 100 per barrel.
Phillips also compared the company’s current position with its pre-pandemic profile. He said PrairieSky had 234 million fully diluted shares outstanding in 2019, with average annual royalty oil production of 8,633 barrels per day and 46 million barrels of reserves. Today, he said, the company has 232.4 million shares outstanding, average oil production of 14,740 barrels per day and 64 million barrels of reserves.
“We will be net cash by this time next year,” Phillips said.
Production Reaches Record Level
Senior Vice President of Finance and Chief Financial Officer Pam Kazeil said PrairieSky delivered “strong second quarter results in cash flow, production and leasing activity.” Total production reached a record 27,479 barrels of oil equivalent per day, up 4% from the second quarter of 2025.
Kazeil said the increase was driven by liquids growth, with oil volumes up 3% and natural gas liquids volumes up 15% year over year. The Clearwater delivered the largest increase, rising 27% from Q2 2025, while the Mannville Stack was up 19%. NGL royalty production growth was driven by the Montney and West Shale Basin Duvernay.
With U.S. dollar WTI averaging $92.80 in the quarter, Kazeil said PrairieSky’s realized oil price averaged CAD 109.87 per barrel. NGL pricing averaged CAD 55.30 per barrel. Liquids production accounted for 93% of the company’s total production revenue, which was CAD 167.1 million in the quarter.
Other revenues contributed CAD 10.9 million to cash flow, including CAD 6.4 million in bonus consideration. Year-to-date bonus consideration totaled CAD 18.7 million, which Kazeil said was 39% ahead of the same period in 2025.
Duvernay, Multilateral Drilling Remain Key Activity Areas
Michael Murphy, Vice President of Geosciences and Capital Markets, said Duvernay activity remained strong in the second quarter, with 51 spuds year to date compared with 55 for all of 2025. He said the first West Shale Basin Duvernay wells from this year’s programs were brought on production late in the quarter and should positively affect third-quarter royalty oil production.
Murphy said expanded third-party capital programs in the Duvernay, along with continued completion activity during the summer, should position PrairieSky for “meaningful light oil growth” through the rest of the year.
Multilateral activity also continued to increase on PrairieSky lands, with 137 spuds year to date compared with 100 over the same period last year. Murphy said activity extended beyond the Clearwater and Mannville Stack, with multilateral spuds in the Charlie Lake, Ellerslie, Bakken and southeast Saskatchewan Mississippian in the second quarter.
In the Clearwater, Murphy said PrairieSky estimates that 60% of its royalty oil volumes are under waterflood support, with declines in the mid-teens contributing to what he described as a sustainable production base. He added that thermal volumes from a new pad at Lindbergh began ramping up in the quarter, supporting expected growth in second-half royalty oil production. A new south pad is also drilling at Lindbergh, which Murphy said positions the asset for incremental growth in 2027 and beyond.
Leasing Activity Increases
Phillips said numerous newly formed oil companies have emerged over the past year. During the quarter, PrairieSky entered into 57 leases with 46 distinct operators. He said the company continues to pursue leasing agreements with qualified, well-capitalized companies.
Kazeil said leasing was most active in the Duvernay light oil and Mannville heavy oil plays during the quarter. She described leasing as a leading indicator of future development and said PrairieSky anticipates operators will remain active across those plays throughout 2026 and beyond.
Phillips said PrairieSky expects another busy summer for both leasing and drilling activity, noting that 215 rigs were active in the field at the time of the call, compared with 170 a year earlier. However, he said wet field conditions in the eastern Alberta heavy oil region had delayed some completion and drilling activity.
Cash Flow Rises, Debt Reduced
Funds from operations were CAD 133.1 million, or CAD 0.57 per share, up 38% from the second quarter of 2025, according to Kazeil. PrairieSky declared dividends of CAD 61.6 million during the quarter, representing a payout ratio of 46%.
Kazeil said excess cash flow was directed to minor acquisitions totaling CAD 1.8 million and debt reduction of CAD 71.1 million. Net debt stood at CAD 186.6 million as of June 30. PrairieSky also declared a third-quarter dividend of CAD 0.265 per common share for shareholders of record on Sept. 29, 2026.
Management Cites Commodity Prices and Technology in Activity Outlook
During the question-and-answer portion of the call, BMO Capital Markets analyst Jeremy McCrea asked whether the increase in activity was driven mainly by higher commodity prices or by opportunities on PrairieSky’s land base.
Phillips said it was “a combination of things,” including multilateral drilling, improvements in technology and the weaker Canadian dollar. He said the commodity environment remains robust and pointed to renewed activity in the Viking as an example.
Phillips said a Viking well costs about CAD 1.1 million, with recent wells producing about 55,000 barrels of light oil, while a Duvernay well costs about CAD 11 million and produces about 550,000 barrels of condensate. “The Viking competes quite well with even really good plays like the Duvernay,” he said, adding that operators with stronger balance sheets and more capital are drilling more of their inventory.
Asked whether other plays could surprise investors in the second half of 2026 or into 2027, Phillips said the company continues to see focused development in its three core growth plays: the Clearwater, Mannville Stack and Duvernay. He also cited renewed drilling across more conventional plays, including southeast Saskatchewan, western Saskatchewan and eastern Alberta, as operators test multilaterals and waterfloods in different ways.
About PrairieSky Royalty TSE: PSK
PrairieSky Royalty Ltd is the owner of subsurface mineral rights on a variety of royalty properties in western Canada. The company encourages third parties to develop these properties, while also seeking additional petroleum and natural gas royalty assets. Once PrairieSky has given a third party the right to explore, develop, or produce on its properties, the company collects royalty revenue from the development of petroleum and natural gas. Property arrangements can be contracted as lease issuances, farmouts, drilling commitments, or seismic option agreements.
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