Pine Cliff Energy TSE: PNE is stepping up drilling in the fourth quarter, with management expecting the activity to increase production as the company enters 2027. President and CEO Phil Hodge said the quarter would be one of Pine Cliff’s busiest ever from a drilling perspective.
The company plans to drill two Glauconite gas wells and one Pekisko oil well. Hodge said the third quarter was better than both the preceding quarter and the same period in 2025, primarily because natural gas and oil prices were higher. He also said free cash flow improved from the prior quarter.
Management has not yet set a 2027 budget. Hodge said commodity prices and the results of the current drilling program will influence capital allocation, including whether Pine Cliff drills more Pekisko or Glauconite wells.
Drilling program targets year-end production
Vice President of Exploitation Dan Keenan said Pine Cliff was drilling the second of two Glauconite wells on the same pad. He expected drilling to reach its target depth early the following week, with completion work beginning around the middle of November. The company hopes to test both wells and bring them on stream just before year-end.
After the Glauconite drilling, Pine Cliff plans to move to its Pekisko area and start a single well, with the aim of completing it and bringing it on early in the new year, Keenan said.
Keenan said the company’s Glauconite inventory would support roughly 10 years or slightly more of drilling at a pace of three net wells annually. He said that inventory gives Pine Cliff room to accelerate activity and could grow with additional mapping and drilling.
Hodge said the company would consider more Pekisko wells if oil prices remain near current levels. He also said Pine Cliff has close to 2 million acres, including areas where horizontal drilling has not been used.
Hedges support cash flow and drilling
Chief Financial Officer Kristopher Zack said Pine Cliff has used hedges to protect cash flow needed for its dividend and capital program. The company reported an average realized natural gas price of CAD 2.44 per thousand cubic feet in the third quarter, 56% above the AECO 5A daily average of CAD 1.56.
For 2027, Pine Cliff had hedged approximately 37% of its natural gas at CAD 2.82 per thousand cubic feet, compared with a current forward price of around CAD 2, Zack said. It had also hedged 41% of gross crude oil production at an average price of almost CAD 80.
Zack said the company expects to continue adding hedges where appropriate, partly to protect its initial drilling investment and the first year of cash flow from new wells.
Natural gas outlook hinges on demand and winter weather
Hodge said he remains positive on the longer-term outlook for natural gas, citing demand from liquefied natural gas facilities under construction in Canada and the United States. He argued that higher gas prices will be needed to justify production in dry gas areas that lack the liquids sought by producers.
In the nearer term, Hodge said winter weather and storage levels remain important to prices. A warmer-than-normal winter could leave storage elevated and pressure natural gas prices, while a larger-than-expected drawdown could support them.
He also pointed to LNG Canada’s operating levels as an uncertainty. Hodge said the facility has faced technical complications and has not been operating at full capacity, but he expects its owners to have strong incentives to increase operations.
CEO discusses share purchases
Asked why he had personally bought more Pine Cliff shares, Hodge said he saw more potential upside than downside at the current price, while acknowledging that he could not predict the stock’s direction.
Hodge estimated that a CAD 1 increase in AECO from CAD 2 to CAD 3 could add more than CAD 30 million in cash flow on a realized-price basis. He also said the company’s dividend was yielding close to 3% at the time of the call.
About Pine Cliff Energy (TSE:PNE)
Pine Cliff is a natural gas and crude oil company with a long-term view of creating shareholder value.
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