Earnings call: PrairieSky Royalty reports growth and dividend increase

PrairieSky Royalty Ltd (PSK.TO), a Canadian land management company, highlighted its Annual and Fourth Quarter 2023 Financial Results. The company reported a 6% organic oil growth and a significant reduction in net debt, alongside a dividend increase. They drilled 197 wells and secured 202 new leasing arrangements, amounting to $26 million in bonus consideration. PrairieSky emphasized their focus on cost control and high-return acquisitions for the upcoming year and highlighted the potential in the East Shale Basin and Southeastern Alberta.

Key Takeaways

• PrairieSky achieved a 6% organic oil growth and drilled 197 wells in 2023.
• The company entered into 202 new leasing arrangements, with $26 million in bonus consideration.
• They announced a 4% increase in their annual dividend to $1 per share.
• PrairieSky’s net debt decreased by 30% from December 2022 to December 2023.
• Plans for 2024 include cost control, leasing undeveloped land, and executing high-return acquisitions.
• The company prioritizes debt retirement over share buybacks.
• Positive results were seen in wells estimated to have produced over 500,000 barrels each.
• PrairieSky acquired $14 million worth of fee mineral title in Southeastern Alberta and spent $8 million on oil sands leases in the Manville stack.

Company Outlook

• PrairieSky plans to focus on controlling costs, compliance, leasing their undeveloped land base, and executing high-return acquisitions in 2024.
• They anticipate growth opportunities in the West Shale Basin, East Shale Basin, and through recent acquisitions in Southeastern Alberta and the Manville stack.

Bearish Highlights

• The company discussed the impact of inflation on operating costs and the truncation of well tails.
• They noted that reducing operating costs is essential for future growth.

Bullish Highlights

• PrairieSky reported strong leasing activity and interest in its large seismic database from operators.
• They highlighted improvements in well performance and cost efficiencies.
• The company is excited about the potential for light oil and liquids-rich solution gas in the East Shale Basin.

Misses

• No specific misses were discussed in the call summary provided.

Q&A Highlights

• The value of PrairieSky’s shares was emphasized, with share buybacks being a priority after debt retirement.
• There is potential for leasing arrangements in the West and East Shale Basins.
• The acquisition of land in Southeastern Alberta and the Manville stack is expected to contribute to double-digit growth.

PrairieSky Royalty Ltd has demonstrated a strong financial performance in 2023, with notable organic growth and an increased dividend for shareholders. The company’s strategic focus on cost management and asset development, particularly in the shale basins and Southeastern Alberta, positions it for continued success in the coming year. With a clear priority on debt reduction and prudent capital allocation, PrairieSky looks to build on its solid foundation and leverage its resources for future growth.