Advantage Energy (TSE:AAV) used its year-end 2025 results conference call to highlight record operational performance, strong capital efficiencies, and progress toward long-term strategic objectives, while emphasizing a cautious approach to capital allocation amid volatile commodity markets.
Record production and liquids growth in 2025
President and CEO Mike Belenkie said 2025 was defined by the strongest operational outcomes in the company’s 25-year history. Annual production averaged 78,267 BOEs per day, which management characterized as a company record. Belenkie attributed the performance to strong well results across the asset base.
Cash flow, capital spending, and debt reduction
Advantage reported CAD 382 million in adjusted funds flow, or CAD 2.29 per share. The company applied CAD 76 million to debt reduction and CAD 287.7 million to development capital. Management said the results reflected continued focus on capital efficiency, cost control, and maximizing cash flow per share.
Belenkie also highlighted reserve economics, stating the company generated a 2.1 times recycle ratio on proved reserves despite what he described as a very weak commodity price environment.
Operational performance and Montney well results
On drilling results, management said the company’s Montney program delivered the top nine Alberta Montney gas wells of 2025. Belenkie said the company believes it drilled the most productive well ever in the Alberta Montney, citing an IP30 rate of 4,567 BOEs per day. He added that every gas well drilled during the year was in the “top 25 list,” while also emphasizing that corporate-average performance is what drives financial results.
Managing low gas prices through hedging, marketing, and curtailments
Belenkie said that despite one of the worst AECO pricing periods in history, Advantage generated significant free cash flow, supported by hedging, downstream market diversification, liquids exposure, and price-sensitive production management. He described a strategy of curtailing production during extremely low prices, saying the company curtailed up to 300 million cubic feet per day of gas at times, averaging 2,600 BOEs per day of dry gas shut-in on an annualized basis.
Management said the curtailments reduced declines and depletion, and improved adjusted funds flow by avoiding operating costs and deferring production until pricing improved. Belenkie summarized the approach as: “If it won’t increase our cash flow, we won’t produce it.”
On marketing, the company said it further reduced exposure to AECO by adding nearly 60 million cubic feet per day of long-term physical transportation service to downstream markets, including Ventura and Dawn. Advantage also said it has hedged a meaningful portion of production out through 2028 to reduce cash flow volatility.
2026 outlook: Progress plant, higher output, disciplined capital allocation
Looking ahead, management said 2026 is expected to be a pivotal year. The company’s new 75 million cubic feet per day Progress gas plant is on track to be commissioned in Q2, following completion of the Progress and Glacier turnaround work. Once those activities are complete, the company expects a period of “highly efficient” capital spending and accelerating free cash flow.
Belenkie said that beginning in Q3 2026, production is expected to average 90,000 BOEs per day through the end of 2027, which he described as six quarters at roughly that level. He added that no additional infrastructure spending is required to support this program, and that operating costs are expected to trend lower as more volumes move through owned infrastructure.
Management reiterated a disciplined approach to growth and capital spending. Belenkie said the company recently reduced its 2026 capital budget by CAD 20 million, while keeping production guidance unchanged due to continued strong well performance. Beyond 2027, he said Advantage has options for efficient future growth, including modular expansions of the Progress plant and the company’s currently idle Caribou gas plant, which he said has 100 million cubic feet per day of capacity near development-ready Conroy assets in Northeast British Columbia. The company said it plans to announce 2028–2030 development plans once commodity prices are more stable, emphasizing it is not interested in growing “for the sake of growth” and that any future growth would be funded by cash flow and justified by full-cycle returns.
Debt reduction remains a top priority, with the company planning to allocate “substantially all” free cash flow to debt reduction until it reaches a target debt range of CAD 400 million to CAD 500 million. Management said it expects to reach that range in the second half of 2026, after which the company intends to balance further debt reduction with opportunistic share buybacks.
Finally, Belenkie provided an update on Entropy, stating that construction of the Glacier Phase 2 CCS project is expected to be completed within months, around mid-2026. He said the project is fully funded by Brookfield and the Canada Growth Fund, and that Advantage is not contributing capital. He added that Advantage’s working interest is now just under 50%, and the company expects to benefit as a partial owner from EBITDA generated by the project.
The call concluded without any analyst questions during the Q&A session.
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.
