Q3 2026 Advantage Energy Ltd Earnings Call

October 30, 2026

Operator: Good morning, ladies and gentlemen, and welcome to the Advantage Energy Ltd. Third Quarter 2026 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Friday, 30 October 2026. I would now like to turn the conference over to Brian Bagnell. Please go ahead.

Speaker #1: Good morning, ladies and gentlemen, and welcome to the ADVANTAGE ENERGY LTD third quarter 2026 results conference call. At this time, all lines are in a a listen-only mode.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press *0 for the operator.

Speaker #1: This call is being recorded on Friday, October 30, 2026. I would now like to turn the conference over to Brian Bagnell. Please go ahead.

Brian Bagnell: Thank you, Joanna, and welcome everyone to today's conference call to discuss Advantage's third quarter results. Before we begin, I would like to remind listeners that our remarks today will include forward-looking information and references to specified financial measures. Advisories on those items are contained in our news release, MD&A, and annual information form, which are available on our website and on SEDAR+. I am joined today by Advantage's executive team, including John Festival, our interim CEO, and Craig Blackwood, our CFO. As usual, if you have any detailed questions, we would ask that you follow up with us individually after the call. With that, I will turn it over to John.

Speaker #2: Thank you, Joanna, and welcome, everyone, to today's conference call to discuss advantage's third quarter results. Before we begin, I'd like to remind listeners that our remarks today will include forward-looking information and references to specified financial measures.

Speaker #2: Advisories on those items are contained in our news release, MD&A, and annual information form, which are available on our website and on CDR+. I'm joined today by Advantage's executive team, including John Festival, our interim CEO, and Craig Blackwood, our CFO.

Speaker #2: And as usual, if you have any detailing questions, we'd ask that you follow up with us individually after the call. And with that, I'll turn it over to John.

John Festival: Thank you, Brian, and thanks to everyone for joining us this morning. The Q3 was an important one for Advantage. We delivered stronger production and lower cost following the completion of our major infrastructure program. We completed the Wembley disposition, we materially reduced debt, and began directing significant free cash flow to share repurchases. The Wembley transaction sharpened our asset base, significantly reduced our leverage, and accelerated our shareholder return strategy. At the same time, our operations continued to perform exceptionally well. Production increased 23% from the Q2 to approximately 87,000 BOE per day as the Progress Gas Plant ramped up and the Glacier Gas Plant returned to full operations following the planned turnaround in Q2. Our cost structure also improved meaningfully.

Speaker #3: Thank you, Brian. And thanks to everyone for joining us this morning. The third quarter was an important one for Advantage. We delivered stronger production and lower cost following the completion of our major infrastructure program.

Speaker #3: We completed the Wembley disposition, we materially reduced debt, and began directing significant free cash flow to share repurchases. The Wembley transaction sharpened our asset base significantly, reduced our leverage, and accelerated our shareholder return strategy.

Speaker #3: At the same time, our operations continue to perform exceptionally well. Production increased 23% from the second quarter to approximately $87,000 BOE per day as a progress gas plant ramped up and the Glacier Gas Plant returned to full operations following the planned turnaround in Q2.

Speaker #3: Our cost structure also improved meaningfully, greater utilization of owned infrastructure, a more focused asset base, and lower leverage reduced our operating transportation and G&A costs, and our interest costs on a per BOE basis.

John Festival: A greater utilization of owned infrastructure, a more focused asset base, and lower leverage reduced our operating, transportation, and G&A costs, and our interest costs on a per BOE basis. With our financial position significantly strengthened and the 2026 capital program substantially complete, all free cash flow is being directed to share repurchases, while we retain substantial flexibility to advance our liquids-rich inventory at Progress, Valhalla, and in the Charlie Lake. Craig will walk through our quarter in more detail. Craig, over to you.

Speaker #3: With our financial position significantly strengthened in the 2026 capital program substantially complete, all free cash flow is being directed to share repurchases, while we retain substantial flexibility in advance to advance our liquids-rich inventory at progress, Valhalla, and in the Charlie Lake.

Speaker #3: Now, Craig will walk through our quarter in more detail. Craig, over to you.

Craig Blackwood: Thanks, John. Before I begin, the financial and operating results I will discuss relate to Advantage Energy only and excludes Entropy Inc. Starting with the financial results for the quarter, adjusted funds flow was CAD 96.8 million, or CAD 0.58 per share. After exploration development expenditures of CAD 60.9 million, we generated CAD 35.9 million of free cash flow, which was dedicated to shareholder returns through share repurchases. We ended the quarter with just CAD 233 million of net debt. That was down 58% from the Q2. This reduction reflects the application of the proceeds from the Wembley disposition. With the balance sheet now substantially stronger, we have the capacity to execute our share repurchase strategy while continuing to invest selectively in high-quality liquids-rich opportunities. As John mentioned, our cost structure also improved significantly from the Q2. Operating expense declined 16% to CAD 4.86 per BOE.

Speaker #4: Thanks, John. Before I begin, the financial and operating results I'll discuss relate to Advantage Energy only and excludes entropy Inc. Starting with the financial results for the quarter, adjusted funds flow was $96.8 million or $58 per share.

Speaker #4: After exploration and development expenditures of $60.9 million, we generated $35.9 million of free cash flow, which was dedicated to shareholder returns through share repurchases.

Speaker #4: We ended the quarter with just $233 million of net debt. That was down 58% from the second quarter. This reduction reflects the application of the proceeds from the Wembley disposition, with the balance sheet now substantially stronger.

Speaker #4: We have the capacity to execute our share repurchase strategy. While continuing to invest selectively in high-quality liquids-rich opportunities. As John mentioned, our cost structure also improved significantly from the second quarter.

Speaker #4: Operating expense declined 16% to $486 per BOE, transportation expense declined 10% to $371 per BOE, and combined G&A and interest expense declined 41% to $1.73 per BOE.

Craig Blackwood: Transportation expense declined 10% to CAD 3.71 per BOE, and combined G&A and interest expense declined 41% to CAD 1.73 per BOE. These improvements reflect the increased utilization of Advantage-owned infrastructure, more focused asset base following the Wembley sale, and much lower leverage. Turning to operations, production for the Q3 averaged approximately 87,000 BOE a day, including 452 million cubic feet per day of natural gas and 11,623 barrels per day of liquids. Total production increased 23% from the Q2 following commissioning of the Progress gas plant and completion of the plant's 21-day turnaround at the Glacier gas plant, both of which occurred in the Q2. Liquids production declined 8%, and that was primarily due to the Wembley disposition and just natural declines. Well performance has remained strong.

Speaker #4: These improvements reflect the increased utilization of Advantage-owned infrastructure, more focused asset base, following the Wembley sale and much lower leverage. Turning to operations, production for the third quarter averaged approximately $87,000 BOEs a day, including 452 million cubic feet per day of natural gas and 11,623 barrels per day of liquids.

Speaker #4: Total production increased 23% from the second quarter following commissioning of the progress gas plant, and completion of the planned 21-day turnaround at the Glacier Gas Plant, both of which occurred in the second quarter.

Speaker #4: Liquids production declined 8%, and that was primarily due to the Wembley disposition and just natural declines. Well-performance has remained strong. At Glacier, the wells brought on production this year had achieved average IP30 rates of 16 million cubic feet per day of raw natural gas.

Craig Blackwood: At Glacier, the wells brought on production this year had achieved average IP30 rates of 16 million cubic feet per day of raw natural gas. At Valhalla, a three-well Montney pad that came on stream last quarter has now achieved an average IP90 rate of approximately 1,100 BOE per day per well, including 35% liquids. At Progress, we drilled two Montney wells from our 5-32 pad, offsetting a successful 16-36 well that we drilled back in 2019. These wells were completed in October with encouraging initial test results over 48 and 62 hours respectively. Both wells demonstrated higher length-normalized productivity than that 16-36 well. The 16-36 well had achieved an IP30 of more than 1,100 barrels per day of oil and liquids and has now produced approximately 265,000 barrels. The new wells were brought on production this week, and we expect to provide IP30 results in early December.

Speaker #4: At Valhalla, our three well monthly pad that came on stream last quarter has now achieved an average IP90 rate of approximately 1,100 barrels of equivalent per day per well, including a 35% liquids.

Speaker #4: At progress, we drilled two monthly wells from our 5 to 32 pad, offsetting a successful 16 of 36 wells that we drilled back in 2019.

Speaker #4: These wells were completed in October with encouraging initial test results, over 48 and 62 hours respectively. Both wells demonstrated higher length normalized productivity than that 16 of 36 well.

Speaker #4: The 16 of 36 well had achieved an IP30 of more than 1,100 barrels per day of oil and liquids and has now produced approximately 265,000 barrels.

Speaker #4: The new wells were brought on, production this week, and we expect to provide IP30 results in early December. Based on these initial results, though, we now plan to drill two additional progress monthly wells in the first quarter of 2027.

Craig Blackwood: Based on these initial results, we now plan to drill two additional Progress Montney wells in Q1 2027. In the Charlie Lake, we are now preparing to drill our first open-hole multilateral well during Q4, and that will be funded by the additional proceeds we received from the Wembley disposition. Industry results using this well design have demonstrated strong productivity with lower capital costs, which could further improve our returns from this important oil-weighted asset. Turning to hedging and market diversification, which remains an important component of our strategy, for Q4 2026, we have hedged approximately 46% of forecast natural gas production and 54% of forecast liquids production. For 2027, we have hedged 37% of forecast natural gas production and 34% of forecast liquids production. We have also hedged approximately 35% of forecast natural gas production in 2028 and 15% in 2029.

Speaker #4: In the Charlie Lake, we are now preparing to drill our first open-hole multilateral well during the fourth quarter. And that will be funded by the additional proceeds we received from the Wembley disposition.

Speaker #4: Industry results using this well design have demonstrated strong productivity with lower capital costs, which could further improve our returns from this important oil-weighted asset.

Speaker #4: Turning to hedging and market diversification, which remains an important component of our strategy, for the fourth quarter of 2026, we've hedged approximately 46% of forecast natural gas production, and 54% of forecast liquids production.

Speaker #4: For 2027, we've hedged 37% of forecast natural gas production, and 34% of forecast liquids production. And we've also hedged approximately 35% of forecast natural gas production in 2028, and 15% in 2029.

Craig Blackwood: Together with our market diversification, this reduces our direct AECO exposure to just 16% in 2027 and 8% in 2028. Finally, as many will know, the Department of Finance recently announced the proposed Productivity Mega Deduction, which allows most new capital investment and development expenditures deducted immediately rather than over time. Based on our current plans and commodity price assumptions, we would now expect that the proposed measure could defer Advantage becoming cash taxable from 2028 to 2031. With that, I will turn the call back to John.

Speaker #4: Together with our market diversification, this reduces our direct eco-exposure to just 16% in 2027 and 8% in 2028. Finally, as many will know, the Department of Finance recently announced the proposed productivity mega deduction, which allows most new capital investment and development expenditures to be deducted immediately rather than over time.

Speaker #4: Based on our current plans and commodity price assumptions, we would now expect the proposed measure to defer advantage becoming cash taxable from 2028 to 2031.

Speaker #4: With that, I'll turn the call back to John.

John Festival: Thanks, Craig. Advantage is in a very strong position. We are entering the final quarter of 2026 with a focused asset base, a substantially stronger balance sheet, a lower cost structure, and a deep inventory of liquids-rich development opportunities. Our focus is on maximizing shareholder returns. Following the Wembley disposition and the substantial completion of our 2026 capital program, all free cash flow is being dedicated to share repurchases. We expect this to allow us to repurchase up to 5% of our common shares outstanding in H2 2026 and up to an additional 10% in 2027. We have already repurchased approximately 6 million shares in 2026, representing 3.6% of the shares outstanding as of 31 December 2025. So we are well on our way to fulfilling our buyback commitment of CAD 300 million over 24 months. We expect to retain substantial financial flexibility after fulfilling this commitment.

Speaker #3: Thanks, Craig. Advantage is in a very strong position. We are entering the final quarter of 2026 with a focused asset base, a substantially stronger balance sheet, a lower cost structure, and a deep inventory of liquids-rich development opportunities.

Speaker #3: Our focus is on maximizing shareholder returns. Following the Wembley disposition and the substantial completion of our 2026 capital program, all free cash flow is being dedicated to share repurchases.

Speaker #3: We expect this to allow us to repurchase up to 5% of our common shares outstanding in the second half of '26 and up to an additional 10% in 2027.

Speaker #3: We've already repurchased approximately $6 million shares in 2026, representing 3.6 of the shares outstanding as of December 31, 2025. So we're well on our way to fulfilling our buyback commitment of $300 million over 24 months.

Speaker #3: We expect to retain substantial financial flexibility after fulfilling this commitment. That flexibility allows us to balance direct shareholder returns with disciplined investment in the liquids-rich monthly at progress and Valhalla, and in the Charlie Lake, all supported by our new owned and operated progress gas plant.

John Festival: That flexibility allows us to balance direct shareholder returns with disciplined investment in the liquids-rich Montney at Progress and Valhalla, and in the Charlie Lake, all supported by our new owned and operated Progress gas plant. Across these 3 areas, we have identified more than 1,000 drilling locations, including more than 300 currently identified as tier-1 locations. Together, these assets represent approximately half our total drilling inventory and provide a strong foundation for long-term liquids growth. We expect to release our formal 2027 budget in early December, together with an updated 3-year plan focused on developing the significant liquids-rich inventory. Finally, I want to provide a short update on our CEO search process. That process is in the late innings, and we expect to have resolution on this process shortly. I continue to be very impressed with the Advantage team.

Speaker #3: Across these three areas, we've identified more than 1,000 drilling locations, including more than 300 currently identified as Tier 1 locations. Together, these assets represent approximately half our total drilling inventory and provide a strong foundation for long-term liquids growth.

Speaker #3: We expect to release our formal 2027 budget in early December. Together with an updated three-year plan, focus on developing the significant liquids-rich inventory. Finally, I want to provide a short update on our CEO search process.

Speaker #3: That process is in the late innings, and we expect to have resolution on this process shortly. A continue to be very impressed with the advantage team.

John Festival: Despite having no permanent CEO over the last 4 months, the team has closed an accretive disposition and right-sized the balance sheet, returned to significant share buybacks, completed a complex plant turnaround, and created new optionality for liquids-rich development. In closing, I would like to thank our employees, contractors, our board, and shareholders for their continued support. With that, I will turn the call back to Brian.

Speaker #3: Despite having no permanent CEO over the last four months, the team has closed and accrued of disposition and right sides the balance sheet, returned to significant share buybacks, completed a complex plat turnaround, and created new optionality for liquids-rich development.

Speaker #3: In closing, I would like to thank our employees, contractors, our board, shareholders for their continued support. With that, I'll turn the call back to Brian.

Brian Bagnell: Thanks, John. Joanna, that concludes our prepared remarks, and we will go to the phone lines in the event there are any questions. Thank you.

Speaker #5: Thanks, John. And Joanna, that concludes our prepared remarks. And we'll go to the phone lines in the event there are any questions. Thank you.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. Again, please press star 1 now if you have any questions. Question on the line from Jamie Kubik with CIBC. Please go ahead.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touch-tone phone.

Speaker #1: You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the 2.

Speaker #1: And if you are using a speakerphone, please let the handset before pressing any keys. Again, please press star 1 now if you have any questions.

Speaker #1: Question on the line from Jamie Kubick with CIBC. Please go ahead.

Jamie Kubik: Yeah. Good morning, guys. Thanks for taking my question here. I am just curious a bit more on Progress. Can you talk about potential plans that that asset might have for capital spending in the future here, and how big the prospect could be in the portfolio given what you see on the recent wells? Thanks.

Speaker #5: Yeah. Good morning, guys. Thanks for taking my question here. I'm just curious a bit more on progress. Can you talk about potential plans at that asset might have for capital spending in the future here?

Speaker #5: And how big the prospect could be in the portfolio, given what you see on the recent wells? Thanks.

Darren Tisdale: Hi, Jamie. It is Darren Tisdale, VP Geoscience. We have identified a pretty robust inventory to follow up on after this first two wells, or most recent two wells. This is a result of six to seven years of delineation across the whole block, so we are now very confident we understand what is happening here. So, we do have a substantial drilling inventory. I will not comment specifically on numbers, but it is definitely bookended by our drilling and competitor drilling in the area.

Speaker #6: Hi, Jamie. It's Dan Tisdale. Sorry, VP Geoscience. We've identified a pretty robust inventory to follow up on after this first two wells or most recent two wells.

Speaker #6: This is a result of 6 to 7 years of delineation across the whole block. So we're now very confident we understand what's happening here.

Speaker #6: So we do have a substantial drilling inventory. I won't comment specifically on numbers, but it's definitely bookended by our drilling and competitor drilling in the area.

John Festival: Maybe just a comment on our 2027 plans. Of course, we are currently in our budget development cycle right now, so I guess you will have to wait till December, and we will have a three-year plan laid out. Clearly, we are kind of excited about the possibility at Progress. If you look at our IR deck, we had some 392 wells identified in that area, but it has been a while since we have been in the Progress area, so our views on that are clearly changing, and we are definitely, like I said, excited about the future for Progress.

Speaker #5: Maybe just a comment on our 2027 plans. Of course, we're currently in our budget development cycle right now. So I guess you'll have to wait to December, and we'll have a three-year plan laid out.

Speaker #5: But clearly, we're kind of excited about the possibility at progress. If you looked at our IR deck, we had some $392 wells identified in that area, but it has been a while since we've been in the progress area.

Speaker #5: So our views on that are clearly changing, and we're definitely, like I said, excited about the future for progress. Great. Thanks. And I guess maybe just to follow on with where oil prices are at relative to gas pricing, would you want to shift as much capital in 2027 into your liquids targets to try and maximize returns on that side, or how should we think about the, I guess, the liquids profile and advantage potentially changing next year?

Jamie Kubik: Great. Thanks. I guess maybe just to follow on with where oil prices are at relative to gas pricing, would you want to shift as much capital in 2027 into your liquid targets to try and maximize returns on that side? Or how should we think about the, I guess, the liquids profile and Advantage potentially changing next year?

John Festival: Yeah. The answer is yes. When you look on the gas side, our wells are top decile among our peers. We have long inventory on gas and so on. We do not need to be producing all that out with a CAD 1.80 or something like that next year. We are very cognizant on shareholder returns. You should expect that we will be leaning a lot more into liquids next year. We have Progress, our last wells at Valhalla have been great, and we are definitely excited about the Charlie Lake as well. It will be a lot more focused on liquids and moving that dial. We have a very significant foundation of gas, so moving to liquids can definitely be significant for us. If you look at us having 15% liquids, it is probably 55% of our revenue this year.

Speaker #6: Yeah. The answer is yes. You look when you look in the gas side, our wells are top desk among our peers. We have long inventory on gas and so on.

Speaker #6: We don't need to be producing all that out with $800 or $80 or something like that next year. So we're very cognizant on shareholder returns.

Speaker #6: So you should expect that we will be leaning a lot more into liquids next year. We have progress. Our last wells at Valhalla have been great.

Speaker #6: And we're definitely excited about the Charlie Lake as well. So it will be a lot more focused on liquids and moving that dial. Now, we have a very significant foundation of gas.

Speaker #6: So moving the liquids can be definitely significant for us. If you look at us having 15% liquids, well, it's probably 55% of our revenue this year.

John Festival: Every little bit of movement in percent is important and meaningful, and we can actually move the dial pretty significantly in that area. I will say stay tuned for our budget and our three-year plan.

Speaker #6: So every little bit of movement in percent is important and meaningful. And we can actually move the dial pretty significantly in that area. So I'll say stay tuned.

Speaker #6: For our budget and our three-year plan.

Jamie Kubik: Okay. That is all for me. Thank you.

Speaker #5: Okay. That's all for me. Thank you.

Operator: Thank you. We have no other questions on the phone lines. Please proceed.

Speaker #1: Thank you. We have no other questions on the phone lines. Please proceed.

Brian Bagnell: Thank you, everybody, for joining the call today. If you have any follow-up questions, please get in touch, but otherwise, have a good weekend.

Speaker #5: Thank you, everybody, for joining the call today. If you have any follow-up questions, please get in touch. But otherwise, have a good weekend.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.