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1. Company Snapshot

1.a. Company Description

PrairieSky Royalty Ltd.holds crude oil and natural gas royalty interests in Alberta, Saskatchewan, British Columbia, and Manitoba of Canada.It holds an interest in approximately 9.8 million acres with petroleum and/or natural gas rights; 8.5 million acres of gross overriding royalty interests; approximately 0.3 million acres of the GRT interests; and other acreage.


The company was incorporated in 2013 and is headquartered in Calgary, Canada.

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1.b. Last Insights on PSK

PrairieSky Royalty Ltd.'s recent performance was driven by record oil royalty production, reaching 14,376 barrels per day, an 8% increase over Q2 2024. Total royalty production averaged 26,457 BOE per day, a 4% increase over Q2 2024. Revenues totaled $123.6 million for Q2 2025. The company's Board of Directors declared a quarterly dividend of CDN $0.26 per common share, payable in cash on October 15, 2025. This dividend is designated as an "eligible dividend" for Canadian income tax purposes, providing shareholders with a steady income stream.

1.c. Company Highlights

2. PrairieSky Royalty Limited Shines with Record Royalty Oil Production

PrairieSky Royalty Limited reported a stellar financial performance in Q2 2025, with royalty production revenue totaling $111.2 million. This was driven by oil production generating $95.7 million of revenue, and natural gas and NGL revenue adding $15.5 million. Other revenues included $8.5 million from new leases. Funds from operations were $96.7 million or $0.41 per share, with a payout ratio of 63%. The company's actual EPS came out at $0.24, slightly beating analysts' estimates of $0.23. The company's dividend declaration of $61.2 million, or $0.26 per share, reflects a payout ratio of 63%, indicating a sustainable dividend policy.

Publication Date: Jul -17

📋 Highlights
  • Royal Oil Production Growth: Royalty oil production reached 14,376 barrels per day, up 8% from the same quarter last year.
  • Royalty Production Revenue: Royalty production revenue totaled $111.2 million, with oil production generating $95.7 million and natural gas and NGL revenue adding $15.5 million.
  • Funds from Operations: Funds from operations were $96.7 million or $0.41 per share, with a payout ratio of 63%.
  • Dividend and Share Repurchase: The company declared dividends of $61.2 million, $0.26 per share, and repurchased $2 million worth of stock.

Operational Highlights

The company's operational performance was impressive, with record royalty oil production of 14,376 barrels per day, up 8% from the same quarter last year. This growth was driven by the strong performance of three plays: the Clearwater (over 2,500 barrels per day), the Mannville stack (approaching 1,000 barrels per day), and the Duvernay (expected to double this year). According to management, "We continue to see strong growth from our Clearwater and Mannville stack plays, and we expect the Duvernay to double its production this year." This growth momentum is expected to continue, driving future revenue growth.

Financial Position and Capital Allocation

PrairieSky exited the quarter with net debt of $242 million and increased its credit facility by $250 million to $600 million. The company's capital allocation strategy remains focused on acquiring royalty interests and repurchasing stock. During the quarter, the company used excess funds to acquire royalty interests for $6.5 million and repurchase $2 million worth of stock. The company's valuation metrics suggest that it is trading at a reasonable multiple, with a P/E Ratio of 25.33 and an EV/EBITDA of 13.0. The dividend yield is attractive at 4.24%, with a free cash flow yield of 5.07%.

Growth Outlook and Valuation

Analysts estimate next year's revenue growth at 4.8%, which seems achievable given the company's strong operational performance. With a P/S Ratio of 10.96 and a P/B Ratio of 2.16, the company's valuation multiples are in line with its peers. The ROIC and ROE are 7.52% and 8.31%, respectively, indicating that the company is generating returns above its cost of capital. Overall, PrairieSky's strong operational performance, solid financial position, and attractive valuation multiples make it an attractive investment opportunity in the energy sector.

3. NewsRoom

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PrairieSky Royalty Declares Quarterly Dividend

Dec -02

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PrairieSky Royalty Posts Lower Third-quarter Profit, Revenue; Ian Dundas Appointed to Board

Oct -20

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PrairieSky Royalty Announces Conference Call for Q3 2025 Results

Oct -06

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PrairieSky Royalty (TSX:PSK): Assessing Valuation After Recent Share Price Momentum

Sep -28

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PrairieSky Royalty Declares Quarterly Dividend

Sep -08

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PrairieSky Royalty Q2 Profit Drops Despite Record Production on Lower Oil and Gas Prices

Jul -14

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PrairieSky Announces Second Quarter 2025 Results

Jul -14

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PrairieSky Royalty Announces Conference Call for Q2 2025 Results

Jul -02

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.86%)

6. Segments

Crude Oil

Expected Growth: 1.8%

PrairieSky Royalty Ltd.'s 1.8% growth in Crude Oil is driven by increasing drilling activities in the Viking and Bakken formations, coupled with improved well productivity and enhanced oil recovery techniques. Additionally, the company's low-decline asset base and strategic acreage acquisitions contribute to its steady growth.

Natural Gas

Expected Growth: 2.2%

PrairieSky Royalty Ltd.'s 2.2% growth in Natural Gas is driven by increasing demand from power generation and industrial sectors, coupled with rising production from existing wells and new drilling activities in the Viking and Mannville formations. Additionally, improved pricing and reduced operating costs contribute to the growth.

Natural Gas Liquid

Expected Growth: 1.9%

PrairieSky Royalty Ltd.'s 1.9% growth in Natural Gas Liquid (NGL) is driven by increasing drilling activities in the Viking and Mannville formations, strong demand from petrochemical and refining industries, and strategic partnerships to optimize production and transportation. Additionally, favorable weather conditions and improved operational efficiencies contribute to the growth.

7. Detailed Products

Royalty Production

PrairieSky Royalty Ltd. generates revenue through royalty production, which involves the collection of royalties from oil and gas producers who operate on the company's mineral title lands.

Leasing

PrairieSky offers leasing opportunities to oil and gas producers, allowing them to access the company's vast mineral title lands for exploration and production.

Freehold Royalties

PrairieSky owns a significant portfolio of freehold royalties, which provide a steady stream of revenue through royalty payments from oil and gas producers.

Working Interest

PrairieSky participates in working interest partnerships with oil and gas producers, providing capital and expertise to develop oil and gas resources.

8. PrairieSky Royalty Ltd.'s Porter Forces

Forces Ranking

Threat Of Substitutes

PrairieSky Royalty Ltd. has a diversified portfolio of oil and natural gas assets, which reduces the threat of substitutes.

Bargaining Power Of Customers

PrairieSky Royalty Ltd. has a diverse customer base, which reduces the bargaining power of individual customers. However, the company's reliance on a few large customers increases the bargaining power of these customers.

Bargaining Power Of Suppliers

PrairieSky Royalty Ltd. has a strong bargaining position with its suppliers due to its large scale of operations and diversified portfolio of assets.

Threat Of New Entrants

The oil and gas industry has high barriers to entry, including significant capital requirements and regulatory hurdles, which reduces the threat of new entrants.

Intensity Of Rivalry

The oil and gas industry is highly competitive, with many established players. However, PrairieSky Royalty Ltd.'s diversified portfolio and strong operational capabilities help to mitigate the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 6.37%
Debt Cost 12.13%
Equity Weight 93.63%
Equity Cost 12.97%
WACC 12.92%
Leverage 6.80%

11. Quality Control: PrairieSky Royalty Ltd. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
PrairieSky Royalty

A-Score: 6.5/10

Value: 3.0

Growth: 5.7

Quality: 8.6

Yield: 8.0

Momentum: 4.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Northern Oil and Gas

A-Score: 5.8/10

Value: 8.7

Growth: 5.4

Quality: 6.4

Yield: 9.0

Momentum: 1.5

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Magnolia Oil & Gas

A-Score: 5.8/10

Value: 6.0

Growth: 6.6

Quality: 7.1

Yield: 5.0

Momentum: 3.5

Volatility: 6.7

1-Year Total Return ->

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Stock-Card
Murphy Oil

A-Score: 5.4/10

Value: 7.7

Growth: 4.6

Quality: 6.0

Yield: 7.0

Momentum: 3.0

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
MEG Energy

A-Score: 5.3/10

Value: 6.3

Growth: 7.0

Quality: 7.0

Yield: 1.0

Momentum: 5.0

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Ovintiv

A-Score: 5.1/10

Value: 7.4

Growth: 4.1

Quality: 5.2

Yield: 5.0

Momentum: 4.0

Volatility: 5.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

27.84$

Current Price

27.84$

Potential

-0.00%

Expected Cash-Flows