PrairieSky Royalty (TSE:PSK) outlined what management described as a “successful year on all fronts” during its fourth-quarter and year-end 2025 results call, pointing to record oil royalty production, growing reserves, and continued third-party drilling activity across its land base. The company also announced a dividend increase and discussed how shifting activity in faster-growing plays is contributing to more quarter-to-quarter variability in reported volumes.
Record oil production and reserves growth in 2025
President and CEO Andrew Phillips said PrairieSky delivered 6% oil growth in 2025, reaching a record 13,940 royalty oil barrels per day, and expects further records in 2026. Phillips also said proved developed producing (PDP) reserves grew “alongside our oil production” at over 7% year-over-year.
Drilling activity highlights: Clearwater, Mannville Stack, and Duvernay
Vice President, Geosciences and Capital Markets Mike Murphy said 2025 drilling activity was strong, with an estimated C$2 billion of gross third-party capital spent on PrairieSky lands. Murphy said this represented about 8.3% of total industry conventional capital spending in the basin, up from 6.9% in 2024.
Murphy highlighted increased activity across key oil growth plays:
- Clearwater spuds up 9% year-over-year
- Mannville Stack up 11%
- Duvernay up 67%
He also pointed to the continuing rise of multilaterals, with 80 multilateral wells spud in the fourth quarter and 285 in all of 2025. Murphy said multilaterals represented about 40% of all drilling activity on PrairieSky lands, up from 36% in 2024.
In the Clearwater, Murphy said PrairieSky now estimates half of its Clearwater volumes are under waterflood support, contributing to a “highly sustainable, low-decline production base.” Improved recovery contributed to a 42% increase in Clearwater P reserve volumes year-over-year. Murphy said Clearwater royalty oil production has grown at a 20% compound annual growth rate since 2022, and management expects double-digit growth again in 2026.
In the Duvernay, Murphy said royalty production increased 90% year-over-year, driven primarily by activity in the West Shale Basin. With sizable third-party operator budgets there in 2026, he said the Duvernay is expected to remain PrairieSky’s fastest-growing play next year.
Financial results, liquids mix, and tax position
Kazeil reported royalty revenue of C$102.9 million for the quarter and C$441.7 million for the year, with 94% of royalty revenue coming from liquids. “Other revenues” contributed an additional C$8.8 million in the quarter and C$36.5 million for the year, which she said was driven by C$22.6 million in bonus consideration.
Funds from operations totaled C$80.5 million (or C$0.35 per share) in the fourth quarter and C$353 million (or C$1.50 per share) for 2025.
On product mix, Kazeil said total royalty production was 64% liquids for the year. She also noted stronger NGL volumes in the fourth quarter, with 17% growth to 2,915 barrels per day, driven by Duvernay and Montney volumes. Pentanes and condensate made up about 35% (or more than 1,000 barrels per day) of NGL volumes, which she said positively affected realized NGL pricing. With the fourth-quarter performance, NGL royalty production grew 5% year-over-year.
PrairieSky entered 2026 with C$1.18 billion of tax pools, which Kazeil said can shelter future taxable income at approximately 10% per year. She said this implies the first C$118 million of cash flow in 2026 is tax-free, with incremental cash flow taxed at 23.5%. Kazeil also said PrairieSky prepared its 2025 U.S. tax information, and that 2025 dividends will be 44% return of capital for U.S. investors.
Capital returns, acquisitions, and 2026 outlook themes
Phillips said PrairieSky executed on C$100 million of acquisitions in 2025, canceled 2.6% of its outstanding shares, and paid C$243.4 million in dividends.
PrairieSky also announced a 2% increase to its annual dividend to C$1.06 per share. The first quarterly dividend under the higher rate will be C$0.265, payable effective March 31, 2026.
In response to a question about buybacks, Phillips said PrairieSky plans to repurchase shares after blackout periods and that management views the shares as offering “good value” across current trading ranges when assessing the business and terminal values.
On 2026 production characteristics, Phillips said Duvernay growth is expected to be strong, but he cautioned that the timing of new pads coming onstream can create “volatility” in quarterly reported volumes. He told analysts that PrairieSky saw a substantial pad come on in the third quarter that drove a spike, followed by high declines that were visible in fourth-quarter results. He said similar patterns could continue as more Duvernay volumes are added.
Phillips also addressed royalty rates, noting the average royalty rate on wells spud in the fourth quarter was down roughly 0.2%, but he expects the annual average to remain “north of 6%,” with variability depending on drilling seasonality and well locations.
On specific plays, Phillips said Mannville Stack royalty volumes have grown from about 200 net royalty barrels in 2022 to just under 1,000, with continued programs by private operators and planned activity from Canadian Natural Resources on licensed wells that have not yet come onstream. He also said the Basal Quartz play was added as a segregated play in PrairieSky’s corporate presentation for the first time, and that PrairieSky expects “pretty strong growth” there, citing operator quality, economics, and processing capacity, while describing it as a light-oil play with liquids-rich gas.
About PrairieSky Royalty (TSE:PSK)
PrairieSky Royalty Ltd is the owner of subsurface mineral rights on a variety of royalty properties in western Canada. The company encourages third parties to develop these properties, while also seeking additional petroleum and natural gas royalty assets. Once PrairieSky has given a third party the right to explore, develop, or produce on its properties, the company collects royalty revenue from the development of petroleum and natural gas. Property arrangements can be contracted as lease issuances, farmouts, drilling commitments, or seismic option agreements.
