PrairieSky Q2 Results: Record Production, Oil Royalty Growth

PrairieSky Royalty Ltd. (TSX: PSK) posted a record quarterly production number in the second quarter, with total average royalty output reaching 27,479 barrels of oil equivalent per day. That was up more than 1,000 BOE/d from a year earlier. Revenue rose to $167.1 million, and funds from operations hit $133.1 million, or 57 cents a share.

The Calgary-based company, which owns a portfolio of fee lands and gross overriding royalties across Western Canada, benefited from strong WTI crude oil prices that averaged $92.80 a barrel during the quarter. That helped offset a modest increase in costs. PrairieSky declared a dividend of 26.5 cents a share, representing a payout ratio of 46%, and used the remaining cash flow to pay down debt. Net debt fell 33% year to date to $186.6 million.

The volume gains came from the company's core growth plays. Clearwater heavy oil royalty production averaged over 3,050 barrels a day in the quarter, a 27% increase from Q2 2025. Roughly 60% of that output is supported by waterflood operations, which helps slow natural decline. Mannville Stack heavy oil production averaged about 1,050 barrels a day, up 19%. Natural gas liquids volumes rose 15%, driven by activity in the Montney and Duvernay formations.

Oil royalty production, including light oil, reached a record 14,740 barrels a day, up 3% from a year earlier. The company said the increase was led by the Clearwater heavy oil play and the West Shale Basin Duvernay light oil play. The Duvernay, in particular, saw 51 wells spud in the first half of 2026, nearly matching the 55 drilled in all of 2025. PrairieSky said the combination of incremental activity, anticipated high-impact Duvernay completions, and an expected ramp-up in thermal heavy oil volumes positions it for further oil royalty growth in the second half.

Third-party operators spud 178 wells on PrairieSky's royalty acreage during Q2, one of the busiest second quarters on record. That compared with 117 wells a year earlier. The average royalty rate on those wells was 5.9%, up from 4.8% in Q2 2025.

Of the total, 168 were oil wells. Clearwater led with 49, followed by the Viking at 41, the Mannville at 23, the Duvernay at 22, and the Mississippian at 15. Eighteen additional oil wells were spud elsewhere in Alberta and Saskatchewan. Of the 10 natural gas wells, five were in the Mannville and three in the Duvernay. Two were in the Montney.

Leasing activity also remained strong. PrairieSky signed 57 new leasing arrangements with 46 separate counterparties during Q2, earning $6.4 million in bonus consideration. The company said the elevated leasing reflects continued interest from operators in its land base, which spans multiple resource plays.

PrairieSky completed minor acquisitions totaling $1.8 million for incremental royalty interests targeting light oil in the Basal Quartz and heavy oil in the Clearwater and Mannville plays. The company's focus remains on reducing debt, and it has now cut net debt by $89.9 million, or 33%, during the first six months of the year.

PrairieSky said current well licensing supports expectations for continued third-party activity through the second half of 2026. Crude prices have moderated from the $92.80 average in Q2, with WTI trading around $85 a barrel in recent sessions.

The next scheduled catalyst for PrairieSky is third-quarter results, expected in October.