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Advantage Energy Ltd. — Management Reports 2025
May 1, 2025
46455_rns_2025-05-01_e57fcc74-fb81-42fe-843c-0e6e0afa9a40.pdf
Management Reports
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CONSOLIDATED MANAGEMENT’S DISCUSSION & ANALYSIS For the three months ended March 31, 2025 and 2024
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CONSOLIDATED MANAGEMENT’S DISCUSSION & ANALYSIS
The following Management’s Discussion and Analysis ("MD&A"), dated as of May 1, 2025, provides a detailed explanation of the consolidated financial and operating results of Advantage Energy Ltd. ("Advantage", the "Corporation", "us", "we" or "our") for the three months ended March 31, 2025 and should be read in conjunction with the unaudited condensed consolidated financial statements for the three months ended March 31, 2025 and the audited consolidated financial statements for the year ended December 31, 2024 (together, the "consolidated financial statements"). The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards" or "IFRS"), representing generally accepted accounting principles ("GAAP") for publicly accountable enterprises in Canada. All references in the MD&A and consolidated financial statements are to Canadian dollars unless otherwise indicated. All dollar per boe figures herein forth only include the results of Advantage’s natural gas and liquids operations and exclude the results of its subsidiary, Entropy Inc. ("Entropy").
This MD&A contains specified financial measures such as non‐GAAP financial measures, non‐GAAP ratios, capital management measures, supplementary financial measures and forward‐looking information. Readers are advised to read this MD&A in conjunction with both the "Specified Financial Measures" and "Forward‐Looking Information and Other Advisories" sections found at the end of this MD&A.
| Financial Highlights ($000, except as otherwise indicated) |
Three months ended March 31 2025 2024 |
|---|---|
| Financial Statement Highlights Natural gas and liquids sales Net income (loss) and comprehensive income (loss)(3) per basic share(2)(3) per diluted share(2)(3) Basic weighted average shares (000) Diluted weighted average shares (000) Cash provided by operating activities Cash provided by financing activities Cash used in investingactivities |
221,790 135,897 (29,024) 23,163 (0.17) 0.14 (0.17) 0.14 166,821 160,444 166,821 164,129 122,949 67,374 11,670 11,883 (107,919) (79,427) |
| Other Financial Highlights Adjusted funds flow(1) per basic share(1)(2) per diluted share(1)(2) Net capital expenditures(1) Free cash flow – surplus (deficit)(1) Bank indebtedness Net debt(1)(4) |
118,642 65,393 0.71 0.41 0.71 0.40 113,987 80,134 655 (14,741) 446,333 238,578 723,247 279,963 |
(1) Specified financial measure which is not a standardized measure under IFRS and may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures" for the composition of such specified financial measure, an explanation of how such specified financial measure provides useful information to a reader and the purposes for which Management of Advantage uses the specified financial measure, and/or where required, a reconciliation of the specified financial measure to the most directly comparable IFRS measure.
(2) Based on basic and diluted weighted average shares outstanding.
(3) Net income (loss) and comprehensive income (loss) attributable to Advantage Shareholders.
(4) As at March 31, 2025, net debt was $723.2 million, consisting of $603.3 million with Advantage and $119.9 million with Entropy. Entropy funds its projects by issuing unsecured debentures to third‐party investors with committed capital. The unsecured debentures are non‐ recourse to Advantage, which does not provide any financing to Entropy.
Advantage Energy Ltd. ‐ 1
| Operating Highlights (1) | Three months ended | Three months ended |
|---|---|---|
| March 31 | ||
| 2025 | 2024 | |
| Operating | ||
| Production | ||
| Crude oil (bbls/d) | 8,487 | 2,630 |
| Condensate (bbls/d) | 1,023 | 1,231 |
| NGLs(bbls/d) | 3,763 | 2,591 |
| Total liquids (bbls/d) | 13,273 | 6,452 |
| Naturalgas(Mcf/d) | 422,998 | 357,410 |
| Totalproduction(boe/d) | 83,773 | 66,020 |
| Average realized prices (including realized derivatives) | ||
| Natural gas ($/Mcf) | 3.29 | 2.86 |
| Liquids($/bbl) | 86.53 | 80.21 |
| Operating Netback ($/boe)(2) | ||
| Natural gas and liquids sales | 29.42 | 22.62 |
| Realized gains on derivatives | 0.87 | 0.70 |
| Processing and other income | 0.13 | 0.30 |
| Royalty expense | (2.80) | (1.52) |
| Operating expense | (4.76) | (4.08) |
| Transportation expense | (4.06) | (4.23) |
| Operatingnetback | 18.80 | 13.79 |
(1) Operating highlights are for Advantage’s natural gas and liquids operations.
(2) Specified financial measure which is not a standardized measure under IFRS and may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures" for the composition of such specified financial measure, an explanation of how such specified financial measure provides useful information to a reader and the purposes for which Management of Advantage uses the specified financial measure, and/or where required, a reconciliation of the specified financial measure to the most directly comparable IFRS measure.
Advantage Energy Ltd. ‐ 2
2025 Guidance
In the first quarter of 2025, the Canadian oil and gas sector, along with other industries, faced uncertainty in respect of the constantly evolving tariff measures introduced by the United States. Although a 10% tariff on Canadian energy imports was initially announced, the U.S. government fully exempted these commodities from tariffs as of April 2, 2025. However, these exemptions are potentially subject to change, and the Corporation will continue to monitor developments in U.S. trade policy and assess any potential impacts on its operations and financial performance. While such trade policy volatility could influence Canadian commodity price differentials, the Corporation’s current production and cost estimates remain unchanged.
The table below summarizes Advantage’s 2025 guidance as at March 31, 2025:
| Forward Looking Information(1) | Guidance(3) |
|---|---|
| Cash Used in Investing Activities ($ millions)(2) | 270 to 300 |
| Production | |
| Total Production (boe/d) | 80,000 to 83,000 |
| Natural Gas (%) | 84 to 85 |
| Crude Oil and Condensate (%) | 11 to 12 |
| NGLs (%) | ~4 |
| Expenses | |
| Royalty Rate (%) | 8 to 10 |
| Operating Expense ($/boe)(4) | 5.20 to 5.90 |
| Transportation Expense ($/boe)(4) | 3.95 to 4.25 |
| G&A Expense ($/boe)(4) | 0.75 to 0.85 |
| Finance Expense ($/boe)(4) | 1.50 to 1.95 |
(1) Forward‐looking statements and information representing Management estimates. Please see "Forward‐Looking Information and Other Advisories".
(2) Cash Used in Investing Activities is the same as Net Capital Expenditures as no change in non‐cash working capital is assumed between years and other differences are immaterial.
(3) Guidance numbers are for Advantage Energy Ltd. only and exclude its subsidiary, Entropy Inc.
(4) $/boe are specified financial measures which may not be comparable to similar specified financial measures used by other entities. Please see “Specified Financial Measures”.
Advantage Energy Ltd. ‐ 3
Production
| Production | |
|---|---|
| Average Daily Production | Three months ended March 31 % 2025 2024 **Change ** |
| Crude oil (bbls/d) Condensate (bbls/d) NGLs(bbls/d) |
8,487 2,630 223 1,023 1,231 (17) 3,763 2,591 45 |
| Total liquids (bbls/d) Naturalgas(Mcf/d) |
13,273 6,452 106 422,998 357,410 18 |
| Totalproduction(boe/d) | 83,773 66,020 27 |
| Liquids (% of total production) Natural gas (% of total production) |
16 10 84 90 |
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16,000 Average Daily Production 450
14,000 400
350
12,000
300
10,000
250
8,000
6,000 340 363 357 356 12,820 369 11,885 389 13,273 423 200
150
273
4,000 7,577 7,863 7,141 100
6,355 6,452
2,000 50
‐ 0
Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Q3 24 Q4 24 Q1 25
Liquids (bbls/d) Natural gas (MMcf/d)
bbls/d MMcf/d
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For the three months ended March 31, 2025, Advantage delivered record total production averaging 83,773 boe/d, increasing 27% compared to the same period of the prior year. Production increased significantly in the first quarter of 2025 compared to the same period in 2024, primarily due to the acquisition of high‐quality Charlie Lake and Montney assets in June 2024 (the “Acquired Assets”). The Acquired Assets were successfully integrated into Advantage's operations and contributed meaningfully to both natural gas and liquids volumes and growth.
Natural gas production for the three months ended March 31, 2025, averaged 423.0 MMcf/d, an increase of 18% compared to the same period of the prior year. Advantage’s natural gas production increased as a result of the Acquired Assets and continued development at Glacier, with 2.0 net Montney wells brought on production in the quarter (see "Cash Used in Investing Activities and Net Capital Expenditures").
Liquids production for the three months ended March 31, 2025, averaged 13,273 bbls/d, an increase of 106% compared to the same period of the prior year largely due to the Acquired Assets, accompanied with the Corporation bringing 5.8 net Charlie Lake wells on production, which delivered production rates exceeding historical type curves (see "Cash Used in Investing Activities and Net Capital Expenditures").
Advantage expects total annual production to be between 80,000 and 83,000 boe/d in 2025 based on the Corporation’s planned 2025 capital program (see "2025 Guidance").
Advantage Energy Ltd. ‐ 4
Commodity Prices and Marketing
| Commodity Prices and Marketing | |||
|---|---|---|---|
| Three months ended | |||
| March | 31 | % | |
| Average Realized Prices(2) | 2025 | 2024 | **Change ** |
| Natural gas | |||
| Excluding derivatives ($/Mcf) | 3.16 | 2.73 | 16 |
| Including derivatives ($/Mcf) | 3.29 | 2.86 | 15 |
| Liquids | |||
| Crude oil ($/bbl) | 94.64 | 91.89 | 3 |
| Condensate ($/bbl) | 97.72 | 94.30 | 4 |
| NGLs ($/bbl) | 59.48 | 61.65 | (4) |
| Total liquids excluding derivatives ($/bbl) | 84.91 | 80.21 | 6 |
| Total liquids including derivatives ($/bbl) | 86.53 | 80.21 | 8 |
| Average Benchmark Prices | |||
| Natural gas(1) | |||
| AECO daily ($/Mcf) | 2.16 | 2.51 | (14) |
| Empress daily ($/Mcf) | 2.46 | 2.59 | (5) |
| Henry Hub ($US/MMbtu) | 3.66 | 2.24 | 63 |
| Emerson daily ($US/MMbtu) | 2.92 | 2.30 | 27 |
| Dawn daily ($US/MMbtu) | 3.86 | 2.26 | 71 |
| Chicago Citygate ($US/MMbtu) | 3.95 | 2.85 | 39 |
| Liquids | |||
| WTI ($US/bbl) | 71.42 | 76.95 | (7) |
| MSW Edmonton ($/bbl) | 95.36 | 92.15 | 3 |
| Average Exchange rate($US/$CAD) | 0.6968 | 0.7414 | (6) |
(1) GJ converted to Mcf on the basis of 1 Mcf = 1.055056 GJ and 1 Mcf = 1 MMbtu.
(2) Average realized prices are considered specified financial measures which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
Natural gas
Advantage’s realized natural gas price excluding derivatives for the three months ended March 31, 2025, was $3.16/Mcf, a 16% increase compared to the same period of the prior year. This increase was attributed to higher natural gas benchmark prices in markets outside of Alberta where Advantage has market diversification exposure and physically delivers natural gas. Most North American natural gas benchmark prices have increased in the first quarter of 2025 compared to 2024 largely due to strong North American natural gas demand, liquified natural gas demand, and a colder winter than the prior year. However, AECO and Empress prices remained low in the first quarter of 2025 due to robust supply as compared to demand, and limited export capacity to other markets.
Advantage’s natural gas exposure consists of the AECO, Empress, Emerson, Dawn, and Chicago markets. Additionally, the Corporation delivers 25,000 MMbtu/d under a long‐term natural gas supply agreement and receives a PJM electricity‐based spark‐spread price, less Alliance tolls. Advantage incurs additional transportation expense to deliver production beyond AECO to the Empress, Emerson, Dawn and Chicago markets (see "Transportation Expense").
Advantage Energy Ltd. ‐ 5
Commodity Prices and Marketing (continued)
The following table outlines the Corporation’s 2025 forward‐looking natural gas market exposure, and three months ended March 31, 2025, actual natural gas market exposure, excluding hedging.
| Sales Markets | Three months ended March 31, 2025 Forward‐looking 2025(2) |
|---|---|
| Production (MMcf/d)(1) Percentage of Natural Gas Production (%) Effective production (MMcf/d) (1) Percentage of Natural Gas Production (%) |
|
| AECO AECO Other(4) Empress Emerson Dawn Chicago PJMpowerprice(5) |
145.0 35% 170.7 42% 56.9 13% 28.4 7% 80.1 19% 88.4 21% 43.1 10% 30.9 7% 52.7 12% 52.7 13% 20.2 5% 17.1 4% 25.0 6% 25.0 6% |
| Total | 423.0 100% 413.2(3) 100% |
(1) All volumes contracted converted to Mcf on the basis of 1 Mcf = 1.055056 GJ and 1 Mcf = 1 MMbtu.
(2) Natural gas market exposure based on contracts in‐place at March 31, 2025.
(3) Represents the midpoint of our 2025 guidance for natural gas production volumes (see News Release dated November 30, 2024).
(4) Transactions that are priced at AECO but may include either a premium or discount to AECO as negotiated with counterparties.
(5) Sales are based upon a spark‐spread price, providing Advantage exposure to PJM power prices, back‐stopped with a natural gas price collar.
Liquids
Advantage’s realized liquids price excluding derivatives for the three months ended March 31, 2025, was $84.91/bbl, an increase of 6% compared to the same period of the prior year due to a higher proportion of Advantage’s liquids production being comprised of crude oil, condensate, and pentanes from the Acquired Assets, accompanied by the positive impact of a weaker Canadian dollar that partially offset the lower WTI price. The price that Advantage receives for crude oil and condensate production is largely driven by global supply and demand and the Edmonton light sweet oil and condensate price differentials. Approximately 83% of our liquids production is comprised of crude oil, condensate and pentanes, which generally attract higher market prices than other liquids. The quality of our liquids production has increased significantly from the prior year due to the Acquired Assets.
Advantage Energy Ltd. ‐ 6
Natural Gas and Liquids Sales
| Natural Gas and Liquids Sales | |
|---|---|
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
| Crude oil Condensate NGLs |
72,287 21,992 229 8,997 10,564 (15) 20,143 14,536 39 |
| Liquids Natural gas |
101,427 47,092 115 120,363 88,805 36 |
| Natural gas and liquids sales per boe |
221,790 135,897 63 29.42 22.62 30 |
Natural Gas and Liquids Sales
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$221.8
$163.5
$147.1 46%
$140.7 $135.9 $139.8
$107.2 $104.1
39% 40% 35% 55%
41% 71%
53%
54%
61% 60% 65%
59% 45%
47% 29%
Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Q3 24 Q4 24 Q1 25
Natural gas sales (% of Total) Liquids sales (% of Total) Total ($ millions)
($ millions)
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Natural gas and liquids sales for the three months ended March 31, 2025, increased by $85.9 million or 63% compared to the same period of 2024.
For the three months ended March 31, 2025, natural gas sales increased by $31.6 million or 36%, compared to the corresponding period in 2024, due to an 18% increase in natural gas production and a 16% increase in realized natural gas prices (see "Production" and "Commodity Prices and Marketing"). The Corporation’s strategy of curtailing natural gas production during periods of depressed AECO prices in 2024 enabled it to realize significantly higher realized prices for the deferred natural gas production in 2025.
First quarter liquids sales increased by $54.3 million or 115%, due to a 106% increase in liquids production (see "Production"), and a 6% increase in realized liquids prices (see "Commodity Prices and Marketing").
Advantage Energy Ltd. ‐ 7
Financial Risk Management
The Corporation’s financial results and condition are impacted primarily by the prices received for natural gas, crude oil, condensate and NGLs production. Natural gas, crude oil, condensate and NGLs prices can fluctuate widely and are determined by supply and demand factors, including available access to transportation, weather, general economic conditions in consuming and producing regions and political factors. Additionally, certain commodity prices are transacted and denominated in US dollars. Advantage has been proactive in commodity risk management to reduce the volatility of cash provided by operating activities supporting our organic development by diversifying sales to different physical markets and entering into financial commodity and foreign exchange derivative contracts. Advantage’s Credit Facilities (as defined herein) allow us to enter derivative contracts on up to 75% of total estimated production over the first three years and up to 50% over the fourth and fifth years. In addition, the Credit Facilities allow us to enter basis swap arrangements to any natural gas price point in North America for up to 100,000 MMbtu/d with a maximum term of seven years. Basis swap arrangements are excluded from hedged production limits.
The Corporation enters into financial risk management derivative contracts to manage the exposure to commodity price risk, foreign exchange risk and interest rate risk. A summary of realized and unrealized derivative gains and losses for the three months ended March 31, 2025, and 2024 are as follows:
| Three months ended | Three months ended | |
|---|---|---|
| March 31 | ||
| 2025 | 2024 | |
| Realized gains (losses) on derivatives | ||
| Natural gas | 3,480 | 4,663 |
| Crude oil | 1,942 | ‐ |
| Foreign exchange | (420) | 90 |
| Naturalgas embedded derivative | 1,523 | (547) |
| Total | 6,525 | 4,206 |
| Unrealized gains (losses) on derivatives | ||
| Natural gas | (58,048) | (9,161) |
| Crude oil | (1,996) | ‐ |
| Foreign exchange | 346 | (847) |
| Natural gas embedded derivative | (31,423) | 16,414 |
| Unsecured debenture – derivative liability | 1,211 | (182) |
| Total | (89,910) | 6,224 |
| Gains (losses) on derivatives | ||
| Natural gas | (54,568) | (4,498) |
| Crude oil | (54) | ‐ |
| Foreign exchange | (74) | (757) |
| Natural gas embedded derivative | (29,900) | 15,867 |
| Unsecured debenture – derivative liability | 1,211 | (182) |
| Total | (83,385) | 10,430 |
Advantage Energy Ltd. ‐ 8
Financial Risk Management (continued)
Natural gas
For the three months ended March 31, 2025, Advantage realized gains on natural gas derivatives of $3.5 million due to the settlement of contracts with average derivative contract prices that were above average market prices.
For the three months ended March 31, 2025, Advantage recognized an unrealized loss on natural gas derivatives of $58.0 million resulting from changes in the fair value of outstanding natural gas derivative contracts and the settlement of contracts. The change in the fair value of our outstanding natural gas derivative contracts was significantly impacted by an increase in forward strip prices at both AECO and Dawn resulting in a liability position as at March 31, 2025.
Crude oil
In conjunction with acquiring liquids assets in the second quarter of 2024, Advantage initiated a disciplined crude oil hedging program by entering into an increased volume of crude oil derivative contracts. For the three months ended March 31, 2025, Advantage realized gains on crude oil derivatives of $1.9 million due to the settlement of contracts with average derivative contract prices that were above average market prices.
Advantage recognized an unrealized loss on crude oil derivatives of $2.0 million. The unrealized loss is due to realizing gains on outstanding contracts during the first quarter of 2025 with no significant change in the fair value of outstanding crude oil derivative contracts.
Foreign exchange
For the three months ended March 31, 2025, Advantage realized a loss on foreign exchange derivatives of $0.4 million while recognizing an unrealized gain of $0.3 million. The realized loss is due to settlement of contracts at a weaker Canadian dollar versus the US dollar then the contract price. The unrealized gain is due to realizing losses on outstanding contracts during the first quarter of 2025.
Natural gas embedded derivative
Advantage has a long‐term natural gas supply agreement under which Advantage will supply 25,000 MMbtu/d of natural gas for a 10‐year period. Commercial terms of the agreement are based upon a spark‐spread price, providing Advantage exposure to PJM electricity prices, back‐stopped with a natural gas price collar. The contract contains an embedded derivative as a result of the spark‐spread price and the natural gas price collar. The Corporation defined the host contract as a natural gas sales arrangement with a fixed price of US$2.50/MMbtu. The Corporation will have realized gains (losses) on the embedded derivative when the realized settlement price differs from US$2.50/MMbtu, resulting in a realized gain of $1.5 million for the three months ended March 31, 2025 (three months ended March 31, 2024 – realized loss of $0.5 million). The Corporation will have unrealized gains (losses) on the embedded derivative based on movements in the forward curve for PJM electricity prices. For the three months ended March 31, 2025 the Corporation recognized an unrealized loss on the natural gas embedded derivative of $31.4 million due to weakening future PJM electricity prices resulting in a lower asset position of the derivative compared to the fourth quarter of 2024.
Unsecured debentures derivative
Entropy issued unsecured debentures that have exchange features that meet the definition of a derivative liability, as the exchange features allow the unsecured debentures to be potentially exchanged for a variable number of Entropy common shares (see "Unsecured Debentures"). The Corporation will record unrealized gains (losses) as the valuation of the conversion option changes. For the three months ended March 31, 2025, the Entropy unsecured debentures derivative liability valuation was reduced due to decreasing interest rates compared to the fourth quarter of 2024, resulting in an unrealized gain of $1.2 million.
Advantage Energy Ltd. ‐ 9
Financial Risk Management (continued)
The fair value of derivative assets and liabilities is the estimated value to settle the outstanding contracts as at a point in time. As such, unrealized derivative gains and losses do not impact adjusted funds flow and the actual gains and losses realized on eventual cash settlement can vary materially due to subsequent fluctuations in commodity prices, foreign exchange rates and interest rates as compared to the valuation assumptions. Remaining derivative contracts will settle between April 1, 2025 and March 31, 2028, apart from the natural gas embedded derivative which will not be settled until 2033.
As at March 31, 2025 and May 1, 2025, the Corporation had the following commodity and foreign exchange derivative contracts in place:
| Description of Derivative | Term | Volume | Price |
|---|---|---|---|
| Natural gas ‐ AECO | |||
| Fixed price swap | April 2025 to October 2025 | 120,847 Mcf/d | $2.66/Mcf |
| Fixed price swap | November 2025 to March 2026 | 123,216 Mcf/d | $3.58/Mcf |
| Fixed price swap | April 2026 to October 2026 | 66,347 Mcf/d | $3.17/Mcf |
| Fixed price swap | November 2026 to March 2027 | 71,086 Mcf/d | $3.27/Mcf |
| Fixed price swap | April 2027 to March 2028 | 14,217 Mcf/d | $3.23/Mcf |
| Natural gas ‐ Chicago | |||
| Fixed price swap | April 2025 to October 2025 | 4,739 Mcf/d | $5.10/Mcf |
| Natural gas ‐ Dawn | |||
| Fixed price swap | April 2025 to October 2025 | 47,391 Mcf/d | $4.04/Mcf |
| Fixed price swap | November 2025 to March 2026 | 28,435 Mcf/d | $4.65/Mcf |
| Fixed price swap | April 2026 to October 2026 | 28,435 Mcf/d | $4.52/Mcf |
| Fixed price swap | November 2026 to March 2027 | 9,478 Mcf/d | $4.25/Mcf |
| Crude oil ‐ WTI NYMEX | |||
| Fixed price swap | April 2025 to June 2025 | 5,000 bbls/d | US $74.43/bbl |
| Fixed price swap | July 2025 to December 2025 | 4,000 bbls/d | US $71.24/bbl |
| Description of Derivative | Term |
Notional Amount |
Rate |
|---|---|---|---|
| Forward rate ‐ CAD/USD | |||
| Average rate currency swap | April 2025 to June 2025 | US $ 4,000,000/month | 1.4048 |
| Average rate currency swap | July 2025 | US $ 3,000,000/month | 1.3969 |
| Average rate currency swap | August 2025 to December 2025 | US $ 1,000,000/month | 1.4320 |
Advantage Energy Ltd. ‐ 10
Processing and other income
| Processing and other income | |
|---|---|
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
| Advantage processing and other income per boe |
978 1,809 (46) 0.13 0.30(57) |
| Entropyengineeringservices | 1,313 375 250 |
| Total processing and othe income | 2,291 2,184 5 |
Advantage earns processing income from contracts whereby the Corporation charges third‐parties to utilize excess capacity at its facilities.
For the three months ended March 31, 2025, Advantage generated processing and other income of $1.0 million, a decrease of 46% compared to the same period of the prior year. The decrease is a result of less third‐party throughput at the Glacier Gas Plant as Advantage acquired production in 2024 that was previously being charged natural gas processing fees.
For the three months ended March 31, 2025, Entropy generated $1.3 million in other income for front‐end engineering and design studies for third‐parties, an increase of $0.9 million, or 250%.
Royalty Expense
| Royalty Expense | |||
|---|---|---|---|
| Three months ended | |||
| March 31 | % | ||
| ($000, except as otherwise indicated) | 2025 | 2024 | **Change ** |
| Royalty expense | 21,079 | 9,135 | 131 |
| per boe | 2.80 | 1.52 | 84 |
| Royalty rate (%)(1) | 9.5 | 6.7 | 2.8 |
(1) Percentage of natural gas and liquids sales.
Advantage pays royalties to the owners of mineral rights from which we have mineral leases. The Corporation has mineral leases with provincial governments, individuals and other companies. Our current average royalty rates are determined by various royalty regimes that incorporate factors including well depths, completion data, well production rates, and commodity prices. Royalties also include the impact of Gas Cost Allowance which is a reduction of royalties payable to the Alberta Provincial Government (the "Crown") to recognize capital and operating expenditures incurred by Advantage in the gathering and processing of the Crown’s share of our natural gas production.
The increase in royalty expense was due to significantly higher production, particularly from liquids (see "Production"). The average royalty rate was similarly higher than the comparative period due to a higher proportion of sales being liquids, which generally attract higher royalty rates (see "Natural gas and liquids sales") but also result in higher operating netbacks.
Advantage expects royalty rates to range from 8% to 10% in 2025 (see "2025 Guidance").
Advantage Energy Ltd. ‐ 11
Operating Expense
| Operating Expense | |
|---|---|
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
| Advantage operating expense per boe |
35,858 24,497 46 4.76 4.08 17 |
| Entropyoperatingexpense | 623 585 6 |
| Operating expense | 36,481 25,082 45 |
Operating expense for Advantage’s natural gas and liquids operations for the three months ended March 31, 2025, increased by $11.4 million, or 46%, compared to the same period of the prior year, while operating expense per boe was $4.76/boe. The increase was primarily due to higher production volumes associated with the Acquired Assets, which are more liquids‐weighted and therefore carry higher operating costs per boe, but also generate stronger operating netbacks. Compared to the fourth quarter of 2024, operating expense per boe declined by 8%, reflecting the continued operational integration and realization of synergies from the Acquired Assets.
Advantage expects 2025 annual operating expense per boe to be approximately $5.20 to $5.90 (see "2025 Guidance"). Advantage realized lower operating expense per boe in the first quarter of 2025; however, the Corporation expects to be within guidance as additional natural gas processing at third‐party plants is scheduled to begin during the second half of 2025.
Operating expense for Entropy for the three months ended March 31, 2025, was comparable to the prior year.
Transportation Expense
| Transportation Expense | |
|---|---|
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
| Natural gas Liquids |
25,083 22,032 14 5,490 3,365 63 |
| Total transportation expense per boe |
30,573 25,397 20 4.06 4.23 (4) |
Transportation expense represents the cost of transporting our natural gas and liquids production to the sales points, including associated fuel costs. Transportation expense for the three months ended March 31, 2025, increased by $5.2 million or 20%. The increase in transportation expense is a result of additional production from the Acquired Assets and additional physical natural gas transportation to Chicago (see "Production"), while transportation cost per boe was comparable to the prior year.
Advantage expects 2025 annual transportation expense per boe to be approximately $3.95 to $4.25/boe (see "2025 Guidance").
Advantage Energy Ltd. ‐ 12
Operating Income and Operating Netback
| Operating Income and Operating Netback | ||||
|---|---|---|---|---|
| Three months ended | ||||
| March 31 | ||||
| 2025 | 2024 | |||
| $000 | per boe | $000 | per boe | |
| Natural gas and liquids sales | 221,790 | 29.42 | 135,897 | 22.62 |
| Realized gains on derivatives | 6,525 | 0.87 | 4,206 | 0.70 |
| Processing and other income | 978 | 0.13 | 1,809 | 0.30 |
| Royalty expense | (21,079) | (2.80) | (9,135) | (1.52) |
| Operating expense | (35,858) | (4.76) | (24,497) | (4.08) |
| Transportation expense | (30,573) | (4.06) | (25,397) | (4.23) |
| Operating income and operating netback(1) | 141,783 | 18.80 | 82,883 | 13.79 |
(1) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures ".
For the three months ended March 31, 2025, Advantage’s operating netback was $18.80/boe, an increase of $5.01/boe or 36%. The increase in operating netback per boe was primarily due to the increase in natural gas and liquids sales, particularly from higher liquids production from the Acquired Assets (see "Production").
General and Administrative Expense
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
|---|---|
| Advantage G&A Capitalized |
8,851 9,120 (3) (1,546) (2,067) (25) |
| Advantage G&A expense per boe |
7,305 7,053 4 0.97 1.17 (17) |
| EntropyG&A expense | 4,318 2,301 88 |
| General and administrative expense | 11,623 9,354 24 |
| Employees at March 31 | 85 66 29 |
Advantage general and administrative ("G&A") expense for the three months ended March 31, 2025, was consistent with the same period of the prior year and reflects typical higher first quarter costs. Entropy G&A expense increased primarily due to higher staff levels required to support the continued business growth.
Advantage Energy Ltd. ‐ 13
Share‐based Compensation
| Share‐based Compensation | |
|---|---|
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
| Share‐based compensation Capitalized |
2,035 95 nm (353) ‐ nm |
| Share‐based compensation expense per boe |
1,682 95 nm 0.22 0.02 nm |
The Corporation’s long‐term compensation plan for employees consists of a balanced approach between a cash‐ based performance award incentive plan (see "General and Administrative Expense") and a share‐based Restricted and Performance Award Incentive Plan. Under the Corporation’s restricted and performance award incentive plan, Performance Share Units are granted to service providers of Advantage which vest over three years from grant date. Capitalized share‐based compensation is attributable to personnel involved with the development of the Corporation’s capital projects.
The Corporation recognized $2.0 million of share‐based compensation during the three months ended March 31, 2025, and capitalized $0.4 million. Share‐based compensation expense in the prior year was lower due to realizing a lower performance multiplier for the settlement of Performance Share Units, accompanied by revising performance multiplier estimates for outstanding Performance Share Units.
Finance Expense
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
|---|---|
| Advantage interest expense per boe Advantage accretion expense |
12,542 7,172 75 1.66 1.19 39 1,290 511 152 |
| Advantage finance expense | 13,832 7,683 80 |
| Entropyfinance expense | 1,354 774 75 |
| Finance expense | 15,186 8,457 80 |
Advantage incurred higher finance expense during the three months ended March 31, 2025, primarily due to the financing of the Acquired Assets through a combination of bank indebtedness and convertible debentures. Interest on bank indebtedness is based on short‐term loans plus fees and determined by net debt to the trailing four quarters earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio as calculated pursuant to our Credit Facilities (see "Bank Indebtedness, Credit Facilities and Working Capital"). Advantage recognized $1.8 million of interest expense related to the convertible debentures and incurred incremental associated accretion expense for the three months ended March 31, 2025 (see "Convertible Debentures").
Entropy finance expense increased during the three months ended March 31, 2025, due to an increased average outstanding aggregate principal amount of unsecured debentures associated with investors financing of the Glacier Phase 2 project. Entropy funds its projects by issuing unsecured debentures to third‐party investors with committed capital. The unsecured debentures are non‐recourse to Advantage, which does not provide any financing to Entropy (see "Unsecured Debentures").
Advantage Energy Ltd. ‐ 14
Depreciation and Amortization Expense
| Depreciation and Amortization Expense | |
|---|---|
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
| Advantage depreciation per boe Entropydepreciation and amortization |
59,283 40,917 45 7.86 6.81 15 958 212 352 |
| Depreciation and amortization expense | 60,241 41,129 46 |
The increase in depreciation expense during the three months ended March 31, 2025 is attributable to an increased netbook value associated with the Corporation’s property, plant, and equipment accompanied by increased production (see "Production"). Depreciation and amortization expense per boe for the three months ended March 31, 2025, increased compared to the prior year due to an increase in the Corporation’s natural gas and liquids depletable base.
Taxes
| Taxes | |
|---|---|
| ($000, except as otherwise indicated) | Three months ended March 31 % 2025 2024 **Change ** |
| Income tax expense(recovery) | (7,012) 7,747 nm |
| Effective tax rate (%) | 19.3 25.3 nm |
Deferred income taxes arise from differences between the accounting and tax bases of our assets and liabilities. For the three months ended March 31, 2025, the Corporation recognized a deferred income tax recovery of $7.0 million. The recovery for the three months ended March 31, 2025, is a result of a loss before taxes and non‐controlling interest of $36.4 million combined with non‐deductible share‐based compensation expense, and valuation allowances applied against Entropy’s non‐capital losses. As at March 31, 2025, the Corporation had a deferred income tax liability of $246.2 million.
Net Income (Loss) and Comprehensive Income (Loss) Attributable to Advantage Shareholders
| Three months ended | Three months ended | ||
|---|---|---|---|
| March 31 | % | ||
| ($000, except as otherwise indicated) | 2025 | 2024 | **Change ** |
| Net income (loss) and comprehensive income (loss) attributable to | |||
| Advantage shareholders | (29,024) | 23,163 | (225) |
| per basic share | (0.17) | 0.14 | (221) |
| per diluted share | (0.17) | 0.14 | (221) |
Advantage recognized a net loss attributable to Advantage shareholders of $29.0 million for the three months ended March 31, 2025. The net loss and comprehensive loss attributable to Advantage shareholders was due to a $89.9 million unrealized loss attributable to changes in the fair value of outstanding derivative contracts (see "Financial Risk Management"), partially offset by a significant increase in natural gas and liquids sales due to higher production (see "Production") and improved commodity prices (see "Commodity Prices and Marketing").
Advantage Energy Ltd. ‐ 15
Cash Provided by Operating Activities and Adjusted Funds Flow ( " AFF " )
| Cash Provided by Operating Activities and Adjusted Funds Flow ("AFF") | ||
|---|---|---|
| Three months ended | ||
| March 31 | ||
| ($000, except as otherwise indicated) | 2025 | 2024 |
| Cash provided by operating activities | 122,949 | 67,374 |
| Expenditures on decommissioning liability | 1,393 | 67 |
| Changes in non‐cash workingcapital | (5,700) | (2,048) |
| Adjusted funds flow(1) | 118,642 | 65,393 |
| per basic share(1) | 0.71 | 0.41 |
| per diluted share(1) | 0.71 | 0.40 |
| Advantage adjusted funds flow(1) | 121,127 | 67,031 |
| per boe(1) | 16.07 | 11.16 |
| Entropyadjusted funds flow(1) | (2,485) | (1,638) |
(1) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
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----- Start of picture text -----
Change in Adjusted Funds Flow [(3)] Increase
(Three months ended March 31, 2025) Decrease
$5.6
$48.7 $2.3 $0.1
$11.9 $5.2
$11.4
$6.6
$16.4
$15.1
$118.6
$65.4
($ millions)
----- End of picture text -----
(1) The change in natural gas and liquids sales related to the change in production is determined by multiplying the prior period realized price by current period production.
-
(2) Other includes G&A, finance expense (excluding accretion of decommissioning liability and unsecured debentures), foreign exchange gain and settlement of Performance Share Units in cash.
-
(3) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
For the three months ended March 31, 2025, The Corporation realized cash provided by operating activities of $122.9 million, an increase of $55.6 million when compared to the same period of 2024. After adjusting for non‐cash changes in working capital and expenditures on decommissioning liability, the Corporation realized adjusted funds flow of $118.6 million, an increase of $53.2 million when compared to the same period of 2024. The increase in cash provided by operating activities and adjusted funds flow were largely due to the increase in natural gas and liquids sales as a result of higher total production and higher natural gas and liquids prices (see "Production" and "Commodity Prices and Marketing"), partially offset by higher costs associated with the increased commodity prices and liquids‐weighted production.
Advantage Energy Ltd. ‐ 16
Cash Used in Investing Activities and Net Capital Expenditures
| Cash Used in Investing Activities and Net Capital Expenditures | ||
|---|---|---|
| Three months ended | ||
| March 31 | ||
| ($000) | 2025 | 2024 |
| Drilling, completions, equipping, and tie‐ins | 78,272 | 53,546 |
| Facilities and infrastructure | 16,144 | 16,296 |
| Corporate(2) | 3,755 | 6,334 |
| Exploration and development expenditures | 98,171 | 76,176 |
| Asset dispositions | (4,000) | ‐ |
| Net capital expenditures – Advantage(1) | 94,171 | 76,176 |
| Carbon capture and storage facilities | 19,714 | 3,418 |
| Intangible assets | 102 | 540 |
| Net capital expenditures – Entropy(1) | 19,816 | 3,958 |
| Net capital expenditures(1) | 113,987 | 80,134 |
| Changes in non‐cash workingcapital | (6,068) | (707) |
| Cash used in investing activities | 107,919 | 79,427 |
(1) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
(2) Corporate includes workovers, turnaround cost, seismic, capitalized G&A, and office furniture and equipment.
Net Capital Expenditures (Excluding Acquisitions & Dispositions)[(1)]
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----- Start of picture text -----
$118.0
$120.0 $110.6
17%
13%
$100.0
3%
5% $80.1 12% 14%
$80.0
9%
$64.9 8% $66.7
5% 5% $61.2
$60.0 20% 18%
18%
13% $45.4 9%
28%
19% 17% $39.9
$40.0 10% 4% 32% 66%
65%
6%
10% 37%
67%
$20.0 58% 57%
67% 41%
47%
$‐
Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Q3 24 Q4 24 Q1 25
Drilling, completions, equipping, and tie‐ins (% of total) Facilities and infrastructure (% of total)
Corporate (% of total) Net capital expenditures ‐ Entropy (% of total)
Net capital expenditures ($000)
($000)
----- End of picture text -----
(1) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
Advantage Energy Ltd. ‐ 17
Cash Used in Investing Activities and Net Capital Expenditures (continued)
Advantage
Advantage incurred $98.2 million of exploration and development expenditures for the three months ended March 31, 2025.
The following table summarizes wells drilled, completed and on production for the three months ended March 31, 2025:
| 2025: | |
|---|---|
| (# of wells) | Three months ended March 31, 2025 |
| Drilled Completed On production Gross(Net) Gross(Net) Gross(Net) |
|
| Glacier Progress Valhalla Wembley Gordondale |
2 (2.0) 5 (5.0) 2 (2.0) 3 (1.5) ‐ ‐ 5 (3.6) 6 (4.5) 4 (3.8) 3 (3.0) ‐ ‐ 2(2.0) 2(2.0) 2(2.0) |
| 15(12.1) 13(11.5) 8(7.8) |
Charlie Lake Assets
Valhalla/Progress/Gordondale
Activity on our Charlie Lake properties continued to accelerate following the closing of the acquisition on June 24, 2024. Activity in the first quarter of 2025 consisted of 10 gross (7.1 net) wells drilled, 6 gross (4.5 net) wells completed, and 6 gross (5.8 net) wells placed on production. Our first four operated Charlie Lake wells placed on production have had liquid rates exceeding historical type curves by over 65%. Average IP30 rates for these wells were 1,004 boe/d (1.4 MMcf/d natural gas, 737 bbls/d crude oil and 29 bbls/d NGLs) confirming the high quality and production potential of the acquired Charlie Lake properties.
During the quarter, Advantage physically connected our main 16‐29 Valhalla Battery to both the North River Midstream Gordondale East plant and the CSV Albright plant gas gathering systems. The plants are undergoing expansion or new construction respectively and, along with our own extensive gas processing and liquid handling infrastructure, will be available in 2025 to facilitate continued development of our Charlie Lake properties.
Montney Assets
Glacier
The first quarter of 2025 was active at our Glacier property with 2 gross (2.0 net) wells drilled, 5 gross (5 net) wells completed, and 2 gross (2.0 net) wells placed on production.
Well performance from the property continues to be strong. Of all Alberta Montney gas wells placed on production in 2024, Advantage had 7 of the top 10 gas producing wells, based on IP90 rates. The two wells placed on production in the first quarter of 2025 similarly had strong performance achieving average IP30 rates of 15.1MMcf/d raw natural gas despite being choked back to minimize erosional risks and impacts on nearby wells.
A new water disposal well was also drilled and completed during the quarter and will help maintain our low‐cost structure at Glacier.
Advantage Energy Ltd. ‐ 18
Cash Used in Investing Activities and Net Capital Expenditures (continued)
Wembley
At Wembley, drilling activity resumed on a three‐well pad during the first quarter of 2025 with completion operations taking place during the second quarter of 2025. The Wembley asset is connected to two major third‐party gas processing facilities and utilizes existing capacity in our 100% owned Wembley compressor site and liquids handling hub. The property remains a key contributor to our liquid rich portfolio of Montney assets.
Progress
At Progress, as outlined in our 2025 capital budget, construction on the Phase 1 75 MMcf/d Progress 4‐21 gas plant is deferred to early 2026, with no impact on forecasted 2025 production. Instead, excess processing capacity strategically acquired in 2024 will be utilized, reducing 2025 capital expenditures and increasing free cash flow by approximately $35 million.
The completion and commissioning of this facility in the second quarter of 2026 will unlock significant synergies and growth from our assets through regional infrastructure and production optimization, resulting in lower operating costs and stronger operating netbacks. The Progress gas plant will also provide incremental processing capacity for our next phase of low‐cost production growth at Glacier.
Valhalla
Two new Montney wells were completed at Valhalla during the first quarter of 2025. These wells will be brought on production through the Glacier Gas Plant coinciding with the start‐up of processing capacity at the CSV Albright plant. No new wells were brought on production in 2024 due to the raw gas transportation line to the Glacier Gas Plant being utilized at capacity. However, the wells drilled in 2023, achieved significant average well IP30 production rates of 1,936 boe/d (7.5 MMcf/d natural gas, 499 bbls/d condensate and 180 bbls/d NGLs). The last six wells placed on production in Valhalla have averaged IP30 production rates of 1,431 boe/d (5.7 MMcf/d natural gas, 354 bbls/d condensate and 121 bbls/d NGLs) despite the wells being choked back to minimize erosional risks. Strong well results support Management’s view that our Valhalla Montney asset will continue to play a pivotal role in the Corporation's liquids‐rich gas development plan.
Entropy
Net capital expenditures incurred by Entropy are funded through the issuance of unsecured debentures to investors that have provided Entropy access to $500 million in committed capital, of which $137 million has been drawn as at March 31, 2025. Advantage does not provide any financing to Entropy.
Entropy invested $19.8 million in net capital expenditures during the three months ended March 31, 2025. Entropy’s expenditures were mainly attributable to front‐end engineering and design cost and procurement of equipment required for construction of the Glacier Phase 2 project.
On June 21, 2024, the CCUS ITC which was included in Bill C‐59 received royal assent. Advantage and Entropy have incurred carbon capture expenditures dating back to January 1, 2022, which once approved by the federal government, should be eligible expenditures under the CCUS ITC program. The Corporation is working with Natural Resources Canada and the Canada Revenue Agency to finalize approval for our existing carbon capture projects at Glacier.
Advantage Energy Ltd. ‐ 19
Commitments and Contractual Obligations
The Corporation has commitments and contractual obligations in the normal course of operations. Such commitments include operating costs for office leases, natural gas processing costs associated with third‐party facilities, and transportation costs for delivery of our natural gas and liquids (crude oil, condensate and NGLs) production to sales points. Transportation commitments are required to ensure our production is delivered to sales markets and Advantage actively manages our portfolio in conjunction with our future development plans ensuring we are properly diversified to multiple markets. Of our total transportation commitments, $347 million or 47% is required for delivery of natural gas and liquids production to Alberta markets, while Advantage has proactively committed to $385 million in additional transportation to diversify natural gas production to the Dawn, Empress, Emerson, and Chicago markets, with the objective of reducing price volatility and achieving higher operating netbacks (see "Transportation Expense"). Contractual obligations comprise those liabilities to third‐parties incurred for the purpose of financing Advantage’s business and development, including our bank indebtedness.
The following table is a summary of the Corporation’s remaining commitments and contractual obligations. Advantage has no guarantees or off‐balance sheet arrangements other than as disclosed.
| ($ millions) | Payments due by period |
|---|---|
| Total 2025 (9 months) 2026 2027 2028 2029 Beyond |
|
| Building operating cost(1) | 1.9 0.5 0.8 0.6 ‐ ‐ ‐ 184.6 20.9 28.1 28.1 28.2 26.4 52.9 732.3 85.5 93.8 88.2 64.4 60.4 340.0 |
| Processing | |
| Transportation | |
| Total commitments | 918.8 106.9 122.7 116.9 92.6 86.8 392.9 |
| 7.0 0.8 2.2 3.2 0.8 ‐ ‐ 2.9 0.9 1.1 0.7 0.1 0.1 ‐ 133.8 9.8 13.0 13.0 13.1 13.0 71.9 450.0 ‐ 450.0 ‐ ‐ ‐ ‐ 34.0 20.4 13.6 ‐ ‐ ‐ ‐ 145.7 ‐ ‐ ‐ ‐ ‐ 145.7 116.2 8.8 11.7 11.7 11.7 11.7 60.6 143.8 ‐ ‐ ‐ ‐ 143.8 ‐ 32.4 7.2 7.2 7.2 7.2 3.6 ‐ |
|
| Performance Awards | |
| Lease liability | |
| Financing liability | |
| Bank indebtedness(2) | |
| ‐ principal | |
| ‐ interest | |
| Unsecured debentures(3) | |
| ‐ principal | |
| ‐ interest | |
| Convertible debentures(4) | |
| ‐ principal | |
| ‐ interest | |
| Total contractual obligations | 1,065.8 47.9 498.8 35.8 32.9 172.2 278.2 |
| Total futurepayments | 1,984.6 154.8 621.5 152.7 125.5 259.0 671.1 |
(1) Excludes fixed lease payments which are included in the Corporation’s lease liability.
(2) As at March 31, 2025 the Corporation’s bank indebtedness was governed by the Credit Facilities, which have a two‐year term with a syndicate of financial institutions. The Credit Facilities are revolving and extendible for a further 364‐day period upon an annual review and at the option of the syndicate. If not extended, the Credit Facilities will mature with any outstanding principal payable at the end of the two‐year term (see "Bank Indebtedness, Credit Facilities and Working Capital").
(3) Entropy funds its projects by issuing unsecured debentures to third‐party investors with committed capital. The unsecured debentures are non‐recourse to Advantage, which does not provide any financing to Entropy. The principal balance of unsecured debenture bears an interest rate of 8%, which can be paid‐in‐kind (subject to certain limitations) or cash, at the discretion of Entropy (see "Unsecured Debentures").
(4) The convertible debentures have a maturity date of June 30, 2029 and a coupon rate of 5% payable semi‐annually.
Advantage Energy Ltd. ‐ 20
Liquidity and Capital Resources
The following table is a summary of the Corporation’s capitalization structure:
| March 31 | December 31 | |
|---|---|---|
| ($000, except as otherwise indicated) | 2025 | 2024 |
| Bank indebtedness | 446,333 | 470,424 |
| Aggregate principal balance of convertible debentures(1) | 143,750 | 143,750 |
| Aggregate principal balance of unsecured debentures(2) | 145,732 | 101,000 |
| Workingcapital(surplus)deficit(3) | (12,568) | 3,275 |
| Net debt(3) | 723,247 | 718,449 |
| Shares outstanding | 166,628,640 | 166,931,440 |
| Shares closingmarketprice($/share) | 10.84 | 9.86 |
| Market capitalization | 1,806,254 | 1,645,944 |
| Total capitalization | 2,529,501 | 2,364,393 |
(1) The convertible debentures have a maturity date of June 30, 2029 and a coupon rate of 5% payable semi‐annually.
(2) Entropy funds its projects by issuing unsecured debentures to third‐party investors with committed capital. The unsecured debentures are non‐recourse to Advantage, which does not provide any financing to Entropy. The aggregate principal balance of unsecured debenture bears an annual interest rate of 8%, which can be paid‐in‐kind (subject to certain limitations) or cash, at the discretion of Entropy (see "Unsecured Debentures").
(3) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
As at March 31, 2025, net debt for Advantage was $603.3 million and Entropy was $119.9 million. Advantage generated $23.0 million of free cash flow during the three months ended March 31, 2025, allowing Advantage to reduce net debt by $22.3 million, when compared to December 31, 2024. Advantage has a $650 million Credit Facility of which $191.4 million or 29% was available after deducting outstanding letters of credit of $8.6 million (see "Bank Indebtedness, Credit Facilities and Working Capital"). Debt to adjusted funds flow ratio excluding Entropy was 2.0, and if the Corporation included $36.7 million of cash flows from the Acquired Assets for the three months preceding the acquisition, the ratio would have been 1.8. Advantage has set a net debt target of $450 million by the end of 2025, which would represent a debt to adjusted funds flow ratio of approximately 1.0, and the Corporation remains well‐positioned to achieve this objective given the strength of its business outlook, current commodity price environment, and the magnitude of its hedging program.
Entropy net debt increased $27.1 million from December 31, 2024, due to drawing $42.0 million of unsecured debentures (see "Unsecured Debentures"), which were used to fund $19.8 million of net capital expenditures in the quarter (see "Cash Used in Investing Activities and Net Capital Expenditures"). Debentures issued by Entropy are funded by investors that have provided Entropy access to an aggregate of up to $500 million in committed capital, of which $137.0 million has been drawn as at March 31, 2025. Entropy funds its projects by issuing unsecured debentures that are non‐recourse to Advantage, which does not provide any financing to Entropy.
Advantage monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The capital structure of the Corporation is composed of working capital, bank indebtedness, convertible debentures, unsecured debentures issued by Entropy, and share capital. Advantage may manage its capital structure by issuing new common shares in the capital of Advantage ("Common Shares"), repurchasing outstanding Common Shares, obtaining additional financing through bank indebtedness, refinancing current debt, issuing other financial or equity‐based instruments, declaring a dividend, or adjusting capital spending. The capital structure is reviewed by Management and the Board of Directors on an ongoing basis. Management of the Corporation’s capital structure is facilitated through its financial and operational forecasting processes. Selected forecast information is frequently provided to the Board of Directors. This continual financial assessment process further enables the Corporation to mitigate risks. The Corporation continues to satisfy all liabilities and commitments as they come due.
Advantage Energy Ltd. ‐ 21
Bank Indebtedness, Credit Facilities and Working Capital
As at March 31, 2025, Advantage had bank indebtedness outstanding of $446.3 million, a decrease of $24.1 million since December 31, 2024 due to adjusted funds flow in excess of net capital expenditures. Advantage’s Credit Facilities are collateralized by a $2 billion floating charge demand debenture covering all assets of the Corporation and has no financial covenants (the "Credit Facilities"). The borrowing base for the Credit Facilities is determined by the banking syndicate through an evaluation of our reserve estimates based on their independent commodity price assumptions. Revisions or changes in the reserve estimates and commodity prices can have either a positive or a negative impact on the borrowing base. The Credit Facilities comprise a $60 million extendible revolving operating loan facility from one financial institution and a $590 million extendible revolving loan facility from a syndicate of financial institutions. The Credit Facility has a term of two years with a maturity date in June 2026 and is subject to an annual review and extension by the lenders. During the revolving period, a review of the maximum borrowing amount occurs annually on or before May 31 and semi‐annually on or before November 30. During the term, no principal payments are required until the revolving period matures in June 2026 in the event of a reduction, or the Credit Facility not being renewed. The Corporation had letters of credit of $8.6 million outstanding at March 31, 2025 (December 31, 2024 ‐ $5.5 million). The Credit Facilities do not contain any financial covenants, but the Corporation is subject to various affirmative and negative covenants under its Credit Facilities. The Corporation was in compliance with all covenants as at March 31, 2025, and December 31, 2024.
The Corporation had a working capital surplus of $12.6 million as at March 31, 2025, as compared to a working capital deficit at December 31, 2024 of $3.3 million, largely due to an increase in cash and cash equivalents from cash held by Entropy, which was partially offset by an increase in trade and other accrued liabilities connected to the timing of net capital expenditures and related payments. Our working capital includes cash and cash equivalents, trade and other receivables, prepaid expenses and deposits, and trade and other accrued liabilities. Working capital varies primarily due to the timing of such items, the current level of business activity including our capital expenditure program, commodity price volatility, and seasonal fluctuations. We do not anticipate any problems in meeting future obligations as they become due as they can be satisfied with cash provided by operating activities and our available Credit Facilities.
Convertible Debentures
The Corporation has $143.8 million principal amount of convertible unsecured subordinated debentures outstanding (the "Debentures") at a price of $1,000 per debenture as at March 31, 2025. The Debentures will mature and be repayable on June 30, 2029 and will accrue interest at the rate of 5% per annum payable semi‐annually in arrears on June 30 and December 31 of each year. The fair value of the Debentures at March 31, 2025, was $153.1 million, using quoted market prices on the Toronto Stock Exchange (“TSX”).
At the Debenture holder's option, the Debentures may be convertible into Common Shares at any time prior to the close of business on the earlier of the business day immediately preceding (i) the maturity date, or (ii) if called for redemption, the date fixed for redemption by the Corporation, (iii) if called for repurchase in the event of a change of control, the payment date, at a conversion price of $14.58 per Common Share, subject to adjustment in certain events. This represents a conversion rate of approximately 68.5871 Common Shares for each $1,000 principal amount of the Debentures, subject to the operation of certain antidilution provisions. In the event of a change of control of the Corporation or the redemption of the Debentures by Advantage, subject to certain terms and conditions, holders of the Debentures will be entitled to convert their Debentures and, subject to certain limitations, receive, in addition to the number of Common Shares they would otherwise be entitled to receive, an additional number of Common Shares per $1,000 principal amount of the Debentures.
Advantage Energy Ltd. ‐ 22
Unsecured Debentures
The Corporation’s subsidiary Entropy has entered into two investment agreements with investors who provided capital commitments of $300 million and $200 million (the "Investment Agreements"). In connection with the Investment Agreements, Entropy will issue unsecured debentures to fund carbon capture and storage projects that reach final investment decision as certain predetermined return thresholds are met. The unsecured debentures are non‐recourse to Advantage, which does not provide any financing to Entropy. Under the terms of the Investment Agreements, Entropy and the investors have options that provide for the unsecured debentures to be exchanged for common shares at an exchange price of $10.00 per share and $12.75 per share, respectively, subject to adjustment in certain circumstances. The investors have the option to exchange the outstanding unsecured debentures for common shares at any time while Entropy may commence a mandatory exchange of unsecured debentures for common shares in advance of an Initial Public Offering ("IPO"). The unsecured debentures have a term of 10 years, if not exchanged for common shares, which are to be repaid at the end of the term in the amount greater of the principal amount and the investor’s pro rata share of the fair market value of Entropy. Each unsecured debenture issued by Entropy bears an interest rate of 8% per annum that Entropy can elect to pay in cash or pay‐in‐kind, due on a quarterly basis. Any paid‐in‐kind interest is added to the aggregate principal, subject to certain limitations. As at March 31, 2025, Entropy’s unsecured debentures have an outstanding aggregate principal balance of $145.7 million (December 31, 2024 ‐ $101.0 million).
During the three months ended March 31, 2025, Entropy issued unsecured debentures for gross proceeds of $42.0 million (March 31, 2024 ‐ $10 million) and incurred $1.9 million of issuance costs (March 31, 2024 ‐ $1.2 million).
For the three months ended March 31, 2025, Entropy incurred interest of $2.7 million which was paid‐in‐kind (March 31, 2024 ‐ $1.0 million).
Other Liabilities
The Corporation has a 15‐year take‐or‐pay volume commitment with a 12.5% working interest partner in the Corporation’s Glacier Gas Plant, with a term due to expire in 2035. The volume commitment agreement is treated as a financing transaction with an effective interest rate of 9.1%. For the three months ended March 31, 2025, the Corporation made cash payments of $3.2 million (March 31, 2024 ‐ $3.3 million) under the take‐or‐pay volume commitment agreement.
As at March 31, 2025, Advantage had a decommissioning liability of $126.7 million (December 31, 2024 – $126.8 million) for the future abandonment and reclamation of the Corporation’s natural gas and liquids properties. The decommissioning liability includes assumptions in respect of actual costs to abandon and reclaim wells and facilities, the time frame in which such costs will be incurred, annual inflation factors and discount rates. The total estimated undiscounted, uninflated cash flows required to settle the Corporation’s decommissioning liability was $166.1 million (December 31, 2024 – $168.7 million), with 57% of these costs to be incurred beyond 2050. Actual spending on decommissioning for the three months ended March 31, 2025 was $1.4 million (year ended December 31, 2024 – $3.1 million).
Advantage Energy Ltd. ‐ 23
Non‐controlling interest ("NCI")
Advantage owns 92% of the common shares of Entropy and therefore consolidates 100% of Entropy while recognizing a non‐controlling interest in shareholders’ equity that represents the carrying value of the 8% common shares held by outside interests.
For the three months ended March 31, 2025, the net loss and comprehensive loss attributed to non‐controlling interest was $0.3 million (March 31, 2024 ‐ $0.3 million).
Shareholders’ Equity
On May 9, 2024, the TSX approved the Corporation renewing its normal course issuer bid ("NCIB"). Pursuant to the NCIB, Advantage may purchase for cancellation, from time to time, as it considers advisable, up to a maximum of 13,835,841 Common Shares of the Corporation. The NCIB commenced on May 14, 2024 and will terminate on May 13, 2025. For the three months ended March 31, 2025, the Corporation used a portion of the proceeds from recent non‐core asset dispositions to fund purchasing 0.3 million Common Shares for cancellation at an average price of $9.56 per Common Share for a total of $2.9 million.
As at March 31, 2025, a total of 2.9 million Performance Share Units were outstanding under the Corporation’s Restricted and Performance Award Incentive Plan, which represents 1.7% of Advantage’s total outstanding Common Shares. Subsequent to March 31, 2025, the Corporation issued 0.7 million Common Shares as a result of the vesting of Performance Share Units on March 27, 2025.
As at May 1, 2025, Advantage had 167.3 million Common Shares outstanding.
Advantage Energy Ltd. ‐ 24
Quarterly Performance
| Quarterly Performance | ||
|---|---|---|
| ($000, except as otherwise indicated) | 2025 | Q4 Q3 Q2 Q1 Q4 Q3 Q2 2024 2023 |
| Q1 | ||
| Financial Statement Highlights Natural gas and liquids sales Net income and comprehensive income (4) per basic share (2) per diluted share (3) Basic weighted average shares (000) Diluted weighted average shares (000) Cash provided by operating activities Cash provided by (used in) financing activities Cash used in investingactivities |
221,790 (29,024) (0.17) (0.17) 166,821 166,821 122,949 11,670 (107,919) |
163,477 139,840 104,081 135,897 147,137 140,724 107,240 17,130 (6,490) (12,084) 23,163 41,026 28,314 2,538 0.10 (0.04) (0.07) 0.14 0.25 0.17 0.02 0.10 (0.04) (0.07) 0.14 0.24 0.16 0.01 166,974 166,972 161,362 160,444 163,939 167,702 167,268 169,785 166,972 161,362 164,129 168,441 172,182 171,815 56,350 46,719 47,090 67,374 89,048 90,376 37,966 22,789 (1,097) 447,502 11,883 (52,120) (3,562) 43,778 (71,202) (52,765) (494,331) (79,427) (58,846) (49,886) (88,439) |
| Other Financial Highlights Adjusted funds flow (1) per basic share (1)(2) per diluted share (1(2))(3) Net capital expenditures (1) Free cash flow (1) Bank indebtedness Net debt (1) |
118,642 0.71 0.71 113,987 655 446,333 723,247 |
81,389 52,260 42,354 65,393 82,494 81,862 52,381 0.49 0.31 0.26 0.41 0.50 0.49 0.31 0.48 0.31 0.26 0.40 0.49 0.48 0.30 99,162 66,727 490,888 80,134 39,938 61,234 64,924 (29,194) (14,668) (3,059) (14,741) 42,556 20,628 (12,543) 470,424 469,551 488,008 238,578 212,854 226,127 226,442 718,449 693,959 674,665 279,963 235,010 236,311 238,493 |
| Operating Highlights Production Crude oil (bbls/d) Condensate (bbls/d) NGLs (bbls/d) Total liquids production (bbls/d) Natural gas (mcf/d) Total production (boe/d) Average prices (including realized derivatives) Natural gas ($/mcf) Liquids ($/bbl) Operating Netback ($/boe) Natural gas and liquids sales Realized gains on derivatives Processing and other income Net sales of purchased natural gas Royalty expense Operating expense Transportation expense |
8,487 1,023 3,763 13,273 422,998 83,773 3.29 86.53 29.42 0.87 0.13 ‐ (2.80) (4.76) (4.06) |
7,527 8,144 3,033 2,630 3,254 3,035 2,801 979 1,055 1,200 1,231 1,264 1,368 871 3,379 3,621 2,908 2,591 3,345 3,174 2,683 11,885 12,820 7,141 6,452 7,863 7,577 6,355 389,331 369,306 355,563 357,410 363,124 339,709 272,919 76,774 74,371 66,401 66,020 68,384 64,195 51,842 2.46 1.65 1.82 2.86 2.84 2.95 2.81 87.84 85.05 84.58 80.21 81.55 77.91 75.36 23.14 20.44 17.22 22.62 23.39 23.83 22.73 2.91 2.44 1.59 0.70 0.98 1.02 1.07 0.11 0.15 0.32 0.30 0.39 0.39 0.22 ‐ ‐ ‐ ‐ ‐ ‐ (0.05) (2.40) (2.83) (1.16) (1.52) (1.64) (1.55) (1.33) (5.19) (5.46) (4.09) (4.08) (3.61) (3.85) (4.44) (3.77) (3.88) (3.73) (4.23) (4.08) (3.70) (4.34) |
| Operating netback (1) |
18.80 | 14.80 10.86 10.15 13.79 15.43 16.14 13.86 |
(1) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
(2) Based on basic weighted average shares outstanding.
(3) Based on diluted weighted average shares outstanding.
(4) Net income (loss) and comprehensive income (loss) attributable to Advantage Shareholders.
The table above highlights the Corporation’s performance for the first quarter of 2025 and for the preceding seven quarters. In 2023 the Corporation achieved a steady increase in production over the year rising to 68,384 boe/d in the fourth quarter. Sales and adjusted funds flow were lower in the second quarter of 2023 due to lower natural gas and liquids benchmark prices and a 17‐day turnaround at the Glacier Gas Plant in May 2023. Sales and adjusted funds improved for the remainder of 2023 with increased production although natural gas benchmark prices remained weak.
Advantage Energy Ltd. ‐ 25
Quarterly Performance (continued)
In the first and second quarter of 2024 Advantage allowed production to decline slightly while natural gas and liquids sales and adjusted funds flow decreased with lower natural gas prices from an unseasonably mild winter, strong natural gas supply and resulting high North American storage levels. The Corporation increased its sales and adjusted funds flow in the third and fourth quarter of 2024 primarily due to increased production and cash flow provided from the Acquired Assets, although significantly weak natural gas prices persisted and had an adverse offsetting impact. The particularly low natural gas pricing environment during the second and third quarter resulted in the recognition of net losses.
In the first quarter of 2025 the Corporation achieved higher adjusted funds flow than the fourth quarter of 2024 due to higher production and higher natural gas prices. However, the Corporation recognized a net loss due to a large unrealized loss due to changes in the fair value of outstanding derivative contracts. Cash provided by operating activities experienced greater fluctuations than adjusted funds flow due to changes in non‐cash working capital, which primarily resulted from the amount and timing of trade payable settlements and accounts receivable collections.
Critical Accounting Estimates
The preparation of financial statements in accordance with IFRS Accounting Standards requires Management to make certain judgments and estimates. Changes in these judgments and estimates could have a material impact on the Corporation’s financial results and financial condition.
Management relies on the estimate of reserves as prepared by the Corporation’s independent qualified reserves evaluator. The process of estimating reserves is critical to several accounting estimates. The process of estimating reserves is complex and requires significant judgments and decisions based on available geological, geophysical, engineering and economic data. These estimates may change substantially as additional data from ongoing development and production activities becomes available and as economic conditions impact natural gas and liquids prices, operating expense, royalty burden changes, and future development costs. Reserve estimates impact net income and comprehensive income through depreciation, impairment and impairment reversals of natural gas and liquids properties. After tax discounted cash flows are used to ensure the carrying amount of the Corporation’s natural gas and liquids properties are recoverable. The discount rate used is subject to judgement and may impact the carrying value of the Corporation’s property, plant and equipment. The reserve estimates are also used to assess the borrowing base for the Credit Facilities. Revision or changes in the reserve estimates can have either a positive or a negative impact on asset values, net income, comprehensive income and the borrowing base of the Corporation.
The Corporation’s assets are required to be aggregated into cash generating units ("CGUs") for the purpose of calculating impairment based on their ability to generate largely independent cash inflows. Factors considered in the classification include the integration between assets, shared infrastructures, the existence of common sales points, geography, geologic structure, and the manner in which Management monitors and makes decisions about its operations. The classification of assets and allocation of corporate assets into CGUs requires significant judgment and may impact the carrying value of the Corporation’s assets in future periods.
Advantage Energy Ltd. ‐ 26
Critical Accounting Estimates (continued)
Management’s process of determining the provision for deferred income taxes and the provision for decommissioning liability costs and related accretion expense are based on estimates. Estimates used in the determination of deferred income taxes provisions are significant and can include expected future tax rates, expectations regarding the realization or settlement of the carrying amount of assets and liabilities and other relevant assumptions. Estimates used in the determination of decommissioning liability cost provisions and accretion expense are significant and can include proved and probable reserves, future production rates, future commodity prices, future costs, future interest rates and other relevant assumptions. Revisions or changes in any of these estimates can have either a positive or a negative impact on asset and liability values, net income and comprehensive income.
In accordance with IFRS Accounting Standards, derivative assets and liabilities are recorded at their fair values at the reporting date, with gains and losses recognized directly into comprehensive income. The fair value of derivatives outstanding is an estimate based on pricing models, estimates, assumptions and market data available at that time. As such, the recognized amounts are non‐cash items and the actual gains or losses realized on eventual cash settlement can vary materially due to subsequent fluctuations in commodity prices as compared to the valuation assumptions. For embedded derivatives, Management assesses and determines the definition of the host contract and the separate embedded derivative. The judgements made in determining the host contract can influence the fair value of the embedded derivative.
In determining the fair value of Entropy’s unsecured debentures, judgments are required related to the choice of a pricing model, the estimation of share price, share price volatility, timing and probability of an IPO, credit spread, interest rates, and the expected term of the underlying instruments. Any changes in the estimates or inputs utilized to determine fair value could result in a significant impact on the Corporation’s future operating results.
Business combinations are accounted for using the acquisition method of accounting. The determination of fair value often requires Management to make assumptions and estimates about future events. The assumptions and estimates with respect to determining the fair value of property, plant and equipment and exploration and evaluation assets acquired generally require the most judgment and include estimates of oil and gas reserves acquired, forecast benchmark commodity prices and discount rates. Changes in any of the assumptions or estimates used in determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets, liabilities and goodwill.
Accounting Pronouncements not yet adopted
A description of additional accounting standards and interpretations that will be adopted in future periods can be found in the notes to the Condensed Consolidated Financial Statements for the three months ended March 31, 2025.
Environmental Reporting
Environmental regulations impacting climate‐related matters continue to evolve and may have additional disclosure requirements in the future. The International Sustainability Standards Board published the new IFRS sustainability disclosure standards, IFRS S1 General Requirements for Disclosure of Sustainability‐related Financial Information and IFRS S2 Climate‐related Disclosures , with the aim to develop an environment sustainability disclosure framework that is accepted globally. In December 2024, the Canadian Sustainability Standards Board (CSSB) published Canadian versions of the international standards (CSDS 1 and CSDS 2) and the Canadian Securities Administrators (CSA) previously announced that it intended to take the finalized CSSB standards into account and develop new Canadian climate‐related disclosure requirements that would be mandatory for subject Canadian issuers. On April 23, 2025, the CSA issued a news release advising that it has paused the work it had previously undertaken to develop new climate and diversity‐related disclosure requirements for Canadian issuers.
Advantage Energy Ltd. ‐ 27
Environmental Reporting (continued)
If the Corporation is unable to meet future sustainability reporting requirements of regulators or current and future expectations of stakeholders, its business and ability to attract and retain skilled employees, obtain regulatory permits, licenses, registrations, approvals and authorizations from various government authorities, and raise capital may be adversely affected. The cost to comply with these standards, and others that may be developed or evolved over time, has not yet been quantified.
Evaluation of Disclosure Controls and Procedures
Advantage’s Chief Executive Officer and Chief Financial Officer have designed disclosure controls and procedures ("DC&P"), or caused it to be designed under their supervision, to provide reasonable assurance that material information relating to the Corporation is made known to them by others, particularly during the period in which the annual filings are being prepared, and information required to be disclosed by the Corporation in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.
Evaluation of Internal Controls over Financial Reporting
Advantage’s Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining internal control over financial reporting ("ICFR"). They have designed ICFR, or caused it to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The control framework Advantage’s officers used to design the Corporation’s ICFR is the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations. Management of Advantage, including our Chief Executive Officer and Chief Financial Officer, evaluate the effectiveness of the Corporation’s ICFR annually.
Advantage’s Chief Executive Officer and Chief Financial Officer are required to disclose any change in the ICFR that occurred during our most recent interim period that has materially affected, or is reasonably likely to materially affect, the Corporation’s ICFR. No material changes in the ICFR were identified during the interim period ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our ICFR.
It should be noted that while the Chief Executive Officer and Chief Financial Officer believe that the Corporation’s design of DC&P and ICFR provide a reasonable level of assurance that they are effective, they do not expect that the control system will prevent all errors and fraud. A control system, no matter how well conceived or operated, does not provide absolute, but rather is designed to provide reasonable assurance that the objective of the control system is met. The Corporation’s ICFR may not prevent or detect all misstatements because of inherent limitations. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the Corporation’s policies and procedures.
Advantage Energy Ltd. ‐ 28
Specified Financial Measures
Throughout this MD&A and in other documents disclosed by the Corporation, Advantage discloses certain measures to analyze financial performance, financial position, and cash flow. These non‐GAAP and other financial measures do not have any standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other entities. The non‐GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income (loss) and comprehensive income (loss), cash provided by operating activities, and cash used in investing activities, as indicators of Advantage’s performance.
Non‐GAAP Financial Measures
Adjusted Funds Flow
The Corporation considers adjusted funds flow to be a useful measure of Advantage’s ability to generate cash from the production of natural gas and liquids, which may be used to settle outstanding debt and obligations, support future capital expenditures plans, or return capital to shareholders. Changes in non‐cash working capital are excluded from adjusted funds flow as they may vary significantly between periods and are not considered to be indicative of the Corporation’s operating performance as they are a function of the timeliness of collecting receivables and paying payables. Expenditures on decommissioning liabilities are excluded from the calculation as the amount and timing of these expenditures are unrelated to current production and are partially discretionary due to the nature of our low liability. A reconciliation of the most directly comparable financial measure has been provided below:
| Three months ended March | Three months ended March | 31 | ||||
|---|---|---|---|---|---|---|
| 2025 | 2024 | |||||
| ($000) | **Advantage ** | Entropy | Total |
Advantage |
Entropy | Total |
| Cash provided by (used in) operating activities | 123,814 | (865) | 122,949 |
69,284 | (1,910) | 67,374 |
| Expenditures on decommissioning liability | 1,393 | ‐ | 1,393 | 67 | ‐ | 67 |
| Changes in non‐cash workingcapital | (4,080) | (1,620) | (5,700) | (2,320) | 272 | (2,048) |
| Adjusted funds flow | 121,127 | (2,485) | 118,642 | 67,031 | (1,638) | 65,393 |
Net Capital Expenditures
Net capital expenditures include total capital expenditures related to property, plant and equipment, exploration and evaluation assets and intangible assets. Management considers this measure reflective of actual capital activity for the period as it excludes changes in working capital related to other periods and excludes cash receipts on government grants. A reconciliation of the most directly comparable financial measure has been provided below:
| government grants. A reconciliation of t | he most directly c | omparable financial measure has b | omparable financial measure has b | omparable financial measure has b | een provide | d below: |
|---|---|---|---|---|---|---|
| Three months ended March | 31 | |||||
| 2025 | 2024 | |||||
| ($000) | **Advantage ** | Entropy | Total |
**Advantage ** | Entropy | Total |
| Cash used in investing activities | 87,901 | 20,018 | 107,919 | 75,481 | 3,946 | 79,427 |
| Changes in non‐cash workingcapital | 6,270 | (202) | 6,068 | 695 | 12 | 707 |
| Net capital expenditures | 94,171 | 19,816 | 113,987 | 76,176 | 3,958 | 80,134 |
Advantage Energy Ltd. ‐ 29
Specified Financial Measures (continued)
Non‐GAAP Financial Measures (continued)
Free Cash Flow
The Corporation computes free cash flow as adjusted funds flow less net capital expenditures excluding the impact of asset acquisitions and dispositions. The Corporation uses free cash flow as an indicator of the efficiency and liquidity of the Corporation’s business by measuring its cash available after net capital expenditures, excluding acquisitions and dispositions, to settle outstanding debt and obligations and potentially return capital to shareholders by paying dividends or buying back Common Shares. The Corporation excludes the impact of acquisitions and dispositions as they are not representative of the free cash flow used in the Corporation’s natural gas and liquids and carbon capture operations and are financed by means other than adjusted funds flow. A reconciliation of the most directly comparable financial measure has been provided below:
| Three months ended March | Three months ended March | Three months ended March | 31 | |||
|---|---|---|---|---|---|---|
| 2025 | 2024 | |||||
| ($000) | **Advantage ** | Entropy | Total |
**Advantage ** | Entropy | Total |
| Cash provided by (used in) operating activities | 123,814 | (865) | 122,949 | 69,284 | (1,910) | 67,374 |
| Cash used in investing activities | (87,901) | (20,018) | (107,919) | (75,481) | (3,946) | (79,427) |
| Changes in non‐cash working capital | (10,350) | (1,418) | (11,768) | (3,015) | 260 | (2,755) |
| Expenditures on decommissioning liability | 1,393 | ‐ | 1,393 | 67 | ‐ | 67 |
| Dispositions | (4,000) | ‐ | (4,000) | ‐ | ‐ | ‐ |
| Free cash flow ‐ surplus(deficit) | 22,956 | (22,301) | 655 | (9,145) | (5,596) | (14,741) |
Operating Income
Operating income is comprised of natural gas and liquids sales, realized gains on derivatives, processing and other income, net sales of purchased natural gas, net of expenses resulting from field operations including royalty expense, operating expense and transportation expense. Operating income provides Management and users with a measure to compare the profitability of Advantage’s field operations between companies, development areas and specific wells. The composition of operating income is as follows:
| Three months ended | Three months ended | |
|---|---|---|
| March 31 | ||
| ($000) | 2025 | 2024 |
| Natural gas and liquids sales | 221,790 | 135,897 |
| Realized gains on derivatives | 6,525 | 4,206 |
| Processing and other income | 978 | 1,809 |
| Royalty expense | (21,079) | (9,135) |
| Operating expense | (35,858) | (24,497) |
| Transportation expense | (30,573) | (25,397) |
| Operatingincome | 141,783 | 82,883 |
Advantage Energy Ltd. ‐ 30
Specified Financial Measures (continued)
Non‐GAAP Ratios
Adjusted Funds Flow per Share
Adjusted funds flow per share is derived by dividing adjusted funds flow by the basic and diluted weighted average shares outstanding of the Corporation. Management believes that adjusted funds flow per share provides investors an indicator of funds generated from the business that could be allocated to each shareholder's equity position.
| Three months ended | Three months ended | |
|---|---|---|
| March 31 | ||
| ($000, except as otherwise indicated) | 2025 | 2024 |
| Adjusted funds flow | 118,642 | 65,393 |
| Weighted average shares outstanding (000) | 166,821 | 160,444 |
| Diluted weighted average shares outstanding (000) | 166,821 | 164,129 |
| Adjusted funds flow per basic share ($/share) | 0.71 | 0.41 |
| Adjusted funds flowper diluted share($/share) | 0.71 | 0.40 |
Adjusted Funds Flow per BOE
Adjusted funds flow per boe is derived by dividing adjusted funds flow attributable to Advantage by the total production in boe for the reporting period. Adjusted funds flow per boe is a useful ratio that allows users to compare the Corporation’s adjusted funds flow against other competitor corporations with different rates of production.
| Three months ended | Three months ended | |
|---|---|---|
| March 31 | ||
| ($000, except as otherwise indicated) | 2025 | 2024 |
| Advantage adjusted funds flow | 121,127 | 67,031 |
| Total production (boe/d) | 83,773 | 66,020 |
| Days inperiod | 90 | 91 |
| Totalproduction(boe) | 7,539,570 | 6,007,820 |
| Adjusted funds flowper BOE($/boe) | 16.07 | 11.16 |
Operating netback
Operating netback is derived by dividing operating income by the total production in boe for the reporting period. Operating netback provides Management and users with a measure to compare the profitability of field operations between companies, development areas and specific wells against other competitor corporations with different rates of production.
| of production. | ||
|---|---|---|
| Three months ended | ||
| March 31 | ||
| ($000, except as otherwise indicated) | 2025 | 2024 |
| Operating income | 141,783 | 82,883 |
| Total production (boe/d) | 83,773 | 66,020 |
| Days inperiod | 90 | 91 |
| Totalproduction(boe) | 7,539,570 | 6,007,820 |
| Operatingnetback($/boe) | 18.80 | 13.79 |
Advantage Energy Ltd. ‐ 31
Specified Financial Measures (continued)
Non‐GAAP Ratios (continued)
Debt to Adjusted Funds Flow Ratio
Debt to adjusted funds flow ratio is a coverage ratio that provides Management and users the ability to determine how long it would take the Corporation to repay its bank indebtedness, including working capital, and its outstanding aggregate Convertible Debentures if Advantage devoted all its adjusted funds flow to debt repayment. Debt to adjusted funds flow is calculated by taking bank indebtedness, inclusive of working capital, plus Convertible Debentures, and dividing it by adjusted fund flow (for the trailing four quarters) that can be used to satisfy such borrowings. The Unsecured Debentures, and adjusted funds flow attributed to Entropy are excluded from the calculation as they are a liability of Entropy and are non‐recourse to Advantage.
| calculation as they are a liability of Entropy and are non‐recourse to Advantage. | ||
|---|---|---|
| March 31 | December 31 | |
| ($000, except as otherwise indicated) | 2025 | 2024 |
| Bank indebtedness | 446,333 | 470,424 |
| Convertible debentures | 143,750 | 143,750 |
| Advantage workingcapital deficit | 13,224 | 11,377 |
| Advantage net debt | 603,307 | 625,551 |
| Advantage adjusted funds flow(for the trailingfourquarters) | 304,127 | 250,031 |
| Debt to adjusted funds flow | 2.0 | 2.5 |
Capital Management Measures
Working capital
Working capital is a capital management financial measure that provides Management and users with a measure of the Corporation’s short‐term operating liquidity. By excluding short term derivatives and the current portion of provisions and other liabilities, Management and users can determine if the Corporation’s energy operations are sufficient to cover the short‐term operating requirements. Working capital is not a standardized measure and therefore may not be comparable with the calculation of similar measures by other entities.
A summary of working capital as at March 31, 2025 and December 31, 2024 is as follows:
| March 31 | December 31 | |
|---|---|---|
| ($000, except as otherwise indicated) | 2025 | 2024 |
| Cash and cash equivalents | 46,846 | 20,146 |
| Trade and other receivables | 90,050 | 83,188 |
| Prepaid expenses and deposits | 9,608 | 10,000 |
| Trade and other accrued liabilities | (133,936) | (116,609) |
| Working capital surplus(deficit) | 12,568 | (3,275) |
Advantage Energy Ltd. ‐ 32
Capital Management Measures (continued)
Net Debt
Net debt is a capital management financial measure that provides Management and users with a measure to assess the Corporation’s liquidity. Net debt is not a standardized measure and therefore may not be comparable with the calculation of similar measures by other entities.
A summary of the reconciliation of net debt as at March 31, 2025 and December 31, 2024 is as follows:
| A summary of the reconciliation of net debt as at March 31, | 2025 and December 31, 2024 is as f | ollows: |
|---|---|---|
| March 31 | December 31 | |
| 2025 | 2024 | |
| Bank indebtedness | 446,333 | 470,424 |
| Convertible debentures | 143,750 | 143,750 |
| Workingcapital deficit | 13,224 | 11,377 |
| Net debt attributable to Advantage | 603,307 | 625,551 |
| Unsecured debentures | 145,732 | 101,000 |
| Workingcapital surplus | (25,792) | (8,102) |
| Net debt attributable to Entropy | 119,940 | 92,898 |
| Net debt | 723,247 | 718,449 |
Supplementary Financial Measures
Average Realized Prices
The Corporation discloses multiple average realized prices within the MD&A (see "Commodity Prices and Marketing"). The determination of these prices are as follows:
" Natural gas excluding derivatives " is comprised of natural gas sales, as determined in accordance with IFRS, divided by the Corporation’s natural gas production.
" Natural gas including derivatives " is comprised of natural gas sales, including realized gains (losses) on natural gas derivatives and natural gas embedded derivative, as determined in accordance with IFRS, divided by the Corporation’s natural gas production.
" Crude Oil " is comprised of crude oil sales, as determined in accordance with IFRS, divided by the Corporation’s crude oil production.
" Condensate " is comprised of condensate sales, as determined in accordance with IFRS, divided by the Corporation’s condensate production.
" NGLs " is comprised of NGLs sales, as determined in accordance with IFRS, divided by the Corporation’s NGLs production.
"Total liquids excluding derivatives" is comprised of crude oil, condensate and NGLs sales, as determined in accordance with IFRS, divided by the Corporation’s crude oil, condensate and NGLs production.
"Total liquids including derivatives" is comprised of crude oil, condensate and NGLs sales, including realized gains (losses) on crude oil derivatives as determined in accordance with IFRS, divided by the Corporation’s crude oil, condensate and NGLs production.
Advantage Energy Ltd. ‐ 33
Specified Financial Measures (continued)
Supplementary Financial Measures (continued)
Dollars per BOE figures
Throughout the MD&A, the Corporation presents certain financial figures, in accordance with IFRS, stated in dollars per boe. All dollar per boe figures herein forth only include the results of Advantage’s natural gas and liquids operations and exclude the results of Entropy. These figures are determined by dividing the applicable financial figure as prescribed under IFRS by the Corporation’s total production for the respective period. Below is a list of figures which have been presented in the MD&A in $ per boe:
-
Depreciation and amortization expense per boe
-
Finance expense per boe
-
General and administrative expense per boe
-
Natural gas and liquids sales per boe
-
Operating expense per boe
-
Realized gains (losses) on derivatives per boe
-
Royalty expense per boe
-
Processing and other income per boe
-
Share‐based compensation expense per boe
-
Transportation expense per boe
Conversion Ratio
The term "boe" or barrels of oil equivalent and "Mcfe" or thousand cubic feet equivalent may be misleading, particularly if used in isolation. A boe or Mcfe conversion ratio of six thousand cubic feet of natural gas equivalent to one barrel of oil (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Advantage Energy Ltd. ‐ 34
Abbreviations
Terms and abbreviations that are used in this MD&A that are not otherwise defined herein are provided below:
| bbl(s) | ‐ barrel(s) |
|---|---|
| bbls/d | ‐ barrels per day |
| boe | ‐ barrels of oil equivalent (6 Mcf = 1 bbl) |
| boe/d | ‐ barrels of oil equivalent per day |
| GJ | ‐ gigajoules |
| Mcf | ‐ thousand cubic feet |
| Mcf/d | ‐ thousand cubic feet per day |
| Mcfe | ‐ thousand cubic feet equivalent (1 bbl = 6 Mcf) |
| Mcfe/d | ‐ thousand cubic feet equivalent per day |
| MMbtu | ‐ million British thermal units |
| MMbtu/d | ‐ million British thermal units per day |
| MMcf | ‐ million cubic feet |
| MMcf/d | ‐ million cubic feet per day |
| Crude oil | ‐ Light Crude Oil and Medium Crude Oil as defined in National Instrument 51‐101 |
| “NGLs" & “condensate” | ‐ Natural Gas Liquids as defined in National Instrument 51‐101 |
| Natural gas | ‐ "Conventional Gas" and "Shale Gas" as defined in National Instrument 51‐101 |
| Liquids | ‐ Total of crude oil, condensate and NGLs |
| AECO | ‐ a notional market point on TransCanada Pipeline Limited’s NGTL system where |
| the purchase and sale of natural gas is transacted | |
| MSW | ‐ price for mixed sweet crude oil at Edmonton, Alberta |
| NGTL | ‐ NOVA Gas Transmission Ltd. |
| WTI | ‐ West Texas Intermediate, price paid in U.S. dollars at Cushing, Oklahoma, for |
| crude oil of standard grade | |
| CCS | ‐ Carbon Capture and Storage |
| CCUS | ‐ Carbon Capture Utilization and Storage |
| IP30 | ‐ average initial peak production rate over 30 consecutive days after a well is brought |
| on production | |
| IP90 | ‐ average initial peak production rate over 90 consecutive days after a well is brought |
| on production | |
| nm | ‐ not meaningful information |
Advantage Energy Ltd. ‐ 35
Forward‐Looking Information and Other Advisories
This MD&A contains certain forward‐looking statements and forward‐looking information (collectively, "forward‐ looking statements"), which are based on our current internal expectations, estimates, projections, assumptions and beliefs. These forward‐looking statements relate to future events or our future performance. All statements other than statements of historical fact may be forward‐looking statements. Forward‐looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar or related expressions. These statements are not guarantees of future performance.
In particular, forward‐looking statements in this MD&A include, but are not limited to, statements about our strategy, plans, objectives, priorities and focus and the benefits to be derived therefrom; the Corporation's plans to continue to monitor developments in U.S. trade policy and assess any potential impacts on its operations and financial performance; Advantage's anticipated 2025 average production; the Corporation's 2025 guidance set forth under the heading "2025 Guidance", including Advantage's anticipated annual royalty rates, operating expense per boe and transportation expense per boe in 2025; potential U.S. imposed tariffs and the anticipated impact on the global economy and commodity markets; the Corporation's forecasted 2025 natural gas market exposure including the anticipated effective production rate; the terms of the Corporation's derivative contracts, including their purposes, the timing of settlement of such contracts and the anticipated benefits to be derived therefrom; terms of the Entropy unsecured debentures; the anticipated benefits to be derived from the Corporation's optimization projects completed during the first quarter of 2025 at Glacier, including its anticipated effect on free cash flow; anticipated synergies and growth from completion and commissioning of the Progress facility; the anticipated timing of the completion and commissioning of the Progress gas plant, and the anticipated incremental processing capacity thereof; management's expectations that the Corporation's Valhalla asset will play a pivotal role in the Corporation's liquids‐rich gas development plan; that Advantage will utilize excess processing capacity acquired in 2024 and the anticipated benefits thereof; the Corporation's future commitments and contractual obligations and the anticipated payments in connection therewith and timing thereof; Advantage's net debt target and ability to achieve such target; the Corporation's continual financial assessment process and the anticipated benefits in connection therewith; the Corporation's ability to satisfy all liabilities and commitments and meet future obligations as they become due and the means for satisfying such future obligations; the Corporation's strategy for managing its capital structure; the terms of the Corporation's Credit Facilities, including the timing of the next review of the Credit Facilities and the Corporation's expectations regarding the extension of the Credit Facilities at each annual review; the terms of the Debentures; the terms of Entropy's unsecured debentures; the anticipated undiscounted, uninflated cash flows required to settle the Corporation's decommissioning liability and the anticipated timing that such costs will be incurred; the statements under "critical accounting estimates" in this MD&A; and other matters.
These forward‐looking statements involve substantial known and unknown risks and uncertainties, many of which are beyond our control, including, but not limited to, risks related to changes in general economic conditions (including as a result of demand and supply effects resulting from the actions of OPEC and non‐OPEC countries) which will, among other things, impact demand for and market prices of the Corporation’s products, market and business conditions; continued volatility in market prices for oil and natural gas; the risk that (i) the tariffs that are currently in effect on goods exported from or imported into Canada continue in effect for an extended period of time, the tariffs that have been threatened are implemented, that tariffs that are currently suspended are reactivated, the rate or scope of tariffs are increased, or new tariffs are imposed, including on oil and natural gas, (ii) the U.S. and/or Canada imposes any other form of tax, restriction or prohibition on the import or export of products from one country to the other, including on oil and natural gas, and (iii) the tariffs imposed or threatened to be imposed by the U.S. on other countries and retaliatory tariffs imposed or threatened to be imposed by other countries on the U.S., will trigger a
Advantage Energy Ltd. ‐ 36
Forward Looking Information and Other Advisories (continued)
broader global trade war which could have a material adverse effect on the Canadian, U.S. and global economies, and by extension the Canadian oil and natural gas industry and the Corporation, including by decreasing demand for (and the price of) oil and natural gas, disrupting supply chains, increasing costs, causing volatility in global financial markets, and limiting access to financing; the impact of significant declines in market prices for oil and natural gas; stock market volatility; changes to legislation and regulations and how they are interpreted and enforced; our ability to comply with current and future environmental or other laws; actions by governmental or regulatory authorities including increasing taxes, regulatory approvals, changes in investment or other regulations; changes in tax laws, royalty regimes and incentive programs relating to the oil and gas industry; the effect of acquisitions; our success at acquisition, exploitation and development of reserves; unexpected drilling results; failure to achieve production targets on timelines anticipated or at all; changes in commodity prices, currency exchange rates, capital expenditures, reserves or reserves estimates and debt service requirements; the occurrence of unexpected events involved in the exploration for, and the operation and development of, oil and gas properties; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; changes or fluctuations in production levels; individual well productivity; delays in anticipated timing of drilling and completion of wells; lack of available capacity on pipelines; delays in timing of facility installation; performance or achievement could differ materially from those expressed in, or implied by, the forward‐looking information; the failure to extend the Credit Facilities at each annual review; competition from other producers; the lack of availability of qualified personnel or management; ability to access sufficient capital from internal and external sources; credit risk; the risk that Advantage's average production in 2025 may be less than anticipated; the risk that Advantage does not achieve its anticipated guidance for 2025 as set forth in this MD&A under the heading "2025 Guidance";
the risk that the Corporation's Valhalla asset may not play a pivotal role in the Corporation's liquids‐rich gas development plan; the risk that the Corporation may not be properly diversified to multiple markets; the risk that the Corporation may not satisfy all of its liabilities and commitments and meet future obligations as they become due; the risk that the undiscounted, uninflated cash flows required to settle the Corporation's decommissioning liability may be greater than expected; the risk that Advantage's annual royalty rates in 2025 may be greater than anticipated; the risk that Advantage's operating expense per boe and transportation expense per boe in 2025 may be greater than anticipated; the risk that additional natural gas processing will not occur in the second half of 2025 as anticipated; the risk that Advantage will not be able to utilize excess capacity acquired in 2024 or realize the anticipated benefits thereof; the risk that the Corporation's optimization projects completed during the first quarter of 2025 at Glacier may not lead to the benefits anticipated; the risk that the Progress gas plant will not be completed and commissioned when anticipated or result in the anticipated benefits thereof; the risk that Advantage's net debt in 2025 may be greater than anticipated; and the risks and uncertainties described in the Corporation’s Annual Information Form which is available at www.sedarplus.ca and www.advantageog.com. Readers are also referred to risk factors described in other documents Advantage files with Canadian securities authorities.
With respect to forward‐looking statements contained in this MD&A, in addition to other assumptions identified herein, Advantage has made assumptions regarding, but not limited to: current and future prices of oil and natural gas; the duration and impact of tariffs that are currently in effect on goods exported from or imported into Canada, and that other than the tariffs that are currently in effect, neither the U.S. nor Canada (i) increases the rate or scope of such tariffs, reenacts tariffs that are currently suspended, or imposes new tariffs, on the import of goods from one country to the other, including on oil and natural gas, and/or (ii) imposes any other form of tax, restriction or prohibition on the import or export of products from one country to the other, including on oil and natural gas; that the current commodity price and foreign exchange environment will continue or improve; conditions in general
Advantage Energy Ltd. ‐ 37
Forward Looking Information and Other Advisories (continued)
economic and financial markets; effects of regulation by governmental agencies; receipt of required stakeholder and regulatory approvals; royalty regimes; future exchange rates; royalty rates; future operating costs; availability of skilled labour; availability of drilling and related equipment; timing and amount of capital expenditures; the ability to efficiently integrate assets acquired through acquisitions; the impact of increasing competition; the price of crude oil and natural gas; that the Corporation will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Corporation’s conduct and results of operations will be consistent with its expectations; that the Corporation will have the ability to develop the Corporation’s crude oil and natural gas properties in the manner currently contemplated; availability of pipeline capacity; that current or, where applicable, proposed assumed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; that the Corporation's cash provided by operating activities and available Credit Facilities will be able to satisfy all of the Corporation's liabilities, commitments and future obligations as they become due; and that the estimates of the Corporation’s production, reserves and resources volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects.
Management has included the above summary of assumptions and risks related to forward‐looking information provided in this MD&A in order to provide shareholders with a more complete perspective on Advantage's future operations and such information may not be appropriate for other purposes. Advantage’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward‐looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward‐looking statements will transpire or occur, or if any of them do so, what benefits that Advantage will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward‐looking statements are made as of the date of this MD&A and Advantage disclaims any intent or obligation to update publicly any forward‐looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
The future acquisition by the Corporation of Common Shares pursuant to its NCIB and future NCIBs, if any, and the level thereof is uncertain. Any decision to renew the Corporation's NCIB and to acquire Common Shares of the Corporation pursuant to the NCIB will be subject to the discretion of the board of directors of the Corporation and may depend on a variety of factors, including, without limitation, the Corporation's business performance, financial condition, financial requirements, growth plans, expected capital requirements and other conditions existing at such future time including, without limitation, contractual restrictions and satisfaction of the solvency tests imposed on the Corporation under applicable corporate law. There can be no assurance of the number of Common Shares of the Corporation that the Corporation will acquire pursuant to its NCIB or future NCIBs, if any, in the future.
This MD&A contains information that may be considered a financial outlook under applicable securities laws about the Corporation's potential financial position, including, but not limited to: the terms of the Corporation's derivative contracts; Advantage's anticipated annual royalty rates, operating expense per boe and transportation expense per boe in 2025; the Corporation's future commitments and contractual obligations; Advantage's net debt target; and the anticipated undiscounted, uninflated cash flows required to settle the Corporation's decommissioning liability, all of which are subject to numerous assumptions, risk factors, limitations and qualifications, including those set forth in the above paragraphs. The actual results of operations of the Corporation and the resulting financial results will vary from the amounts set forth in this MD&A and such variations may be material. This information has been provided for illustration only and with respect to future periods are based on budgets and forecasts that are speculative and are subject to a variety of contingencies and may not be appropriate for other purposes. Accordingly, these estimates are not to be relied upon as indicative of future results. Except as required by applicable securities laws, the Corporation undertakes no obligation to update such financial outlook. The financial outlook contained in
Advantage Energy Ltd. ‐ 38
Forward Looking Information and Other Advisories (continued)
this MD&A was made as of the date of this MD&A and was provided for the purpose of providing further information about the Corporation's potential future business operations. Readers are cautioned that the financial outlook contained in this MD&A is not conclusive and is subject to change.
This MD&A contains metrics commonly used in the oil and natural gas industry which have been prepared by management such as “operating netback”. These terms do not have standard meaning and may not be comparable to similar measures presented by other companies and, therefore, should not be used to make such comparisons. Management uses these oil and natural gas metrics for its own performance measurements, and to provide shareholders with measures to compare Advantage’s operations overtime. Readers are cautioned that the information provided by these metrics, or that can be derived from metrics presented in the MD&A, should not be relied upon for investment or other purposes. Refer above to “Specified Financial Measures” section of this MD&A for additional disclosure on “operating netback”.
References in this MD&A to short‐term production rates, such as IP30 and IP90, are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long‐term performance or of ultimate recovery. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production of Advantage.
References to natural gas, crude oil and condensate and NGLs production in the MD&A refer to conventional natural gas, light crude oil and medium crude oil and natural gas liquids, respectively, product types as defined in National Instrument 51‐101.
Additional Information
Additional information relating to Advantage can be found on SEDAR+ at www.sedarplus.ca and the Corporation’s website at www.advantageog.com. Such other information includes the annual information form, the management information circular, press releases, material change reports, material contracts and agreements, and other financial reports. The annual information form will be of particular interest for current and potential shareholders as it discusses a variety of subject matter including the nature of the business, description of our operations, general and recent business developments, risk factors, reserves data and other oil and gas information.
May 1, 2025
Advantage Energy Ltd. ‐ 39