Peyto Exploration & Development Corp. ("Peyto" or the "Company") is pleased to present the results and in-depth analysis of its independent reserves report effective December 31, 2025. The evaluation encompassed 100% of Peyto锟絪 reserves and was conducted by GLJ Ltd. ("GLJ"). This marks the Company锟絪 27th year of successful reserves development. Certain financial and operating information included in this news release is based on estimated unaudited financial results for the year ended December 31, 2025. See "Unaudited Financial Information" in the Advisories section of this news release.
2025 HIGHLIGHTS
The Company added 504 BCFe1 (84 MMboe2) of new Proved Developed Producing ("PDP") reserves at a Finding, Development and Acquisition3 ("FD&A") cost of $0.94/Mcfe ($5.66/boe), Peyto锟絪 lowest in 23 years. The Company锟絪 continuous focus on adding reserves at low costs has generated a three-year average PDP FD&A of $1.05/Mcfe.
Peyto invested $475 million of capital4 in 2025, using 55% of funds from operations5 ("FFO"), while returning $265 million in dividends to shareholders and decreasing net debt6 by $170 million.
The Company achieved record production in December of 145 Mboe/d (763 MMcf/d gas, 18,270 bbl/d NGLs), generating an exit rate capital efficiency7 of $9,900/boe/d.
A systematic hedging program and market diversification strategy, paired with Peyto锟絪 low operating cost structure, delivered an average field netback8 of $3.61/Mcfe ($21.66/boe). This netback, combined with a low PDP FD&A, resulted in a recycle ratio9 of 3.8 times (2.9 times excluding hedges), Peyto's highest in 22 years.
Peyto delivered reserves growth across all categories in 2025 through its successful drilling program. PDP reserves increased 7% to 509 MMboe, Total Proved ("TP") reserves increased 6% to 926 MMboe, and Total Proved plus Probable ("P+P") reserves increased 6% to 1,450 MMboe. On a per-share basis, reserves grew 4%, 3%, and 3% for PDP, TP, and P+P, respectively. Since inception, the Company has generated a 20% compound annual growth rate10 ("CAGR") in PDP reserves per share.
Peyto锟絪 capital investment replaced 172%, 203% and 270% of annual production with new PDP, TP, and P+P reserves, respectively.
The before-tax, 10% discounted net present value ("BT NPV10") of the Company锟絪 reserves is $5.0 billion on a PDP basis, $6.9 billion on a TP basis, and $9.4 billion on a P+P basis. Peyto锟絪 2025 capital program delivered a 2% increase in PDP reserve value and a 5% increase on a debt-adjusted per-share basis, compared to the prior year, despite lower forecasted pricing used by GLJ in this year锟絪 evaluation.
Total Company BT NPV10 for PDP, TP, and P+P reserves on a debt-adjusted basis implies values of $19 per share, $28 per share, and $40 per share, respectively, using the January 1, 2026, Three-Consultant Average ("3CA") price forecast (GLJ, McDaniel, and Sproule).
The Reserve Life Index11 ("RLI") for PDP reserves remains unchanged at 10 years, while Peyto grew year-over-year fourth quarter production by 5.5%. TP and P+P reserves RLI also remain unchanged at 18 and 28 years, respectively, supported by the Company锟絪 industry-leading cash costs. Peyto锟絪 PDP reserve life is one of the longest in the industry.
Peyto consistently develops reserves at a lower cost than originally forecasted, providing confidence in valuing the Company锟絪 over 1,600 undeveloped booked locations.
The Company锟絪 TP and P+P FD&A costs, inclusive of changes to future development capital, were $0.96/Mcfe ($5.78/boe) and $0.83/Mcfe ($4.98/boe), respectively, with corresponding field netback recycle ratios of 3.7 and 4.3 times, including hedges.
2026 CAPITAL BUDGET
The Board of Directors of Peyto has approved a 2026 capital budget of $450锟�$500 million. The capital program is projected to add between 43,000 and 48,000 boe/d of new production by year end and more than offset the Company锟絪 estimated 26% to 28% decline in base production. The Company expects to utilize four to five drilling rigs to drill 70锟�80 net horizontal wells, representing approximately 80% of the 2026 budget. The remaining capital is planned for optimization and maintenance projects for Peyto锟絪 13 operating gas plants and extensive gathering system infrastructure. An incremental $13 million is expected to be spent on abandonment and reclamation activities.
Peyto锟絪 active hedging program has secured prices for approximately 475 MMcf/d of natural gas for 2026 at an average price over $4.00/Mcf, and when combined with the Company锟絪 liquids hedges, provides revenue certainty of over $830 million, reflecting one of the highest levels of price protection in the industry. This fixed revenue more than covers the planned capital program and dividends to shareholders for the year and allows for continued debt repayment at current commodity price forecasts.
Additionally, the Company's market diversification to non-AECO hubs is positioned for another solid year. For the first quarter of 2026, all of Peyto's floating-price exposure to Chicago, Dawn, Parkway, Emerson 2 and Malin is contracted to daily benchmark indexes, which allowed the Company to capture high daily prices during the most recent cold weather-related volatility in the premium US Mid-West and Ontario markets.
As always, Peyto锟絪 capital program will remain flexible to respond to changing commodity prices. However, the Company锟絪 strong hedge book, market diversification and industry leading cash costs insulate the effects of short-term volatility and allow the efficient development of the Company锟絪 high-quality assets.
HISTORICAL PERSPECTIVE
Over the past 27 years, Peyto has acquired, explored and discovered 12 TCFe of Alberta Deep Basin natural gas and associated liquids, of which 60% has now been developed12.
Each year the Company invests in the discovery of new reserves and the efficient and profitable development of existing reserves into high netback natural gas and NGL production for the purpose of generating the maximum possible return on capital for its shareholders.
In those 27 years, a total of $9.4 billion was invested in the Canadian economy in the acquisition and development of 7.2 TCFe of total developed natural gas and associated liquids at an average cost of $1.31/Mcfe, while a weighted average field netback of $3.47/Mcfe delivered $10 billion in FFO, $3.4 billion in dividends and distributions to shareholders, and resulted in a cumulative recycle ratio of 2.6 times. Royalty payments made to Alberta during this time have totaled over $1.3 billion.
Based on the December 31, 2025, evaluation, net debt of $1.18 billion at December 31, 2025, and 203.3 million shares outstanding at December 31, 2025, the debt-adjusted BT NPV10 of the Company锟絪 P+P reserves was $40 per share. This value is comprised of $25 per share attributable to developed reserves and $15 per share attributable to undeveloped reserves. The assessment includes a full provision for abandonment and reclamation liabilities associated with all wells, well sites, and facilities for which Peyto has ownership and responsibility. The evaluation excludes financial hedges but includes market diversification contracts.
2025 RESERVES REPORT AND ANALYSIS
The following table summarizes Peyto锟絪 reserves and the discounted Net Present Value of future cash flows, before income tax, using the 3CA price forecast. The 3CA price forecast is available on GLJ锟絪 website at www.gljpc.com.
The following table presents a reconciliation of the Company锟絪 gross reserves compared to the prior year锟絪 reserves evaluation. The increase in Peyto锟絪 reserves is primarily attributable to development activity completed during the year, as well as positive technical revisions, largely related to wells drilled in 2024.
ANALYSIS FOR PEYTO SHAREHOLDERS
One of the guiding principles at Peyto is "to tell you the business facts that we would want to know if our positions were reversed". Therefore, each year Peyto provides an extensive analysis of the independent reserve evaluation that goes far beyond industry norms to answer the most important questions for shareholders:
Base Reserves 锟� How did the "base reserves" that were on production at the time of the last reserve report perform during the year, and how did any change in commodity price forecast affect their value?
Value Creation 锟� How much value did the 2025 capital investments create, both in current producing reserves and in undeveloped potential? Has the Peyto team earned the right to continue investing shareholders锟� capital?
Growth and Income 锟� Are the projected cash flows capable of funding the growing number of undeveloped opportunities and a sustainable dividend stream to shareholders, without sacrificing Peyto锟絪 financial flexibility or allowing for the timely repayment of any debt used?
Risk Assessment 锟� What are the risks associated with the assessment of Peyto锟絪 reserves and the risk of recovering future cashflows from the forecasted production streams?
1. Base Reserves
Peyto锟絪 existing PDP reserves at the start of 2025 (the base reserves) were evaluated and adjusted for 2025 production as well as any technical or economic revisions resulting from the additional twelve months of production and commodity price data. As part of GLJ锟絪 independent engineering analysis, all base 3,192 producing reserve entities (zones/wells) were evaluated. These base producing wells and zones represent a total gross Estimated Ultimate Recoverable ("EUR") volume of 9.6 TCFe (remaining PDP + Probable Additional ("PA") reserves plus all cumulative production to date), which is up 0.1% from the prior year estimate. As a result, Peyto is pleased to report that its total base reserves continue to meet expectations, which provides confidence in the prediction of future recoveries.
2. Value Creation/Reconciliation
During 2025, Peyto invested $475 million in organic activity to evaluate exploration lands, expand its gathering and infrastructure network, and drill, complete, and tie in 82 gross (78.4 net) wells. In alignment with Peyto锟絪 strategy of maximizing shareholder returns, evaluating the economic outcomes of these investments is essential to determining the optimal deployment of shareholder capital going forward. This look-back analysis not only provides shareholders with a detailed "report card" on the capital deployed but also highlights the potential returns available from similar undeveloped opportunities in the future.
Exploration, Development, and Acquisition Activity
Of the total capital invested in exploration and development activities (excluding acquisitions) in 2025, approximately 1% was allocated to land and seismic acquisition, 18% to pipeline and facility projects, and the remaining 81% to drilling, completing, and tying in both existing and new wells. This capital program delivered approximately 48,000 boe/d of incremental production in December 2025, after adjustments for base production backout, resulting in a capital efficiency of $9,900 boe/d.
Of the 82 gross wells drilled during the year, 53 wells (65%) were previously identified undeveloped locations. Peyto successfully converted the reserves assigned to these locations into developed status through the drilling of 48 wells with longer horizontal well designs, which enabled more efficient development of previously identified locations.
The remaining 34 wells were new locations developed during the year, on both existing and newly acquired lands, and were not included in last year锟絪 booked undeveloped inventory.
The 2024 year-end P+P Undeveloped reserves originally assigned to the 53 locations referenced above totaled 273 BCFe, or 5.1 BCFe per location, and included a forecasted capital investment of $232 million ($0.85/Mcfe). Ultimately, 366 BCFe were developed in 2025 through the conversion of these locations, an average of 6.9 BCFe per conversion, for a total capital investment of $236 million. This translated to a conversion cost of $0.65/Mcfe, representing a 24% improvement relative to the 2024 year-end forecast.
Peyto锟絪 dedication to driving down costs through continuous optimization and efficient operations is illustrated in the Company锟絪 ability to consistently develop reserves at a lower cost than originally forecasted, providing confidence in valuing future undeveloped locations. The following table details Peyto锟絪 historical success in converting forecasted future undeveloped locations into producing wells.
Historical Undeveloped Reserves Conversion Performance
Value Reconciliation
To accurately assess the Peyto team锟絪 contribution to year-over-year value creation, the Company re-runs the prior year锟絪 reserves evaluation using the current year锟絪 price forecast. This approach isolates the impact of changes in commodity price forecast from the factors that are within the team锟絪 control. It allows Peyto to distinguish the value generated from capital invested, operational improvements, and value created through the Company锟絪 marketing diversification efforts throughout the year.
The 3CA price forecast used by GLJ in this year锟絪 evaluation is lower than last year for both natural gas and natural gas liquids, which has had the effect of decreasing the net present value of all reserve categories. Specifically, 2024锟絪 PDP reserves decreased $459 million (9% of the 2024 BT NPV10) due to this price adjustment.
After isolating the price forecast impact, the Peyto team delivered meaningful value creation through its 2025 capital program, strong operational performance, and marketing diversification efforts, resulting in an increase of $550 million of PDP BT NPV10 using only 55% of FFO.
In addition, the Company distributed $265 million of dividends and reduced net debt by $170 million.
3. Growth and Income
Over the past 23 years, Peyto has returned a total of $3.4 Billion ($23.95 per share) to shareholders through distributions and dividends. As a dividend-paying, growth-oriented corporation, Peyto锟絪 objective is to profitably grow the resource base that supports sustainable shareholder income. For dividends to be sustainable and grow over time, Peyto must continue to profitably find and develop new reserves. Merely increasing production from the existing reserve base does not enhance the long-term durability of that income. The RLI, the ratio of reserves to production rate, provides a useful measure of this long-term sustainability. Management believes the most meaningful way to evaluate current reserve life is to divide PDP reserves by actual, annualized fourth-quarter production.
During 2025, the Company锟絪 capital program successfully replaced 172% of annual production with new PDP reserves, resulting in 7% year-over-year growth (4% per share). Fourth-quarter production increased 6%, rising from 133 Mboe/d (708 MMcf/d of gas and 15,409 bbl/d of NGLs) to 141 Mboe/d (740 MMcf/d of gas and 17,439 bbl/d of NGLs). The combined impact of higher PDP reserves and increased fourth-quarter production maintained the PDP RLI at 10 years. For comparison, the TP and P+P RLIs were 18 and 28 years, respectively.
Future Undeveloped Opportunities
Each year, Peyto identifies and develops new drilling inventory, which GLJ reviews to form its forecast of future development activity. This forecast does not represent a complete assessment of Peyto锟絪 full opportunity set, nor is Peyto inclined to simply harvest the currently recognized locations. Over the last 10 years, 32% of the wells drilled by Peyto were not previously identified as undeveloped reserves, and specifically in 2025, 34 wells (41%) of the Company锟絪 drilling program consisted of locations not previously identified by GLJ.
As of December 31, 2025, the future drilling locations recognized in the reserve report totaled 1,636 gross (1,317 net), up slightly from 1,605 gross (1,294 net) in the prior year, as Peyto continues to add new locations in well-established zones as well as emerging opportunities. Of these future locations, 1,070 (65%) are classified as Proved Undeveloped by the independent reserve evaluators, while 566 (35%) are categorized as Probable Undeveloped.
The Company interest P+P reserves associated with these undeveloped locations (excluding existing uphole zones) total 4.8 TCFe, or 3.6 BCFe per well, consisting of 4.1 Tcf of natural gas and 111 MMbbls of NGLs. The capital required to develop this inventory is estimated at $5.9 billion, or $1.22/Mcfe. This development is forecasted to generate $3.6 billion of BT NPV10, inclusive of profit after capital recovery and future abandonment liabilities, equivalent to approximately $15 per share on a debt-adjusted basis using the 3CA commodity price forecast.
The undiscounted forecast of Net Operating Income for the TP and P+P reserves over the future development capital schedule, as contained in the evaluator锟絪 report, totals $21 billion and $35 billion, respectively, more than sufficient to fund the future development capital shown in the table below, ensuring those reserve additions are accretive to shareholders.
Effectively all Peyto锟絪 natural gas and natural gas liquids reserves are contained within low-permeability (tight) sandstone reservoirs of the Alberta Deep Basin. In nearly all cases, the volumetric capacity of these reservoirs can be reliably defined using traditional geological and reservoir engineering techniques. When these methods are complemented with ongoing production performance data, the certainty of the associated reserve estimates is further enhanced. Additionally, in Peyto锟絪 core operating areas, continuous drilling activity provides a steady stream of new subsurface information, enabling ongoing refinement of geological interpretations and volumetric assumptions, further supporting a high level of confidence in forecasted reserves.
In addition, these Deep Basin sandstone reservoirs are characterized by the absence of mobile water and are not supported by active aquifers. The presence of mobile water traditionally increases recovery risk by restricting hydrocarbon flow within the reservoir and up the wellbore. Water production also necessitates separation and disposal facilities, increasing operating costs and shortening the economic life of producing wells, which can further reduce ultimate recovery. As many of these traditional reserves determination and recovery risks are not present in Peyto锟絪 Deep Basin reservoirs, Management has a high degree of confidence in both the Company锟絪 reserves estimates and their ultimate recovery.
Peyto锟絪 ability to operate as a low-cost, high-margin producer means that its forecasted net operating income is less impacted by commodity price volatility than producers with lower operating margins. As a result, the forecasted economic life of Peyto锟絪 producing wells is less sensitive to changes in commodity prices. These strong operating margins are achieved through the Company锟絪 significant ownership and control of all levels of its production operations, a highly concentrated geographic asset base, and continual efforts to be the lowest-cost producer in the industry.
Peyto further mitigates the risk associated with forecasted operating incomes through an active market diversification and hedging program designed to smooth volatility in both Alberta and U.S. natural gas markets. This program employs frequent transactions that effectively "dollar-cost average" future natural gas prices over time. Although the reserves evaluation includes the value attributable to the Company锟絪 physical market diversification, the reserves report does not reflect the value contributed by the hedging program, in accordance with the guidelines of the Canadian Oil and Gas Evaluation ("COGE") Handbook. The hedging program provides important cash-flow stability in a volatile commodity price environment, enabling Peyto to maintain consistent operations. This stability enhances the Company锟絪 ability to efficiently develop锟絘nd ultimately realize锟絫he full value of its currently booked reserves.
Finally, Peyto operates over 95% of its producing wells, consistent with the Company锟絪 "own and control" strategy. As of December 31, 2025, Peyto owned 2,839 net wells, of which 90% are currently on production, and most are expected to continue producing for decades. For perspective, Peyto锟絪 existing developed reserves have an estimated forecast value of $5.8 billion (BT NPV10 of PDP + PA and Proved Developed Non-Producing + PA), while the total cost to abandon and reclaim all wells, well sites, and facilities is estimated at $91 million, calculated using an equivalent 10% discount rate for future costs. Peyto锟絪 future abandonment and reclamation liabilities fall almost entirely within Alberta. The Company utilizes the Alberta Energy Regulator Directive 011 cost estimates as a primary baseline for wellsite abandonments. For natural gas processing plants and other major facilities, the Company engages independent third-party engineering firms to perform site-specific assessments.
Despite maintaining a very low count of non-producing wells, Peyto remains committed to responsible asset retirement. In 2025, the Company fully abandoned 6.1 net wells and partially abandoned an additional 5.6 net wells. In 2026, Peyto plans to spend approximately $13 million on abandonment and reclamation activities, exceeding the mandatory spending requirements established by the Alberta Energy Regulator for the period.
RESERVES COMMITTEE
Peyto has a Reserves Committee, comprised of a majority of independent members of the Board of Directors, which is responsible for reviewing the qualifications and appointment of the Company锟絪 independent qualified reserves evaluators. The committee also reviews the procedures used to provide information to the evaluators. All booked reserves are based on annual evaluations conducted by independent qualified reserves evaluators in accordance with the COGE Handbook and National Instrument 51-101. These evaluations are completed using all available geological and engineering data. The Reserves Committee has reviewed the reserves information and approved the reserves report.
GENERAL
A complete filing of the Statement of Reserves (form 51-101F1), Report on Reserves (form 51-101F2), and Report of Management and Directors on Oil and Gas Disclosure (form 51-101F3) will be available in the Annual Information Form to be filed by the end of March 2026. Shareholders are encouraged to actively visit Peyto锟絪 website located at www.peyto.com. For further information, please contact Jean-Paul Lachance, President and Chief Executive Officer of Peyto at (403) 261-6081.