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On June 30th, LNG Canada successfully loaded its first cargo of liquefied natural gas to Asian markets from its facility at Kitimat, British Columbia. This milestone marks the beginning of a new era for the Canadian natural gas market as it enters the global LNG export market. In anticipation of this project, Canadian natural gas producers had ramped up production, which raised natural gas storage levels. While the LNG Canada project is scaling up throughput, cooler temperatures in the United States and Canada have kept storage levels elevated on both sides of the border. These factors have resulted in lower natural gas prices this summer, particularly in Canada. Pine Cliff continues to prudently manage our operations and balance sheet, anticipating a favorable shift in natural gas fundamentals beginning this winter.
Read Full MessageSecond Quarter 2025 Summary Highlights
• Generated $4.9 million ($0.01 per basic and fully diluted share) and $16.4 million ($0.05 per basic and fully diluted share) of adjusted funds flow1 for the three and six months ended June 30, 2025, compared to $10.8 million ($0.03 per basic and fully diluted share) and $21.3 million ($0.06 per basic and fully diluted share) for the same periods in 2024;
• Production averaged 21,2362 Boe/d and 21,2593 Boe/d for the three and six months ended June 30, 2025, compared to 23,6884 Boe/d and 23,7765 Boe/d for the same periods in 2024;
• Paid dividends of $1.3 million ($0.004 per basic and fully diluted share) and $6.7 million ($0.02 per basic and fully diluted share) during the three and six months ended June 30, 2025, compared to $5.4 million ($0.02 per basic and fully diluted share) and $14.9 million ($0.04 per basic and fully diluted share) during the same periods in 2024;
• Capital expenditures totaled $2.3 million and $3.6 million for the three and six months ended June 30, 2025, compared to $1.0 million and $1.6 million for the same periods in 2024;
• Reduced net debt1 by $3.4 million or 5% to $58.9 million on June 30, 2025 down from $62.3 million on December 31, 2024; and
• Generated a net loss of $7.1 million ($0.02 per share basic and fully diluted) and $9.9 million ($0.03 per share basic and fully diluted) for the three and six months ended June 30, 2025, compared to net loss of $4.1 and $9.0 million for the same periods in 2024.
Extended and Increased Debt Facilities
In early June, Pine Cliff announced the following amendments to our debt facilities to provide additional financial flexibility:
1. Renewed our demand loan with a Canadian chartered bank at $15 million. This facility was scheduled to be reduced to $12 million at the end of May. Maintaining this additional capacity preserves incremental liquidity to help manage our short-term working capital needs.
2. Amended our term loan agreement to reduce our annual scheduled amortization to 7.5% of the initial principal balance from 15%. This reduces our quarterly payments to $1.05 million from $2.10 million, while the additional dividend-linked payments that were layered in at the end of 2024 have been eliminated. While debt repayment continues to be an important consideration in our allocation of free cash flow, lower mandatory payments provide Pine Cliff with the option to preserve more capital in the business to support reinvestment into the asset base. We have retained the right to make additional prepayments if that is determined to be the best way to allocate incremental free cash flow.
3. Extended the maturity of the term loan to January 3, 2028, which aligns with what we expect will be a better natural gas price environment in the back half of the decade.
Disciplined Capital Spending
Pine Cliff continues to be disciplined with respect to our 2025 capital program in the lower price natural gas environment, with the $3.5 million of spending in the first half of the year mostly related to maintenance activities and $2.2 million of decommissioning expenditures.
Pine Cliff’s intention is to commence our drilling program in Q4 this year, provided that commodity prices continue to support attractive economics. We are leaving our 2025 capital budget at $23.5 million, which includes $12.5 million of development spending.
Production Profile
Second quarter production averaged 21,236 Boe/d, remaining consistent with our first quarter volumes, despite normal course maintenance outages at third-party processing facilities and temporary shut-ins on our properties due to low AECO gas prices.
Dividend
We continue to monitor our payout ratio, and at current commodity prices we are maintaining our monthly dividend at $0.00125 per share.
Hedging and Diversification Update
Pine Cliff’s physical hedging and internal market diversification strategies have proven especially valuable during this summer’s price environment. Pine Cliff realized an average natural gas price of C$2.48/Mcf, representing a 48% premium to the AECO Daily 5A average price of C$1.68/Mcf.
In recent months, we have further strengthened our hedge position with approximately 54% of our gross natural gas production6 now hedged at an average price of $2.82/Mcf through the second half of 2025. Similarly, approximately 43% of our gross crude oil production7 has been hedged at US$64.15/Bbl over the same period.
We have taken advantage of favorable forward pricing by securing additional hedges for 2026, locking in an average price of just over C$3.00/mcf on roughly 32% of natural gas production6. We remain committed to opportunistically expanding our hedge positions where they align with our business strategy, capital program and dividend sustainability.
Webcast
Pine Cliff will host a webcast at 9:00 AM MDT (11:00 PM EDT) on Thursday August 7th, 2025. Participants can access the live webcast via https://www.gowebcasting.com/14138 or through the links provided on our website. A recorded archive will be available on Pine Cliff’s website following the live webcast.
Outlook
The launch of LNG Canada exports this quarter marks one of the most significant milestones in our industry since Pine Cliff was founded nearly 14 years ago. These exports are expected to ramp up to 1 Bcf/d by the end of this year, with Phase 1 capacity reaching 2 Bcf/d in 2026. Canada is also advancing additional projects: Cedar LNG and Woodfibre LNG are currently under construction and meaningful progress is being made toward final investment decisions on the Ksi Lisims and LNG Canada Phase 2 projects. If all these developments move forward, Canada could be exporting over 6.5 Bcf/d by 2030, positioning itself as the fourth-largest LNG exporter globally. This volume would represent roughly 35% of the country’s current natural gas production of 18.5 Bcf/d.
Simultaneously, U.S. LNG exports are projected to more than double from their current 16 Bcf/d, and global natural gas demand, driven in part by the power requirements of rapidly growing data center infrastructure supporting artificial intelligence, is expected to rise significantly.
Investors are taking note of this bullish medium to long-term outlook, with increased trading volumes and positive price momentum in natural gas–weighted equities like Pine Cliff. While we remain patient for these developments to materialize, we remain focused on navigating the current environment of low natural gas prices. Our priority is to ensure that our assets are well positioned to benefit from a rebound in prices in the coming months to be able to optimize the free cash flow for our shareholders.
We remain steadfast in our commitment to making operational decisions that enhance long-term shareholder value as the broader macro fundamentals of rising global and North American demand for natural gas remain intact.
Thank you for your continued support.
Yours truly,
Phil Hodge
President and Chief Executive Officer
August 6, 2025
1 Disclosure Note: Please refer to Pine Cliff’s Website for Reader Advisories regarding forward looking information, non-GAAP measures, oil and gas measurements, definitions as this President's Message is subject to the same cautionary statements as set out therein.
2 Comprised of 102,528 Mcf/d natural gas, 2,849 Bbl/d NGLs and 1,299 Bbl/d light and medium oil.
3 Comprised of 101,727 Mcf/d natural gas, 2,917 Bbl/d NGLs and 1,387 Bbl/d light and medium oil.
4 Comprised of 112,521 Mcf/d natural gas, 3,334 Bbl/d NGLs and 1,599 Bbl/d light and medium oil.
5 Comprised of 113,076 Mcf/d natural gas, 3,343 Bbl/d NGLs and 1,587 Bbl/d light and medium oil.
6 Based on Q2 2025 sales volumes of 102,528 Mcf/d natural gas.
7 Based on Q2 2025 sales volumes of 1,299 Bbl/d of light and medium oil.