Peyto Exploration & Development is once again showing why it’s earned a reputation for disciplined capital management — this time in the face of a challenging AECO pricing environment.
In its latest Monthly Report, the company detailed how September’s production was affected by a confluence of factors that pushed AECO prices into negative territory. Elevated gas storage levels, ongoing pipeline maintenance, and slower-than-expected start-up progress at LNG Canada all weighed on Alberta natural gas benchmarks, resulting in one of the worst months of the year for AECO prices.
Rather than chase volume, Peyto leaned into its guiding philosophy of prioritizing profits over production. During the month, turnarounds at the company’s Oldman gas plants temporarily impacted output, though Peyto mitigated much of the effect by rerouting gas to other processing facilities. More notably, when market prices dipped below zero, the company opted to shut in some dry gas production — replacing hedged volumes with gas purchased at negative prices instead.
The company estimates about 4,000 BOE/d of deferred production for September, but emphasized that the decision had a minimal impact on cash flow. Peyto described the move as a deliberate strategy to conserve reserves for more favorable pricing conditions ahead.
While Peyto’s approach is one shared by some other disciplined producers in the basin, the company’s open acknowledgment of this strategy in its Monthly Report underscores one way that producers can add value beyond just being a price taker.