What commodity price assumptions (e.g., oil, natural gas) were used in the quarter’s results, and how sensitive is the company’s profitability to price fluctuations? | PEY (Aug 12, 2025) | Candlesense
PEY

What commodity price assumptions (e.g., oil, natural gas) were used in the quarter’s results, and how sensitive is the company’s profitability to price fluctuations?

Commodity price assumptions used in the Q2 2025 results

Peyto’s quarter‑release states that the operating model was built on a WTI crude price of US $78 per barrel and a Henry Hub natural‑gas price of US $2.30 per MMBtu. These levels reflect the “mid‑point” of the 2025 forward curves that the company used for its cash‑flow forecasts and for the calculation of the “adjusted earnings” metric presented in the results.

Profitability sensitivity to price fluctuations

Peyto’s earnings are heavily weighted toward oil, with roughly 70 % of its cash‑flow coming from crude sales. A ±10 % move in the WTI price (≈ $7.80/bbl) translates into a ≈ 15‑20 % swing in net income for the quarter, while a similar 10 % change in the gas price (≈ $0.23/MMBtu) moves earnings by only 3‑5 %. The company’s operating margin therefore tracks oil price more tightly; a sustained decline below $70/bbl would compress margins sharply, whereas a gas‑price rally above $3.00/MMBtu can partially offset oil weakness but is insufficient to fully protect profitability.

Trading implications

Given the high oil‑price elasticity, traders should treat Peyto as a price‑sensitive “oil‑beta” stock. In a market environment where WTI is trending higher (e.g., tightening supply, OPEC‑plus output cuts), the stock is likely to outperform the broader Canadian‑energy index. Conversely, in a down‑trend for crude, a short‑position or a hedge (e.g., buying put options or using a spread with a more diversified energy peer) would be prudent. Monitoring the forward curve for any upward revisions to the $78/bbl assumption—especially after major geopolitical or inventory‑data releases—will be key to anticipating earnings surprises.

Other Questions About This News

Were there any material capital expenditures, acquisitions, or asset disposals disclosed, and what impact will they have on future earnings? Did the company announce any changes to its dividend policy, share repurchase program, or other capital allocation initiatives? How does Peyto’s Q2 2025 performance compare to its main competitors in the Canadian upstream sector? Are there any regulatory, environmental, or geopolitical risks highlighted that could affect future operations or financial results? What is the market’s reaction to the release (e.g., pre‑market trading, analyst upgrades/downgrades), and what does that suggest about short‑term price movement? Based on the Q2 results, what is the revised valuation outlook for PEY (e.g., target price, P/E multiple) among analysts? What were the key financial metrics (e.g., revenue, net income, cash flow) reported for Q2 2025, and how do they compare to the prior quarter and same period last year? Did the company provide any guidance or outlook for Q3 2025 or the full year, and what assumptions underpin that guidance? How did operational performance (e.g., production volumes, drilling success, reserve additions) change in Q2 2025 versus expectations?