Cavvy Energy Ltd.

Q2 production was just under 21.5 thousand BOE per day, with 984 metric tons per day of sulfur. Net operating income was just under $50 million, up 87% year over year, and funds flow from operations was just under $42 million, up 189% year over year. Operating netback was a record $25.38 per BOE, more than double last year. Third-party processing volumes reached 152 million cubic feet per day, and third-party processing revenue grew 26% year over year. The company reduced total debt by nearly $40 million in the quarter; total debt at quarter-end was $86.8 million, and year-to-date debt repayment was $76.5 million. 2026 net operating income guidance was raised to $170 million to $180 million from $125 million to $140 million, capital guidance rose to $52 million to $57 million from $35 million to $40 million, and year-end debt guidance was revised to $75 million to $85 million. Management also said 200,000 metric tons, or about 50%, of anticipated 2027 sulfur production was hedged at $525 per metric ton, supporting over $100 million of 2027 net revenue after deductions and royalties.

Darcy Reding emphasized that Cavvy’s strategy is being validated by diversified cash flows from upstream, midstream, and sulfur, with sulfur and third-party processing now central to the story. He framed the company as moving into a second phase focused on value-accretive growth opportunities, including organic drilling, M&A, and possible partnerships around power generation, data centers, or other industrial uses of infrastructure. His tone was confident and upbeat, but he also acknowledged unresolved issues around shut-in production and said the company cannot commit to a restart timeline for the West Central Alberta volumes.

Adam Gray focused on execution, cash generation, and balance-sheet repair. He cited operating costs of $43.7 million, royalties of $8.2 million, tax pools of about $542 million translating to a future tax asset of just under $80 million, and debt repayment of over $39 million in Q2; he also noted existing debt maturities of $39 million in March 2027 and $48 million in September 2027. On guidance, he said 2026 net operating income is now expected at $170 million to $180 million, capital spending at $52 million to $57 million, and year-end debt at $75 million to $85 million, while saying debt reduction should slow in 2H26 and then reaccelerate in Q1 2027. He also said the company expects Waterton back online mid next week and Caroline to resume in early September.

Analysts asked about Ram River startup timing, 2027 turnaround plans, debt structure, the Waterton post-turnaround outage, whether Central Alberta shut-ins are in guidance, sulfur hedge timing, free-cash-flow priorities, Aimco engagement, and a possible midstream spinout. Management said there is no specific timeline or expectation for Ram River volumes, 2027 currently only has a planned Jumping Pound turnaround in Q3, and Waterton’s repair is expected to hold until the 2029 turnaround, with the vessel now hydrotested and returning to service. On capital allocation, management said future priorities are growth through organic development, M&A, and expansion of fee revenue, but 2026 remains focused on debt reduction; they also said there are no plans to spin off the midstream business. On the sulfur hedge, management said the 200,000 tons was a market-driven decision and is roughly the target hedge ratio, about 50% of production.