Cavvy Energy Releases Q1 2026 Financial and Operating Results
Press Release
Strong Sulphur and Midstream Margins Drive 29% Growth in Net Operating Income, Quarterly Debt Repayment of US$27 million
CALGARY, ALBERTA – May 7, 2026 – Cavvy Energy Ltd. (“Cavvy” or the “Company”) (TSX:CVVY) is pleased to announce its first quarter 2026 financial and operating results. The Company produced 24,655 boe/d of hydrocarbons, 1,089 mt/d of sulphur, and generated Net Operating Income1 (“NOI”) of $41.9 million in the first quarter of 2026. Management’s discussion and analysis (“MD&A”) and unaudited interim condensed consolidated financial statements and notes for the quarter ended March 31, 2026 are available at www.cavvyenergy.com and on SEDAR+ at www.sedarplus.ca.
Q1 2026 Highlights
- Generated NOI of $41.9 million ($0.14 per basic and fully diluted share) and Funds Flow from Operations1 of $32.2 million ($0.11 per basic and fully diluted share), up 29% and 48% respectively from Q1 2025.
- Produced 24,655 boe/d (80% natural gas) and 1,089 mt/d of sulphur during the quarter, up 9% and 1% respectively from Q1 2025.
- Increased third-party raw gas processing volumes to 156.8 MMcf/d, up 72% compared to Q1 2025, resulting in a 100% increase in third-party gathering, processing and marketing revenue.
- Repaid US$27.0 million of senior debt during the quarter, marking the highest quarterly debt repayment in Company history, reducing total debt to US$88.9 million.
- Reduced cash interest expense by 29% from Q1 2025 through material debt reduction, to $3.9 million.
- Achieved 100% runtime at all three operated gas processing facilities during the first quarter.
- Simplified capital structure following the exercise of all 24.9 million outstanding share purchase warrants for proceeds of $3.5 million, in exchange for issuing approximately 18.2 million common shares.
[1] Refer to the “non-GAAP measures” section of the Company’s MD&A.
“Exposure to improved sulphur pricing beginning January 1st has proven transformational for Cavvy, as demonstrated by the strong results in the first quarter of 2026,” stated Darcy Reding, President and CEO.
“The Vancouver FOB sulphur price averaged over US$500/mt during the quarter, helping to generate NOI of $41.9 million, with sulphur sales contributing 34% of revenue. We are confident the positive momentum from Q1 supports achieving our 2026 debt repayment target of $50 million.
Cavvy’s midstream business continues to grow with a record high 157 MMcf/d of third-party raw gas volumes processed, representing 12% of revenue generated in the quarter, reinforcing Cavvy’s identity as a uniquely diversified, premiere energy company. Long-term and sustainable value creation for shareholders remains management’s top priority.”
Selected Q1 2026 Financial and Operating Highlights
| ($000s unless otherwise noted) | 2026 | 2025 | 2024 | |||||||||
| Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | |||||
| Production | ||||||||||||
| Natural gas (mcf/d) | 118,284 | 111,834 | 115,467 | 126,198 | 105,338 | 111,787 | 115,196 | 157,077 | ||||
| Condensate (bbl/d) | 2,302 | 2,065 | 2,258 | 2,507 | 2,454 | 2,149 | 2,191 | 2,472 | ||||
| NGLs (bbl/d) | 2,639 | 2,299 | 2,454 | 2,524 | 2,574 | 1,788 | 1,726 | 2,210 | ||||
| Sulphur (mt/d) | 1,089 | 989 | 1,120 | 1,128 | 1,076 | 968 | 1,444 | 1,376 | ||||
| Total production (boe/d) [1] | 24,655 | 23,003 | 23,956 | 26,064 | 22,584 | 22,568 | 23,116 | 30,861 | ||||
| Third-party volumes processed (mcf/d) [2] | 156,825 | 136,579 | 138,544 | 121,319 | 90,926 | 74,650 | 72,654 | 55,688 | ||||
| Financial | ||||||||||||
| Natural gas price ($/mcf) | ||||||||||||
| Realized before Risk Management Contracts [3] | 1.99 | 0.66 | 0.77 | 1.73 | 2.24 | 1.55 | 0.77 | 1.14 | ||||
| Realized after Risk Management Contracts [3] | 2.93 | 3.60 | 3.25 | 3.23 | 3.58 | 3.36 | 3.43 | 2.71 | ||||
| Benchmark natural gas price (AECO) | 2.01 | 2.25 | 0.62 | 1.72 | 2.14 | 1.46 | 0.68 | 1.17 | ||||
| Condensate price ($/bbl) | ||||||||||||
| Realized before Risk Management Contracts [3] | 92.04 | 76.62 | 82.65 | 84.60 | 95.15 | 94.87 | 92.13 | 99.96 | ||||
| Realized after Risk Management Contracts [3] | 85.17 | 79.75 | 83.66 | 85.88 | 88.29 | 90.61 | 84.61 | 87.75 | ||||
| Benchmark condensate price (C5 at Edmonton) | 97.94 | 79.61 | 86.58 | 87.71 | 100.24 | 98.85 | 97.10 | 105.62 | ||||
| Sulphur price ($/mt) | ||||||||||||
| Realized before Risk Management Contracts [4] | 599.69 | 304.85 | 196.11 | 168.45 | 111.46 | 49.00 | 40.64 | 51.94 | ||||
| Realized after Risk Management Contracts [4] | 360.35 | 43.22 | 34.59 | 32.40 | 17.00 | 12.09 | 8.86 | 18.43 | ||||
| Benchmark USD (Vancouver FOB) | 508.40 | 414.47 | 268.42 | 271.75 | 184.42 | 135.78 | 97.49 | 73.82 | ||||
| Net income (loss) | 3,538 | (1,598) | (10,086) | 4,147 | 2,666 | (20,921) | 7,496 | (19,196) | ||||
| Net income (loss) $ per share, basic and diluted | 0.01 | (0.01) | (0.03) | 0.01 | 0.01 | (0.08) | 0.04 | (0.12) | ||||
| Net operating income [5] | 41,876 | 20,785 | 30,631 | 26,491 | 32,550 | 13,720 | 19,818 | 7,652 | ||||
| Cashflow provided by (used in) operating activities | 45,412 | 7,776 | 4,466 | 1,599 | 22,612 | (592) | 2,260 | (4,874) | ||||
| Funds flow from operations [5] | 32,168 | 13,518 | 12,898 | 14,502 | 21,707 | 3,341 | 8,234 | (4,874) | ||||
| Operating netback ($/boe) [5] | 18.87 | 9.82 | 13.90 | 11.17 | 16.02 | 6.61 | 9.31 | 2.74 | ||||
| Total assets | 537,868 | 539,136 | 536,274 | 553,216 | 571,470 | 612,423 | 615,040 | 585,940 | ||||
| Adjusted working capital (deficit) [5] | (39,490) | (19,769) | (10,631) | (20,144) | (30,540) | (29,777) | (42,658) | (37,986) | ||||
| Net debt [5] | (156,613) | (170,617) | (163,697) | (166,878) | (185,438) | (197,564) | (206,779) | (219,204) | ||||
| Capital expenditures [6] | 6,302 | 10,404 | 4,022 | 2,391 | 6,538 | 5,800 | 10,002 | 5,003 | ||||
(1) Total production excludes sulphur.
(2) Third-party volumes processed are raw inlet natural gas volumes reported by activity month.
(3) Includes physical commodity and financial risk management contracts inclusive of cash flow hedges, (together “Risk Management Contracts”). The realized natural gas price after Risk Management Contracts shown above is normalized to exclude the impact of the hedge monetization.
(4) Sulphur price is based on FOB Vancouver and is net of customary deductions such as transportation, handling, marketing, and storage fees.
(5) Refer to the “Net Operating Income”, “Operating Netback”, “Capital Resources”, “Funds Flow from Operations” and “Working Capital and Capital Strategy” sections of the Company’s MD&A for reference to non-GAAP and other financial measures.
(6) Excludes reclamation and abandonment activities.
Outlook
The Company’s 2026 guidance is unchanged as follows:
| ($ 000s unless otherwise noted) | Initial 2026 Guidance | |
| Low | High | |
| Production (boe/d) (1) | 22,000 | 24,500 |
| Sulphur production (mt/d) | 1,000 | 1,150 |
| Net operating income (2)(3)(4) | 125,000 | 140,000 |
| Capital expenditures (5) | 35,000 | 40,000 |
| Total debt (at YE 2026) (6) | 110,000 | 125,000 |
(1) Production guidance assumes persistence of previously announced shut-ins in Central AB and Northern AB, while production in Northeast BC is assumed to be on-production through 2026
(2) Refer to the “Net Operating Income” section of the Company’s MD&A for reference to non-GAAP measures
(3) Assumes unhedged average 2026 AECO price of $3.15/GJ, average unhedged 2026 WTI price of US$60.90/bbl and average unhedged 2026 Vancouver FOB Sulphur price of US$237.50/mt
(4) Includes the impact of hedge contracts and the 2026 structured sulphur price agreement
(5) Excludes asset retirement and decommissioning expenditures
(6) Assumes USD/CAD exchange rate of 0.7210
Key priorities for 2026 remain:
- Sustain a safe and regulatory compliant business.
- Capture additional opportunities to grow third-party gathering and processing business value.
- Minimize facility outages to maximize sales and processing revenue.
- Reduce long-term debt to improve financial flexibility and position the Company to refinance its 2027 debt maturities.
- Identify and high-grade both organic and acquisition opportunities to replenish Cavvy’s resource base and increase development upside.
Revenue diversification is one of Cavvy’s strengths and a key differentiator allowing Cavvy to better withstand commodity price volatility. During the first quarter, the escalating Middle East conflict contributed to an increase in both sulphur and NGL prices, while AECO gas prices have simultaneously fallen sharply. Third-party processing volumes and revenues at the Caroline and Jumping Pound facilities and third-party sulphur re-melting and processing at Shantz are increasingly important to Cavvy’s business.
Senior debt repayment of US$27.0 million occurred in the first quarter, and another meaningful principal repayment is expected in the second quarter. De-leveraging has been Cavvy’s top priority over the past several years, and management will continue to direct free cash flow primarily towards debt repayment. At the end of Q2, Cavvy will receive a prepayment for two-thirds of estimated second half sulphur sales (one-third fixed and one-third collared) under the previously announced sulphur pricing agreement, which will continue to support debt repayment and drive interest savings.
The Company’s 2026 capital program is highlighted by the scheduled maintenance turnaround at the Caroline Facility in the third quarter of 2026, capital maintenance at the Waterton Facility during the third-party pipeline maintenance outage in June, and the execution of certain high return, short payback well and facility optimization projects. In the first quarter, Cavvy incurred $6.8 million in reclamation and abandonment expenditures, proactively managing asset retirement obligations.
Due to the current outlook for natural gas prices, Cavvy is not planning to resume development drilling in 2026. The Company will only develop its portfolio of high impact conventional Foothills drilling opportunities once natural gas prices sustainably recover and the Company has achieved its deleveraging target.
Hedge Position
The Company has 68,394 GJ/d of its remaining 2026 natural gas production hedged at a weighted average fixed price of $3.38/GJ, and 1,498 bbl/d of its remaining 2026 condensate production hedged with a weighted average floor price of $85.07/bbl and a weighted average ceiling price of $91.11/bbl. The Company’s aggregate hedge position for the remainder of 2026 totals 12,302 boe/d, or approximately 53% of the midpoint hydrocarbon production guidance. For the remainder of 2026, one-third of the Company’s 2026 sulphur sales will be sold at a fixed price of US$225/mt, one-third collared with a floor price of US$205/mt and ceiling price of US$250/mt, and the remaining one-third sold at Vancouver FOB spot price, consistent with the terms of the existing one-year sulphur sales agreement.
Cavvy may hedge to mitigate commodity price, interest rate and foreign exchange volatility to protect the cash flow required to fund the Company’s operations, capital requirements and debt service obligations, while maintaining exposure to commodity price upside. Cavvy continues to execute its risk management program governed by its hedge policy and in compliance with the thresholds required by senior lenders.
As of March 31, 2026, the Company is hedged in accordance with the requirements of its senior loan agreements. The discounted unrealized gain on the Company’s hydrocarbon hedge portfolio is approximately $20.9 million using the forward strip on May 6, 2026.
The tables below summarize the hedge portfolio as of May 7, 2026:
| 2026-2027 Hedge Portfolio (1) | Q226 | Q326 | Q426 | 2026 | Q127 | Q227 | Q327 | Q427 | 2027 | |
| AECO Natural Gas Sales | ||||||||||
| Total Hedged (GJ/d) | 71,854 | 68,340 | 65,025 | 71,140 | 63,340 | 28,154 | 22,637 | |||
| Avg Hedge Price (C$/GJ) | $3.34 | $3.40 | $3.41 | $3.36 | $3.41 | $3.40 | $3.41 | |||
| WTI / C5+ Sales | ||||||||||
| Total Hedged (bbl/d) | 1,529 | 1,364 | 1,600 | 1,528 | 1,821 | 1,551 | 1,525 | 1,525 | 1,605 | |
| Avg Collar Cap Price (C$/bbl) | $90.94 | $91.67 | $90.80 | $91.26 | $90.64 | $89.43 | $90.37 | $90.37 | $90.22 | |
| Avg Collar Floor Price (C$/bbl) | $83.83 | $85.64 | $85.77 | $84.81 | $90.40 | $85.93 | $90.37 | $90.37 | $88.09 | |
| Sulphur Sales | ||||||||||
| 1/3 Sales Avg Fixed Price (US$/mt) | $225 | $225 | $225 | $225 | ||||||
| 1/3 Sales Avg Collar Cap Price (US$/mt) | $250 | $250 | $250 | $250 | ||||||
| Avg Collar Floor Price (US$/mt) | $205 | $205 | $205 | $205 | ||||||
| Power Purchases | ||||||||||
| Total Hedged (MW) | 55 | 55 | 55 | 55 | 41 | 41 | 41 | 41 | 41 | |
| Avg Hedge Price (C$/MWh) | $71.80 | $71.80 | $71.80 | $71.80 | $64.82 | $64.82 | $64.82 | $64.82 | $64.82 | |
| 2028 Hedge Portfolio (1) | Q128 | Q228 | Q328 | Q428 | 2028 | Q129 | Q229 | Q329 | Q429 | 2029 |
| AECO Natural Gas Sales | ||||||||||
| Total Hedged (GJ/d) | ||||||||||
| Avg Hedge Price (C$/GJ) | ||||||||||
| WTI / C5+ Sales | ||||||||||
| Total Hedged (bbl/d) | 1,385 | 1,350 | 600 | 600 | 982 | 600 | 600 | 600 | 600 | 600 |
| Avg Collar Cap Price (C$/bbl) | $88.57 | $86.35 | $86.17 | $86.17 | $87.08 | $84.67 | $84.67 | $84.67 | $84.67 | $84.67 |
| Avg Collar Floor Price (C$/bbl) | $88.57 | $86.35 | $86.17 | $86.17 | $87.08 | $84.67 | $84.67 | $84.67 | $84.67 | $84.67 |
| Sulphur Sales | ||||||||||
| 1/3 Sales Avg Fixed Price (US$/mt) | ||||||||||
| 1/3 Sales Avg Collar Cap Price (US$/mt) | ||||||||||
| Avg Collar Floor Price (US$/mt) | ||||||||||
| Power Purchases | ||||||||||
| Total Hedged (MW) | 15 | 15 | 15 | 15 | 15 | |||||
| Avg Hedge Price (C$/MWh) | $60.60 | $60.60 | $60.60 | $60.60 | $60.60 | |||||
(1) Includes forward physical sales contracts and financial derivative contracts as of May 7, 2026
Conference Call Details
A conference call and webcast to discuss the results will be held on Friday, May 8, 2026, at 1:30 p.m. MDT / 3:30 p.m. EDT, following Cavvy’s Annual General Meeting of shareholders. To participate in the webcast or conference call, you are asked to register using one of the links provided below.
To register to participate via webcast please follow this link:
https://edge.media-server.com/mmc/p/24tjxx4n
Alternatively, to register to participate by telephone please follow this link:
https://register-conf.media-server.com/register/BIc3835a1486ce43b184ab59bfb81edfd2
A replay of the webcast will be available two hours after the conclusion of the event and may be accessed using the webcast link above.
About Cavvy Energy
Cavvy Energy is an integrated Canadian upstream and midstream energy company headquartered in Calgary, Alberta. Cavvy’s objective is to create long term shareholder value through development, production, processing, and marketing of natural gas, natural gas liquids, and sulphur while providing superior service to the Company’s third-party customers through our strategic, company-owned gathering and processing infrastructure located in western Canada.
For further information, visit www.cavvyenergy.com, or please contact:
Darcy Reding, President & Chief Executive Officer
Telephone: (403) 261-5900
Adam Gray, Chief Financial Officer
Telephone: (403) 261-5900
Investor Relations
investors@cavvyenergy.com
IBF4
